AMERICAN ECONOMIC GROWTH

America was something of slow starter in developing manufacturing and small industries. Jefferson's Embargo and the War of 1812 both demonstrated that the United States could not remain dependent on foreign imports, and Yankee ingenuity soon led to economic progress. Economic growth in the United States before 1820 was built on agriculture and commerce. The success of the “carrying trade” diverted investment from more risky manufacturing ventures, although some innovations, especially in the textile industry, did appear.

American workers reacted to new machines with ambivalence, fearful of reduced wages and loss of independence and status. American shipping enjoyed a spurt of prosperity between 1793 and 1805 but suffered when England and France restricted America's rights as a neutral nation. Cities were closely associated with international trade but still played a marginal role in the life of the rest of the nation. Industrialization and mechanization were just beginning to frighten skilled craftsmen. The growth of American industry required certain technological advances including the factory system, interchangeable parts, steam power, and the cotton gin. The Bank of the United States provided an important source of credit for financing America’s industrial revolution.

The Birth of the Factory: Profitable from the start in 1789. The factory boom gets going around 1800.

Important points in America's industrial and population growth:

• Early America was overwhelmingly agricultural;
• Population west of Appalachians: 1800 ½ million; 1860 15 million.
• Industrial revolution the most profound social change in 10,000 years, not only in America, but world wide. It brought about a “complete revolution in domestic life and social manners.”
• In 1800 each farm was a small factory; the farm generated little or no cash; families made their own clothes, candles, utensils and even simple tools.
• By 1860 industrial progress resulted in 5,000,000 horsepower generated from inanimate sources.
• By 1840 most people wearing manufactured clothing.

A person living in 1700 or 1500 or even earlier would not have been overwhelmed by advances evident in 1800. But imagine Washington of Jefferson looking 100 years ahead to the automobile, light bulb, telephone, cross-country railroads (200,000 miles by 1900), factories full of heavy machinery and hundreds of other advances. The rate of change began to pick up in the early 1800s and has been accelerating ever since.

The Northern Industrial Juggernaut

Industry grew rapidly in the North. Steam power was critical to the expansion of the factory system and industry was remarkably receptive to technological change. In America, individual freedom encouraged resourcefulness and experimentation, business growth encouraged new techniques, and a labor shortage encouraged the substitution of machinery. Even the British admired American inventiveness.

• Industrial expansion created jobs that attracted thousands of immigrants to America. Resident “native” Americans tended to look down on these immigrants, especially the Irish who began to arrive a large number by the 1840s, and natives and immigrants alike were unfriendly toward blacks. By 1860 Irish immigrants had largely replaced the New England mill girls as textile workers.
• Invention begets invention; cans and containers were important to store and transport products.
• The sewing machine was a secondary growth development of the textile boom.
• Creation of demand for labor had a huge social impact along with of industrialization that led to economic advance and new sources of substantial wealth.
• Distribution of wealth:
  • At the time of the revolution 45% of the wealth existed in the top in 10% of the population.
  • Boston 1845: the top 4% owns 65% of the wealth.
  • In Philadelphia in 1860 the top 1% own over 50% of the wealth.
  • Relative standards (the gap between rich and poor) is widening, but absolute standards are up for all.
• The telegraph was an important economic contribution; the railroads needed it, as well as businesses for negotiating deals and orders across distances. By 1860 50,000 miles exist under the Western Union Telegraph Corp. Most lines run NE-NW, as the South, devoted to land, slaves and cotton, falls behind in industrial development.

YANKEE INGENUITY: RESOURCEFULNESS AND EXPERIMENTATION

• Americans willing to try anything; first copiers, then innovators
• 1800 41 patents were approved; in1860 4,357 (100X); Thresher, reaper, harrows, plows, mowers, hay rakes, etc.
  • Oliver Evans—automated flour mill;
  • Jacob Perkins—Nail-making machine
  • Charles Goodyear —rubber
  • John Deere, McCormick, others invent new farm machinery
• Innovations: The Ice Industry.
  • A couple of ingenious Yankees made a fortune by developing insulated containers to preserve ice that was harvested from lakes and ponds during winter. Their system was so effective that over 90% of stored ice would remain frozen over the summer. They even transported and sold ice in the Caribbean and in other warm climates.
• Eli Whitney's cotton gin (actually invented by a slave) revolutionized cotton production.
• John Fitch and Robert Fulton developed the steamboat and made it profitable.
• Samuel Slater left England with plans for Richard Arkwright's spinning frame that could produce stronger threads for yarns in his head (it was illegal to export written plans) and developed water-powered machinery for spinning and carding cotton. Slater built a mill on the Blackstone River in Rhode Island.
• Corporations: See Marshall’s Decisions (Dartmouth). 1781-1801, only 326 charters in U.S.
• Charters required separate government action in each case, most for quasi-public projects, and corporation laws were passed to facilitate the process.

THE TRANSPORTATION BOOM: CROSSING THE ATLANTIC & CROSSING THE CONTINENT

By the late 1840s, steamships had captured much of the Atlantic freight and passenger traffic. These British-built vessels, stronger and larger than wooden sailing ships, challenged America’s shipbuilding industry. Competition, subsidies, and new technology reduced shipping rates. Bargain rates in steerage enabled tens of thousands of Europeans to immigrate to America.

• Packets—steam and sail
• English iron ships were superior

Foreign Commerce

• Foreign commerce grew dramatically in the 1840s and 1850s.
• United States mostly exported raw materials (cotton was the most valuable export), and it usually imported more (mostly manufactured goods) than it exported.
• Britain was the best customer of the United States and its leading supplier.
• Regularly scheduled sailing packets concentrated trade in New York and other large cities.
• Raw materials out, manufactures in
• The Growth of New England Trade
• The 19-knot clipper ship: Fast, sleek but expensive—enjoyed brief popularity at mid-century.
• Whaling industry

The Canal Boom

Erie Canal in New York built under the leadership of Governor Dewitt Clinton transformed in New York City into the Emporium of the Western world. The great metropolis became the center of American and eventually world commerce and remains so to this day.if

• New York's Erie Canal was completed 1825 for $7 million. It runs from Albany to Buffalo and connects the Great Lakes with the Atlantic via the Hudson River, which is navigable to above Albany.
• The Delaware and Hudson canal connected Chesapeake Bay with inland rivers.
• Ohio Canals—many built, not all made money
• In 1817 the Black Ball Line established regularly scheduled departures between New York and Liverpool. Thanks to the Black Ball Line's innovation, New York became a top-notch port, outshining Boston and Philadelphia.

THE RAILROADS: Expanding Traffic

Railroads probably had the largest impact on the American economy of any development in the entire 19th-century. Railroads changed everything, even America's concept of time; in fact, our time zones were invented by the railroads. In order for trains to leave and depart on time the telegraph was necessary, for many of the longer lines were single track and passing points (sections of double track created between stations) had to be coordinated. Aaccurate time keeping was important for the successful operation of the railroad. Railroads also created large demands for better steel and iron manufacturing techniques, and communications, and the eventual handling of tickets, cargo manifests and so on created the first real white-collar class in America.

• Railroads: 1830—100 miles; 1840—3,500 miles; 1860—30,600 miles.
• Prior to Civil War there was no real national network, but in the East several major lines existed: NYC, PA, B&O
• Overcoming Engineering Problems: Iron rails; engines that curve—the swivel truck; the standard American engine.
• Early rail travel was angerous and uncomfortable; engines often started fires until coal appears; brakes weak and frequently failed on downgrades. (“The Wreck of the Old 97” was one of many songs about famous railroad accidents.)

Financing the Systems

The building of railroads required enormous amounts of capital. Because of America's basic laissez-faire approach to private enterprise, the government would not finance railroads directly. However, the granting of large tracts of land by the government helped to finance the building of lines, and the government recouped its investment because the land which was subsequently sold in the vicinity of rialroads commanded a much higher price than land which had no access to any transportation system. The federal and state governments gave hundreds of millions of acres of land to the railroads in 19th-century and yet the investment probably profited all concerned.

Points about railroads:

• Slave labor built the South’s railroads, immigrants built the North’s.
• Private investors supplied capital, particularly when their communities stood to profit from the railroad.
• East-west rail lines usually required some public funding—loans, investments, and tax exemptions.
• Federal government helped by granting federal lands to states to build railroads.
• Railroads profoundly affected the farmers. Location of the lines helped determine what land could be profitably cultivated. Railroad companies created farms by selling their land grants as farm sites. Prices for farm goods were high, but farm labor was scarce. Machinery appeared to ease the labor shortage. Steel plows and mechanical reapers reduced the labor and time required to plant and harvest.
• Railroads also affected cities. Chicago became the railroad center of the Midwest.
• Railroads also stimulated other kinds of economic activity. It influenced real estate values, spurred regional concentration of industry, increased the size of business units, and stimulated the growth of investment banking. Railroads also revolutionized business organization and management, and they sharply reduced freight and passenger rates. Finally, railroads revolutionized western agriculture; the center of wheat production moved westward.
• Effects on the Midwestern Farmer—opened new areas and gave them access to World Markets.

Railroads and the Sectional Conflict

• The East-West rail Corridors transformed political lines to an East-West axis.
• Lines in the South were short; no coherent rail system in South could rival the New York Central or Baltimore and Ohio.
• Southerners were not industrial capitalists—they made excellent returns from cotton production.
• The Old Northwest was more agriculture oriented than the Northeast, but the average farm had but 200 acres—mostly self-owned and operated.
  • Corn, wheat, hogs, cattle, sheep
• Northeast provides markets for farm produce; Northwest for manufactured goods.

THE ROLE of GOVERNMENT in INDUSTRY

Laissez faire idea popular, but government did much to assist capitalism; federal and state governments provided “social overhead capital”—internal improvements, corporation laws, etc. Protective tariffs were designed to aid American manufacturers. The government also created markets by adding new territory: the Louisiana Purchase and the Mexican Cession.

As wealth increased, prejudice against corporations broke down, and most states passed general laws of incorporation. Development capital came from the Northeastern merchant class. By 1860 1500 major banks existed with assets of $1 billion. The insurance industry also boomed as Insurance companies had to provide protection against risks.

• Labor Force early 1800s predominantly women
• Early unions usually local, social, weak.
• Courts unfriendly until Mass. S.C. Commonwealth v. Hunt provided precedent for other state cases
• Unions gradually appear; 1828 Working Men’s Party
• Worker Political parties ineffective; but some mainstreamed

• The Irish Wave; potato blight
• Displaced women in factories
• Urban Squalor: worst conditions in history
• A Land of Opportunity?

WORKING CLASS PEOPLE: Immigrants and factory workers often lived in crowded slums in industrial cities. Life there was squalid and dangerous. Low wages meant wives and children of most factory workers also had to work to help the family survive. Most workers did not belong to unions. Early unions and workingman’s political parties were virtually destroyed by the depression of the late 1830s. Nevertheless, in the 1840s and 1850s many states passed laws that both limited the workday to ten hours and regulated child labor. Before 1860 most labor unions were small and local. Laborers rarely thought of themselves as members of a permanent working class. Republican values, a high rate of social and geographical mobility, and the ready availability of woman, child, and immigrant labor made labor organization difficult. Mid-19^th century America was a land of opportunity with a relatively high standard of living. Yet, there was also an underclass of poorly paid and unskilled workers, mostly immigrants. Toward these, middle-class Americans were indifferent or unaware. Society became more stratified, the distance between the top and bottom widened. Still, the ideology of egalitarian democracy endured.

THE ECONOMY OF THE SOUTH

The Cotton South: By the middle of the 19^th century the United States was developing a national market economy marked by inter-regional dependence. The South remained agricultural. Cotton was king in the Deep South, but the Upper South produced tobacco and wheat and a growing diversity of other crops. Myths about the Old South:

• The kind “Massa” and contented darkies, gallant young men and radiant southern belles. (Slavery was harsh and cruel under the best of circumstances.)
• Poor white trash, dirt poor, scratching in the clay hills; masses reduced to ignorance, degeneracy created by slave system.
• Corrupt opulence based on human exploitation; the haughty slave owner as cattle breeder; the seraglio in the slave quarters; beatings; hardships; women suffer in silence; slaves yearning for freedom.
• Poets have explained the South better than historians.

PLANTATION LIFE.

• A plantation resembled a small village.
• Sexual division of labor was less evident in the South than in the North, and southern women had immense responsibilities on the plantation.
• Both slave men and women worked as field hands. Slave children typically went to the fields around age ten.

Impact of Cotton on the South

• In 1810 South had as much manufacturing as the North!
• Slavery was on the decline in 1780s, early 1790s; 10,000 slavees were freed in Virginia about that time.
• The Need for Cash Crops; the Price of Cotton and the Cotton Boom. Whitney’s Cotton Gin 1793
• North is South’s Middleman: Insurance, transport, marketing
• Panic of 1819: Prices in Liverpool on Cotton sink
• 1816-1819 Banking frauds; bank blamed for panic
• Land speculation based on 1800 law; prices crash
• King Cotton: 1812—150,000 bales; 1860—3.8 million bales
• Voracious appetite of British, French looms
• New Land existed in the Southwest; prices climbed gradually.
• Large numbers of livestock; maybe 50% of overall total.
• Foodstuffs: South produced much food, fed itself and others.
• Corn, wheat; farmers alternated between staples, food crops
• Less than great prosperity; staples depleted soil—tobacco, corn, cotton; soil erosion; farm production shifted westward as much of the Southeast was abandoned.
• Agricultural reform attempted; soil treatment. Moderate success only.

SLAVERY As the cotton culture spread westward, slavery strengthened its hold on the South. The demand for slaves was greatest in the Deep South, and the Upper South sold its slaves “down the river” at ever higher prices. Slave trading was a lucrative business, but it sometimes led to the breakup of slave families. As the price of slaves increased, only wealthy southerners could afford to buy them, so by 1860 only one-quarter of southern families owned slaves. Slavery was profitable, but it kept southern capital from being invested in trade and manufacturing. Thus, northern business firms handled the marketing of the southern cotton crop. At bottom, slavery was a stagnant and inefficient labor system that wasted talent and energy.

Since there was no incentive for slaves to work any harder than they had to, they required constant supervision. Tools often broke “accidentally” so had to be stronger. Many forms of passive resistance made slave labor far from free. Some economists argue that the South would have been even richer and stronger with a free labor system.

ANTEBELLUM PLANTATION LIFE. A plantation resembled a small village. Sexual division of labor was less evident in the South than in the North, and southern women had immense responsibilities on the plantation. Both slave men and women worked as field hands. Slave children typically went to the fields around age ten.

THE PLANTATION SYSTEM:

SOUTHERN INDUSTRY: Diversification as salvation

• There was some manufacturing in the antebellum South. Cotton and water power made textile manufacturing profitable. But southern manufacturing was small in scale compared with the North; only 15 percent of the nation’s manufactured goods came from the South in 1860.
• In 1810 South has more manufactures than New England; cotton displaced everything else after War of 1812. Meanwhile industry booms in North;
• Southern capital put into cotton and slaves; by 1850 North far ahead, and South becomes economically dependent on North.
• Economic reformers (DeBow, Gregg) pushed textiles, etc. Tredegar Iron Works; Prattville, Alabama. Concentrated in upper South; slaves used; High per capita income ($184) compares well with rest of world

• Generally stagnant; no innovation, immigration.
• Planters with 20+ slaves—46,000 of 380,000 slave holders; 8,000 w/ 50; 2300 w/ 100; 11 w/ 500; 1 w/ 1000+
• Wealth and leisure for many, not all; hard work
• Women work hard too: "No slave like a wife"
• Attitude towards slaves determines their life;
• Middle Class: Overseers; yeoman farmers; businessmen
• Poor Whites: scratch farmers, wanderers, etc.
• Professionals; lawyers, doctors, etc. in planter class
• 40,000 slaves imported 1804-1808; Abolition or Colonization? Liberia established
• Northern Racism: Blacks had limited legal rights
• As the cotton culture spread westward, slavery strengthened its hold on the South.