The United States went through the process of economic and social modernization during the six decades of the nineteenth century before the Civil War. Between the Revolutionary War and the Civil War, the U.S. economy began its gradual transformation into a vast and complex industrial system (Gallman & Wallis, 1992).
The U.S. Constitution came into effect in 1787 and established a common market in the entire nation, with no taxes or tariffs on interstate commerce. Alexander Hamilton was the first secretary of the treasury, and was chiefly responsible in creating the First Bank of the United States in 1791.
Hamilton strongly believed that the United States should pursue a diversified path of economic growth through shipping, manufacturing, and banking. The Bank and the policies of Alexander Hamilton formed the monetary and fiscal underpinnings of the new nation. A sound credit basis was established and a sophisticated capital market was about to grow (North 1961).
By the early 1790’s there was a new political stability and the economy was already doing well.
The country enjoyed an abundance of resources and its long run economic growth appeared promising. Between 1793 and 1808, the economic development of the United States was largely dependent on international trade and shipping. The American Northeast expanded at a very impressive pace during the period.
The outbreak of the European War in 1793, the imposition of the Embargo at the end of 1807, and the peace treaty of 1814 were very significant events for the economy before 1815, the year which brought an era of peace for the United States. There was a three-year depression that followed the end of the war, but the economy that was emerging was already markedly different from that of 1790.
The re-export and carrying trades, which had been the main sources of expansion in the economy during the boom years prior to the Embargo, started diminishing in importance generally. The radical decline in freight rates after 1818, revival of navigation laws, and stiff competition of other ocean carriers affected the carrying trade and it was no longer a major driving force in the economy.
In the years after 1807, the rapid development of manufacturing began to partially substitute the role of re-exports and shipping. The Industrial Revolution that began in Europe around the turn of the nineteenth century quickly spread to the United States, and it was to create the shape of things to come.
The dumping of English manufactured goods created a major setback for the newly evolving American industry, during the years 1815-1818. However, in spite of temporary setbacks, nothing could stop the long-term demographic growth, and the creation of new industries. New inventions and capital investment fostered industrial growth and economic expansion.
All the quantitative data available indicate that there was a significant and sustained improvement in economic performance between 1790 and 1860. By 1860 1/5th to 1/6th of the U.S. population lived in rapidly developing urban areas, and 1/3rd of the nation’s income came from manufacturing. However, the impact and contribution of the agricultural sector on the growing national economy has been a very significant one in these years.
Thriving agricultural areas emerged in the eastern United States in the early decades of the nineteenth century. These farms supplied the growing urban populations, and some of their produce was exported. Agriculture formed a robust basis for the economy in the eastern areas, and the number of farm laborers kept on growing until the advent of the Civil War. Interestingly, though rural farmers were leaving to the cities in search of better work in factories in large numbers, the farming community went on expanding.
In the East, in the regions of New England, Massachusetts, and Connecticut, the numbers of people employed in farming work reached its peak around 1840 and started dwindling only slowly in the next twenty years. In other regions like the Middle Atlantic region and states such as New York and Pennsylvania, the numbers of farmers either kept on increasing or were stabilized after 1840.
One of the reasons for the boom in agriculture was the access the agricultural areas had to cheap and convenient transport which could be used to reach markets in the cities.
As transportation improved, more markets opened. Rivers have become easier to traverse because of the steamboats, and even more importantly, expanding network of railroads opened up vast stretches of new territory in West for agricultural cultivation and development. From1820 onward, government and private sources invested substantial sums in paving canals; and from1835 on, railroad investment started increasing. However, the full impact of the transportation and communication revolution was to be felt only in the years after 1860, as prior to that, the old-fashioned wagon still served the agricultural community efficiently and many areas of the East were accessible by cheap and quick waterway transportation.
Within a range of about fifty miles, the cost of wagon transport was more affordable than alternative transport modes, but on condition that the commodities were of high value relative to their weight. These restrictions of weight and distance did not significantly impede the wagon transport of industrial manufactures and agricultural produce, hence the wagon prevailed for much longer time than would have been expected. But with growing pace of industrialization, the humble wagon was sooner or later bound to disappear.
Cities of the East such as Boston, New York, Philadelphia, Baltimore, together with their neighborhoods (forming metropolitan industrial complexes), became leading manufacturing centers, and other industrial centers too emerged in prosperous agricultural areas far away from these complexes. The East industrialized first followed by the Midwest, together they constituted the American Manufacturing Belt, whereas the South failed to catch up, though the West was not far behind.
The quality and efficiency of both American manufacturing and agriculture during the first half of the nineteenth century, was continuously enhanced by means of a wide range of practical inventions and innovations. Eli Whitney’s cotton gin, which separated raw cotton from waste material, perhaps first comes to the mind, and it was also one of the earliest too.
There were many other remarkable inventions which determined the direction of progress and change during this epoch; some of the more notable ones are Richard Chenaworth’s cast-iron plow, John Deere’s steel plow, Samuel Morse’s telegraph, and George Pullman’s sleeping car. Though Francis Cabot Lowell did not invent the power loom, he brought it from England and helped quicken the pace the industrial revolution in America.
Last but not least, there was a rapid expansion of slavery in the United States between the years 1790 and 1840. Slave system played a very important role in the creation of a national capitalist economy. It is claimed by some historians that the emergence of the United States as an industrial nation depended to a significant extent on the huge input provided by the slave labor at a time when labor was the scarce factor in the production function. Some estimates suggest that the contribution of slave workers to the national wealth between the period 1790-1850 was almost three times as much as that of free immigrant workers. Together, immigrant workers and black slave laborers formed the basis of rapid economic expansion.
Rates of growth accelerated over the whole period between 1790 and 1860, despite several temporary setbacks. Before 1800 the labor force and the capital stock sometimes grew faster than population, and sometimes a little more slowly. After 1800, however, the supplies of inputs typically grew at higher rates than did population. Productivity was dramatically improving in the northern regions, both in agricultural and industrial sectors. In effect, the aggregate economy of the United States was growing faster than any large economy had grown before. This set the trend for the decades and centuries to come.
Gallman, R. E. & Wallis, J. J. 1992. American Economic Growth and Standards of Living
before the Civil War. Chicago : The University of Chicago Press
North, D C. 1961. The Economic Growth of the United States, 1790-1860. Englewood Cliffs,
NJ : Prentice Hall.