EARLY REPUBLIC TO CIVIL WAR, 1815–1860 (OVERVIEW)

At the end of the War of 1812 (1812–1814) the U.S. economy was overwhelmingly agricultural. It had a small industrial base concentrated in the Blackstone and Merrimac river valleys of New England and the Delaware River valley between Philadelphia and Wilmington, Delaware. The largest manufacturing industry was flour milling, followed by the production of leather goods, and then other food processing, including distilling. The iron, chemical, paper, and textile industries were very small.

During this period most industry was still carried out by the putting out system (in which craftsmen and their families did work in their homes). In 1810 ninety percent of the textile production in the nation was still done in homes, even though the textile industry was among the most industrialized in the nation at the time. The total value of manufacturing production was approximately $200 million.

By 1860, however, there were over 140,000 manufacturing establishments employing more than 1.3 million people to produce just under $2 billion in products. Very little of this output was produced by the putting out system, except in the shoe industry. Nearly all of this industrial growth took place north of Chesapeake Bay. By this time the United States was second in the world in manufacturing production behind only Great Britain. Between 1810 and 1860 the nation's population increased over four-fold, from 7.2 million to 31.5 million, with most of the growth occurring in the industrializing areas.

The economy in 1815 was not only largely agricultural, but it was also very localized due to poor roads. It was difficult to move bulky goods over any significant distance, with few alternatives for transportation outside the areas that could ship by river or sea. Steamboats, however, began sailing rivers in 1807 and by the 1840s they carried 10 million tons of freight a year on the Ohio, Mississippi and other western rivers. Steamboats were much faster than sailboats, but their period of dominance was brief due to the rise of canals and railroads.

In 1825 the Erie Canal connecting New York City to the Great Lakes at Buffalo opened. Its immediate success led to a boom that saw canal construction increase dramatically. By 1840 there were 3,300 miles of canal in operation. However a decade later canal construction plans were being abandoned due to competition from the railroads. In the 1830s railroads began to appear and by 1860 the nation had over 30,000 miles of rail in operation. Local, state, and federal governments subsidized both canal and railroad construction as well as river and harbor improvements to facilitate transportation. The construction of this transportation network was a major factor in the economy, employing large numbers of people and facilitating the movement of raw materials and manufactured goods. Most importantly it allowed the inexpensive and efficient movement of food from the west to the industrial cities of the northeast.

Plantation slavery dominated the South during this period. The invention of the cotton gin in 1793 by Eli Whitney increased the potential profit in growing the short-staple cotton that grew well in the interior parts of the South. The expansion of the textile industry both in England and the northeastern United States provided a large and expanding market for the crop. Cotton production increased from just 209,000 bales in 1815 to almost 5.4 million in 1859. Planters moved their slaves in large numbers to the interior of Virginia, North and South Carolina, Georgia, Alabama, Mississippi, Arkansas, Louisiana, and Texas. World demand for cotton kept pace with increasing production and cotton plantations were highly profitable during most of the period leading up to the American Civil War (1861–1865). Tobacco growing did continue in Virginia and North Carolina as well as sugar cane and rice growing in coastal Carolina, Georgia, and Louisiana. But cotton dominated the Southern economy and drove the political agenda of the Southern states. For example, railroad development in the South focused on short transport routes that moved cotton to the nearest river rather than an integrated system tying the region together. (Integrated transportation systems were only beginning to appear when the Civil War began.)

Cotton plantations were highly specialized: nearly all available land was planted in cotton while food and other goods were purchased from those areas in the upper South that were not well-suited to cotton, particularly Kentucky. Slavery was only marginally profitable in those areas that did not grow cotton, but the demand for slaves in the cotton areas kept slave prices high. A large internal slave trade developed rapidly after the importation of slaves ended in 1808. Southern capital was largely invested in land and slaves for the production of cotton and the economy of the region was highly specialized by 1860.

Industry in the Northeast began to develop in several areas, initially using waterpower. For generations northerners had ground grain into flour, fulled cloth, and cut lumber using water-powered mills. There was an extensive community of millwrights familiar with water-powered machinery and who had worked on ways to mechanize work in those mills. For years northern merchants had traveled all over the world carrying world commerce and accumulating capital. In 1790 Samuel Slater brought detailed knowledge of the new British textile technology to the United States. With the support of Moses Brown he built a wool mill and a machine shop at Pawtucket, Rhode Island. Slater's venture was almost immediately successful and gave the community of millwrights enough information to not only replicate the British machinery, but to begin independently improving it.

After the War of 1812 capital in the United States began to shift away from trade to domestic manufacturing. The Tariff of 1816 was the first truly protective tariff; it provided a secure environment for investment in factories. As a result, the textile industry, especially cotton textiles, began to expand rapidly. Cotton textile production increased from 600,000 yards in 1810 to 141.1 million yards in 1830, and ultimately reached over 857 million yards in 1860.

The scale of textile factories changed during this period. The small mills with a few dozen spindles and looms that characterized the initial period of the industry gave way to larger complexes. This pattern began with the Boston Associates complex at Waltham, Massachusetts. Waltham itself soon appeared small as the Boston Associates developed Lowell on the Merrimac River. The population of Lowell increased from 2,500 in 1826 to 35,000 in 1850. The Lowell Machine Shop became a center for innovation not only in textile machinery but waterpower technology as well. It also trained a generation of industrial engineers that spread throughout the economy. Lowell attracted further international attention because of its labor system that employed young women housed in corporate boarding houses with an extensive corporate welfare and cultural program.

The expansion of textile manufacturing was not only important in its own terms but also as a stimulus to the machine tool industry. This industry began developing machinery for a wide range of industrial activities, as well as iron and steel production. A key element of the machine tool industry was its emphasis on interchangeable parts for machinery. Known as the American system of manufacturing, it entailed an increasing range of products manufactured by machines that turned out identical objects and could be operated by a minimally skilled operator. The skill needed was built into the machine.

The increased demand for iron led to the expansion of what had been a small industry making iron with charcoal at a large number of small-scale furnaces and forges spread across the country. The new furnaces and forges were much larger in scale and capitalization, and they increasingly used coal to produce higher quality iron and steel. They used the Bessemer Process discovered by William Kelly (1811–1888), a west Kentucky iron master. The discovery of extensive deposits of rich iron and copper in the Upper Peninsula of Michigan further contributed to the rapid development of the iron and steel industry. The completion of locks at Sault Ste. Marie in 1855 removed a major obstacle in the shipping of iron ore and copper to Cleveland and to the emerging iron and steel center at Pittsburgh.

The growth of large cities in the industrial northeast created a tremendous demand for food. The Erie Canal allowed the relatively inexpensive transport of bulky foodstuffs from western New York, Ohio, Indiana, and Illinois. Feeder canals and eventually railroads within those states expanded the transportation network, moving larger and larger amounts of food to the growing industrial cities. Agriculture in the Midwest was a large-scale commercial activity raising crops and livestock for sale to the east. The transportation system involving railroads, canals, and the Great Lakes linked the east and the Midwest, binding them together into a single economic unit. As commercial agriculture expanded in the Midwest farming declined in the northeast and the scale of farms increased. While 70 percent of the North's population lived on farms in 1820, by 1860 this figure was down to only 41 percent.

An important element in the development of the northeastern manufacturing economy was the large number of immigrants who arrived in the country during the 1820s. With the exception of a few southern seaports like Savannah most immigrants came to the North because of the greater economic opportunity there. Between 1820 and 1860 some five million people came to the United States, the vast majority of them derived from western Europe: as much as 85 percent came from Ireland, Germany, and Great Britain. Immigrants provided labor for expanding industries and for the construction of canals and railroads. The rapid expansion of population in the emerging industrial cities was a further stimulus to the economy, creating a tremendous demand for housing and other infrastructure.

During this period there were two largely separate economies north and south of the Ohio River. There were some connections between the two—northern textile mills used southern cotton and the South imported some manufactured goods from the North. But otherwise the two economies were almost entirely independent of one another. This can be seen clearly in their transportation systems, each built to facilitate the operation of its economy. The two systems connected at only one point in 1860: Bowling Green, Kentucky.

The economy in 1860 was not only much larger than it had been in 1810, it also produced a much wider range of products than ever before. The industrialization of the economy changed the material lives of people living in the United States. This involved new products and improved every day items, as well as lower prices due to the increasing efficiency of industrial production.