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The American Economy in the 19th Century

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Nova Southeastern University

H. Wayne Huizenga School of Business and Entrepreneurship

ECON 2010 Macroeconomics

Chapter 1

Part 1: The American Economy in the 19th Century.

At the time of the American revolution, 9 out of every 10 Americans lived on a farm; 100 years

later, however, fewer than 1 out of every two people worked in agriculture.

The great abundance of land was the most influential factor in our economic development

during the 19th century. Not only did the availability of very cheap or free land attract millions

of immigrants to our shores, but it also encouraged early marriage and large families, since

every child was an additional worker to till the fields and handle the animals. Even more

important, this plentitude of land, compared to amount of labor, encouraged rapid technological


At the time of George Washington’s inauguration in 1789, there were about 4 million people

living in the United States. Our population reached 248.7 million in 1990, according to the U.S.

Census, and is now about 270 million. America’s large and growing population has been

extremely important as a market to our farmers and manufacturers. After World War II,

Japanese manufacturers targeted the American manufactured goods. Japan with just half our

population, and until very recently, much less the purchasing power than the United Stateshas

largely financed its industrial development with American dollars.

Although all regions of the United States remained primarily agricultural in the years following

the Civil War, New England, the Middle Atlantic states, and the Midwest with their already wellestablished

iron, steel, textile and apparel industries-were poised for a major industrial

expansion. In contrast, the South, whose economy was based on the cash crops of cotton,

tobacco, rice, and sugar, as well as on subsistence farming, remained primarily an agricultural

region well into the 20th century.

Times were bad for agriculture from the end of the Civil War until the close of the century. The

government’s liberal land policy, combined with increased mechanization, vastly expanded

farm output. The production of the nation’s three basic cash crops-corn, wheat and cotton-rose

faster than did its population through most of that period.

The National Railroad Network.

The completion of a national railroad network in the second half of the 19th century made

possible mass production, mass marketing, and mass consumption. Interestingly, however the

transcontinental lines all bypassed the South, which severely retarded its economic

development well into the 20th century. What the railroads did, in effect, was to weave the

country together into a huge social and economic unit, and eventually into the world’s first

mass market.

The Age of the Industrial Capitalist.

The last quarter of the 19th century was the age of the industrial capitalist. The great empire

builders-Carnegie (steel), Du Pont (chemicals), McCormick (farm equipment), Rockfeller (oil),

and Swift (meat packing), among others dominated this era.

Industrial Development.

By the turn of the century, America had become an industrial economy. Fewer than 4 in 10

people still lived on farms. We were among the world’s leaders in the production of steel, coal,

steamships, textiles, apparel, chemicals, and agricultural machinery.

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