Analysis of economic growth in the US 1815-1860

The period between the American Revolution and the Civil War had great significance for the United States’ economy. Although initially the economy seemed unstable at first, after the second war that America fought with England, the economy began to show considerable growth thereafter. This can be seen as the result of the cotton trade in the South and the eventual industrialisation of America, especially in the Northeast and later the West. From the invention of cotton gins to the adaptation of railways one can see how the United States used their opportunities and resources to their full advantage, transforming their economy to be able to compete among the worlds leading economical countries.

‘The year 1793 was a doubly significant one in American economic history.’ This statement by the historian D. C. North illustrates the favourable conditions the United States experienced. This was the year in which Britain went to war with France, a war that lasted until1815. Moreover in the same year Eli Whitney invented the cotton gin allowing America to promote their cotton trade and increase their economic activity. This fact and the existence of the war meant that the United States could carry on with world trade as the shipping of France and England had consequently been tied up. Indeed the United States took full advantage of this scenario in order to promote productivity. Domestic exports greatly increased as the cotton trade spread rapidly over the South in response to the growing demand from English textile mills. In addition the United States was able to purchase more imports for itself from the received revenue of its mass exports.

However as is usually the case in an economy, the situation did not last for very long and when France and Britain reached temporary peace from 1801-1803, the United States experienced a significant decline in trade. Having said this, as peace was broken, another period of expansion took place until 1807. This economic development and increased productivity can be accounted for due to the growth in the size of the market available for exploitation. From this came increased revenue and America came to be ‘…better off than ever before.’ Again as the historian North explains, ‘There can be no doubt that the years 1793 through 1807 were extraordinarily prosperous for the American economy.’

This prosperity was halted in the following year of 1808 and America experienced depression and unemployment as the United States President enforced an embargo on trade, in fear of rising tensions with the British. As prices of manufactured goods rose dramatically, businessmen were thus eager to put capital into the economy. This can be seen through the fact that before 1808 only 15 cotton mills existed yet by 1809 an extra 87 mills were in operation. Nevertheless these higher prices of manufactured goods disillusioned the American economy and as North explains, ‘It is clear that American capital would at that time have been more profitably employed…’ in particular in shipping. The earnings from which should have been used to purchase British manufactures, as they were just too competitive in terms of price when compared to American goods. Thus it can be concluded that the embargo and the war forced an inefficient course on American manufacturing.

However it appears that the economic growth which had been achieved prior to this had laid down a strong foundation for the economic growth which was eventually to come in the future. It was not until the second war with England came to an end that America began to show significant steps in promoting its economy. This was a period of readjustment for American industry from the above-described situation. What stood against them was the fact that the United States’ relationship with the rest of Europe remained unaltered, hindered by European merchant policies. The big difference was the invention of the cotton gin and the cotton trade in the South and without doubt ‘…cotton made the big difference in the economy after 1815,…exerting an important influence in the national pattern of development.’ In the early nineteenth century Britain was experiencing the joys of industrial revolution with its prime product being cotton, which the factory system evolved around. Britain therefore determined American industry at this point due to its need of cotton and ‘It was the behaviour of prices that decided the way southern development was to take place.’

Due to this, the economy of America at this period of time was centred around cotton and as Clement Eaton stated, ‘After the invention of the cotton gin in 1793, the tempo of life in the South quickened.’ The industry was able to achieve large profits through the use of slaves-the cheapest labour of all-and eventually ‘Three-fourths of the world’s supply of cotton came from the southern states.’

Although the South produced the huge amounts of cotton needed, and exported it as a primary product to the rest of the world, it did not lead the way in industrialisation-this was dominated by the Northeast. What America lacked was manufacturing efficiency and as the Historian J.G.Rayback explains the war made ‘Americans profoundly aware of other areas besides their own; in the post-Revolutionary period they made a vigorous effort to increase their knowledge of the entire nation and to take advantage of its limitless opportunities.’

It was from this that the merchant-capitalist arose becoming the significant figure behind the American factory system, wanting to promote economic growth for his own benefit but benefiting the whole country at the same time. Progress was slow until1815 when a power loom for weaving was perfected, greatly increasing the efficiency of the textile industry. This was known as the Waltham-Lowell system where cotton was ‘carded, spun and woven into cloth.’ under the same roof. The significance of the system, set up in Massachusetts, is recognised by R.F.Dalzell, JR who states, ‘…the Waltham-Lowell system represented the greatest single concentration of industrial sources in the United States.’ This started the process and by 1850 cotton textile production was wholly mechanized. Similar transitions in other industries also took place, contributing greatly to the overall American economy. These could be seen in the woollen textile industry and iron industry.

These innovations were only possible through technological transfer between the United States and the world leader, Great Britain. Initially this came from immigrants as technology carriers such as James Montgomery, a Glasgow cotton mill manager who emigrated to New York in 1836 who wrote ‘…extremely informative and influential books about early cotton technology.’ He made the first exact reliable comparison of British and American manufacture costs and therefore increased productivity.

The other significant part of the United States was the West. The West in comparison to the South and the Northeast was more diversified, primarily providing cereal commodities yet also traded in various other goods, such as lead and other natural resources. As North states, the west ‘…was destined to become a more broadly based economy and one in which manufacturing would later develop…’ in the period after the Civil War.

Having said this industrialisation in the Northeast can not fully claim credit for the rapid growth in American economy, instead each area was interdependent on each other. It was the opening of the transportation network that allowed for these lucrative trade opportunities. The first link was formed due to the introduction of steamboats, allowing products to flow, via the Mississippi and other rivers, to each area concerned with trade. Later, roads and canals opened up even more of these trade routes, both internally and externally to the many seaports which existed; yet the most important evolution was that of the Railroads. As before, just like the factory system the technology for this had to be adopted from Britain. Even up until the middle of the nineteenth century Britain had to supply parts to America but as time progressed the United States began to manufacture their own, consequently adding to their own economy. The railway’s importance is portrayed by the following statement by Dalzell who says ‘The coming of the railway altered everything…For the first time significant industry developed.’

Overall ‘It was the whole American economy that was responsible for the growth, since productivity was increasing in each region.’ This was being achieved through technicians, skilled engineers and craftsmen adopting and modifying British ways to their advantage. Technological progress was also important and together with increased efficient organisation, the American market was able to expand. Of course larger markets meant reduced costs and advantages were taken advantage of, of the economies of scale open to them. Indeed the most significant development in the period 1815-1860 was the area of manufacturing with a recognisable version of a textile industry being achieved by the 1820s.