1850-1877: Business and the Economy: Overview

The Midst of Change. The Civil War caught Americans in various stages of a profound economic transformation. Pockets of the nation, particularly in the Northeast and Midwest, had begun to industrialize and to lay the foundations for centralized, national market structures. In other regions, rural, local patterns of economic life still prevailed. And of course in the South, an economy built around slave labor and the export of agricultural commodities had taken deep root. Still, above the Mason-Dixon Line the pace of change began accelerating rapidly over the 1850s, driven above all by the railroads, which opened possibilities of enterprise on an unprecedented scale. The war itself checked some aspects of this change temporarily; others it intensified, especially as it destroyed Southern slavery and the economy it had supported. By 1877 it was becoming clear that the entire nation was being drawn into a new, recognizably modern economic system of making, earning, spending, and living.

Infrastructure. From a business viewpoint, the most important development of the mid 1800s was the laying down of a new infrastructure that was highly efficient, usable year-round, relatively inexpensive, and increasingly national in scope. Over earlier decades steamships and canals had begun the process. But it was railroads and the telegraph that would radically reshape the contours of American economic life. The first lines of rail transport and electronic communication were laid down in New England and the Middle Atlantic states in the 1830s and 1840s. Over the 1850s, 1860s, and 1870s rail corridors spread across the continent, into the Midwest, the Far West and the South. This shipping network in turn set off rapid, radical economic restructuring. Without the railroads, mass production, distribution, and consumption—the fundamental features of our modern economy—would have been inconceivable. With the railroads, they not only became workable, they happened with blazing speed.

Railroads as Business Pioneers. As the railroad network expanded, the scale of individual railroads’ business and financial structures grew apace. Starting in the 1850s, they became the biggest businesses the country had ever known—enterprises capitalized in the tens, then hundreds of millions of dollars, and employing thousands, then tens of thousands of workers. As shippers the railroads untapped vast new entrepreneurial possibilities; as businesses they presented the United States with its first taste of the challenges that big business in an industrialized, centralized economy would create. The railroads, in other words, posed new and important problems, in finance, in management, in labor relations, and in public policy.

Livelihoods. The signs of industrial development were clear by midcentury, but industrialization did not dislocate American agriculture. In 1880 as in 1850, over half of American workers worked on farms, and only one in twenty worked in manufacturing. Farmers easily outnumbered factory workers, and while the number of those employed in manufacturing climbed steadily, doubling between 1850 and 1870 and reaching 3.3 million by 1880, the number of agricultural workers grew at just about the same rate, reaching nearly 9 million by 1880. While factories, mines, and steel mills burgeoned, new farmers began cultivating vast stretches of the prairies in the Midwest. Even in the South, where forceful emancipation necessitated structural economic change, and where wartime destruction abruptly cut off economic growth, broad macroeconomic patterns—export commodity agriculture, especially the cultivation of cotton—remained intact.

Urbanization. Most Americans, then, continued to live and work in the countryside through and in fact well past 1877, on farms and plantations, or in small rural towns. Still, the pace of urbanization was mounting by midcentury. As factories grew in size and spread across the landscape they tended to gather workforces in clustered, urban locations. And as railroads centralized production and distribution, they centralized settlement, too. Thus between 1850 and 1860, while U.S. population as a whole grew 36 percent, the country’s urban population grew 75 percent—more than twice as fast. By 1880, the population of Manhattan had reached 1 million, nineteen other cities held populations of over 100,000, and more than half of the Americans living in the Northeast lived in cities.

Immigration. The expanding economy drew, and also drew on, waves of immigration. Over the late 1840s and 1850s, famine in western Europe drove hundreds of thousands of families to the United States, principally from Ireland and Germany. Some two million immigrants came through the Port of New York over the 1850s alone. Employers actively promoted immigration: companies such as the American Emigrant Company, established in New York, dispatched agents abroad to recruit foreign workers for American factories, railroads, and mining companies. On the West Coast, a parallel system developed to bring over Chinese immigrant labor. Congress endorsed the practice in 1864 in the Contract Labor Law, which authorized businesses to set up contracts abroad paying for passage in exchange for labor once an immigrant arrived. Immigration, in other words, tied in directly with economic growth; it represented a response to expansion, and it contributed to expansion too, by providing employers with a continuous stream of cheap labor.

Getting and Spending. In 1851 Horace Greeley’s New York Tribune published a weekly budget of $10.37 for an urban working-class family of five, allotting $3 for rent, 54 cents for fuel and candles, $2 for clothing, 25 cents for “wear and tear” of “household articles,” 12 cents for newspapers, and the remainder for foodstuffs: flour, sugar, butter, milk, butcher’s meat, potatoes, coffee and tea. But $10 was a weekly rate only an elite segment of New York’s skilled workmen could hope to earn; smiths and wheelwrights, for example, earned closer to $7.50. Common laborers and factory workers, lower on the social scale, earned substantially less: when workers in Lynn, Massachusetts, went on strike in 1860, male factory hands earned weekly wages of $3, and female workers $1, for workdays up to sixteen-hours long. Moreover, industrial and unskilled employment was frequently erratic, and wages tended to shrink during periods of economic downturn. In the depression of 1877 railroad brakemen (ranking near the bottom of the railroad salary scale) earned an average of $1.75 a day for a twelve hour day. Firemen (who shoveled coal and worked tender brakes) earned slightly more, $1.90 per day, while conductors commanded salaries of $2.78 per day.

Child Labor. American children worked not just on farms and in households, but in mills and factories in large numbers in the mid 1800s. The Civil War actually exacerbated the trend by draining the supply of adult male labor. By the end of the war as many as 13 percent of Massachusetts textile-mill workers were under sixteen; in Pennsylvania the proportion was closer to one-quarter. And the end of the war did not release children from working. By 1872 more than 10,000 children toiled in Philadelphia’s industrial workplaces. A year later, reformer Charles Loring Brace surveyed New York City factories and estimated that they employed 100,000 children, including boys and girls as young as four years old toiling in tobacco factories in New York neighbor hoods. Mill, factory, and sweatshop owners hired boys and girls because they earned less than adult workers—as little as a dollar a week. Advocates like Brace agitated against child labor, pushing for the formation of state investigations and regulations. Enacting legislation prohibiting child labor also became a major goal for emerging labor political movements. But even in those states that passed child labor laws, commitment to change was slow in taking hold, partly because lower-class families often desperately needed the extra income their children’s labor earned.

Sectional Trends. Industrialization, urbanization, and immigration occured throughout the country, but they concentrated especially strongly in the northern states. In New England manufacturing investment, broken down per capita, had topped $80 by 1860; while in the South as a whole the figure barely exceeded $10, and in the cotton South specifically it came in at $7.20. Antebellum Southern entrepreneurs tended overwhelmingly to sink their capital into agriculture—into plantations and slaves—while their Northern countrymen were investing in railroads, mines, and factories. Southern settlement patterns were correspondingly rural: whereas over 35 percent of New Englanders and residents of the Middle Atlantic states lived in cities in 1860 (including more than half of those living in Massachusetts and Rhode Island), less than 12 percent of southerners did. Pockets of urban and industrial activity had emerged in the South—in cities such as Richmond, for example, where slaves worked in iron forges, tobacco factories, and flour mills. But these pockets remained isolated. The changes transforming economy and society in the Northern states were not taking hold in the South, and as a result the two sections were growing more and more different, economically speaking.

“Robber Barrons” and the Republic. As industrialization worked its way into the American economy, it set off profound social changes—changes that stirred powerful popular concerns about where the nation was going. From diverse quarters, sharp protest resisted the new economy. Antebellum proslavery spokesmen, laboring to deflect criticism of conditions on Southern plantations, fulminated against conditions in the nation’s new cities and factories. Workers in many of the industries drawn into the factory system issued searching and impassioned denouncements of “wage slavery” and the power of the new industrial capitalists: as the National Labor Tribune put matters in 1874, “the working people of this country…suddenly find capital as rigid as any absolute monarchy.” In the countryside, farmers also felt their loss of autonomy keenly. These various critics spoke from sharply different perspectives, and for sharply different agendas. Yet all of them were concerned with how the new industrial economy could be made compatible with American institutions of government and ideology? This concern grew more pointed over the wartime and postbellum years, as the excesses of financial speculation surrounding and supporting railroad construction became lurid spectacles. It was an age that stirred profound anxiety—an age that made men such as Cornelius Vanderbilt and Jay Gould wildly rich, and made them infamous, too, as “Robber Barons.” Exposing the corrupt lobbying and influence-buying that underlay the struggle between these two titans over financial control of the Erie Railroad, Charles Francis Adams came to realize that the emergence of the railroads, the nation’s first big businesses, presented the United States with a situation it had never before encountered. Striving to express the situation, Adams groped for terms, and resorted an older image he knew his countrymen and his Revolutionary ancestors would appreciate: “It is a new power for which our language contains no name,” he warned Americans. “We know what aristocracy, autocracy, democracy are; but we have no word to express government by monied corporations.”