Industry and Economy during the Civil War By

By Benjamin T. Arrington, National Park Service

The American economy was caught in transition on the eve of the Civil War. What had been an almost purely agricultural economy in 1800 was in the first stages of an industrial revolution which would result in the United States becoming one of the world's leading industrial powers by 1900. But the beginnings of the industrial revolution in the prewar years was almost exclusively limited to the regions north of the Mason-Dixon line, leaving much of the South far behind.

In 1860, the South was still predominantly agricultural, highly dependent upon the sale of goods to a world market. By 1815, cotton was the most valuable export in the United States; by 1840, it was worth more than all other exports combined. But while the southern states produced two-thirds of the world's supply of cotton, the South had little manufacturing capability, about 29 percent of the railroad tracks, and only 13 percent of the nation's banks. The South did experiment with using slave labor in manufacturing, but for the most part it was well satisfied with its agricultural economy.

The North, by contrast, was well on its way toward a commercial and manufacturing economy, which would have a direct impact on its war making ability. By 1860, 90 percent of the nation's manufacturing output came from northern states. The North produced 17 times more cotton and woolen textiles than the South, 30 times more leather goods, 20 times more pig iron, and 32 times more firearms. The North produced 3,200 firearms to every 100 produced in the South. Only about 40 percent of the Northern population was still engaged in agriculture by 1860, as compared to 84 percent of the South.

Even in the agricultural sector, Northern farmers were out-producing their southern counterparts in several important areas, as Southern agriculture remained labor intensive while northern agriculture became increasingly mechanized. By 1860, the free states had nearly twice the value of farm machinery per acre and per farm worker as did the slave states, leading to increased productivity. As a result, in 1860, the Northern states produced half of the nation's corn, four-fifths of its wheat, and seven-eighths of its oats.

The industrialization of the northern states had an impact upon urbanization and immigration. Between 1850 and 1900, the population more than tripled. In 1850, there were 23 million Americans; by 1900, there were 76 million. By 1860, 26 percent of the Northern population lived in urban areas, led by the remarkable growth of cities such as Chicago, Cincinnati, Cleveland, and Detroit, with their farm-machinery, food-processing, machine-tool, and railroad equipment factories. Only about a tenth of the southern population lived in urban areas.

Northern free states attracted the vast majority of the waves of European immigration through the mid-19th century, with more than 87% of foreign immigrants settling in the free states. As a consequence, the population of the states that stayed in the Union (North) was approximately 23 million as compared to a population of 9 million in the states of the Confederacy (South).

The Southern lag in industrial development was not due to economic disadvantages. There was great wealth in the South, but it was primarily tied up in the slave economy. In 1860, the economic value of slaves in the United States exceeded the value of all of the nation's railroads, factories, and banks combined. On the eve of the Civil War, cotton prices were at an all-time high. The Confederate leaders were confident that the importance of cotton on the world market, particularly in England and France, would provide the South with the diplomatic and military assistance they needed for victory.

As both the North and the South mobilized for war, the relative strengths and weaknesses of the "free market" and the "slave labor" economic systems became increasingly clear - particularly in their ability to support and sustain a war economy. The Union's industrial and economic capacity soared during the war as the North continued its rapid industrialization to suppress the rebellion. In the South, a smaller industrial base, fewer rail lines, and an agricultural economy based upon slave labor made providing the resources needed for war more difficult. As the war dragged on, the Union's advantages in factories, railroads, and manpower put the Confederacy at a great disadvantage.

Nearly every sector of the Union economy witnessed increased production. Mechanization of farming allowed a single farmer growing crops such as corn or wheat to plant, harvest, and process much more than was possible when hand and animal power were the only available tools. (By 1860, a threshing machine could thresh 12 times as much grain per hour as could six men.) This mechanization became even more important as many farmers left home to enlist in the Union military. Those remaining behind could continue to manage the farm through the use of labor-saving devices like reapers and horse-drawn planters.

Northern transportation industries boomed during the conflict as well--particularly railroads. The North's larger number of tracks and better ability to construct and move parts gave it a distinct advantage over the South. Union forces moving south or west to fight often rode to battle on trains traveling on freshly lain tracks.

Other Northern industries--weapons manufacturing, leather goods, iron production, textiles--grew and improved as the war progressed. The same was not true in the South. The disadvantages of a smaller industrial economy and having so much of the war fought in the South hampered Confederate growth and development. Southern farmers were hampered in their ability to sell their goods overseas due to Union naval blockades. Union invasions into the South resulted in the capture of Southern transportation and manufacturing facilities.

The Southern economy, while shaky throughout the war, grew worse in its later years. The Emancipation Proclamation threatened the very existence of its primary labor source, slaves.

William T. Sherman's Union troops laid waste to much of the Georgia countryside during the Atlanta Campaign and the subsequent "March to the Sea." Sherman's campaigns inflicted massive damage to Southern industry, agriculture and infrastructure. His soldiers destroyed rail lines and captured the major economic and transportation hub of Atlanta and the critical seaport of Savannah. Sherman himself later estimated that this campaign, which eventually moved north and similarly impacted the Carolinas, caused $100 million of destruction.

When Lincoln became president in March 1861, he faced a divided nation, but also a Congress dominated by Republicans after many Southern Democratic members left to join the Confederacy. Lincoln and congressional Republicans seized this opportunity to enact several pieces of legislation that had stalled in Congress for years due to strong Southern opposition. Many of these bills set the course for the United States to emerge by war's end as a nation with enormous economic potential and poised for a massive and rapid westward expansion. When Southerners left Congress, the war actually provided the North with an opportunity to establish and dominate America's industrial and economic future.

Foremost among these bills was the Homestead Act, a popular measure regularly debated in Congress since the 1840s. This law was signed into law on May 20, 1862 and granted anyone who had never taken up arms against the U.S. government, was 21 years or older, or the head of a family to file an application to claim up to 160 acres of undeveloped federal land outside the 13 original colonies. For the next 5 years, the homesteader had to live on the land and improve it by building a 12-by-14 dwelling and growing crops. After 5 years, the homesteader could file for the deed of title. Southerners had opposed the Homestead Act fearing it would severely restrict any opportunity to expand slavery into the areas where settlement would be likely.

Another major initiative was the Pacific Railway Act, approved by President Lincoln on July 1, 1862. Before the Civil War, Northerners and Southerners had been unable to agree on a route for a Transcontinental Railroad. Southerners wanted a railroad built along a southern route. Northerners, not surprisingly, wanted a Northern route. Once Southerners left Congress at the beginning of the war, Republicans passed legislation that actually dictated a so-called "middle route" with an eastern terminal at Omaha and a western one at Sacramento. After the war, separate crews of engineers and laborers worked from California eastward and from the middle of the country westward. The construction of the first transcontinental railroad meant jobs for thousands in factories producing tracks and tools as well as those that labored for years to lay the tracks across rough terrain. It also meant the literal and symbolic linking of East and West and decreased travel times for passengers and goods. It improved commercial opportunities, the construction of towns along both lines, a quicker route to markets for farm products, and other economic and industrial changes.

For better or worse, the political philosophies underlying the creation of the Confederate States of America, with its emphasis upon a strong state and a weak central government, coupled with its vast investments in a slave-labor-based agricultural economy, meant that the South had neither the ability nor the desire to develop the kind of industrial economy or centralized financial system required to sustain a "modern" war. By contrast, the Union's willingness and ability to vastly increase the influence and footprint of the federal government not only contributed directly to its military success in the war, but it also transformed many other areas of national life, including industrial, economic, agricultural, mechanical, and financial realms. Simply put, the United States of America would be a very different nation today than had the war never been fought. If we are truly the world's last remaining superpower, then it is, at least partially, the massive industrial and economic expansion enabled by the Civil War that allowed us to ascend to that role in the first place.