Chapter III

1860-1900

The Civil War marked a notable turning point in the economic history of the United States. National development since 1860 has been shaped to a large degree by fundamental political and economic changes that occurred during the war--changes which were for the moat part the effect of various expedients resorted to by the federal government to bring the struggle for the preservation of the Union to a successful issue. To crush the military strength of the South the federal authorities adopted the expedient of the abolition of slavery, and to the surprise of both the North and the South "the cause of the conflict ceased before the conflict itself," and the nation emerged from the war freed of the greatest obstacle to its social homogeneity. To secure revenue for the prosecution of the war, the duties on imports were raised to an unprecedented point, and when Congress failed, after the return of peace, to reduce the tariff schedules to their former level, manufacturing interests found themselves protected by a tariff wall so high that foreign competition was largely eliminated. To secure needed aid in financing the costly struggle, Congress established the national banking system which gave greater uniformity to the currency and brought the financial centers of the country into closer relation. The anxiety to connect the Atlantic and Pacific coasts by rail led the federal government to adopt the practice of granting large subsidies to the builders of great transcontinental railway lines. The stimulation which the war gave to manufacturing and transportation in the North and the shrewd manipulation of the money market during the years of the national crisis made possible the accumulation and concentration of large quantities of capital funds under the control of a small number of persons.

It was inevitable that such radical changes would modify the course of industrial progress. Because of the importance of slavery as the underlying cause of the war, there has been a natural tendency to regard its abolition as the most striking and significant net result of the great conflict, but it is to be doubted whether the emancipation of the negro had as great an effect on subsequent economic development as the other innovations, which were so obscured by the turmoil of the war that they received but little attention and were regarded as being of much less significance. The complete transformation in the tariff policy of the nation permitted the growth of manufacturing to an extent that would have been impossible had the war not occurred; the construction of the transcontinental railroads had an immeasurable effect on the development of the great region west of the Missouri river; the concentration of capital provided the means by which industrial enterprises could be carried out on a gigantic scale; the establishment of a uniform currency and a better banking system accelerated the growth of industry and trade. It is in these changes that one finds the key to much of the economic history of the United States since the Civil War.

The period from 1860 to 1900 was one of development and exploitation. The years prior to the Civil War had been marked by the advance of the political dominion of the United States to the Pacific Ocean, and at the same time the nation had enjoyed an era of notable agricultural, industrial and commercial prosperity, especially in the states east of the Mississippi River. However, the tremendous possibilities of the country were only beginning to be realized in 1860, and remarkable as was development before that year, it was completely eclipsed by the amazing progress made during the latter part of the century. An abundance of unoccupied land, of rich and varied natural resources, favorable climatic conditions, a complete absence of checks on individual initiative and enterprise and of restrictions on internal communication and trade, and the encouragement afforded to industry by the liberal policies of the federal government all combined to create economic opportunities of boundless scope. Labor, capital and transportation facilities alone were needed and as these increased the wealth production of the United States multiplied with astonishing rapidity. The extension of the railway system permitted the constant growth of agriculture and rendered accessible the mineral and forest products in which the land abounded; cheap and plentiful raw materials from field, mine and forest, made possible a phenomenal increase of manufacturing. Multitudes of European immigrants, eager to share in the wealth of the new world, poured in and recruited the labor force necessary for the industrial conquest; and the invention and application of labor-saving machinery of every description increased many fold the effectiveness of the effort of each individual. All parts of the country participated in the material progress. The South, issuing quickly from the almost abject state of prostration in which it was left by the ravages of a disastrous war, became more prosperous and flourishing than ever; the Northern States east of the Mississippi constantly increased their agricultural production, and at the same time became one of the greatest manufacturing and mining districts in the world; on the prairie lands west of the Mississippi a new cereal kingdom was founded; the western plains were converted into great live stock ranches; the forests, orchards and grain fields of the Pacific States proved to be an even greater source of wealth than were their mines of gold and silver.

In the forty years following 1860 the number of people in the United States, exclusive of outlying possessions, rose from 31,000,000 to 76,000,000, the wealth of the nation grew from $16,000,000,000 to $89,000,000,000. These figures convey some idea of the progress of the country as a whole. Such an advance was possible only by the most rapid expansion of all the numerous lines of industry to which the resources and energies of the nation were devoted.

The growth of agriculture proceeded on a magnificent scale. Within two decades after the war the United States assumed the leading place among all nations of the world in the production of grain and live stock, maintaining at the same time its supremacy as a producer and exporter of cotton and tobacco. Countless thousands of acres of virgin soil west of the Mississippi River were given away under the provisions of the famous Homestead Act of 1862 and by 1880 the continent was practically settled from one coast to the other. The area of farm lands increased from 407,000,000 acres in 1859 to 841,000,000 acres in 1899, and the value of farm property rose from $8,000,000,000 to $21,000,000,000. The application of machinery to the cultivation of the soil and the substitution of horse and steam power for manual labor multiplied the productivity of each unit of land and labor. In 1899 the country produced from its fields 4,500,000,000 bushels of cereals, 9,500,000 bales of cotton, 79,000,000 tons of hay and 868,000,000 pounds of tobacco. The value of the live stock that year was $3,000,000,000, and the production of dairy products, poultry and eggs amounted to $750,000,000.

The output of the mines increased in value from $219,000,000 in 1869 to $1,107,000,000 in 1899. Over 240,000,000 tons of coal, 27,000,000 tons of iron ore, 270,000 tons of copper, and 63,000,000 barrels of petroleum were taken from the earth during the latter year.

The most significant feature of the economic history of the United States between 1860 and 1900 was the rise of manufacturing. The radical change in tariff policy, the rapid expansion of the home market due to the tremendous growth of agriculture and the spread of railroads, and the presence of an unlimited amount of cheap fuel and raw materials all combined to make manufacturing in some respects the dominant industry of the country. The value of the products of manufactures in 1899 reached a total of $13,000,000,000.

Simultaneously with the expansion of agriculture, the exploitation of natural resources and the rise of manufacturing, partly as an effect of them but almost equally as a cause, came the development of the great transportation system. This was the era of the railroad. Immediately after the war there began a period of extensive construction, over 35,000 miles of line being laid between 1865 and 1874. The first transcontinental line was completed in 1869. Unfortunately the enormous increase of mileage during these years was considerably in excess of the needs of the country, and the speculative fever which attended the expansion resulted in the panic of 1873. After a period of depression of five years there was a second and much greater revival of construction. Between 1878 and 1890 over 85,000 miles of new track were laid, including four transcontinental tracks completed and others partially finished. By 1900 there were 199,000 miles of railroad spreading a vast net over the entire country.

The important result of the growth and improvement of railways was the great reduction in the cost of transportation. At the close of the period before the war it had been demonstrated that railroads could economically carry high grade freight such as flour, live stock, lighter manufactured goods and general merchandise, but as yet they had been unable to compete successfully with waterways for the transportation of grain, and the carriage for long distances of such low-grade freight as coal and ore had not been attempted. As the railway developed, however, its use was extended, and it was soon found that there was no commodity so cheap that it could not be profitably handled. Accompanying the extension of the service to include all kinds of bulky freight there was an uninterrupted decline in the general level of rates on all classes of goods, resulting from the increased efficiency of roads, the stress of competition, and above all from the tremendous increase of traffic. The rate per ton per mile decreased from 1.92 cents in 1867 to 0.73 of a cent in 1900. This reduction of transportation charges was one of the most potent factors determining the course of economic progress. Field, mine, forest and store were linked together into a unified whole; raw materials could be concentrated at any point and there was practically no limit to the extent of the market for finished commodities. The increase of the tonnage of railway freight from less than 20,000,000 tons in 1860 to almost 600,000,000 tons in 1900 is the best index of the growth of internal trade during this period.

As the railways increased in importance, transportation on most of the inland waterways declined. Nearly 1,700 miles of canals were abandoned between 1860 and 1900. After 1880 there was a gradual decrease of nearly all canal and river traffic. The Great Lakes were practically the only inland waterway that retained an important position in internal trade. The unusually favorable conditions prevailing for the growth of traffic on these bodies of water enabled their commerce to thrive and expand at a rate which compared favorably at all times with the growth of railway traffic.

Commerce has been aptly defined as "taking things from where they are plentiful to where they are needed." This being true, the volume of internal commerce of any country must depend upon the number of its people, the total volume of its production, the sectional diversity of its products, the efficiency and cheapness of its transportation, and the freedom from foreign competition in the sale of native commodities in home markets. In the economic progress of the United States from 1860 to 1900, there was a continuous and rapid development of all the requisite factors for the existence of a large internal trade. Population more than doubled, annual production per capita quadrupled, the diversification of industry became more pronounced and the transportation system developed to a degree that afforded the utmost fluidity of movement of all articles of trade. Furthermore, the range of movement of internal trade was greatly widened by the settlement of the vast expanse of new country west of the Mississippi River.

The extent, volume and complexity of internal trade during this period render it impossible to attempt, within the scope of this paper, to give a connected account of its development. However, some idea of its wonderful expansion may be conveyed by the following brief statement of the growth of the movement of some of the most important commodities.

_Cereals and Flour._ The history of the internal grain trade from 1860 to 1900 centers around the receipts and shipments at the great primary grain markets situated on the Great Lakes and the rivers of the upper Mississippi Valley. In 1900 the chief surplus cereal area of the United States comprised a vast stretch of territory included in a semicircle described by a southern and western sweep of a compass moving on a radius extending from Duluth to Buffalo. Three-fourths of the 4,500,000,000 bushels of grain were raised in the twelve states embraced in this territory. The ten most important markets in the region, each of which was receiving annually from 10,000,000 to 300,000,000 bushels of grain, were Chicago, Minneapolis, Duluth-Superior, St. Louis, Milwaukee, Toledo, Kansas City, Peoria, Cincinnati and Detroit. From each of these points there radiated toward the South and West a network of railways over which grain came from the farming districts and over some of which there was a return movement of flour and grain for domestic consumption or for exportation from Gulf ports, while stretching to the eastward were numerous rail and water lines by which an immense cereal and flour traffic was carried to the manufacturing districts and exporting cities of the Atlantic coast. In 1900 the ten markets named received about 850,000,000 bushels of grain, including flour, and shipped 650,000,000 bushels.

_Live Stock and Meat._ The extension of railroads to the grazing lands of the West and the tremendous increase of corn production in the Mississippi Valley after 1860 gave a great impetus to live stock raising. Like the trade in grain the trade in live stock centered around a series of great cities located centrally within easy reach of the producing sections on one side and of the consuming region on the other. To these primary markets the railroads carried thousands of car loads of stock--horses and mules for distribution among the farms and cities of the East and South, cattle, hogs and sheep for slaughter at the packing houses at the primary markets, for distribution among the farms of the Central States to be fattened for subsequent killing, or for shipment to the slaughter pens of Eastern cities.

Until 1863 Cincinnati was the chief meat packing city of the country, but in that year Chicago took the lead and has held it ever since, and as the live stock industry shifted westward, St. Louis, Kansas City, Milwaukee, Indianapolis, Omaha and St. Joseph in turn surpassed Cincinnati in the business. The trade in meat was revolutionized during this period by the introduction of the refrigerator car which made possible the transportation of fresh meat for any distance. The total value of the products of wholesale slaughtering and meat packing in 1900 amounted in value to $700,000,000, of which more than one-half was produced in three cities, Chicago, Kansas City and South Omaha. In Chicago alone 2,000,000 cattle and 22,000,000 hogs were packed. The chief market for the numerous products of the packing establishments was in the manufacturing districts of the East. The eastbound rail shipments of provisions from Chicago in 1900 averaged about 20,000 tons a week.

_Cotton._ The geographical limits of the cotton belt had been reached before 1860 and consequently there was no further extension, but the cotton acreage was increased from about 13,000,000 acres to more than 30,000,000 acres during the period. Texas in 1900 had over 7,000,000 acres of land devoted to cotton raising and seven more of the thirteen states in the cotton belt each had an acreage of more than 1,000,000. The chief interior cotton markets in 1898 were Houston, St. Louis, Memphis, Augusta, Cincinnati, Atlanta, Little Rock and Shreveport. The city of Houston, through which passed a large part of the Texas crops, destined for export from Galveston, had the heaviest receipts amounting to 1,800,000 bales. St. Louis and Cincinnati owed their prominence to their position as natural gateways through which cotton passed to Northern markets from Texas and the lower valley of the Mississippi. Among the Southern seaports New Orleans held the lead in cotton receipts until 1899, when Galveston took first place. Together these two cities shipped nine-tenths of the cotton exported by the way of the Gulf of Mexico. On the Atlantic coast Savannah held the lead in cotton receipts. The trade of Charleston declined somewhat after 1880; Norfolk and Wilmington, of relatively small importance before the war, became large markets during this period, the former ranking next to Savannah after 1880.

The "overland movement" of cotton by rail to the North, which began in 1855, developed to large proportions after the war. This movement represented the results of the efforts of the railroads to secure a share of the traffic that had formerly belonged entirely to the coasting trade. The "overland" traffic originated in all the cotton states, most of it passing through St. Louis and the gateways on the Ohio and Potomac rivers to North Atlantic States to be sold to Eastern spinners or exported to Europe. In 1899 the all-rail movement of cotton amounted to 1,370,000 bales, as compared to a coastwise movement of 2,019,153 bales.

A noteworthy feature of the cotton trade of this period was the increase of cotton consumption in the South. After 1885 there was a rapid expansion of cotton manufacturing in several Southern States, and in 1899 their mills used 1,400,000 bales of cotton, only a third less than the number of bales consumed in Northern mills. The decline of cotton receipts at Charleston was largely due to the growth of cotton manufacturing in South Carolina, whose mills were consuming more than one-half of the annual product of the state at the close of the century.

_Coal._ Previous to 1860 practically all the coal shipped from the anthracite districts in Pennsylvania was transported to Philadelphia and New York where it was consumed or carried coastwise to points along the Atlantic seaboard. The movement to Eastern points continued to constitute the largest part of the anthracite trade after 1860, but a trade toward the West also sprang up. The chief route for this traffic was by canal or rail to Buffalo, from where it was distributed among other ports on the Great Lakes. Another important movement was to Pittsburgh, large quantities being shipped thither for distribution westward by rail.

Until the early sixties the production of bituminous coat was less than that of anthracite, but with the increase of manufacturing the production of the former increased rapidly and by 1900 the output, amounting to 190,000,000 tons, was nearly four times the output of anthracite. The great fields of Pennsylvania, West Virginia, Maryland and Ohio turned out much more than one-half of the bituminous coal mined during this period. From these fields there were large shipments in all directions. The Chesapeake and Ohio Canal and the southern trunk line railroads carried a heavy tonnage to the cities on the Atlantic seaboard; millions of tons were floated down the Ohio River; the railroads took immense quantities westward for consumption among the Central States, a large part of it being distributed by water from all the lake ports on the southern shore of Lake Erie. The second great center of bituminous coal trade was in the fields of Indiana, Illinois, Iowa, Missouri and Kansas, whence the numerous cities of that district drew most of their large fuel supplies. The third important center of production, which was developed very rapidly after 1885, was the Alabama and Tennessee field. It provided fuel for the growing manufacturing industries of the south-eastern portion of the country and competed for the coal trade of points on the lower Mississippi.

_Iron Ore, Iron and Steel._ The development of the movement of iron ore from the mines around Lake Superior to the furnaces of the Eastern States was one of the most interesting features of the internal trade of the United States during this entire period. This trade grew in volume from less than 1,000,000 tons in 1870 to 18,000,000 tons in 1899, the shipments during the latter year comprising two-thirds of the total iron ore production of the whole country. Practically the entire traffic went by lake vessels to ports on Lake Erie and Lake Michigan whence it was taken by rail to the blast furnaces of Pennsylvania, Ohio, New York and Illinois.

No other industry in the United States had a more remarkable growth after 1860 than the iron and steel industry. The production of pig iron in 1899 was nearly 15,000,000 tons, and of crude steel almost 11,000,000 tons. Pennsylvania contributed about one-half of the entire output of both pig iron and steel during the forty years, Ohio ranking second. The pig iron industry began to expand rapidly in Alabama and Illinois in the early eighties, and by 1900 the output of these two states constituted a fifth of the total product. The immense output of iron and steel was distributed everywhere throughout the country. A large part of it was used in building the railroads and the remainder was utilized as the raw material for the manufacture of a great variety of iron and steel products that were used in all branches of industry.

_Lumber._ The forests of the United States were subjected to a rapid and often wasteful exploitation during these years. Extensive building operations, the construction and maintenance of an enormous railway mileage and the growth of manufacturing created a heavy demand for timber, and by 1900 the annual cut amounted to 35,000,000,000 feet. The northeastern group of states which had formed the chief source of lumber supply before 1860, lost precedence by 1880 to the lake states, Michigan, Wisconsin and Minnesota. The tremendous consumption of timber throughout the country rapidly depleted the supply in this district and by 1900 the yellow pine of the South was being heavily drawn upon, forming a fourth of the production of the country. The timber lands of the Pacific coast contributed more than 2,000,000,000 feet a year after 1890, and the shipments of lumber and shingles from this region to the interior were beginning to take on very large proportions.

_Manufactures._ In 1859 the New England and Middle Atlantic States produced nearly three-fourths of the total manufactured products of the United States, and these two groups together with the Central States reported more than 80 per cent of the product of manufactures of each census year thereafter. In general, it may be said that the rest of the country was dependent upon these sections for its manufactured goods. The fact that over one-half of the product of 1899 came from five states, New York, Pennsylvania, Illinois, Massachusetts and Ohio, serves to designate still more clearly the chief centers of trade in manufactured goods. Of the fifteen leading manufacturing cities in 1899, twelve were located east of the Mississippi River and two were situated on its west bank. New York City alone produced in 1899 one-tenth of all the manufactures of the country and Chicago and Philadelphia together produced another tenth. The localization of many industries within the manufacturing belt itself was an important factor in determining the course of internal trade between the manufacturing states and the rest of the country and among the manufacturing states themselves, which were the largest consumers as well as the largest producers of manufactured goods. The increase in the value of the products of manufactures from $2,000,000,000 in 1859 to $13,000,000,000 in 1899 gives an idea of the expansion in the trade in manufactured commodities, the details of which it is impossible here to consider.

There were no other articles the movements of which equalled in importance those of the various commodities discussed above, but there were many that contributed a tonnage of large volume and value to internal trade. Dairy products, poultry and eggs, wool, hay, sugar, tobacco, fruits and vegetables from the farms, petroleum, gas, copper, stone and many other valuable mineral products, and the large annual quantity of imports of food products, manufactures and raw materials entering the seaports to be distributed among interior markets helped to swell the volume of traffic that moved from place to place within the country.

_Conclusion._ A most interesting and significant feature of the history of the United States during this period was the transition in the character of the economic problems of the country. Until the time of the Civil War its chief problems had been those of securing the means to develop its resources, of acquiring the facilities for transporting its products from place to place, and of providing markets in which its products could be sold. As capital, population and transportation facilities were provided to exploit the latent wealth of the continent it was found that out of their presence grew far larger and more vital problems than their absence had ever created. The economic difficulties of the nation after the Civil War arose chiefly because of the existence of the things which before 1860 it was a question of acquiring.

In no instance was this general proposition better demonstrated than in the railroad problem. For nearly sixty years of the nineteenth century the chief obstacle to internal trade had been the lack of the means of transportation. To overcome this difficulty the states had first built their own canals and railroads. Many of the state enterprises failing because of weak administration, the states had surrendered the management of railroads to private corporations, but the public continued to share in railroad construction through numerous grants of aid by federal, state and local governments. For a number of years almost the only activity of the public in regard to railroads was to foster and protect the interests of the railroad companies. In the seventies the public gradually came to a realization of the fact that the railroad companies were displaying a lamentable lack of regard for the interests of the public. Persons and communities found themselves entirely at the mercy of railroad corporations, which, by vicious discriminations, built up and destroyed where they chose, and even endeavored to control arbitrarily the economic future of entire groups of states regardless of their natural advantages or the choice of their people. And not only did the railroad companies themselves become a source of danger, but they were instrumental in the creation and development of great industrial combinations, which were equally indifferent to the welfare of the general public. The transportation problem of the United States was no longer that of providing facilities, but of controlling and regulating the existing facilities in such a manner that reasonable rates and services would be given to the public which had entrusted the business of transportation to private agencies. The demand for relief was first voiced in state legislation. The states being powerless to regulate interstate trade, the national government found it necessary to act, and, in 1887, the Interstate Commerce Law was passed, having for its chief purpose the prevention of unjust discrimination. As a regulative measure the law proved inadequate, its most important provisions being emasculated by court decisions, and the century ended with effective railway regulation unaccomplished.

No less pressing than the problem of regulating railroads, over which the internal commerce of the nation was carried on, was the question of regulating the great industrial combinations through which a large part of the buying and selling of the products of the country was controlled. The unfair advantages secured by large combinations because of their abundance of capital and the discriminating favors of railroads enabled them often to throttle competition and to establish monopolies that were a menace to the public. This situation likewise called forth federal legislative measures intended to prevent the monopolization of trade. Previous to 1900, however, but little application of the law was made.

To the tariff and to the currency the nation owed its most bitter political struggles after the reconstruction of the Union was accomplished. The net result of a half dozen efforts to modify the tariff was the existence, at the end of a century, of a tariff law in which the general average of duties was 10 per cent higher than the average at the close of the Civil War. The currency system of the nation, with the exception of the improvement in banking, became worse instead of better after the war, the chief trouble arising because of the adoption of measures intended to satisfy insistent demands for a greater volume of money, without making provision for its retirement when business conditions were such as to warrant a contraction of circulation. A quarter of a century of struggle finally ended in the overthrow of the advocates of the unlimited issue of cheap money, but no attempt was made before 1900 to remedy the inelasticity of the national currency or to check the tendency toward a concentration of the control of credit in a few financial centers. In 1873 and in 1893 the country suffered from money panics, the latter one being due almost entirely to unwise financial measures that had virtually bankrupted the government and destroyed confidence in the money it issued.

The end of the century was reached with only a little headway made in the solution of the most vital economic problems. In striking contrast to the "golden age" of American history, noted for the absence of both pauperism and great riches, this period saw the development of the extremes of poverty and wealth, and, furthermore, an ever-growing tendency toward the concentration of the national wealth under the control of a few powerful interests. The disregard which too many of these interests evinced for the welfare of the general public and the power which they possessed to thwart the efforts of the public to protect itself created most of the great questions which confronted the nation--questions of such serious nature as to dim the record of achievement and material progress from 1860 to 1900.

However there was ample evidence that the national consciousness was beginning to take cognizance of much of the prevailing maladjustment and was awakening to a sense of duty--long undone. A growing sense of personal responsibility both on the part of those who suffered from existing conditions and on the part of those who profited by them was paving the way for a speedy application and a willing acceptance of a system of conservative public regulation of private business in which careful consideration would be given to the rights of all persons. In the intelligent realization of the meaning of the existing situation lay the basis of a dear perception of the proper steps to be taken and a strong hope for the immediate future.