The Economy on the Eve of Civil War 341The railroads, like the textile industry, stimulated
other kinds of economic activity. They transformed
agriculture; both real estate values and the buying and
selling of land increased whenever the iron horse puffed
into a new district. The railroads spurred regional con-
centration of industry and an increase in the size of
business units. Their insatiable need for capital stimu-
lated the growth of investment banking. Their massive
size required the creation of complex structures and the
employment of salaried managers.
The railroads consumed nearly half the nation’s
output of bar and sheet iron in 1860. Probably
more labor and more capital were occupied in eco-
nomic activities resulting from the development of
railroads than in the roads themselves—another way
of saying that the railroads were immensely valuable
internal improvements.
The proliferation of trunk lines and the competi-
tion of the canal system (for many products the slow-
ness of canal transportation was not a serious
handicap) led to a sharp decline in freight and passen-
ger rates. Cheap transportation had a revolutionary
effect on western agriculture. Farmers in Iowa could
now raise grain to feed the factory workers of Lowell
and even of Manchester, England. Two-thirds of the
meat consumed in New York City was soon arriving
by rail from beyond the Appalachians. The center of
American wheat production shifted westward to
Illinois, Wisconsin, and Indiana. When the Crimean
War (1853–1856) and European crop failures
increased foreign demand, these regions boomed.
Success bred success for farmers and for the railroads.
Profits earned from carrying wheat enabled the roads
to build feeder lines that opened up still wider areas
to commercial agriculture and made it easy to bring
in lumber, farm machinery, household furnishings,
and the settlers themselves at low cost.
Railroads and the Sectional Conflict
Increased production and cheap transportation
boosted the western farmer’s income and standard of
living. The days of isolation and self-sufficiency, even
for the family on the edge of the frontier, rapidly dis-
appeared. Pioneers quickly became operators of
businesses and, to a far greater extent than their fore-
bears, consumers, buying all sorts of manufactured
articles that their ancestors had made for themselves
or done without. These changes had their costs. Like
southern planters, they now became dependent on
middlemen and lost some of their feeling of self-
reliance. Overproduction became a problem. Buying
a farm began to require more capital, for as profits
increased, so did the price of land. Machinery was an
additional expense. The proportion of farm laborers
and tenants increased.
The linking of the East and West had fateful
effects on politics. The increased ease of movement
from section to section and the ever more complex
social and economic integration of the East and
West stimulated nationalism and thus became a force
for the preservation of the Union. Without the rail-
roads and canals, Illinois and Iowa would scarcely
have dared to side against the South in 1861. When
the Mississippi ceased to be essential to them, citi-
zens of the upper valley could afford to be more
hostile to slavery and especially to its westward
extension. Economic ties with the Northeast rein-
forced cultural connections.
The South might have preserved its influence
in the Northwest if it had pressed forward its own
railroad-building program. It failed to do so. There
were many southern lines but nothing like a south-
ern system. As late as 1856 one could get from
Memphis to Richmond or Charleston only by very
indirect routes. As late as 1859 the land-grant road
extending the Illinois Central to Mobile, Alabama,
was not complete, nor did any economical connec-
tion exist between Chicago and New Orleans.
This state of affairs could be accounted for in
part by the scattered population of the South, the
paucity of passenger traffic, the seasonal nature of
much of the freight business, and the absence of large
cities. Southerners placed too much reliance on the
Mississippi: The fact that traffic on the river contin-
ued to be heavy throughout the 1850s blinded them
to the precipitous rate at which their relative share of
the nation’s trade was declining. But the fundamental
cause of the South’s backwardness in railroad con-
struction was the attitude of its leaders. Southerners
of means were no more interested in commerce than
in industry; their capital found other outlets.The Economy on the Eve of Civil War
Between the mid-1840s and the mid-1850s the United
States experienced one of the most remarkable periods
of growth in the history of the world. Every economic
indicator surged forward: manufacturing, grain and
cotton production, population, railroad mileage, gold
production, sales of public land. The building of the
railroads stimulated business, and by making trans-
portation cheaper, the completed lines energized the
nation’s economy. The American System that Henry
Clay had dreamed of arrived with a rush just as Clay was
passing from the scene.