1815-1850: Business and the Economy: Overview
1815-1850: Business and the Economy: Overview
Transportation Revolution. In an 1817 congressional address calling for federal support for federal support for a national system of roads and canals, South Carolina’s John C. Calhoun noted the potential advantages to American business of such a system of internal improvements: “An article, to command a price, must not only be useful but must be the subject of demand; and the better the means of commercial intercourse the larger the sphere of demand.” Over the next three decades Americans underwent what historians have come to call a “Transportation Revolution.” Between 1815 and 1840 state governments and private investors built more than three thousand miles of canals, including the monumental Erie (finished in 1825), which reduced average freight costs from Buffalo to New York from about twenty cents a ton-mile to two cents. At the same time steamboats began to open the nation’s river system to inexpensive upriver travel. The steamboat quickly accelerated trade on the Mississippi River and its tributaries (including the Ohio River), where the number of steam vessels rose from 17 in 1817 to 727 in 1855. Ground transportation and communications improved as well. In 1815, with railroads still on the horizon, stagecoaches provided the fastest overland transportation and mail delivery, achieving average speeds of more than ten miles per hour on express routes. By 1850 America’s thirty thousand miles of railroads exceeded that of the rest of the world combined, and travel time from New York City to Chicago had dropped from six weeks to three days. By the late 1850s telegraph wires provided nearly instantaneous communications between America’s major cities. With the population growing by 30 percent each decade from 1810 to 1850 and the transportation revolution swelling the “sphere of demand” that producers could reach, it is no wonder that the American economy grew explosively in this period.
National Market Economy. Before the War of 1812 many Americans accepted Thomas Jefferson’ vision of an economy of self-sufficient farmers as appropriate for a republic built on the selfless virtue of its citizens. With the enormous new markets that began to open after the War of 1812, however, came the irresistible temptation to do more than just get by. Manufacturers sought to increase production by developing new methods and investing in new factories, new machinery, and larger workforces. Factories employing hundreds of “operatives” began to produce massive quantities of axes, plows, reapers, shoes, and textiles. Specialized wholesale merchants appeared who distributed these goods to the most remote country stores in the interior, where farmers expanded their acreage and invested in new labor-saving devices to earn the cash needed to buy these goods. Retailing changed dramatically as owners separated production areas from salesrooms and opened speciality shops and department stores catering to the needs of a growing professional middle class created by the market economy.
Liberalism. Americans justified the newly unleashed entrepreneurial spirit that sparked the dynamic expansion of the economy with the liberal political economy of the eighteenth-century British Philosopher Adam Smith. As it was understood by his American disciples, Smithian liberalism argued that individuals pursuing their self-interest (desire for profit and wealth) in a free marketplace created and economy where constant competition eventually yielded benefits for everyone, in the form of cheaper goods and services as well as a general increase in wealth. This economic theory was tailor-made for the populist “common man” politics of the Jacksonian era. Birth and rank counted for nothing in America’s expanding and ever-changing economy, only one’s ability to make money. Anyone, in other words, could make it in America, and as long as that was true, all Americans would benefit.
Discontents. Not everyone liked the market-driven America that emerged in the Jacksonian era. Visiting Europeans tended to be shocked by the relentless pace of American life and the national obsession with profit. “I know no country,” Alexis de Tocqueville claimed in the early 1830s, “where the love of money has taken a stronger hold on the affections of men.” A British traveler agreed, claiming that he had “never overheard Americans conversing without the word DOLLAR being pronounced between them.” After experiencing first hand the tireless wealth seeking of Americans, Frances Trollope of England wrote in her 1832 memoir that “such unity of purpose, such sympathy of feeling, can, I believe, be found nowhere else except perhaps in an ant’s nest. More profoundly, many Americans worried that the ideal of America as a virtuous, egalitarian, agrarian republic was giving way to an increasingly urbanized, industrialized, corrupt, and class-divided society no different from Europe with its grimy factories, urban slums, and shady business practices.
Reorganization of Labor. While many farmers found themselves working harder to afford the consumer goods available in the new market economy, it was urban labor that underwent the most dramatic change. In place of traditional craft labor, where individuals made items by hand from start to finish, entrepreneurs began to increase the speed of manufacturing by breaking down processes into simple steps that could be performed cheaply by unskilled laborers instead of trained craftsmen. The introduction of new machines such as the power looms that revolutionized the textile industry in the 1820s further changed the nature of work since these machines were generally simple to operate and could be attended by unskilled laborers. As large mills and factories replaced small workshops in the iron, glass, paper, and shipbuilding industries (among others), the rhythm of work changed dramatically. Instead of working at his own pace, learning his trade while working side by side with the master of the shop (in whose house he probably lived), the typical worker was now supervised and paid by strangers whose only interest was to make sure that he was as productive as possible. Class lines grew more distinct, and words such as employer and boss entered the American lexicon.
Business Cycle. Moreover, as Americans buckled themselves more firmly into the market economy, they were forced to ride the roller coaster of modern capitalism, the cycles of boom and bust endemic to an emerging global marketplace. No one could yet predict with any degree of accuracy how many shoes Americans might want next year, or how many shoes Americans might want next year, or how many bales of cotton Liverpool might demand, and thus no investment or fortune was ever entirely secure. The financial panics of 1819 and 1837 showed how slender was the reed of national prosperity. Still, enough people succeeded to make Smithian liberalism the dominant economic philosophy as Americans learned to adape to, occasionally reform, and in many cases embrace the changes wrought by the national explosion in economic activity. It was John C. Calhoun’s hope that “the more extended that of social intercourse; the more strongly are we bound together; the more in separable our destinies.” Ironically, by 1850 a vastly enlarged “sphere of commerical circulation circulation” had indeed bound America together, in ways that Calhoun and his Southern allies found they could not continue to accept.
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