Domestic Economy

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Domestic Economy


Agriculture. As important as trading was to the United States economy, the economic activity that Americans were most directly involved with was farming. Agriculture was the mainstay of this economy and the culture it supported. The early United States was overwhelmingly rural, with only 3.3 percent of the population living in cities with over eight thousand people in 1790, rising to only 4.9 percent in 1810. In the North wheat, corn, and other grains were the principal crops, and their production increased as the cities along the Atlantic coast began to grow more rapidly after 1790. Land in coastal areas was already becoming scarce by 1790, however, fueling the dispersion of the population to the west. As white Americans settled the trans-Appalachian interior, farming there began to grow as well. It was hampered at first by the difficulty of clearing land and establishing farms. The typical pioneer family would arrive at their tract with a cow, some pigs, and little else. Felling trees and building a house were the first priorities, as well as planting a first crop, usually Indian corn and pumpkins. Farming was mainly for the familys own consumption at first, although some marketing was done when possible, to provide money for tools and other manufactured necessities. Corn was the key crop, providing food and liquor for humans and fodder for animals. Meat could be hunted, but the main source was pigs, which were relatively easy to raise. As the work of clearing fields advanced, wheat could be planted once it was possible to plow the soil, and other grains such as oats and barley followed. The process was slow, however. Farmers cleared only from one to three acres a year, and it could easily take a decade of hard work before there was a well-established family farmstead to show for the effort.


YearBales of Raw Cotton
Source: Curtis P. Nettels, The Emergence of a National Economy, 17751815 (New York: Holt, Rinehart & Winston, 1962).
17903, 125
179516, 719
180073, 145
1805146, 290
1810177, 369
1815208, 986

Southern Farming. Staple crop production dominated southern agriculture, which participated in a much more developed agricultural market economy than the North in this era. Tobacco was historically the most important southern crop, and production peaked in 1790 when exports totaled 118, 000 hogsheads. Tobacco farming quickly drains nutrients from soil, and by this period much land in tidewater Virginia and other tobacco regions was exhausted. After 1793 production declined quickly, hurt as well by the disruptions in trade caused by the Napoleonic wars. Cotton soon took its place at the center of the Southern economy. Cotton farming was limited to the coastal region of South Carolina and Georgia before 1793, when Eli Whitney perfected

a cotton gin that made production of cotton easier. Production grew from three million pounds in 1793 to eighty million pounds in 1811, and it spread from the southeastern states to the Mississippi River. Cotton was a lucrative cash crop, and exports to Englands textile mills boomed, growing from five hundred thousand pounds in 1793 to over forty-five million pounds in 1807. The Embargo of 1807 and the War of 1812 hurt cotton exports to Europe, but the growth of a domestic textile industry in New England began to make up the loss. Both cotton and tobacco, as well as sugar, which America began to produce after the purchase of the Louisiana Territory, were labor-intensive and relied on slavery to be profitable.

Innovations. In the early national era, the ways Americans earned their livings changed little. Almost all were engaged in farming, shipping, and fishing. Farmers used simple tools, such as the crude plow typically guided by the farmer and pulled by the team of oxen, which did no more than scrape a furrow into the topsoil. Few farmers attempted to enrich the land by rotating crops or planting clover; fertilizing was also uncommon. There was so much new land available that when the land was exhausted, many farmers simply moved and cleared new fields. At the same time, some early Americans were interested in new farming techniques, and the periodical press of the era printed many articles about farming improvements. Reformers included many national leaders, such as George Washington, Thomas Jefferson, Robert Livingston, and John Taylor of Caroline. Taylors book Arator (1813) publicized a system of tillage he had devised along with advice on fertilizer. George Morgan of New Jersey experimented with new varieties of corn and grains and methods to control harmful insects. Technical improvements to plows and new inventions such as the cotton gin also helped improve agriculture. Reform came slowly, however, hindered as much by its high cost as by the ready availability of new land.

Transportation. An essential part of the agricultural economy was the ability to move products to the market. Early Americans found transportation a difficult problem, given the size of the nation and its primitive road system. In upstate New York in 1804, getting wheat from the area around Rochester to the market in Albany on the Hudson River took a fourteen-day wagon trip, at a cost of more than fifty dollars a ton. Farmers in the West faced the challenge of exporting agricultural products across the mountains to the east. The Ohio and Mississippi Rivers became the principal avenues out of this area, and areas with ready access to cheap water transportation routes flourished. Major trading towns such as Cincinnati and Pittsburgh were on rivers. New Orleans became the center of trade with the Old Northwest, especially after the Louisiana Purchase in 1803 removed the threat of Spanish and French interference with river traffic. The value of goods arriving from the North in New Orleans increased from $1 million in 1799 to over $5 million in 1807. River traffic would further increase with the introduction of practical steamboats, following the experiments of John Stevens and Robert Fulton in the 1790s and early 1800s. Efforts to improve transportation also included road and canal building. In 1792 investors in Pennsylvania formed a company to build a toll road, or turnpike, between Philadelphia and Lancaster. The stone and gravel road took two years to build but was an immediate success. By 1801 there were similar companies building roads and profiting from tolls in all the states from Virginia north. Tolls also funded companies building bridges, like the fifteen-hundred-foot bridge over Bostons Charles River built in 1786. Other private companies formed to improve river navigation by building canals, like the twenty-seven-mile Middlesex Canal from Boston up the Merrimac River to New Hampshire (built between 1794 and 1803), but relatively little canal building was finished before 1815.

Indian Trade. Trading between Native Americans and European settlers had always been an important component of the economic activity of North America, and this continued to be the case during the early national period. This trade went on in the midst of the white encroachment on Indian land and the destruction of Native American cultures, making it fertile ground for conflict. On 7 August 1786 Congress passed an ordinance establishing an Indian department, mostly concerned with regulating trade with Indians. It limited trading to American citizens with licenses from the federal government. This policy proved ineffective, weakened by rivalries between the states and the central government and by individuals who pressed into western territories without regard for legal niceties, which the government had neither money nor troops to enforce. Organized trade was also often resisted by the Indians themselves, who rightly saw it as the first step in displacing them from their land. The new Constitution gave Congress clearer control over trade with Native American tribes. Under the leadership of President Washington and Secretary of War Henry Knox, the United States began forging a policy of treating with tribes for the purchase of land in an effort to avoid war. In 1790 the first of a series of trade and intercourse acts provided for trading licenses, forbade private purchases of Indian land, and set out punishments for whites committing various crimes in Indian territory. Congress strengthened these provisions in subsequent acts until the revision of March 1802 when the Intercourse Act took the form it would have for the next thirty years.


This index compares the amount it would cost to buy $100 worth of goods in 1860 with the cost in the following years. For example, these commodities would cost $28 more in 1783 than in 1860. Higher prices are not necessarily bad; since many of the commodities used to make the index were farm products and since most Americans were farmers, higher prices on this index generally meant prosperity, and lower prices meant hard times. From this index, for example, we see that prices fell in the late 1780s, a period of depression; began to rise again after the new Constitution took effect; and jumped after 1793 when American merchants capitalized on the war between France and England.

Note: One hundred dollars in 1860 would be roughly equivalent to $1, 629 today.
Source: John J. McCusker, How Much is That in Real Money? A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States (Worcester, Mass.: American Antiquarian Society, 1992).

Fur and Whiskey. The main products these acts tried to regulate were fur and whiskey. After land, furs were what white Americans wanted most from Indians. Native Americans had better access to the plentiful game of the interior than any fur traders like John Jacob Astor could have, and the provision of furs was a major economic activity for many Indians. The extent of this trade made regulation difficult, and there was much illegal trading. Rivalries with British traders operating from Canada also made the reality of fur trading conditions far from the ideal envisioned in the intercourse acts. To further regularize the trade, Congress as early as 1796 established the factory system. The factories were government trading posts which were to deal fairly with the Indians in an effort to earn their trust and end their contacts with foreign traders. The factories were also meant to be outposts of civilization and so furthered the diplomatic goal of assimilating Indians into white culture. The factories proved unable to meet these large ambitions, in part because of the opposition of private fur traders like Astor. They also failed because of the ongoing destruction of Native American civilization, which was at least symbolized by the use of liquor. Indian traders often received whiskey for furs, and the increased availability of hard alcohol had a devastating effect on Native American societies. Efforts to control the spread of liquor to Indians began in 1803 but met with little success. However well-meant, these attempts to use trade to improve relations between whites and Indians could not prevail against the underlying political and cultural differences between the two groups.

Business. Change came as slowly to early American business as it did to agriculture. Throughout the period, most businesses were small sole proprietorships. Owners were also workers and took the risks on themselves. Some businessmen did form joint ventures to pursue larger projects. Most of these were privately formed partnerships, where all the partners shared the risk of failure. Few ventures took the form of corporations, the most common business organization today. The corporation had the advantage of limited liability for investors; if they lost money, they were liable only for their initial investment. At this time, however, corporations had to pursue some public benefit beyond the investors profits and be chartered by special legislative acts. Most early corporations formed to build roads or canals or perform essential banking functions. Few were devoted to manufacturing goods. The numbers of corporations rose steadily over the period, especially in the North. By 1801 the states had chartered 326 corporations, and between 1800 and 1817 there were another 1, 800 corporations. The passage of general incorporation laws, allowing investors to incorporate routinely rather than wait for the legislature to act, spurred the process. North Carolina passed the first of these statutes in 1795, followed by New York in 1811. The rise of corporations was also due to the general economic success of the United States before 1807. Profits from trade needed to be invested again, and the corporate venture soon became the investment of choice.

Industry. Profits came from foreign trade but also from the increasing domestic market, dominated by agricultural produce. Many early Americans made their living in retail trades as peddlers, supplying small manufactured articles to farmers too far from settled areas to have ready access to centralized markets or to the country stores springing up in the new towns on the frontier. More and more of the goods in these stores were made in America, as manufacturing slowly took a place at the center of the economy. In the cities, people worked in printing, meatpacking, sugar refining, and rum distilling. The most important industries were associated with iron, mining, smelting, and forging tools. The iron industry ran on charcoal, the first experiments using anthracite coal as a more efficient fuel not taking place until 1808. The biggest change in American industry came in association with cotton as textile milling became an important business. This industry began to mechanize with the introduction of the spinning jenny during the Revolution. Mills sprang up across New England, spurred by the Embargo of 1807. The Embargo limited exports of southern cotton to England and imports of cloth from England, and the domestic textile industry grew. A significant advance came in 1814 when Francis Cabot Lowell and his associates opened a mill in Waltham, Massachusetts, which was the first to combine spinning and weaving in one factory. The Waltham mill was just the first step toward the industrialization which would sweep the North after 1820.

Labor. As business grew and the economy expanded after 1790, labor diversified and conditions for working men and women changed accordingly. Some laborers worked in farming, helping at times when more hands were needed than the typical farm family could provide for itself. Industrial laborers usually worked in small groups; in 1815 a very large manufacturing enterprise would have at most 150 employees. Most early American wage earners were artisans or skilled workers, and they included blacksmiths, shoemakers, hatters, tailors, carpenters, and chandlers, among others. They usually worked in shops under the supervision of a master craftsman, performing specialized or routine tasks under his direction. In most main towns the master craftsmen in various trades formed craft societies, something like medieval guilds, to support each other and protect their trade. In New York in 1786, these groups associated together in a General Society of Mechanics and Tradesmen. The journeymen and apprentices who worked for the master craftsmen also associated together, although usually to secure a wage increase, after which they would disband. In 1792 Philadelphia shoemakers banded together in support of higher wages, an association that was more permanent and more like todays labor unions. There were at least twelve strikes in the United States between 1786 and 1816, although they were hampered by the prevailing idea that organized strikes were illegal. With the rise of textile milling, women and girls became wage earners in significant numbers. The earliest mills used neighborhood women who would commute daily to the mill from home. Later mills, like Lowells Waltham mill, sponsored closely regulated boarding homes to house young women who would move to the area while they worked in the mill for several years before returning home.


Reginald Horsman, Expansion and American Indian Policy, 17831812 (Lansing: Michigan State University Press, 1967);

Stephen Innes, ed., Work and Labor in Early America (Chapel Hill: University of North Carolina Press, 1988);

Drew McCoy, The Elusive Republic (New York: Norton, 1980);

Curtis P. Nettels, The Emergence of a National Economy, 17751815 (New York: Holt, Rinehart & Winston, 1962);

Francis Paul Prucha, American Indian Policy in the Formative Years (Cambridge, Mass.: Harvard University Press, 1962).

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