The Growth of the American Economy: An Introduction to the Economic History of the United States

By Robert G. Albion; Harold F. Williamson | Go to book overview

CHAPTER 32
The Performance of the American Economy Since 1860

IN THE PERIOD that has elapsed from the beginning of the War Between the States to the present time, the structure of the American economy has undergone a profound change, although the change was a gradual one and was not crucially influenced by the war itself. Not until some time later, in fact, did it become evident that American economic development bad entered a new era in which manufacturing was beginning to make a greater contribution to national income than agriculture.1 But the war probably hastened the movement by reducing the influence of the agricultural, low-tariff South. This internal change meant that a predominantly open, world-dependent, and relatively undeveloped economy had become a predominantly closed, self-sufficient, and intensively organized economy. The trend of the country's economic growth was fundamentally altered thereby and so was its performance in war and peace.

____________________
1
The change in the relative importance of agriculture and manufacturing may be observed in Figure 1, which traces the percentage shares of these two industries in realized private production income. From 30.8 per cent for agriculture and 12.1 per cent for manufacturing in 1859, the proportions change to 12.3 per cent for agriculture and 30.3 per cent for manufacturing in 1937. ( Robert F. Martin, National Income in the United States, 1799-1938, pp. 60-61. New York: National Industrial Conference Board, 1939.)

The declining relative importance of agriculture may be traced to the passing of the frontier--that is, the extensive frontier in terms of free land in the West. With the elimination of free land, the rate of growth of agriculture became stabilized and the drainage of labor and capital from the potential manufacturing areas of the East was reduced. This does not mean that agricultural development had reached a stationary condition. Intensive development took place, of course, and has continued to this day.

The changes in the field of manufacturing may be traced largely to the influence of the Industrial Rovolution on the United States. The growth of population through immigration and natural increase created an enlarged market and increased the labor supply. Improvements in transportation, mainly in the building of transcontinental lines, increased the accessibility of the market and made the various sections of the economy more interdependent. These developments, together with improved financial and distribution facilities, made possible the extensive introduction of machine technology and mass production in manufacturing. Manufacturing contributed an increasing share of the national income, and it surpassed agriculture in income production even before the end of the nineteenth century. The number of persons employed in manufacturing exceeded that in agriculture somewhat later because of the high labor productivity in mechanized factory production. These developments automatically meant a more self-sufficient economy.

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