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Development of the US National Market Economy

Instructor: James Walsh

M.B.A. Veteran Business and Economics teacher at a number of community colleges and in the for profit sector.

During the nineteenth century, a true national market economy formed in America. Large farms and corporations took advantage of the new forms of transportation to ship and sell goods in all parts of the country. We will explore the national market's development as well as some consequences.

Life at the Turn of the Nineteenth Century

John and Martha had lived on the land for as long as they could remember. They grew vegetables in the backyard, John and the boys grew wheat and grains on the few acres of farmland they owned, and they hunted a few days a week to put meat on the family table. Martha and their daughter cooked the food and made all of the clothing the family wore. Outside of church on Sunday, they had little contact with neighbors or other Americans.

At the turn of the nineteenth century, most Americans lived the kind of self-sufficient life that resembled John and Martha's. The rugged individualism they practiced is part of America's heritage. As times changed, it would be unlikely that John and Martha's grandchildren would live anything like they did. The nineteenth century would bring changes that would transform the country and it's citizens.

Transportation Revolution

Travel at the turn of the nineteenth century was costly and slow. A fully-loaded stagecoach could only travel the rutted roads of the day at four miles an hour. Transporting a ton of freight 300 miles overland cost more than it did to ship it from an East Coast port to Europe!

Before America could become a true national market, where businesses and farms could sell products from coast to coast, the transportation problem had to be solved. Three things occurred in the nineteenth century to make this happen:

  1. Canal building: After the initial success of the Erie Canal which connected the East Coast with the Midwest, a frenzy of canal building occurred. By 1840, over 3,000 miles of canal were operating across the country.
  2. Road building: Pennsylvania started it all when it built a 66-mile long stretch of good-quality road between Philadelphia and Lancaster. By 1815 over 3,000 miles of turnpikes had been constructed across the country. Better roads aided the movement of people between cities.
  3. Railroads: The biggest breakthrough by far was the the construction of railroads. Rail transport was faster than stagecoaches or water-going vessels. Railroads also ran in all seasons, which was especially important in winter when canals might freeze over. For many products rail became the least expensive choice, especially if the factory was not located near a waterway.

The railroad moved crops and goods faster and cheaper than any transportation before
Railroad

A Bigger America

In the new, connected America, the biggest change was that everything got bigger! The population spread by settling western areas of the country. Land was plentiful and sold for cheap to entice eastern farmers to move west and own a bigger farm. New implements like the thresher made it possible to cultivate more acres. Many Easterners pulled up stakes and took the plunge. Crops from the new, larger farms could easily be shipped to market by rail or barge.

An even bigger impact of fast and cheap transportation was on the scale of business. A new national market was emerging for many things; one example of this is the clothing industry. Before the transportation revolution, most family clothing was made in the home. With the garment district in New York City producing large quantities of clothing cheaply and efficiently, the new clothing began to appear in stores across the country, arriving there by rail. Housewives loved the idea of buying ready-made clothing in stores and soon stopped making clothes at home.

Other industries, like oil and steel, began to consolidate. Andrew Carnegie and J.P. Morgan consolidated Carnegie Steel and other major competitors into US Steel which dominated the industry for many years. Steel was now made in large and efficient blast furnace style mills which dramatically lowered the cost and led to the rise of the automobile later on. Soon, most products were made in large, efficient, centrally-located factories, and shipped to the rest of the country on the new forms of transportation.

Carnegie Steel works in Ohio, located next to railroad tracks
Carnegie steel

The People Problem

What these new, bigger farms and factories needed more than anything else was people. All of the newly opened land needed new farmers, and the larger factories needed new workers. The usual flow of immigrants from Protestant Northern Europe just wasn't going to be enough. Soon, immigrants from Catholic Southern Europe and other parts of the world flooded into the United States. Immigrants were enticed by promises of cheap land and plentiful work in the factories.

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