Toward a Market Economy

Several factors played a role in the development of the market economy in the United States. Millions of acres of land belonging to Native Americans in the Old Northwest and Southeast were taken over by the federal government. Federal land policy, though often benefiting speculators more than individual homesteaders, certainly encouraged settlement. American agriculture experienced an unprecedented boom from the introduction of new staple crops, such as cotton, and productivity advancements in farm equipment. Although the United States remained overwhelmingly rural, the country experienced significant urban growth between 1815 and 1860.

Removal of Native Americans. The economic growth of the United States was achieved to a great degree at the expense of Native Americans. Despite giving up tens of thousands of acres through treaties, the tribes found the demand for land by settlers and speculators insatiable. Even the willingness of Native Americans to acculturate did not relieve the pressure on their land. The Cherokee—one of the “Five Civilized Tribes” along with the Creek, Choctaw, Chickasaw, and Seminole—were farmers and even owned slaves. They developed a written language in which books, tribal laws, and a constitution were published, and they were ready to press the case for their sovereignty in court. Even though the Supreme Court found in Worcester v. Georgia (1832) that the Cherokee were entitled to federal protection of their lands against state claims, President Andrew Jackson did not enforce the decision.

Jackson's solution to the land question was to resettle the tribes west of the Mississippi, which Congress authorized through the Indian Removal Act of 1830. Within a few years, the Creek, Choctaw, and Chickasaw had given up their lands in Alabama, Arkansas, and Mississippi and were moved to the Indian Territory in what is today Oklahoma. The Cherokee held out until 1838. Of the approximately fifteen thousand Cherokee who took the grueling trek from Georgia to the west, a route that became known as the Trail of Tears, a quarter died of disease and exposure. Some tribes resisted relocation. The Sauk and Fox were easily defeated by U.S. troops and militia forces in the Black Hawk War (1832), and the Seminoles fought a guerrilla action in Florida for seven years (1835‐42). In the end, however, more than 200 million acres of Indian land passed into the control of the United States.

Federal land policy. The sale of public lands, which the federal government offered at $2 per acre (for a minimum of 160 acres) with four years to pay, increased quickly after the War of 1812. Land speculators were encouraged by the credit provisions, and they bought up land with the expectation of turning a profit when its value rose. The Panic of 1819 and the economic depression that followed led to legal changes intended to make the direct purchase of land easier for small farmers. The price was cut to $1.25 an acre, and the minimum amount of land that could be purchased was reduced first to eighty acres (1820) and then to forty acres (1832), but payments had to be made in cash, which many settlers did not have. Speculators continued to buy up most of the available land and then loan money to small farmers for the purchase price and farm equipment.

Aside from the terms of purchase, an important issue was the claims of squatters, who had settled and begun to work the land before it was surveyed and auctioned. The Pre‐Emption Act, enacted as a temporary measure in 1830 and made permanent in 1841, allowed squatters to buy up to 160 acres at the minimum price of $1.25 an acre.

A boom period for agriculture. The period from 1815 to 1860 proved a golden age for American agriculture. Demand for American farm products was high, both in the United States and Europe, and agricultural prices and production rose dramatically. A key factor was the increasing importance of cotton. Until the 1790s, cotton was a relatively minor crop because the variety that grew best in the more southerly latitudes contained seeds that were difficult to remove from the cotton boll. In 1793, Eli Whitney of Connecticut learned of the seed problem while visiting friends in South Carolina; he devised a simple machine known as the cotton gin to separate the fiber from the seeds. With cotton demand high from the textile industry in Great Britain and soon mills in New England, Whitney's invention led to the expansion of cotton production across Virginia, Alabama, Mississippi, and Louisiana, and into Texas. The Cotton Kingdom, as this vast region was called, produced most of the world's cotton supply and more than fifty percent of American exports by 1860.

The cotton boom also revitalized slavery. Despite the end of the foreign slave trade in 1808, more than four times the number of slaves lived in the United States on the eve of the Civil War than on the day Thomas Jefferson took office. Cotton was a labor‐intensive crop, causing the demand and price for field hands to skyrocket. Planters in Virginia found it very profitable to sell their surplus slaves farther south.

Cotton was not the only sector of agriculture to benefit from technological innovations. In 1831, Cyrus McCormick invented the mechanical reaper, which harvested considerably more wheat with less labor. John Deere developed a steel plow (1837) that was far more efficient in turning the soil than cast iron and wooden moldboards. The new equipment allowed American farmers to put more land under cultivation and increase production to meet the growing world‐wide demand for wheat, corn, and other cereal grains.

Changing demographics. During the nineteenth century, the United States became a country on the move. By 1850, almost half of all Americans did not reside in the state where they were born, and the population had made a clear shift to the west. About a third lived west of the Appalachian Mountains, and two million people were already west of the Mississippi River. Rapid urbanization also characterized the pre‐Civil War decades. According to the 1850 census, cities (defined as towns with a population of 2500 or more) were home to one in five Americans. Although the nation's largest cities were in the Northeast—New York, Philadelphia, Baltimore, and Boston—the population of St. Louis had already topped one hundred thousand. The midcentury urban growth was caused by improvements in transportation, industrial opportunities, and renewed immigration.

U.S. immigration, which had been sharply curtailed during the Napoleonic wars, began to increase in the 1820s and then rose dramatically—to well over two hundred thousand people a year—in the 1840s and 1850s. Irish Catholics, fleeing the effects of the potato famine that started in 1846, and Germans, seeking either economic opportunity or refuge from the failed liberal revolution of 1848, were the two largest immigrant groups. The Irish were an important part of the labor force that built the canals and railroads, and they tended to remain in the eastern cities. The Germans, on the other hand, moved west and contributed to the growth of St. Louis and Milwaukee. Scandinavians, who had also begun to leave their homelands, established farming communities in Wisconsin and Minnesota.