ALTHOUGH GASLIGHT RAPIDLY ILLUMINATED the cities beginning in the 1820s, it wasn’t available in the countryside, where most Americans still lived. Coal gas required a considerable (as well as messy, smelly, and sometimes dangerous) industrial process, and the gas was piped directly from the gasworks to the users. Because of the high cost of the infrastructure, only areas with a high population density could support a gasworks. But as reading and other evening activities increased, the demand for artificial light in rural areas increased as well. More and more, it was met with whale oil.
Men had hunted whales since Neolithic times, and the Basques, Norwegians, Netherlanders, and Scots all went whaling. In early days it was mostly offshore whaling, with the carcasses towed back for processing. But as offshore stocks declined, Europeans went farther and farther afield in search of whales.
Whales produced a cornucopia of products. Besides the meat, the blubber, when tried out, produced an oil that was an excellent fuel for lamps as well as a lubricant for machinery. And the baleen, the flexible, fringed structures up to twelve feet long that replaced teeth in most large whales, yielded great quantities of whalebone, a stiff but flexible material that was indispensable for corsets, buggy whips, and myriad other uses.
New England whaling began as early as 1645. The prime target of early whalers was the right whale, so called because it was abundant, relatively easy to hunt, and floated when it was dead. Thus it was the right whale to catch. Then in 1712 an offshore whaler was blown out to sea in a storm, and the crew managed to catch a sperm whale and bring it safely home.
Sperm whales are not like the other great whales. They have teeth, not baleen, and live mainly on giant squid caught at great depths. Their oil is superior to that of other whales and they have in their huge heads, as part of their echolocation system, a vast reservoir filled with spermaceti, a waxy substance that made the best candles.
Sperm whales were immensely profitable, and New Englanders began to specialize in them, building oceangoing whalers to pursue them on the main deep. By 1765 New England whalers were calling at the Azores and were operating off the coast of Brazil soon afterward. By the 1770s New England was exporting three to four hundred thousand pounds of spermaceti candles a year.
The British government had encouraged whaling, paying a bounty for whaling vessels more than two hundred tons. But the industry flourished after independence as well. By the nineteenth century American whalers were found throughout the world’s oceans, and voyages often lasted two years, sometimes four. In 1800 some three hundred whalers operated out of such New England ports as Provincetown, Nantucket, New Bedford, and Marblehead. By the 1840s there were more than seven hundred American whaling ships searching the seas for whales and turning their home ports into boom towns as the ships unloaded as many as two thousand barrels of oil each at the end of their voyages. Many of the early nineteenth-century New England fortunes were based on whaling.
Unfortunately, the New Englanders were too good at catching whales and caught them far faster than the great mammals could reproduce. As the world’s stocks of the various species declined, the voyages became longer and longer (it was an American whaler who discovered the Bounty mutineers on Pitcairn Island in 1808). The price of whale oil rose steadily as demand continued to increase faster than supply.
But one of the underappreciated aspects of a free-market economy is how it deals so efficiently with shortages. As demand outstrips supply, prices rise. The price rise, in turn, causes both increased conservation of the scarce resource and an intensified search for additional supplies or substitutes in order to convert the high prices into profit. One editor of the day noted “the impetuous energy with which the American mind takes up any branch of industry that promises to pay well.”
As the price of whale oil increased (it reached $2.50 a gallon in the 1850s, when $5 a week was a good wage for skilled labor) the search for other illuminants and lubricants increased as well. Camphene, derived from turpentine, is an excellent illuminant, but has a nasty habit of exploding. Coal tar—what is left over after the gas for gaslight is extracted from coal—was first distilled into kerosene in the 1850s, but the process is complex and expensive. Still, by the late 1850s a plant in New York City was producing five thousand gallons of kerosene a day from coal tar, so acute was the need and so high was the price of whale oil.
(Coal tar, while it was used only briefly as a source for kerosene, would prove to be a fecund source of chemicals with other economic uses, including insecticides, plastics, paints, and medicines. It would be the basis of a whole new industry—chemicals—that blossomed in the second half of the nineteenth century. Aniline dyes, discovered by the eighteen-year-old Englishman William Henry Perkin in 1856, were the first commercial chemical products to come from coal tar. They quickly destroyed the market for vegetable dyes derived from such plants as indigo and madder.)
The solution to the problem of finding a cheap, good illuminant came from a wholly unexpected source, rock oil. Petroleum (which means rock oil in Latin) has been known from ancient times but was largely a curiosity. Its principal use was as a cure-all medicine. (It would seem that nearly everything unappetizing—and crude oil is certainly that—and which is not deadly poisonous in small doses has been declared to be medicinal at one time or another.) In many areas of the world it bubbles up out of the ground on its own and could be gathered by skimming it off ponds or soaking it up with rags.
In 1853 a Dartmouth graduate named George Bissell happened to be visiting his old school when he saw in a professor’s office a bottle of rock oil that had come from western Pennsylvania. He knew that the stuff was flammable and suddenly conceived of the idea that it could be turned into an illuminant. He organized a small group of investors and asked one of the country’s leading chemists, professor Benjamin Silliman, Jr., of Yale, to look into the possibilities. Silliman reported that rock oil could easily be fractionated into various substances, including kerosene, by heating it. “Gentlemen,” Silliman reported, “it appears to me that there is much ground for encouragement in the belief that your Company have in their possession a raw material from which by simple and not expensive processes, they may manufacture very valuable products.”
But while Bissell and his investors (soon including Silliman himself, who bought two hundred shares) now knew that they could manufacture a highly saleable commodity from rock oil, the supply of rock oil was still very limited. An industry could not be based on what could be skimmed from ponds. Then Bissell had another epiphany. Shading himself under a druggist’s awning in New York City on a hot summer’s day in 1856, he noted an advertisement for a patent medicine made from rock oil that showed several derricks of the sort that were used to bore for salt. The rock oil used in the medicine, it happened, came from the oil obtained as a by-product of drilling for salt. Bissell wondered if it might be possible to use the technology of drilling to find oil.
The company sent a man named Edwin Drake to northwestern Pennsylvania, from where most rock oil in this country then came, and Drake, with no small difficulty, finally found men who knew how to drill for salt and who were willing to drill for oil, widely regarded as a ridiculous idea. On August 27, 1859, outside Titusville, at sixty-nine feet, the first oil well in the world struck oil. Drake attached a pump to the well and began to pump up what seemed an unlimited quantity of rock oil. The biggest problem quickly became not finding oil but finding enough barrels to store it in.
Professor Silliman was far more right than he knew. Within a century, petroleum would become so central to the functioning of the world economy that armies would march to acquire or defend its sources.
ANOTHER DEPLETING RESOURCE that fueled the American economy in the years before the Civil War was the country’s seemingly inexhaustible forests. Thomas Jefferson predicted that it would be a thousand years before the frontier reached the Pacific Ocean. But even in Jefferson’s lifetime, all but three of the states east of the Mississippi had been admitted to the Union, and the eastern forest was being cut down at an astonishing rate. The rich farmlands of the Middle West could not be productive until the trees were cleared, and the demand for lumber rose at an ever-increasing rate as the country’s population increased by a third every decade, from 5.3 million in 1800, to 31.4 million in 1860.
The statistics are staggering. In 1820 Michigan was nearly uninhabited by Europeans. By 1897 it had shipped 160 billion board feet of white pine lumber, leaving less than 6 billion still standing. State after state experienced similar deforestation.
But lumber was by no means the only use of the wood cut down by the forest industry in these years. Wood remained the major fuel in the forest-rich United States long after coal had supplanted it in forest-poor Europe. The growing number of steamboats, and after 1830, railroad locomotives, greatly increased the demand for firewood. The huge smokestacks unique to American locomotives of this period, shaped like inverted cones, were designed to deal with the greater flaming-cinder output of wood-burning fireboxes.
Firewood production had a far larger impact on the land than did trees felled for lumber. The latter amounted to about twenty-five thousand square miles of forest, but fuel cutters denuded fully two hundred thousand square miles between 1811 and 1867, enough to make almost five billion cords of firewood. (To get some idea of just how much firewood that is, consider that five billion cords, neatly stacked, would cover the state of Connecticut to a depth of four feet.)
The effect on the natural ecosystem of this epic deforestation, needless to say, was titanic. But agricultural production soared as the forests turned to fields. And most of the people of the time saw nothing wrong whatever with the transformation. “I never beheld a scene more delightful,” a visitor to southern Ohio wrote in 1823, only twenty years after Ohio became a state, “than when I look down on that field. Three hundred acres of waving corn…And those fifteen or twenty men scattered over it—all at work. It was doubly interesting coming, as it did, out of nature’s forest, only broken by the occasional cabins and the small patches of cleared land of the early settlers.”
Indeed, most people at the time thought that this alteration of the landscape was biblically ordained, for Genesis commands human beings to fill up “the earth, and subdue it.” Except for a few lonely voices such as George Perkins Marsh, whose Man and Nature was published in 1864, and the establishment of large urban parks in the rapidly expanding cities, what today is called the environmental movement did not yet exist.
Ohio’s rising corn production fueled the meat-packing industry, which was centered in Cincinnati until Chicago surpassed it in 1860. In 1833 Cincinnati had processed eighty-five thousand hogs. Fifteen years later it handled five hundred thousand. The growth of American agricultural production in the pre–Civil War era is without parallel in world economic history. While statistics exist only for the years from 1839 on, corn production went from 378 million bushels that year to 839 million twenty years later. Wheat went from 85 million bushels to 173 million.
But as the country’s productive farmland expanded rapidly, American stewardship of the land did not improve from the standards of the colonial era. Indeed it declined. In the early days, when the population was still very low, the best land was cleared for agriculture but the slopes and wetlands were largely left alone. Only in the plantation South, where one crop dominated an area, was erosion and worn-out soil a problem. As early as the 1780s Patrick Henry thought that “the greatest patriot is he who fills in the most gullies.”
But because the supply of land seemed without end, the value placed on each unit was small. This is only common sense, at least in the short term (and, as Lord Keynes observed, in the long term we are all dead). One husbands the scarce, while the plentiful is used, or misused, freely. Caring for the land was an inescapable necessity in Europe, where there was no more to be had. But in America, new, unspoiled land nearly free for the taking was just over the next row of hills or river valley, and settlers could always move on. For three hundred years they did exactly that, with ever increasing speed.
But labor, scarce and expensive in pre–Civil War America as it had been in the colonial era, was a resource to be cherished. And American inventiveness devised many ways to make American agriculture more productive. The plows of colonial days were little different from those in use in medieval Europe and were made of wood. They worked well enough in the light soils of the eastern United States, but were useless in the rich, heavy soils of the developing Middle West.
Thomas Jefferson studied the plow and attempted to devise a better one. In 1797 Charles Newbold began manufacturing plows made of cast iron, and in 1814 Jethrow Wood designed a plow with interchangeable parts, making it much easier to repair. But even iron plows were useless in much of the Middle West because the soil would not turn over but rather fell back in place once the plow passed.
A blacksmith named John Deere was a Vermonter who had joined the New England diaspora and settled in the oddly named Grand Detour, Illinois. There, while engaged in fixing the broken plows of farmers, he began experimenting with new designs. In 1837 he made a plow using a piece of a steel circular saw blade, and it worked beautifully in the toughest Middle Western soils as the blade cut cleanly through and did not “scour.” Deere promptly went into the manufacturing business, setting up a factory in Moline, Illinois, to turn out the new plows that soon spread throughout the growing farm belt. The company’s motto regarding its founder, “He gave to the world the steel plow,” would be in use as late as the mid-twentieth century, long after the horse-drawn single plow had vanished from the American farm.
But no one did more to transform American agriculture than Cyrus McCormick. Yankee ingenuity has never been a New England monopoly, and Cyrus McCormick was a Virginian from Rockbridge County in the Shenandoah Valley who supported the South and defended slavery until the end of the Civil War. Like Eli Whitney’s father, McCormick’s father was both a farmer and a mechanic, making and fixing equipment for other farmers. And like Whitney, McCormick was a born tinkerer. Working on his father’s twelve-hundred-acre farm, McCormick began thinking about how wheat was harvested. Harvesting had long been the limiting factor in wheat production. There is a strictly limited period after the wheat has ripened in which it can be successfully harvested. And working with a scythe and cradle, a man could cut only about one acre of wheat per day. Obviously, there was no point in planting more wheat than the available labor could harvest.
McCormick broke the process of harvesting wheat into its separate components and devised a mechanical means for accomplishing each. Then he designed a machine that accomplished them all. By the time he was twenty-two, he had a working prototype of a mechanical harvester, powered by a wheel, called a driving wheel or bull wheel, that turned in contact with the ground as the machine moved behind the horse. Farmers were, to put it mildly, skeptical at first. McCormick didn’t sell a single machine for ten years, and in 1842 he sold only seven. But when Great Britain, after the failure of the British harvest in 1845, repealed the “Corn Laws” that protected British farmers from international competition, the demand for American wheat grew quickly. McCormick seized the opportunity.
He built a factory in Chicago, then a city less than twenty years old, and began to mass-produce harvesters. In five years he sold five thousand. By 1860 Cyrus McCormick was a very rich man, reporting in that year’s census that he had personal assets of $278,000, and real estate valued at $1.75 million.
With McCormick’s reaper, one man could harvest eight acres a day, not one, and the American Middle West could become the bread basket of the world. In 1839 only eighty bushels of wheat were shipped out of the infant town of Chicago. Ten years later Chicago shipped two million.
The McCormick reaper not only greatly enlarged the potential size of American grain crops, it changed how Americans have earned their livelihoods. With the introduction of the reaper and the endless parade of mechanical agricultural equipment that followed, the percentage of American workers engaged in agriculture has steadily declined, even while agricultural output has continued to grow. The McCormick reaper thus helped crucially to supply the labor needed in the great expansion of American industry that followed the Civil War.
In 1851 McCormick exhibited his reaper at the Great Exposition in London, the first world’s fair and one of the defining moments of the nineteenth century. At first skepticism abounded. The Times of London, with typical xenophobia, described McCormick’s machine as “A cross between a flying machine, a wheel barrow, and a chariot…. An extravagant Yankee contrivance, huge, unwieldy, unsightly and incomprehensible.”
After a demonstration in an English wheatfield, however, the Times changed its mind completely. “The reaping machine from the United States,” it wrote on June 9, 1851, “is the most valuable contribution from abroad to the stock of our previous knowledge…. It is worth the whole cost of the Exposition.”
Other American mechanical inventions dazzled the crowds at London’s Crystal Palace that summer as well, and prizes were won by American plows, the Colt revolver, Goodyear rubber products, and the sewing machine of Elias Howe.
The last, when it was redesigned by Isaac Singer to make it much more reliable and versatile, quickly improved the lot of housewives and drastically lowered the cost of ready-made clothes. A shirt sewn by hand required more than fourteen hours to manufacture. With the new sewing machine, a seamstress could make one in only a little over an hour.
Many clothing workers (there were more than five thousand in New York City alone in 1853) feared that their livelihoods would be devastated by the sewing machine, but exactly the opposite happened. As the price of ready-made clothes plunged, thanks to the sewing machine, the increased demand for them more than made up for the fall in price. This is the reason industrialization has greatly enriched, not impoverished, the world’s workers, at least in the long term. In the short term, of course, as new technology sometimes destroys the market for old skills, the economic pain can be terrible for whole classes of workers. The great American folk song “John Henry Was a Steel-Driving Man,” which dates to the mid-nineteenth century, exemplifies exactly this problem, rendered into art.
IN THE EARLY YEARS of the nineteenth century this country developed another major industry that fueled a nearly worldwide trade. And it maintained a near monopoly on it, one that lasted for decades before vanishing as technology overtook it: the ice trade.
Ice was free for the taking during part of the year in New England and a precious commodity during another part and in other, warmer areas of the world. It was the genius of Frederic Tudor of Massachusetts that saw an opportunity to make money by bringing the ubiquitous supply of ice in wintertime New England to the bottomless demand for it in the summertime and the tropics.
There had been an ice trade of sorts in ancient Rome when snow was brought down in baskets from the high Apennines to the tables of the very rich. And New England farmers maintained ice houses dug into the earth in which they would store ice cut from ponds during the winter and insulated with straw for use in the summer to keep perishable foods, such as milk, cold. Tudor thought he could make money by bringing this ice to parts of the world where ice was never seen. He was about the only one who thought so.
On February 13, 1806, a ship chartered by Tudor named the Favorite sailed out of Boston harbor, and the Boston Gazette reported, “No joke. A vessel with a cargo of 80 tons of Ice has cleared out from this port for Martinique. We hope this will not prove to be a slippery speculation.”
Unfortunately for Tudor, it proved to be exactly that. There was no ice house in Martinique to store what ice survived the voyage, and Tudor had not yet learned how to insulate the ice effectively on shipboard. Nor did the Martiniquais, who had done without ice for nearly two centuries, know exactly what to do with it, so they treated it as a curiosity.
Over the ensuing three decades, Tudor struggled up the learning curve of the ice trade, establishing ice houses in likely markets, perfecting insulation, and educating his potential customers. Ice harvesting, from New England ponds and rivers, was also by this time becoming a routine business, with special tools for cutting and hauling the ice to ever-larger ice houses on the shore.
In a perfect example of economy synergy, it turned out that the best insulating material for ice was what had always been a troublesome waste product of the lumber industry: sawdust. Previously thrown into the nearest stream to be carried away (and where it often caused dams and flooding), now it could be sold to the ice industry at $2.50 a cord.
By the 1830s ice had become a very profitable American export. In 1833 American ice was being shipped as far as Calcutta, when the Tuscany, which had sailed from Boston on May 12, reached the mouth of the Ganges on September 5. Calcutta, one of the hottest and most humid cities on earth, and then the capital of British India, was ninety miles up the Hooghly River, and the population awaited the ice with breathless anticipation. The India Gazette demanded that the ice be admitted duty free and that permission be granted to unload the ice in the cool of the evening. Authorities quickly granted the demands. Frederic Tudor managed to get about a hundred tons of ice to Calcutta, and the British there gratefully bought it all at a profit for the American investors of about $10,000.
By the 1850s American ice was being exported regularly to nearly all tropical ports, including Rio de Janeiro, Bombay, Madras, Hong Kong, and Batavia (now Jakarta). In 1847 about twenty-three thousand tons of ice was shipped out of Boston to foreign ports on ninety-five ships, while nearly fifty-two thousand tons was shipped to southern American ports.
Other cities with easy access to areas where ice could be harvested began their own ice trades. The Hudson River had as many as 135 ice houses on its shore, each capable of holding thousands of tons. Ice boxes became standard household equipment in middle-and upper-class houses in the 1840s and daily delivery of ice a routine. The ice man and the ice wagon entered into American folklore and legend, and the American love affair with both iced drinks and frozen desserts (still a notable American peculiarity to most Europeans, especially the British) was already in full swing.
By 1880 the extent of the ice trade was estimated at eight million tons annually, and mild winters invariably brought newspaper warnings of an impending “ice famine” the following summer and swiftly rising prices. Mechanical refrigeration ended the trade with the more distant foreign cities in the 1880s, when it could no longer compete with locally made ice. But the domestic trade continued to expand until well into the twentieth century, when the household refrigerator began replacing the ice man.
THE DEEP DEPRESSION that had started in 1837 began to lift in the mid-1840s. Federal government revenues, a good measure of economic activity, had been a miserable $8.3 million in 1843, the lowest in decades. But the following year they jumped up to $29 million. The Mexican War, which began in 1846, then stimulated the economy strongly, as wars always do, and prosperity returned. The Mexican War also, of course, added vast new territories to the United States when Mexico relinquished all claims to Texas north of the Rio Grande. Further, it ceded almost a million square miles of what is now Arizona, Utah, Nevada, California, and parts of Colorado, Wyoming, and New Mexico in early 1848 in exchange for $15 million and the assumption by the United States of several million dollars’ worth of debts owed by Mexico to American citizens.
That same year the division of the Oregon Territory along the forty-ninth parallel was peacefully agreed to with Great Britain. The United States now had a coastline on the Pacific Ocean nearly as long as its Atlantic one. But much of the territory west of Texas and the states bordering the Mississippi was unsettled and largely unknown.
Even before the treaty that ended the Mexican War was fully negotiated, an event that would deeply affect the United States had taken place in what was still Mexican territory: the discovery of gold at Sutter’s Mill in California.
On January 24, 1848, a man named James Marshall was inspecting the millrace of a sawmill that he had just constructed for his employer, John Sutter, on the American River, not far from what is today the city of Sacramento. He had turned the water into the millrace the night before to clear it of debris, and now something “about half the size and the shape of a pea” caught his eye. “It made my heart thump,” he remembered later, “for I was certain it was gold.” He turned to his workmen and said, “Boys, by God, I believe I have found a gold mine.”
The California gold strike was not the first one in the United States. A young boy named Conrad Reed had found a large gold nugget (it weighed seventeen pounds) in a stream on his father’s farm in Cabarrus County, North Carolina, in 1799. As word spread, others began looking for gold in streams and digging for it. North Carolina produced enough gold in the ensuing decades that the first American gold coins were minted there in the 1830s, at a private mint established by Christopher Bechtler, a German immigrant, in Rutherford County. (The Constitution forbids states to coin money, but does not forbid individuals to do so, although the coins, of course, are not legal tender. The Bechtler coins, minted in denominations of $1, $2.50, and $5, were well and honestly made and proved very popular in the hard-money-starved economy of the antebellum South.)
But the California gold strike was of an entirely different order of magnitude from that in North Carolina. In 1847 the United States had produced 43,000 ounces of gold, most of it as a by-product of base-metal mining. In 1848 it produced more than ten times as much, thanks to California, and in 1849, as word spread around the world, it produced 1,935,000 ounces. In 1853 California spewed out more than 3 million ounces, worth some $65 million, $4 million more than total federal revenues that year.
Gold is strange stuff. For one thing, it is extremely heavy. By definition, a cubic centimeter of water weighs one gram. Thus a cubic foot of water would weigh 62.43 pounds. A cubic foot of granite weighs about 170 pounds. Gold weighs more than 1,200 pounds per cubic foot. For another, gold is inert, not combining with other elements (that is why it does not tarnish). Thus gold is usually found in its pure state, sometimes in very small flakes or dust, often embedded in stone such as quartz, sometimes in large nuggets of pure gold.
When gold nuggets, flakes, and dust, erode out of hillsides, they are washed downstream, but because gold is so very heavy, the metal tends to settle out whenever the current slows down, such as in an eddy or on the inside of a bend in the stream, and there the gold concentrates.
Thus gold, unlike nearly all other metals, can often be successfully mined with very little capital investment. In the early days of a gold strike, the miners often need little more than a few tools, a pan, and a willingness to do hard work. In 1848 there was no shortage of men more than willing to abandon their slow-but-steady employment as farmers, teachers, bank clerks, and a thousand other jobs, to seek instant wealth in the California gold fields.
The result was one of the most remarkable migrations of the nineteenth century or, indeed, any century. As the news spread (the attempt by James Marshall and John Sutter to keep the news a secret was, of course, an utter failure), whole towns were depopulated as men rushed to the gold fields. San Francisco, then a town of fewer than a thousand, was virtually emptied and its harbor became choked with shipping as arriving sailors deserted to moil for gold. As news spread farther, Hawaii, Oregon, South America, Australia, and China were equally affected, as men by the thousands headed to California.
News took a long time to reach the East Coast, however, and it was late summer before rumors of gold in California began to circulate. And it was December 8 before official word was released. That day President James K. Polk sent Congress a message informing it of the gold strike and sending along a guaranteed-to-get-everyone’s-attention piece of proof: a nugget that weighed fully twenty pounds. At $20.66 an ounce (the official ratio of the United States dollar to gold since 1837), the nugget was worth about $4,800. In 1848 that was enough for a large family to live in very considerable upper-middle-class comfort for a year or more.
Something very close to mass hysteria was the result. In 1849 about ninety thousand Americans set off for California, and as many followed in 1850. That is not far short of 1 percent of the population. And most of them, not surprisingly, were men. When California became a state, less than three years after the gold strike, its population was 92 percent male.
It was not an easy journey. In 1849 there were only three ways to get to California from the eastern United States. One was overland, a difficult journey of six months through unsettled and sometimes hostile territory. Another was to go around Cape Horn by sailing ship, a journey that also took about six months. It was usually more comfortable but more expensive as well. The third means was via Panama. Steamships began running regularly to Panama, and passengers would then have to make their way across the rain-soaked, fever-ridden isthmus to the Pacific and hope to find a passage north to California, such as on the steamer California, which had been dispatched around the Horn for the purpose.
In theory, the trip via Panama could take as little as seventy days, but often the wait in Panama City was weeks long. Ogden Mills, who would make a fortune in banking in the gold rush, found three thousand people waiting for passage to the gold fields and no northbound ships at all. He finally took a passage south looking for a ship to charter and had to go as far as Callao, in Peru, to find one. His journey from New York to California ended up taking six months as well.
Politically, the California gold rush pushed the country’s center of gravity sharply westward. In 1850 the population center of the United States—east of Baltimore in 1790—was located near Parkersburg, Virginia (now West Virginia). But as early as 1851, as gold fever was still epidemic, John L. B. Soule wrote in the Terre Haute Express, “Go west, young man, go west!” a phrase that was quickly picked up by Horace Greeley and usually attributed to him thereafter.
The country’s connections to its new, distant state, more than a thousand miles west of the westernmost point of Texas, became a major concern. Clipper ships, whose great virtue was speed (and whose great drawback was lack of cargo space) began to be built in Boston and New York shipyards in increasing numbers to carry people to California and reduce the time needed to go around the Horn. The appropriately named Flying Cloud made the trip from New York to San Francisco in an astonishing eighty-nine days, half the time of normal sailing ships. In 1853 some 120 clippers were launched. But when a railroad was built across Panama and more reliable steamship service was established on the Pacific leg of the journey, the clippers could not compete and the number built rapidly declined, the last of them sliding down the ways in 1859.
An all-American route was also pressed. In 1853 the United States bought an additional twenty-nine thousand square miles from Mexico in what is now southern Arizona because it was thought at the time that that would be the best route for a southern railroad. In 1860 the Pony Express reduced communication time with California to about ten days, and in 1861 a telegraph link reduced it to minutes.
THE EFFECT OF THE CALIFORNIA GOLD STRIKE on the American economy was quite as great as on its politics.
In the mid-nineteenth century gold was money. After the end of the Napoleonic Wars, in 1821, Great Britain went on the gold standard. That meant that the Bank of England stood ready to buy or sell unlimited quantities of pounds sterling for gold at the rate of 3 pounds, 17 shillings, 101/2 pence per ounce. (That ratio had been determined more than a century earlier by Sir Isaac Newton, of all people, who enjoyed the well-remunerated but largely no-show job of Master of the King’s Mint.)
Because the United Kingdom dominated the world economy and world trade in the nineteenth century, and the Bank of England was, in effect, the world’s de facto central bank, all major trading nations soon pegged their currencies to gold. World trade was conducted on a gold (or pound sterling) basis. But while the United States was, externally, on the gold standard, internally monetary chaos continued and, indeed, increased. In the 1850s there were more than seven thousand kinds of more or less valid banknotes in circulation and more than five thousand that were fraudulent or counterfeit.
By 1860 more than two thousand banks were in operation in the United States. Some were large, conservative, and sound, headquartered in the big eastern cities. Most, however, were located in small towns and dependent on local economies. Still others were known as wildcat banks because their headquarters (the only place their notes could be redeemed for gold and silver) were located “out among the wildcats” where they were, quite deliberately, hard to find.
As California gold flowed into the American economy, the money supply increased markedly. The minting of gold coins by the federal government increased, as did the issuance of banknotes based on gold reserves. Because the country had no central bank, there was no mechanism to regulate the money supply or to use monetary policy to control what Alan Greenspan would famously call “irrational exuberance.” The result was a huge, but unsustainable, boom.
There was just over 9,000 miles of railroad trackage in the United States in 1850, but a decade later there was 30,626. Pig iron production soared from 63,000 tons in 1850 to 883,000 tons a mere six years later. Increasingly, the iron ore came from the Marquette Iron Range in the Upper Peninsula of Michigan, the first of the iron ore deposits found around Lake Superior that would prove in the next half century to be the largest and richest in the world. The production of coal, only beginning to replace wood as the main source of fuel in American transportation and industry, doubled in these years.
As always when the American economy boomed, capital poured in from Europe to finance development. American securities held overseas in 1847 amounted to $193.7 million. A decade later they were $383.3 million.
Much of this new capital was brokered through Wall Street, which cemented its position as the financial center of the country in the 1850s. “Every beat of this great financial organ,” wrote the Louisville Courier in 1857, “is felt from Maine to Florida, and from the Atlantic to the Pacific.” Out-of-state banks increasingly kept large deposits in New York City banks to facilitate their customers’ business needs in New York, as the city came to dominate the southern cotton trade and Middle Western wheat trade with Europe. And twenty-seven new banks opened in New York itself in just the period from 1851 to 1853.
As the American economy rapidly expanded in the early 1850s, the froth, as it always is, was most obvious in New York’s financial market. New exchanges opened up to handle penny stocks that the New York Stock and Exchange Board would not touch, and the number of corporations formed in the 1850s equaled the number created in the entire first half of the century. By 1856 there were 360 railroad stocks, 985 bank stocks, and 75 insurance stocks being regularly traded on Wall Street, as the average volume on the Street increased by a factor of ten.
By 1857, however, the boom was running out of steam. California gold production was leveling off; the Crimean War and poor harvests in Europe, which had stimulated demand for American exports, were over. New York wharves were now crowded with ships that could find no cargoes. Six thousand cotton looms in New England sat idle by that summer.
James Gordon Bennett wrote in the Herald on June 27 that year, “What can be the end of all this but another general collapse like that of 1837, only upon a much grander scale?…Government spoilation, public defaulters, paper bubbles of all descriptions,…millions of dollars, made or borrowed, expended in fine houses and gaudy furniture; hundreds of thousands of silly rivalries of fashionable parvenus, in silks, laces, diamonds and every variety of costly frippery are only a few among the crying evils of the day.”
As the summer began to wane, prices on Wall Street began to reflect the sagging national economy. The weaker banks and brokers began to collapse. When the steamer Central America foundered off North Carolina in a hurricane on September 12, it took four hundred passengers with it. But, of more concern to the market, $1.6 million in California gold went down with the ship as well, and panic hit Wall Street. It soon spread to Europe in the first truly international market crash, a sure sign of the growing importance of the American economy to the world. By mid-October most banks in the country (and all the major New York City ones) had suspended payment in specie. It was only temporary, as they built their reserves and called in loans, and most had resumed payment in gold and silver by December, but the economy would be mired in a new depression for the next three years. Federal revenues fell by a third from 1857 to 1858.
THE AMERICAN ECONOMY in the first six decades after the adoption of the Constitution had proved one of the wonders of the world. The country’s territory had more than tripled, and its population had increased eightfold. But the size of the economy had expanded by a factor of eighteen or more. A string of small states, with largely agricultural economies, had expanded across half a continent. American manufactures had grown from trivial to one of the world’s leading concentrations of industry. A transportation and communications net had been created that was the largest on earth.
But it was still an unfinished economy. While the United States had more railroad trackage than any country in the world by 1860, for instance, it still imported much of its rails and rolling stock from England, as it did most of its steel, a metal that was becoming increasingly important.
More, sectional political forces were increasingly pulling the country apart across a North-South divide, despite an ever more integrated national economy. As it turned out, these forces could not be successfully contained by political means, despite decades of effort. What Sir Winston Churchill called the most inevitable conflict ever fought by the English-speaking peoples would prove the most consequential event in American history.
For while the American Union had been created by the Revolution, the American nation would be forged only upon the awful anvil of the Civil War.