Economic Growth Between the North and the South in Postbellum America

The North and the South of the United States experienced significantly different economic growth during the Postbellum years. First, we must remember the past, including the  Antebellum and Civil War years. Looking at the past, one can see the growth and changes in both regions' economies during the Postbellum years.

The economy during the Antebellum years was waning in the South. This continued into some postbellum years, except that the South’s economy was changing for the better in the latter years. The North’s economy was mainly industrial, and before the Civil War, this area's economy was doing well. However, the South was primarily agricultural, and before the Civil War, the South’s economy faltered. Pessen states, “The South nevertheless lagged far behind the Northeast in manufacturing; one influential school of historians has described the antebellum economy” (1980. p. 1125). Despite this manufacturing lag, the North relied on the South and the cotton they produced for the textile mills. Then came the Civil War, and all this would change for both the North and the South.

The Civil War started, and the economies changed for both regions again. President Lincoln, a crafty politician (and a great president), would not want to start the Civil War. He would wait for the South to make the first move. While waiting, Lincoln would have the industrial might of the North behind him and the Union army. The North would benefit from having most of all the manufacturing in the United States then. This would prove one of the deciding factors in the North’s victory over the South (though not the only factor). The South had very little manufacturing and could not produce the equipment for war on the scale the North could. What does all this mean? Manufacturing for the North still fueled the economy, while the South was primarily agricultural.

Now, why is this important? One must see the past to progress and understand the differences between these regions and their economies. Now, one comes to the postbellum period, which started after the Civil War and lasted during Reconstruction and the Jim Crow era. This period would be difficult for the entire United States. First, the South would have to integrate back into the United States economy. Second, rebuilding of the South would have to take place. Both of these factors are ways in which the economy could be affected. One way to see these factors at work is through the market. According to James, during the “postbellum” time, there was an integration of local “interest rates,” which shows the “development of the national capital market,” which did not take long to develop (1970. p. 13). James breaks the United States into several different regions. For this topic, the focus is on three of James' six areas. According to James, Region One consists of the Northeastern states “(Maine, Vermont, New Hampshire, Massachusetts, Rhode Island, and Connecticut),” which had a three ½ percent interest rate, Region Two which is the Mid-Atlantic states “(New York, New Jersey, Pennsylvania, Delaware, Maryland, and the District of Columbia)” had an eleven and a half percent interest rate, and region three was all of the southern states “(Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana, Texas, Arkansas, Kentucky, and Tennessee)” had a five and three-quarters interest rate all paid to the earnings of these regions national banks between “1870-1914” (1970. p. 14). These are important because the banking industry is a marker of how the economy was in each of these regions. The Northeast, where most of the industry production growth was, was declining faster, the Mid-Atlantic region growth was declining slower, and the South growth was higher than the Mid-Atlantic but declining quickly. This decline is shown in the interest rate decline between 1879-1880. This is important because it shows each economy's growth through the banking institutions' lens. These are a big part of the economy, and interest rates and their percentage can significantly indicate economic growth. There are several reasons this growth declined.

They were first looking at the Northern states, which were broken into two sections: the Mid-Atlantic and the Northeast. The Northeast had peaked, and growth was slowing due to the transition from war, whereas the Mid-Atlantic was industrial but not like the Northeast, so this created a slower decline. New York was gaining a lot of immigrants from Europe into the country. This expansion helped push for a slower decline. This is shown in the Northeast's interest rate decline from led 11 ½ percent payout to the national bank's earnings in 1870 to 6 ½ percent in 1880 (James. 1978. p. 13). Payments to banks were slowing due to the decline in growth in manufacturing. This is the most significant decline in this period between the three regions. The Mid-Atlantic's decline was not as drastic. The interest rate went from 4 ½ percent in 1870 to about 3 percent in 1880 (James. 1978. p. 13). This shows the economy slowing which would be another indicator that manufacturing was declining.

Finally, one needs to look at the South. This region was devastated during the Civil War. Davis &Weidenmeir state, “Indeed, the war reduced industrial production by more than 50 percent during the conflict, and the Southern manufacturing sector remained severely depressed for years after the Civil War had ended” (N.D. p. 3). What begs to be looked at is the years in which these interest rates started, which were in 1870. This shows a ten-year absence in which the South was unstable, and interest rate growth was declining quickly. According to Davis & Weidenmier, the South did not start to have growth in industrial production “until the early 1870s” (N.D. p. 3). Looking at the interest rate and money made by the Southern national banks shows that this was when growth started to occur. The 5 ¾ percent interest rate dropped in 1870 to 4 ½ percent in 1880 but picked up beyond 1880 (James. 1978. p. 13). This shows that banks in the South began to grow during this industrial growth, partly due to reconstruction. Payment is being made to increase the banking financial income. This indicates that reconstruction is starting to impact the Southern economy positively. However, it would take years for the South to recover fully.

Each region differed in how each economy was affected during the antebellum period. The North would decline, looking at the interest rates the banks paid for their income. The Mid-Atlantic states would decline the slowest while the Northeast decline was rapid. The Southern states experienced a decline in interest rate growth during the 1870s, but beyond 1880, it slowly increased. Reconstruction, though not perfect, helped to bolster the South’s economy.

References:

Davis, Joseph H.& Weidenmier, Marc D. “The Macroeconomic Impact of the American Civil War.” Federal Reserve Bank of Atlanta. ND. Accessed on May 20, 2024. Retrieved from https://www.atlantafed.org/blogs/-/media/CFBC939B67FA46169DA711319F15FDD2.ashx#:~:text=The%20conflict%20dramatically%20reduced%20industrial,annum%20during%20the%20Civil%20War.

James, J. A. (1978). Money and capital markets in postbellum America. Princeton University Press. Retrieved from https://www.jstor.org/stable/j.ctt13x0z3n?saml_data=eyJzYW1sVG9rZW4iOiIzNmM3NjZlZi1jNjFhLTQyODMtYWQ3Zi0zNjMxOGQ3NDQ3MzgiLCJpbnN0aXR1dGlvbklkcyI6WyJjNGZjMjNmMC01MDQzLTRiOWMtYjgzNS0wZTBkZDBhMDA2MjMiXX0.

Pessen, Edward. "How Different from each Other were the Antebellum North and South?" The American Historical Review 85, no. 5 (1980): 1119. Retrieved from https://web.p.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=0&sid=f109b218-8613-47dc-8b69-034036068568%40redis.