American Business

American business grew in the 1820's and 1830's as a result of the transportation revolution, growing population, and creativity and ruthlessness of a new generation of entrepreneurs. Specialized shops emerged to take the place of the increasingly uncommon general store (which still existed in smaller towns, where bartering was still common). The organization of business continued to change. By the mid-ninteenth century, America had the beginnings of a capitalist economy and a growing industrial capacity.


Many clipper ships, like the one shown here, were used to transport goods as well as passengers. They averaged a speed of 300 miles a day.

In the 1820's, individuals and limited partnerships continued to operate most businesses. The dominating figures were merchant capitalists, individuals who had ownership of their own enterprises. Mercantile groups thrived on the business of shipping agricultural goods down the Mississippi River by barge or steamboat to New Orleans. From there, the goods would be shipped to cities along the East coast or to foreign ports in Europe or Asia. However, merchant capitalism began to decline by the end of the century as a result of the British competitors who stole much of the United State's export trade, and the discovery that there were greater opportunities for profit in manufacturing than in trade.

Beginning in the 1830's, the corporation became a more common form of business organization due to the removal of some legal obstacles which had previously stifled corporate growth. Interest in corporations also grew due to the introduction of a system of limited liability, under which individual stockholders did not risk losing everything if the corporation they invested in were to fail. The result was that the ownership of American enterprise moved away from individuals and families with complete ownership and began to be dominated by a number of stockholders who held a portion of the company. Most businesses relied on credit to obtain enough capital to meet their demands, but since credit was still unstable at this point, frequent bank failures made economic growth challenging. However, business was still able to expand rapidly during these years, and Industrial capitalists were quickly becoming the new ruling class.

The Emergence of the Factory

The expansion of the factory system was the most profound economic developement in America in the mid-1800s. Before the War of 1812, most manufacturing was done in private homes and individually-operated workshops, but new advances in technology and growing demand for manufactured goods led to several changes in the nature of American manufacturing.

Here is an example of what a factory might have looked like in the 1800s.
Industrialization began in New England. The ability to bring textile operations under one roof was made possible by the innovations of entrepreneurs there who made use of new and larger machines driven by water power. The shoe industry also became industrialized, with manufacturers in Massachusetts producing large numbers of shoes at a relatively low cost. By the 1830's, factory production spread to other industries and from the New England to other parts of the Northeast.

The factory system continued to expand through 1860 and manufactured goods increased in value. For the first time in American history, the value of manufactured goods was equal to the value of agricultural products. The Northeast continued to dominate the market of manufactured goods. About half of the coutry's factories were located in the Northeast, but two thirds of manufactured goods were produced there. Industrialization also spread in some degree to the Northwest (centered in cities like Cleveland, Chicago, and Cincinnati), where it served to further associate the Northwest with the Northeast and alienate the South within the Union.

The Lowell System

This image shows women workers in a typical Lowell factory.

The Lowell System (also called the Watham System) was named for the town of Lowell, Massachusetts in which it became common, and was one of two systems of recruitment that emerged to bring new labor supply to expanding textile industry. It involved the recruitment of young, unmarried women to work in the town's factories and mills. Usually, these women would work in the mills for several years, save up some of the money they had earned, and return home to resume their traditional domestic roles. Because many people in New England were uneasy about women doing factory work, it was ensured that the factory girls were kept in relatively good working conditions and upheld proper moral standards.

The increasing immigration that occurred in the 1830's and 40's ultimately led to the decline of the Lowell System in New England factories. Immigrants were willing to work in much worse conditions, and for much lower pay, than native-born Americans. Factory owners found it more profitable to employ an immigrant workforce that they didn't care much about than to provide for their young women workers.

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