What was the basic difference between the economy of the North and the economy of the South?

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pohnpei397 eNotes educator| Certified Educator

There are two major differences between the economies of the North and the South during the time before the Civil War. The North had a more diversified economy based on free labor.  The South had an agrarian economy based on slave labor.

The most famous difference between the economies of the two regions was the difference between free labor and slave labor. Slavery had been legal in the North early in the history of the United States, but it was soon banned. By contrast, slavery remained legal in the South until the end of the Civil War. In the South slavery remained a pillar of the economy.  In 1860, most of the Confederate states had populations that were at least 40% African American.  This was a major difference between the two regions’ economies.

The other difference is less well-known but is perhaps just as important.  This is the difference between an agrarian economy and a diversified economy. The South’s economy was based mainly on the production of cotton for export.  There was very little manufacturing.  By contrast, the North’s economy had a great deal of manufacturing and relatively less farming.  The farming that did go on in the North (and there was a great deal of it) was generally concerned with producing food for domestic markets. 

In these ways, there were two very important differences between the economies of the North and South before the Civil War.