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

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I am going to assume that this question is asking about the differences in the economies of the northern and southern United States during the Civil War. Prior to the Civil War, the South was the big money maker for the United States in terms of exports. That main export...

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I am going to assume that this question is asking about the differences in the economies of the northern and southern United States during the Civil War. Prior to the Civil War, the South was the big money maker for the United States in terms of exports. That main export was cotton, and by 1840 it was worth more than all of our other exports combined. Unfortunately, the South lacked in other areas. The South had minimal manufacturing capability, about 29 percent of the railroad tracks, and only 13 percent of the nation's banks. Additionally, most of the South's economy was tightly tied to slavery. This contrasted with the North's "free market" approach. Coinciding with this economic model was the fact that the North's economy was focused on the commercial and manufacturing side of things. As the Industrial Revolution gained momentum, the North's economy boomed as they could produce more textiles, guns, etc. than the South, and the North could produce it faster. These basic differences ended up having a huge impact on the Civil War.

The Union's industrial and economic capacity soared during the war as the North continued its rapid industrialization to suppress the rebellion. In the South, a smaller industrial base, fewer rail lines, and an agricultural economy based upon slave labor made mobilization of resources more difficult. As the war dragged on, the Union's advantages in factories, railroads, and manpower put the Confederacy at a great disadvantage.

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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.

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