As the war dragged on, the North’s economic advantages became more apparent. The Union could provide more arms, food, and clothing to its troops and more of the necessities of life for families back home. Indeed, the Civil War quickened the industrial development of the North that had begun in the early nineteenth century. By 1860 manufacturing establishments in the region outnumbered those in the South six to one, with 1.3 million industrial workers in the North compared with only 110,000 in the South. Northern factories flourished as they turned out weapons, ammunition, blankets, clothing, and shoes, and shipyards built the fleets that blockaded southern ports.
Initially, the effects of the war on northern industry were little short of disastrous. Raw cotton for textiles was no longer available, southern planters stopped ordering shoes, and trade fell off precipitously in seaport cities. By 1863, however, the economic picture had improved dramatically. Coal mining and iron production boomed in Pennsylvania. In New England, woolen manufacturing replaced cotton, and the shoe industry thrived on orders from the army. Merchants dealing in war materiel made particularly handsome profits.
The economic boom was linked to a vast expansion in the federal government’s activities. Direct orders from the War Office for blankets, firearms, boots, and other goods fueled the industrial surge. The government also granted large contracts to northern railroads to carry troops and supplies. With southern Democrats out of federal office, Congress increased the protection of northern industries by passing a steep tariff on imported manufactured goods. The government also hired thousands of “sewing women,” who worked under contract in their homes (often in crowded tenements) to make uniforms for Union soldiers. Other women joined the federal labor force as clerical workers, who sustained the expanding bureaucracy by handling the increasing amounts of government-generated paperwork.
That paperwork multiplied exponentially when the federal government created a national currency and a national banking system. Before the Civil War, private banks (chartered by the states) issued their own banknotes, which were used in most economic transactions. During the war, Congress revolutionized this system, giving the federal government the power to create currency, issue federal charters to banks, and take on national debt (which totaled $2 billion by the war’s end). The government used its new powers to flood the nation with treasury bills, commonly called greenbacks. The federal budget mushroomed as well—from $63 million in 1860 to nearly $1.3 billion in 1865. By the end of the war, the federal bureaucracy had grown to be the nation’s largest single employer.
These federal initiatives provided a tremendous stimulus to industry, and northern manufacturers greeted them, on the whole, with enthusiasm. But they faced one daunting problem: a shortage of labor. Over half a million workers left their jobs to serve in the Union army, and others were hired by the expanding federal bureaucracy. Manufacturers dealt with the labor shortage primarily by mechanizing more tasks and by increasing the employment of native-born women and children and recently arrived immigrants. Mechanization advanced quickly in the clothing and shoe industries, allowing more jobs to be filled by unskilled or semiskilled workers. Industrialists also formed organizations such as the Boston Foreign Emigrant Aid Society to encourage European migration, which had fallen off sharply in the first two years of the war. By 1863 the number of immigrants—mostly Irish, German, and British—had reached pre-1860 levels and continued to increase. Combining the lower wages paid to women and immigrants with production speedups, manufacturers improved their profits while advancing the Union cause.