How did industrialization lead to the development of cities in the United States?

The story of nineteenth century development in the United States is one of dynamic tension between extensive growth as the country was settled by more people, bringing more land and resources into production and the intensive growth from enhancing the productivity of specific locations. Key elements in that intensive growth are the movement of population out of agriculture and into other activities. These activities included not only trade (with its closely associated exchange and movement of goods and people) which concentrated in marketplaces but also and increasingly over the century, manufacturing. This paper seeks to clarify the interaction of these forces with particular attention to the growth of population centers and their increasing colocation with manufacturing. At its inception, America’s first industrial revolution was predominantly rural. It would become increasingly urban over the course of the nineteenth century, not only as economic activity agglomerated around early nuclei but also because changes in technology diminished the importance and value of certain initial conditions and freed manufacturing to relocate to more centralized and concentrated locations. We document the increasingly urban character of manufacturing over the century, and we sketch an economic framework for its interpretation.

In 1800 83 percent of the American labor force was engaged in agricultural production, mostly for household consumption with any surplus of most crops directed towards local markets (Carter et al., 2006, Ba814 and Ba817). There were some American products where the principal market lay overseas, like tobacco and cotton, but these were the rare exception. Most basic manufactured goods were also made in the home although some might be purchased from local artisans. Household production was driven both by a lack of the necessary cash to buy in the market and the distance to readily accessible marketplaces.

Population densities in the United States were very low, especially when compared with those in western Europe or the Far East. There were few towns and cities of any size. In 1800, for example, the US population of 5.3 million was spread out across over 860,000 square miles of territory, giving the country an average population density of 6.1 per square mile—barely over the 1890 census threshold of “settled” (density ​> ​6.0).1 Moreover, the Louisiana Purchase (1804) approximately doubled the land area of the US, adding so much sparsely populated territory that despite the US population growing by 36 percent between 1800 and 1810, density fell to just 4.3 persons per square mile (far short of one family) and did not surpass the 1800 level until sometime in the 1820s (Carter et al., 2006). Just 33 communities nationwide in 1800 would have met the conventional Census definition of “urban” – population of 2500 or more – comprising 6.1 percent of the population.2 Only two cities (Philadelphia and New York) where 1.9 percent of the US population lived, were of any real size and would have met the population cutoff to qualify as one of largest 100 cities as of 1900 (that is, a population of 38,000 or more, see Gibson, 1998).

Moreover, the location of the few urban places in 1800 reflected the primitive nature of overland transportation, which was extremely limited and costly, even when it occurred on “improved” surfaces like turnpikes or graded and paved roads in or near the few population centers. Shipping goods by wagon over indifferent or bad roads – the vast majority -- cost as much as 70 cents per ton-mile in 1816 (Taylor, 1951), ruling out all but the least bulky, most valuable commodities. Personal travel overland was equally difficult, expensive, and time-consuming. While a horse might carry a rider 20–30 miles in a day, horses were costly, and most trips were made on foot. If a wagon were needed, a trip to and from market could easily take several days (Rothenberg, 1981). Much transportation, therefore, of goods or people in the early nineteenth century occurred along the Eastern seaboard or on navigable internal waterways. Fig. 1 maps the locations of urban places and geographic variation in population density in 1800.

The few relatively large agglomerations on the coast – Boston or New York, for example – were located where natural advantage provided harbors with ocean access. Further inland, water transportation had to stop where rivers draining to the Atlantic Ocean crossed the Eastern fall line, again creating points of agglomeration and concentrated settlement – so-called “portage” sites (Bleakley and Lin, 2012).3 However, as noted, the number of such places and the share of the population living in them were very small at the start of the nineteenth century – the vast majority of the population was rural, and sparsely settled at that.

Over the nineteenth century, the American economy grew dramatically in the aggregate and per capita, coincident with a pronounced shift of labor out of agriculture (Gallman and Rhode, 2019). By 1900, the share of the labor force in farming had decreased 43 percentage points during the preceding century. And, as the labor force shifted out of agriculture, the nation became more urban with almost 40 percent of the American population living in places of 2500 population or more and average population density increased. Moreover, fully a quarter of the population lived in the nation’s 100 largest cities (population of 38,000 or more). These cities are mapped in Fig. 2, along with the geographic variation in population density:

Many cities were deep in the interior, far from either coast and the eastern fall line or, in the case of the Midwest, the Great Lakes. Some had limited or no access to navigable waterways (for example, Indianapolis or Salt Lake City).

An important component of the shift of labor out of agriculture was into manufacturing. When the nineteenth century began, the Industrial Revolution was well underway in Britain but barely in its infancy in the United States (United States. Congress. House, 1791). By the early twentieth century, the United States was the world’s leading producer of manufactures, with labor productivity twice as high as that in Britain, the nation where industrialization had first taken hold (Broadberry and Irwin, 2004, Table 3; Broadberry and Irwin, 2006). Critical to American industrial ascendancy were radical changes in the nature of the manufacturing process and the rise of the factory. Home manufactures declined precipitously, and many local artisans were displaced by the factory system. Compared with artisan shops, factories employed more workers per establishment and used powered machinery to produce a large volume of output that was sold in increasingly distant markets. Early in the nineteenth century waterpower was the preferred source, but by the end, steam power predominated.

To make this transition work, inputs had to be purchased and product shipped all over the nation using a dramatically expanded and improved transportation network – the so-called “Transportation Revolution” (Taylor, 1951). The most important innovation was the development of a nationwide railway network. The diffusion of railways began in the 1840s and was essentially complete by the end of the century, dramatically increasing market access (Taylor, 1951; Fogel, 1964; Fishlow 1965; Atack, 2013; Donaldson and Hornbeck, 2016). Overall, the transportation revolution was associated with profound changes in the cost of transportation both within and between modes. Wagon haulage experienced the smallest change with per ton-mile rates perhaps halving to 15 cents where there were surfaced rather than dirt roads. Water rates, which were already low relative to overland rates, declined perhaps 30 percent on downstream passage; 66 percent transatlantic and 85 percent upstream to fractions of a cent per ton mile thanks in part to steam power. And, in railroading, productivity growth drove down shipping rates by 80 percent to the point where shipping by rail was cost competitive with rivers on a ton-mile basis but for much quicker and more direct delivery. The transportation revolution (especially the railroad) fueled the growth in the number and size of urban places. Coupled with the changes in manufacturing production, this incentivized establishments to urbanize. While it would be incorrect to say that such agglomeration could occur almost anywhere, sources of natural advantage in the early nineteenth century such as coastal access or portage, were much less important by 1900, as shown in Fig. 2.

Over the past several decades, American economic historians have assembled empirical evidence that allows this explanation of why manufacturing urbanized to be refined in ever greater detail. Some involves the digitization and processing of published data from the various nineteenth century census volumes, as well as archival evidence from the original manuscript census returns. It also involves digitization and GIS processing of historical maps of various kinds, part of the ongoing big data revolution in economic history. Similar efforts are underway for other countries experiencing historical industrialization and urbanization. We mention these briefly in the conclusion but focus mainly on research on the United States along with suggestions for improvement and further analysis moving forward.

From artisan shop to factory: manufacturing in nineteenth century America

At the start of the nineteenth century the American population was overwhelmingly rural and agricultural. Because internal transportation costs were very high, it was prohibitively expensive for most rural farm households to purchase manufactured goods from abroad. Instead, rural farm households made much of what they needed at home, such as clothing or “homespun”. As Albert Gallatin, the US Secretary of the Treasury, observed “by far the greater part of goods made of cotton, flax, or wool are

Explaining the urbanization of nineteenth century American manufacturing

As the labor force shifted out of agriculture in the nineteenth century, the American population became more urban and so did manufacturing. Why did manufacturing become more urban? Boustan, Bunten, and Hearcy (in Cain et al., 2018, vol. 2, chapter 22), hereafter BBH, suggest a simple model derived from Rosen (1979) and Roback (1982) that can serve as a broad interpretive frame. More densely populated areas command higher land rents in equilibrium. For workers to be willing to live in

Concluding remarks

America industrialized over the course of the nineteenth century. Initially, industrialization was not an urban affair, but over time, manufacturing and urbanization became tightly connected, as the nature of manufacturing shifted from the hand labor of the artisan shop to the machine labor of the factory. We have related this change to the transportation revolution, the growing use of steam power, and other key historical changes of that epoch. Our argument is that the tighter connection was

Author statement

This manuscript or a very similar manuscript has not been published, nor is under consideration by any other journal.

Declaration of competing interest

Jeremy Atack has no conflicts of interest with respect to this article. Robert Margo has no conflicts of interest with respect to this article. Paul Rhode has no conflicts of interest with respect to this article.

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