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Economic Development
by Drew VandeCreek, Ph.D.

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The Civil War brought prosperity to Illinois' farmers and manufacturers. Union armies relied upon the state's corn and grain fields for rations, and upon its factories for uniforms, wagons, and other supplies. Chicago's position at the nexus of the Northwest's growing railroad network made it a major point for the distribution of eastern-made goods to troops serving in the western theater as well.

Many Illinois farmers borrowed money to increase their productive capacity in wartime's strong markets. But the war's end, coupled with a decrease in European demand for American agricultural products, left many of these individuals to face dramatically lower crop prices. Many farmers faced large debts that they could not pay. Some became tenant farmers, working lands owned by absentee landlords.

The war's end also brought a rapid increase in new railroad construction, especially in the lands west of Chicago. The completion of a transcontinental railroad stretching from Omaha to San Francisco in 1869 made Chicago, which already enjoyed a rail link with the Nebraska city, the hub of the new western rail network as well.

In 1871 the Chicago Fire burned nearly forty percent of the city. But a combination of its unique location and eastern capital contributed to its rapid reconstruction. The large opportunities for new building in Chicago led the city to become a center for architectural innovation, and gave rise to Louis Sullivan and Frank Lloyd Wright. In Chicago, architects devised the world's first skyscrapers, relying upon steel-frame construction based upon cement caissons sunk to bedrock far below the surface. 1

As it became the nation's western railroad center, Chicago merchants gathered in midwestern and western produce, from lumber to corn and grain, and distributed finished products, from clothing and tools to pre-fabricated housing units, to the same markets. Montgomery Ward's and Sears, Roebuck became major mail-order houses, providing their customers with catalogs describing available merchandise and an opportunity to receive orders by rail.

Chicago also became the home of major manufacturing industries, many of which supported the West's agricultural trade. The McCormick Harvester Company had moved from Virginia in 1847 to take advantage of Chicago's proximity to the western grain belt, and its huge factory on the city's west side employed thousands of workers throughout the period. Packingtown also rose on the city's southwest side, a collection of giant slaughterhouses and meat processing facilities operated by Cudahy, Armour, Swift. The city also maintained its leading role in the processing and distribution of western raw materials, including lumber and grain. 2

The rise of railroads undermined the trade of steamboats plying the Mississippi, which had so characterized antebellum transportation in the Mississippi Valley and made St. Louis and New Orleans important commercial centers. In the Gilded Age Chicago decisively defeated the Missouri city in the struggle for commercial supremacy in the region. The construction of the Eads Bridge across the Mississippi River at St. Louis in 1873 reflected how important the railroads' new east-west transportation axis had become. 3

In this period coal mining became a major industry in Illinois at Braidwood, LaSalle, Carbondale, and other centers. Mining companies shipped coal to urban areas by rail, to be burned by industry and homeowners. Railroads' steam engines themselves also relied upon plentiful supplies of coal.

A major depression began with the Panic of 1873, sparked by railroad overbuilding, stock speculation, and industrial overproduction. Many employers sought large wage cuts from workers, a policy that led to the Great Strike of 1877. Striking workers and sympathizers, outraged by their shrinking wages and employers' high-handed methods, destroyed railroad property in Baltimore, Pittsburgh, Chicago, East St. Louis and other cities. Police put down the disturbances with many deaths and injuries among both their own ranks and the rioters. 4

As postwar crop prices fell lower, denizens of rural Illinois perceived a palpable crisis. Not only did many farmers face persistent debts. Many believed that the forces of the new national economy, and especially railroads and banks, were arrayed against them. Bankers often proved unwilling to negotiate with indebted farmers. And railroads milked routes on which they faced little competition from other carriers or water transportation for maximum profit. As a result, farmers living near Chicago's grain elevators often paid considerably more to have their crops hauled there than farmers living farther away. 5

This situation led farmers to take up cooperative self-help schemes and political organization. Farmers pressured the Illinois legislature to regulate railroads and grain merchants. One Chicago merchant challenged the laws in court, but the United States Supreme Court upheld governments' right to regulate interstate commerce in 1877. 6

Another major depression began in 1893. Again overproduction and speculation contributed to a financial panic, and again employers demanded wage cuts. Many workers, including those at the Pullman Palace Car Company south of Chicago, went out on strike. When the American Railway Union paralyzed American railroad traffic in support of the Pullman strikers, President Grover Cleveland called out the United States Army to smash the work stoppage. 7

In a period of rapid, if intermittent, economic growth, federal currency policy contributed to a general deflationary trend. Government officials' policy of basing American currency on gold bullion, and of retiring Civil War era paper currency not so supported (also known as Greenbacks) had serious social and political consequences. It served to protect the interests of creditors, who collected debts in progressively more valuable dollars, and harmed debtors, who paid back loans in progressively scarcer dollars. In addition to farmers complaints about railroads and workers concerns about wage cuts, this issue served to fire Gilded Age reform movements. 8

Despite the attempts of the Farmers' Alliance and other movements to effect a larger role for the federal government in economic oversight and regulation, by the mid-1890s powerful financiers had taken advantage of the decade's depression to acquire many distressed industrial firms and refashion them into new arrangements devoted to mitigating overproduction and price competition in major industries. 9

These tactics succeeded in those economic sectors in which reliance upon expensive new technology and a devotion to large-scale production prohibited new competitors from taking the field. In industries such as oil refining and steel making financiers and far-seeing industrialists fashioned new companies, known to many as "trusts," which together made up a new economic system. In spite of these arrangements' very visible success, other segments of the American economy (especially those with few barriers to newcomers) continued to struggle with bitter price competition and overproduction. 10

1. Cole, Arthur Charles. The Centennial History of Illinois: The Era of the Civil War, 1848-1870. Springfield: Illinois Centennial Commission, 1919.

2. Cronon, William. Nature's Metropolis: Chicago and the Great West. New York: W.W. Norton, 1991.

3. Belcher, Wyatt W. The Economic Rivalry Between St. Louis and Chicago, 1850-1880. New York: Columbia Studies in the Social Sciences, 1947.

4. Bruce, Robert V. 1877: Year of Violence. Chicago: Quadrangle Books, 1970.

5. Bogart, Ernest Ludlow. The Centennial History of Illinois: Industrial State, 1971-1893. Springfield: Illinois Centennial Commission, 1920.

6. Woods, Thomas A. Knights of the Plow: Oliver H. Kelley and the Origins of the Grange in Republican Ideology. Ames: Iowa State University Press, 1991.

7. Papke, David Ray. The Pullman Case: The Clash of Labor and Capital in Industrial America. Lawrence: University Press of Kansas, 1999; Salvatore, Nick. Eugene V. Debs: Citizen and Socialist. Urbana: University of Illinois Press, 1982.

8. Unger, Irwin. The Greenback Era: A Social and Political History of American Finance, 1865-1879. Princeton: Princeton University Press, 1964.

9. Lamoreaux, Naomi. The Great Merger Movement in American Business, 1895-1904. New York: Cambridge University Press, 1985.

10.Chandler, Alfred. The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Belknap Press, 1977.


©2002 Illinois During the Gilded Age Digitization Project.