Introduction to the study of economics

Introduction

TO THE

Study of Economics

BY

PROFESSOR OF ECONOMICS IN HARVARD UNIVERSITY THIRD EDITION, REVISED AND ENLARGED

SILVER, BURDETT AND COMPANY New York Boston Chicago

Copyright, 1897, 1900, 1908, By Silver, Burdett and Company

Preface

This work is designed for an introductory text-book of economic science. The first three chapters aim to familiarize the student with an orderly treatment of some leading facts in the economic history of the United States before the study of economic theory is commenced. Throughout the book economic principles are discussed with special reference to American conditions, and their workings are illustrated by frequent allusions to American experience.

Some of the chapters treat of topics that are extremely difficult. In such cases no attempt has been made to secure a false appearance of simplicity. The subject of public finance has been only incidentally touched upon. The author considers it impossible to discuss taxation satisfactorily without studying public expenditures also. To do this would have required more space than could be allotted to that subject.

When many important points of economic theory are unsettled, as is certainly the case at the present time, the preparation of a text-book is not an easy task. The author believes that it is neither desirable nor possible to introduce the beginner to many controversies

4 PREFACE,

on fundamental points of theory. For this reason he has been obliged oftentimes to present his own views much more dogmatically than he would desire to do under other circumstances. On practical problems, however, such as bimetallism and monopolies, where weight of opinion is nearly evenly balanced, every effort has been made to present both sides of the controversies. The author has received invaluable assistance in the preparation of this work. Special acknowledgment should be made to Professor Charles H. Hull, of Cornell University, to whose suggestions and criticisms this book owes much of whatever value it may have. The thanks of the author are due especially to his wife, who prepared nearly all the manuscript for the printer, lightening by one half the labor of writing this work.

CHARLES J. BULLOCK.

Ithaca, N. Y., April, 1897.

Preface To The Third Edition

In the second edition of this work the chapter upon value was revised and a new chapter upon public expenditure and revenue was added. This third edition gives opportunity for thoroughly revising all statistical matter, inserting a discussion of the localization of industry, and adding a new chapter upon railroad transportation. Minor changes have been made in a number of other

chapters.

C. J. B.

Cambridge, May, 190?^.

Chapter I. Page

llSfTRODUCTION TO THE ECONOMIC HiSTORY OF THE

TJnited States 11

I. Westward Expansion 11

II. Land Tenures in the United States ...... 14

III. Growth of Population in the United States ... 18

IV. Systems of Labor in the United States o . . . . 22 Literature on Chapter I. . . . . o , . . • 30

CHAPTER IL

The Growth of Foundational Industries .... 32

I. The Fur Trade and Cattle Raising 32

IL Agriculture 35

III. Fisheries and Mining 43

Literature on Chapter II , 47

CHAPTER m.

Manufactures and Transportation 48

I. Colonial Manufactures 48

IL The Industrial Revolution and the Factory System . 53

HI. Transportation . . 58

CONTENTS.

PA6B

IV. Ship Building 65

V. The Textile Industries 69

VI. Iron and Steel Industries 74

Literature on Chapter III • • . . . 77

CHAPTER IV.

The Consumption of Wealth 79

I. Human Wants 79

IT. Economic Goods 84

III. The Consumption of Wealth 87

IV. Statistics of Consumption 99

V. Economy in Consumption. Saving and Investment . 101

VI. Demand 110

Literature on Chapter IV 114

CHAPTER V.

The Production of Wealth 115

■^ I. Production in General ...115

^ II. The Factors of Production 118

III. The Localization of Industry 142

Literature on Chapter V 148

CHAPTER VL

The Production of Wealth {continued) 149

I. Organization of the Factors of Production .... 149 IT. Stages in the Development of Production . ... 1 63 III. Freedom in the Establishment of Productive Undertakings .... 166

TV. Cost of Production 168

V. The Investment of Labor and Capital upon Land . 170

VT. Large-Scale Production 176

Literature on Chapter VI. ...•...•• 185

CONTENTS. "

CHAPTER Vn.

PA OB

The Theory of Exchange • • • • • 186

' I. Exchange in General 186

'II. Value 189

III. Market Value 192

IV. Normal Value 200

V. Exceptions to the Theory of Normal Value . . . . 215

Literature on Chapter VII 223

CHAPTER VIU.

Money 221

I. Development of Metallic Money • • 224

\ n. The Value of Metallic Money 233

s^ III. Debased Money. Gresham's Law ..••••• 248

^!»-IV. Inflation and Contraction 258

V. Government Paper Money 263

Literature on Chapter VIH. • • 269

CHAPTER IX.

Money and Credit 270

•^ I. Credit and Instruments of Credit 270

II. Banks as Institutions of Credit 279

III. Advantages and Disadvantages of Credit .... 284

\ IV. Territorial Distribution of the Precious Metals . . 285

V. Summary of the Theory of Money 288

Literature on Chapter IX 293

CHAPTER X.

Monetary History of the United States. Bimetallism 294

I. Monetary History of the United States 294

n. Bimetallism 303

Literature on Chapter X 314

8 CONTENTS.

CHAPTER XL

PAGE

Monopolies 315

"^ I. The Nature of Monopolies. Monopoly Value . . . 315

•^ II. Classes of Monopolies 319

III. General Considerations concerning Modern Monopo-

lies 324

IV. The Problem of Natural Monopolies 326

V. Capitalistic Monopolies 331

VI. Final Considerations concerning Monopolies . . • 335

Literature on Chapter XI 342

CHAPTER XIL

Railroad Transportation 343

I. Railroad Competition and Combination 343

II. Railroad Rates 353

III. Public Control of Railroads 361

Literature on Chapter XII 372

CHAPTER XIIL

International Trade 373

I. The Foreign Trade of the United States .... 373

II. The Nature of International Commerce 375

III. International Values . 380

IV. Restriction of International Trade 387

Literature on Chapter XIII 410

CHAPTER XIV.

The Distribution of Wealth 411

I. Social Income 411

' \. II. Private Income 414

HI. Primary and Secondary Distribution ..,.,. 416

CONTENTS. 9

PAGE

IV. General Classifieation of Private Incomes .... 421

-- V. Interest 423 ..; 3D

VI. Rent 435 _j ^?

"*VII. Wages 446

VIII. Profits 460

Literature on Chapter XIV 467

CHAPTER XV.

The Wages System 468

I. General Considerations on the Labor Contract . . . 468

11. Labor Laws and the Labor Contract 473

III. Labor Organizations and the Labor Contract . . . 476

IV. The Unfavorable Relation of Laborers to the Product

of their Labor 485

V. Conciliation and Arbitration 489

Literature on Chapter XV 493

CHAPTER XVI.

Land Nationalization. Socialism 494

I. Land Nationalization , 494

Literature on Chapter XVI 513

CHAPTER XVIL

The Economic Functions of Government ..... 514

I. Economic Functions Performed by Governments . . 514 II. Examination of Modern Theories of Governmental

Functions 518

III. The Several Functions of Government Considered

from the Point of View of Individualism . . . 524

Literature on Chapter XVII 528

10 CONTENTS.

CHAPTER XVIII.

PAGE

Governmental Expenditures and Revenues .... 529

I. Public Expenditures 529

II. Public Revenues 534

III. Taxation in the United States 650

Literature on Chapter XVIII 587

I. English and American Works 589

II. Periodical Literature 604

III. French and German Works ....... 605

(1) French Works on Economics 605

(2) German Works on Economics 606

Index 609

Introduction To Economics

CHAPTER I.

Introduction To The Economic History Op The United States

I. Westward Expansion.

§ 1. The English colonies in North America were planted on the mere threshold of a vast territory of continental extent and imperial richness. Re-

Westward

sistlessly the line of settlement has been movement of pushed westward until, at the present day, ^^ no distinct frontier of unsettled land exists in the United States. This westward expansion of population over a vast area of free land has been the fundamental fact in the economic history of the country, exerting an influence upon almost every phase of its economic life.

§ 2. The colonists of the seventeenth century, advancing through the valleys of the rivers flowing into the Atlantic, pushed their settlements The first slightly beyond the " fall line," or the point JfweSrd where the first falls obstructed the naviga- expansion, tion of the rivers. The frontier of the seventeenth century corresponded roughly with the western border of the Atlantic coast region. From 1700 to 1760 the frontier was advanced another stage toward the west Emigrants gradually followed the rivers that penetrate the Appalachian region, and formed settlements in the table-lands of Pennsylvania, Yirginia, and the Carolinas. In New York and New England many settlers pushed toward the interior of those sections. Meanwhile, the eastern or tide water regions became an area of more or less continuous settlement.

§ 3. The third stage in the advance of the frontier occurred between 1760 and 1790. Settlers moved through the valleys and mountain passes of and fourth the Appalachians, and emerged in Tennessee, and Kentucky, and around the upper branches of the Ohio River. Thus the frontier passed over the mountains, while the area of continuous settlements advanced well into the Appalachian region. With the Appalachian mountains once passed, emigrants moved rapidly into the Mississippi Yalley. In 1820, Ohio, southern Indiana and southern Illinois, Tennessee, Kentucky, and southeastern Missouri were included within the settled area. West of the Mississippi and along the Great Lakes, a fourth region of frontier existed.

§ 4. From 1820 to 1850 the westward movement of

population was very rapid. The construction of the

Erie Canal, in 1825, and the use of the

The fifth ' '

and sixth steamboat upon the western rivers, facili-

^^^' tated communication with the East, and

stimulated the settlement of the Mississippi Yalley. By

1850 the frontier was advanced to the eastern boundary

WESTWARD EXPANSION. 13

of Kansas and Nebraska, while great states had arisen east of the Mississippi. At the same time a new frontier of settlement was begun in California, Oregon, and Utah. By 1880 the territory intervening between the Kansas-Nebraska and the Pacific frontiers of 1850 had become populated, although somewhat sparsely. In many places frontier conditions still existed, but areas of thicker settlement had so broken into the old Rocky Mountain frontier that a distinct line of frontier no longer existed. The decade from 1880 to 1890 saw almost the complete disappearance of an " American frontier."

§ 5. Up to the present time the economic history of the United States has been marked by a continual west-^ ward movement of population over vacant lands. In the future it will be altogether a of westward story of the more complete development of the territory won for the cause of civilization by the labors and privations of the American pioneer. The significance of this movement for westward expansion has been understood by few. For this reason, says Woodrow Wilson, '' the history of the country and the ambitions of its people have been deemed both sordid and mean, inspired by nothing better than a desire for the gross comforts of material abundance ; and it has been pronounced grotesque that mere bigness and wealth should be put forward as the most prominent grounds for the boast of greatness. The obvious fact is that for the creation of the nation the conquest of her proper territory from Nature was first necessary; and this task, which is hardly yet completed, has been idealized in the popular mind. A bold race has derived inspiration from the size, the difficulty, the danger of the task. Expansion has meant nationalization ; nationalization has meant strength and elevation of

view."

n. Land Tenures in tlie United States.

§ 6. Systems of land tenure influence powerfully the economic development of a country. In Europe, the The influence po^session of land has often conferred of land economic superiority and social distinc-

tion. In the Middle Ages the large landowners became the feudal rulers of Europe, while the small owners and the landless men were obliged to place themselves under the protection of some feudal lord, in a position of economic and social dependence. In modern Europe the landed aristocracy has lost most of its exclusive political privileges, but retains something of its former social superiority. Land tenures have in most countries remained aristocratic, — that is, such as to perpetuate large estates and to make difficult the growth of a large number of small holdings. Such land tenures keep the mass of the agricultural population of Europe in a position of economic dependence upon the land-owning classes.

In the United States economic development has

taken a different direction. In some colonies efforts

Tenures in were made to create large estates whose

the United proprietors should enjoy special privileges,

states. ^ T • I

and various conditions sometimes made it

difficult for small proprietors to acquire titles to land.

LAND TENURES IN THE UNITED STATES, 15

But, in the long run, the tendency was toward a popular system of land tenure and land transfer. After the Revolution, practically all traces of aristocratic land laws were swept from the statutes of the states. Small holdings had always been the rule in New England, while large estates became more common as one passed toward the South. These differences had an economic explanation. The more fertile lands of the middle and southern colonies made large farms and plantations profitable economically. On the less fertile soils of New England, smaller farms and a more careful cultivation were an economic necessity. Similar causes explain differences in agricultural tenures that exist in the country at the present day.

§ 7. Since vacant lands abounded, the management and settlement of such public lands became an important problem early in colonial history. Majiagement

The usual outcome was that the people ofpubuc

lands, finally secured the right to acquire ownership of the vacant territory by simple methods of registration, and by making a payment that was often nominal. The growth of democracy in the colonies made such a solution inevitable.

The War for Independence placed in the control of the United States nearly all the territory now comprised within its limits east of the Mississippi.^ The pubUc

The territorv west of the Alleghanies was domain of the

^ United states,

ceded to the national government by the

1 On the subject of land cessions, see maps in MacCofn, Historical Atlas ; Hinsdale, The Old Northwest ; Gannett, The Building of a Nation.

16 ECONOMIC HISTORt OF THE UNITED STATES

states, and became a public domain. In 1785 and 1787 Congress passed ordinances that provided for the administration of the Northwest Territory. These ordinances laid down the lines which the policy of tlie United States has always followed, in many important features. The lands were divided by a governmental survey into townships six miles square.^ Entire townships or sections of townships were sold at public sale for not less than a dollar per acre. This system enabled settlers to locate easily in the states north of the Ohio, and consequently the flow of population into the Ohio Valley was very rapid. By several acquisitions the United States extended its territory to the present limits ; and the public domain included, at one time and another, 2,889,175 square miles.^ The thirteen original states, together with Maine, Kentucky, and Texas, were never part of the public domain. Their area is about 699,000 square miles.

This vast public domain has been sold at public and

at private sale at a common price of 11.25 to 12.50 per

, . acre. Since 1862 a free homestead of not

Disposal of

thepubHc more than one hundred and sixty acres has been granted practically free of charge to every citizen who is the head of a family, or above the age of twenty-one, on condition that he shall actually cultivate the land for five years. Lands valuable for minerals, for timber or stone, for town sites, etc. have

1 See FiSKE, Civil Government, 81-88 ; Hinsdale, The Old North west, 255-279.

- For these statistics see Donaldson, The Public Domain, 10-14 ; Sato, The Land Question, 21-77.

LAND TENURES IN THE UNITED STATES. 17

been sold on special terms. Vast tracts of land have

been given away for the purpose of assisting in the

construction of railroads and military roads, for the

endowment of schools and colleges, and for military

bounties to soldiers and sailors. In these ways the

larger part of the original domain has passed out of

the hands of the United States. In 1894, exclusive of

Indian and military reservations, there remained about

850,000 square miles of public domain. To this should

be added nearly all of the 577,390 square miles included

in the limits of the territory of Alaska. Of the lands

that remain, only a small part will be available for

agricultural purposes until the arid regions of the West

shall be irrigated.

There have been great abuses in the administration

of the public domain. Vast tracts of land have been

secured by fraud, railroads and other cor-

•; Result of the

porations have secured land without fulfill- puwic land

ing the conditions upon which the grants ^ ^^' were made, while land and timber thieves have supported lobbies at Washington to prevent the passage of laws designed to protect public interests. Yet, in spite of all abuses, millions of settlers have found homes on lands secured from the United States, the resources of the country have been developed, and twenty-seven states, carved out of the public domain, have been admitted to the Union. On the agricultural lands, holdings of moderate size have been the rule ; and the public-land states have become composed of a large number of proprietors, not of landlords and tenants.

III. Growth of Population in the United States. § 8. During the seventeenth century the population of the English colonies grew quite slowly, but from 1700 to 1775 numbers increased rapidly.

statistics of T .

increase of Mr. Bancroft estimates the population in population. ^^^^ ^^ 1,165,000 whites and 263,000 negroes. In 1775 it had increased to 2,500,000 souls. The English element predominated in most of the colonies at that time, but the population was quite heterogeneous. In New York the Dutch stock prevailed, on the Delaware River there were settlements of Swedes, in Pennsylvania there were many Germans, in the mountainous districts of the Appalachian frontier Scotch-Irish were most numerous, while the southern colonies contained many Huguenots. The First Census of the United States, in 1790, showed the population to be 3,924,214. The subsequent growth of the country is shown in the following table : —

Date

Number of of

Population.

of inhabitants

Census.

increase.

per sq. mile.

3,929,214

4.89

5,308,483

35.10

6.61

7,239,881

36.38

3.69

9,633,822

33.07

4.76

12,866,020

33.55

6.35

17,069,453

32.67

8.43

23,191,876

35.87

7.93

31,443,821

35.58

10.84

38,558,371

22.63

13.30

50,155,783

30.08

17.29

62,622,250

24.86

21.20

75,568,686

20.70

25.60

THE GROWTH OF POPULATION. 19

§ 9. The enormous increase of the population of the United States during the last century is due partly to natural increase by a constant excess of

*' Natural

births over deaths. From 1700 to 1820 increase of the natural increase was very great, so that ^^ °"' population doubled repeatedly in periods of about twenty-five years. This was due to the abundance of fertile land which was usually accessible to every one. Food, clothing, and shelter could be secured very cheaply. An increase of numbers meant not so much an increase of mouths to be fed, as an addition to the productive labor of each family employed upon new land. Under such conditions marriages occurred early, families were large, and the natural increase of numbers was rapid. After 1820 it was noticed that the rate of natural increase began to diminish. This became apparent in the older and more thickly populated regions. In recent times tliis condition has become very general, as the population of more states has become relatively dense.^

§ 10. Immigration has been so large that the smaller rate of natural increase has been less apparent than it would have been otherwise. From 1790 to 1820 immigration was small, less than °™^^* °°* 250,000 persons coming to this country during that period. Between 1820 and 1850 over 2,400,000 immigrants arrived on our shores, and as many more came

1 See Tucker, "Progress of the United States," 89-107, published in 1843, for a discussion of the decreased rate of natural increase. Also read Mayo-Smith's '* Statistics and Sociology," chaps, v., vi., vii., and ?iii.

between 1850 and 1860. In the latter year more than thirteen per cent of the total population was estimated to be of foreign birth. After the close of the Civil War immigration assumed larger proportions than ever. The West welcomed immigrants, bureaus were established to aid them, the cost of ocean and land transportation was cheapened, and transportation companies made efforts to obtain passengers from foreign lands. In 1871, 321,350 immigrants came to this country; and in 1882, 788,992 arrived. Since then the annual average has been about half a million. The whole number of immigrants from 1820 to 1904 has been 22,078,000. The Census of 1900 sliowed that the population of the United States fell into the following groups : —

Native-born whites with native parents . . 41,053,417

Native-born whites with foreign parents . 15,687,322

Foreign-born whites 10,250,049

Colored persons 9,312,599

Formerly, most of the immigrants came from Ireland, England, and Germany. More recently, larger numbers have come from the Scandinavian countries. During the last decade immigration from Ireland has fallen off, while Austria-Hungary, Poland, and Italy have sent vast numbers of immigrants.

§ 11. The general movement of population has always

been westward, on account of the unoccupied lands of

MobUity of the frontier. Not only immigrants, but also

^f^the^uSted ^^^y ^^ t^® native population, have formed

states. this stream of westward migration. No

other country of the world has shown, at least in

THE GROWTH OF POPULATION.

modern times, an equal amount of internal migration. This mobility of population has diminished the force of all economic shocks. In 1900 it appeared that 21.00 per cent of the native-born inhabitants of the United States were living in a different state from that in which they were born. In 1880 it was shown that only one half of the people of native birth were living in the county where they were born.

§ 12. In progressive countries there has appeared, in modern times, a marked tendency of the population to concentrate in cities. This has been the Growth of result of the development of manufactures *^^*^®^- and commerce, and of the improvement of transportation facilities. The following table shows the growth of that portion of the population of the United States which lives in towns and cities of 8,000 inhabitants and over. In 1790 the number of such towns was six, in 1900 it was five hundred and forty-five.

Census Years.

Population of the

Population of

Inhabitants of Cities in each 100

United States.

Cities.

of the Total Population.

3,929,214

131,472

3.35

5,308,483

210,873

3.97

7,289,881

356,920

4.93

9,633,822

475,135

4.93

12,866,020

864,509

6.72

17,069,453

1.453,994

8.52

23,191,876

2,897,586

12.49

31,443,321

5,072,256

16.13

38,558,371

8,071,875

20.93

50,155,783

11,318,547

22.57

62,622,250

18.284,385

29.20

75,568,600

24,992,200

33.10

A comparison of different sections shows more striking results. In the North Atlantic States 58.60 per cent of the people live in cities. In Massachusetts and New York the numerical increase of the urban population is larger than the total increase of the population of the states, so that there has been an actual depopulation of the rural districts. This concentration of the population in cities is greatest in all the states where manufacturing and commercial interests are most important.

IV. Systems of Labor in the United States.

§ 13. In the original colonies there was a great

scarcity of laborers. Small proprietors cultivated their

Scarcity of ^^^^ lands, but on the larger farms and

laborers in plantations there was great need of addi-

tlie colonies. . ,

tional laborers. This lack was intensified as other industries grew up beside agriculture. To supply this need immigration was encouraged, and various systems of obtaining laborers were developed.

§ 14. Indentured white servants were found in all the colonies at an early date. They were of three Indentured classes. The first and principal class conservants, sisted of free persons who desired to migrate to the colonies, but were unable to pay the expense of transportation thither. They voluntarily contracted with some one in America to place their labor at his disposal for a term of years, in return for his assuming the expense of transporting them to the colonies and supporting them during the stipulated terms of service. The second class was made up of

/.ABOR SYSTEMS IN THE UNITED STATES. 23

English political or criminal offenders, whose labor was sold for a term of years or for life. The third and least important class was composed of persons in the colonies who were sold into servitude for a term of years, either for criminal offenses or for non-payment of debts. Sometimes orphans were bound out to service in this manner.

This system of indented servitude differed very materially from slavery. The term of service was usually from three to six years. At its character of close the servant was entirely free. The this system, rights of servants under the contracts were usually safeguarded fairly well. On becoming free, servants often rose in the social scale, even into positions of prominence. Many of them became free laborers, but the majority became landholders and swelled the number of small proprietors.

Except where slavery assumed greater importance, the larger part of the laboring class of the colonies was composed of servants. In the eight- End of the eenth century the system of indented serv- system, itude declined in the southern colonies, yet it continued everywhere until the Revolution, when further importations of servants from England became impossible. Thus the supply gradually disappeared by expiration of the terms of service ; yet indented servants were found here and there until the present century, when the system was abolished by law in some states. This class of servants had been an important addition to the labor force of all colonies where slavery had not assumed greater importance. But by 1780, even in the northern

states, the system was less profitable to employers,

since laborers had become more abundant and it was

less desirable to hire workmen for so long a period as

six years.

§ 15. Slavery differed from indented servitude in

that the master had the legal right of ownership of the

person of the slave. In the sixteenth cen- Slavery.

tury various European nations entered upon

the African slave trade, and introduced slaves into the New World. In 1619 a Dutch ship landed twenty African slaves in Virginia, and soon African slavery was introduced into the English colonies. The English slave trade became very large, and the government fostered it, forcing negroes upon the colonies even in opposition to protests and restrictive legislation. But the profits of the trade were so large that the colonists finally entered upon it. After the Revolution various states restricted this nefarious traffic ; and, in 1807 and 1808, Congress finally abolished it.

English and American traders brought thousands of

slaves into the country ; while, in the southern colonies,

the negroes multiplied rapidly by natural

slavery in the increase. In the eighteenth century the

importation of slaves gradually declined in

the colonies north of Maryland, this tendency being

most marked in New England. After the Revolution

slavery was gradually abolished in the northern states.

In 1790 the distribution of slaves among the states was

as follows : —

LABOR SYSTEMS IN THE UNITED STATES, 25

New England States 3,886

New York, Pennsylvania, and New Jersey , . . . 36,484

Southern States 657,527

697,897

Up to this time the course of the institution or slavery had been shaped mainly by economic forces. It is incorrect, however, to say that moral causes that considerations had nothing to do with the ^sto^^o^f abolition of the institution in the North, slavery, for an opposition to slavery based upon moral and religious grounds commenced early in the eighteenth century. Moreover, this feeling was not confined to the North, but was shared by eminent southern statesmen. Said Jefferson, writing concerning slavery, ^' I tremble for my country when I reflect that God is just." But back of all such considerations lay the fact that slavery had never been profitable in the North, and that in the South it had enabled the slave-owners to accumulate much wealth.

Abolition, therefore, would cost the northern states little ; while, in the southern states, it would destroy millions of dollars of property. In the

Abolition.

South the demand for labor, to be employed in raising tobacco, rice, and indigo, caused a rapid increase of slavery. In the North smaller holdings and more careful cultivation were the rule. The careless and indolent slave was wholly unsuited for such work. On small farms, also, overseers could not be employed, and slave labor could not be directed properly. Finally, the expense of feeding and clothing slaves was much larger in the North, while the mor< tality of negroes was far greater; so that the cost of slave labor was high and its efficiency was low.

The result of slavery was to divide the United States Into two groups of states, — one dependent upon slave

„^ , labor, the other upon free. From 1790 to

The end ' ^

of the in- I860 there arose a bitter sectionalism based upon these differences. Slavery was forbidden in the Northwest Territory, and the great states formed in that region entered the Union as free states. Into the free states the increasing tide of immigration flowed, population increased rapidly, and manufactures and commerce developed. The southern states received few immigrants, and fell behind the rest of the country in respect to the growth of population and industries. By 1860 the free states had a population of 19,083,927 ; while the population of the slave states was only 12,315,374, of which number 3,953,696 were slaves. The invention of the cotton gin, in 1792, vastly extended the cultivation of cotton in the South, and this soon became the great staple crop of that section. Other branches of agriculture were neglected in order that the production of cotton might be increased. Slave labor was adequate to the work of producing large crops of cotton by wasteful surface culture extended constantly over new lands. But improved agriculture and mechanical or manufacturing industries, which required more efficient labor, could not be undertaken with the labor of slaves. So the South was shut up to agricul tural pursuits that tended toward the gradual impoverishment of the soil. It could have no part in the