Northern US Agriculture, the Distribution of Income, and the Economic Growth of the United States in the Nineteenth Century

The United States established a record of economic growth in the nineteenth century unmatched by other nations. What has not been recognized is the role of the distribution of income in generating an aggregate demand that sustained such growth. By comparing the economies of Great Britain and the United States, this article demonstrates that the egalitarian distribution of farmland in the sixteen states of the US North generated a roughly egalitarian distribution of farm income that resulted in a broad demand for goods and services. Britain's lopsided agrarian economy, in which the bulk of the rural population was poor, had a weak domestic demand and had to obtain overseas markets, by international trade and by forging an empire, to gain the consumers necessary to sustain an industrial economy. Northern farms generated most of the demand for consumer goods beyond a subsistence bundle. By estimating yearly income for various income categories in northern agriculture, manufacturing, and service activities (banking, commerce, nonmanufacturing and nonagricultural labor), it becomes obvious that free-state agriculture was responsible for 47 to 58 percent of supra-subsistence purchasing ability.