Growing Wealth

Finding opportunities

Until this period, Americans are somewhat limited in their ability to accumulate wealth. Serious money can be made in shipping, land speculation, textiles and cotton, but that's about it. Stock trading barely exists.  

Large projects require more money than most individuals can command, and the big commercial banks are only located in big ports, supporting shipping. This makes it difficult to launch ambitious new ventures elsewhere.

As a consequence, larger enterprises are typically financed by small groups of private investors, pooling their resources to get the business started. Investors own private shares in the company, and divide the profits.
Growing wealth, 1830

  Banks and Investors
Established wealth in America is derived largely from shipping, and New York is its showplace. But big commercial banks are just beginning to fund new industries built on steam technology, like railroads. There are 300 banks sprinkled across America, mostly offering mortgages and financing speculative land deals, especially in the rapidly expanding western states.

Banks and bank notes, 1830

  Paper Money
Money in America is paper currency, issued by private and state banks, and used locally (top left). State and private banks issue their own banknotes, with no regulation, and no limit on the amount of new paper currency that can be issued. This makes banking highly profitable, but creates incentives to print too much new money. The massively capitalized Second Bank of the US, with private investors and its own hefty notes, effectively puts an end to the era of unregulated money creation (see chart).


Early corporations, 1810-1850

  Expanding Corporate Model
Back in 1810, few business ventures are large enough to require outside investors. By 1830, however, textile mills, commercial banks, turnpikes and steamship lines are all turning to the corporate model to cover their higher investment costs. This enables attracting funding from a larger group of initial investors. By 1850, large-scale operations, like insurance companies and railroads, need even larger pools of potential investors. Private stock offerings for new start-up businesses are becoming more common.