The Understated Impact of the American System of Manufactures
“ I have succeeded in an object that has hitherto completely baffled the endeavors of those who have heretofore attempted it— I have succeeded in establishing the methods for fabricating arms [ rifles ] exactly alike and with economy.”
Beginning in the 1820s, US mechanics and entrepreneurs introduced multiple innovations that enabled manufacturers to use precision machinery to craft products with interchangeable parts. This achievement may seem relatively inconsequential in the 2020s, but it was groundbreaking in the 1800s.
Before that time, mechanics had failed for decades to establish a level of precision to manufacture parts that were interchangeable. As a result, manufacturing during the first half of the 1800s was labor intensive and heavily reliant on the use of skilled craftsmen. Finished products consisted of parts that appeared identical to the naked eye but were not interchangeable. This
a powerful and unintended benefit: the construction of a vast railroad network. The network dramatically reduced the cost of transporting raw materials and manufactured goods across the expansive mainland.
By the turn of the 20th century, the era of Jay Gould, Collis Huntington and Daniel Drew had given way to a new generation of railroad leaders and financiers, including Edward Harriman, J. Pierpont Morgan and James J. Hill. These men were more disciplined, more operationally competent and ethical. They improved efficiency and integrated railroads into a coherent national system.
In 1902, financier Frank Vanderlip noted with astonishment that freight costs in the United States averaged just 0.75 cents per ton-mile, compared with 1.6 cents in France and 2.4 cents in Great Britain. American railroads were built not merely for transport, but to serve mass manufacturing at scale. Their efficiency
— John Hall, 1822
limitation was especially problematic in the United States because of the chronic scarcity of skilled labor.
Thomas Blanchard is often regarded as the founder of precision manufacturing. In 1818, he began designing a series of machines to build muskets. Many American engineers subsequently expanded on Blanchard’ s innovations. John Hall and Samuel Colt are among the more notable.
Precision manufacturing and interchangeable parts proved to be a critically important factor in the rise of the American economy during the 19th century. But more importantly, it created an infrastructure that would repel an existential threat in the next century.
lowered prices across the economy and created a durable competitive advantage.
Railroads also provided natural corridors for the construction of telegraph and telephone lines, binding together a vast nation with unprecedented speed. By the early 20th century, the United States had become one of the most economically integrated societies in the world.
The Legacy of the Gilded Age
“ We shall never surrender, and even if, which I do not for a moment believe, this Island or a large part of it were subjugated and starving, then our Empire beyond the seas, armed and guarded by the British Fleet, would carry on the struggle, until, in God’ s good time, the New World, with all its power and might, steps forth to the rescue and the liberation of the old.”
— Winston Churchill, June 4, 1940
On December 7, 1941, the Empire of Japan struck a devastating blow on the US Pacific Fleet, stationed at Pearl Harbor on the Hawaiian island of Oahu. On the very next day, the United States declared war on Japan. The Americans then joined the British in the war against Nazi Germany when Hitler foolishly declared war on the United States three days later. Over the next four years, nearly the entire world was embroiled in the deadliest conflict in human history. An estimated 100 million people perished before World War II ended on September 2, 1945, with the formal surrender of Japan.
Many factors explained the victory of the Allied powers in World War II, but among the most important was the ability of the United States to outproduce the Axis powers. The Nazis and the Japanese simply could not match the massive industrial output of the United States. Dubbed the Arsenal of Democracy, this unique American capability is what enabled the New World to liberate the Old.
But the US Arsenal of Democracy would not exist if not for hundreds of thousands of miles of railroad track, massive manufacturing production facilities, bottomless reserves of natural resources and innovation that was the envy of the world. The foundation of this arsenal was poured during the Gilded Age.
History offers no shortage of examples in which corruption ultimately short circuits a nation’ s progress, causing it to fall short of its full potential. The American experience tells a different story. Even during an era of peak corruption, the underlying force of progress was impossible to suppress. The compounding power of American innovation and the insatiable desire of its people to improve in the face of perennial imperfection ensured that corruption neither defined the nation’ s character nor prevented its maturation toward adulthood.
Mark J. Higgins, CFA, CFP ® is a financial historian, experienced institutional investment advisor and author. His book, Investing in US Financial History( Greenleaf Book Group, 2024), recounts the full financial history of the United States from 1790 to 2023. He is a member of the Financial History editorial board and a guest curator of the Museum’ s forthcoming exhibits, opening in Boston in July 2026.
14 FINANCIAL HISTORY | Winter 2026 | www. MoAF. org