Golden Anniversary

By the time the long-dreaded war came, California gold had made the North richer than the South.

At the time of statehood its population was still fully 92 percent male. That imbalance, needless to say, was quickly corrected out of existence. The subsequent history of California, since its golden beginning, both economic and demographic, is unparalleled. Its mineral wealth is more varied than that of any comparably sized area in the world, and its gold has long been supplanted as the most valuable commodity to be pulled from its earth (that is, by oil). Today California has almost twice the population of any other state, and were it a sovereign country it would have the world’s sixth-largest economy and be a great power in its own right.

But the story of the gold rush is at least as interesting for its effect on the entire country as for that on the history of California. The California gold strike moved the country’s center of gravity sharply westward in a historical instant. As early as 1851, at the gold rush’s height, John L. B. Soule wrote in the Terre Haute Express , “Go west, young man, go west!,” a phrase quickly picked up by (and forever after attributed to) Horace Greeley.

Immediately the country’s connections to the Pacific became a prime political issue. Where and by what means a railroad would be built to California occupied much congressional debate. The state was more than a thousand miles from Texas, the nearest state. In terms of communications it was months away from Washington, D.C. The Panama railway soon made the trip across the isthmus a quick one and, together with regular steamer service in the Pacific, reduced travel time from months to weeks. In 1860 the storied Pony Express reduced communication time to about ten days. In 1861 a telegraph line linked the West Coast directly to the rest of the country. Finally, in 1869, the Union Pacific Railroad joined California to the Union in geographic as well as political fact.

In economic terms as well the California gold strike profoundly affected the country. It would be hard to overstate the centrality of gold to the world financial system in the middle of the nineteenth century. The Bank of England had gone on the gold standard in 1821, declaring itself ready to buy or sell unlimited amounts of pounds sterling for gold at the rate of one ounce of gold for £3.17.10½ (a ratio set more than a century earlier by Sir Isaac Newton, of all people, enjoying the perks of a largely no-show job as Master of the Mint). Because the United Kingdom dominated the world’s economy in the nineteenth century and the Bank of England was the world’s de facto central bank, all major trading nations were soon forced to follow and peg their currencies to gold.

The good thing about a gold standard is that it makes inflation impossible, for if a country begins to create too much money, gold will begin to flow out of its treasury. But that means that under a gold standard, the money supply is limited by the amount of gold available to back the currency.

The United States was not a major gold producer in the early nineteenth century. In 1847 a typical pre-California-gold-strike year, the United States produced only 43,000 ounces, mostly as a byproduct of base metal mining. The following year, 1848, the country turned out 484,000 ounces, thanks to California. By 1853 output was no less than 3,144,000 ounces, worth almost $65 million. (And that was a year when the federal government spent a grand total of only $48 million.)

The result of this sudden influx of gold into the American economy was a period of great prosperity and economic growth. Government revenues, a rough measure of economic activity, had been only $29 million in 1844; by 1854 they were more than $73 million. Railroads had only 9,021 miles of track in 1850; by I860 there were 30,626 miles. Telegraph wires spread quickly. Shipping, iron smelting, and textile manufacture increased sharply. Other industries likewise expanded.

This economic development was by no means evenly distributed, however. It was disproportionately concentrated in the Northern states, where population also grew faster than in the South. As a result, when the long-dreaded Civil War began in the next decade, the relative strengths of the two sections had shifted markedly in the direction of the North.

Perhaps equally important, California gold helped fund the titanic cost of the war, while the South, necessarily trying to finance its war effort with paper, saw its economy collapse under uncontrollable inflation. Thus, while they doubtless never knew it, those hundreds of thousands who pursued their self-interest in the early 1850s by moiling for gold in the foothills of the Sierra Nevada helped mightily to save the Union in the 1860s.