The United States was transforming into a manufacturing-based economy by the eve of the Civil War, a change that would make it one of world’s leading industrial powers by the end of the 19th century. But while the states north of the Mason-Dixon line were establishing a commercial and manufacturing economy, the South was still predominantly agriculture-driven by the beginning of the Civil War in 1860. Southerners relied heavily on the export of crops such as cotton, rum, sugar and tobacco, all made possible by the use of slave labor. While the economic value of slaves in the South actually surpassed that of nation’s banks, railroads and factories in 1860, the North’s rapid industrialization ultimately proved better at sustaining a war economy, a factor that put the southern Confederacy at an enormous disadvantage during the Civil War.

Southern Reliance on Cotton

At the onset of the Civil War economy of the South was almost completely agricultural and highly dependent on the sale of crops. Cotton became the most valuable U.S. export by the mid 1800s -- by 1840 it became worth more than all other exports combined. However, even though Southern states produced about two-thirds of the world’s cotton, it had no manufacturing capabilities. The North, by contrast, already had a burgeoning commercial and manufacturing economy that was producing 90 percent of the nation’s manufacturing output by 1860. Despite its use of slave labor, the South was unable to keep up with the North’s growing industrial and textiles market, causing its economic growth to stagnate.

Neglect of Manufacturing and Transportation Development

In the pre-Civil War United States, the Northern and Southern economies had a symbiotic relationship. Because the southern states specialized in labor intensive (and land consuming) cotton production, the North developed manufacturing economy that specifically catered to the South -- such as textiles factories, insurance agencies, cotton brokers and a meat processing industry.

Southern states relied on these Northern imports to meet their needs, leaving them suddenly incapable of receiving those services once the Union divided. The South’s miniscule industrial base, sparse railway lines and slave-labor economy made the mobilization of resources difficult once the Civil War hit, giving the North the advantage when it came to manufacturing output, transportation and manpower.

Southern Plantations Not Economically Practical

Southern plantation owners who used slave labor often were not profit seeking, according to an analysis by "The Economist." Instead, slave owners were focused on flaunting their enormous plantations and army of forced laborers, considered tangible representations of their wealth, rather than making rational economic investments. Although slavery was initially extremely profitable for plantation owners, slave ownership began to dwindle the decade before the Civil War, as soil erosion and exhaustion diminished the availability of fertile land. The price of land and slaves began to skyrocket as a result. The South's dependence on human labor for economic growth, however, could not compete with the North's more efficient industrial-based economy.

Booming Northern War Economy

The Northern states’ industrial economy quickly proved to be more effective at supporting and sustaining a war economy. Nearly every sector of the Union economy experienced increased production during the Civil War years -- including, to the detriment of the South, the mechanization of farming. A threshing machine, for instance, could thresh 12 times more grain per hour as could six men. The North’s growing reliance on labor-saving farming machines allowed more men to enlist for military service. The Union's railroad industry also boomed during the war, leading to the War Department’s creation of the United States Military Railroads. By the end of the war it was the world’s largest railroad system.