California Gold Rush from an Economic Perspective


On January 1848, James Wilson Marshall discovered gold while he was constructing a saw mill at Sacramento, California along the American river. This did not catch the attention of San Francisco reporters as many did not believe him until May 1848 when Sam Brannan who was a store keeper in Sutter’s creek verified the truth of Gold in the American river, California. This information was like a spark that ignited the world fire of gold rush (Brands 2003, 10). The month of May meant a very big transformation in the economic well being of people in California and around the world. This essay reveals the impact of the Gold Rush in California’s economic development and the United States of America at large.

Population Influx

By December 1848, the population influx was great in just four years more than one percent of the United States of America’s population moved to California. People from the Oriental cultures like the Japanese and Chinese came in large numbers in search of this gold introducing a new blend of culture in California (Whaples 2008). This great entry of newcomers made the town to be populated with big building and shanties, a crisis in the building industry. The entertainment industry boomed with huge crowds thronging the entertainment halls Social evil was on rise including gambling, stealing, murdering among others. Prostitution became rampart due to sudden availability of money and newcomers. Miners purchased sex as they could have purchased mining tools. sex became a necessity (Brands 2002, 56).By 1860, the population in California reached 400,000 from 1848’s population of 100,000 people (Rawls and Orsi 1999, 69).

Transition in Modes of Payment

Discovery of gold in California meant the end of an era in which wealth was defined in terms of land, cattle and houses that one owned and a start of a new era in which wealth was defined in terms of gold. There was also a significant transition in modes of payment from cowhides to gold dust (Rawls and Orsi 1999, 88). With the introduction of new currency, the prices of commodities like food and lodging fee increased steeply to the surprise of new comers. This led to artisans abandoning their workshops and laborers running way from the field to look for gold. Soon the San Francisco’s harbor was filled with the fleet of ships filled with foreign merchants and locals both men and women even young kids rushing to tap this vain Gold. By august 1848, there was a great jam in the harbors and forced many incoming ships to look for a round-about routes especially routes via Panama among others which became expensive and time consuming (Whaples 2008).

Economic Inflation in 1847

Gold mining was manual intensive; there was need for more laborers in the mining field. This raised inflation by 500 percent as from 1847 and 1849. Although there was slight fall of wages as thousands of labors arrived in 1860s from China and around the world still the wages were four times what they used to be. California’s economy became integrated with the United States of America’s economy resulting in nation wide inflation (Brands 2002, 126).

Production Trends

At first Gold was excavated from streams of the river using simple methods like panning rather there was need for improved technology including use of compressed-air drills and chemicals especially the cyanide chemical process in order to excavate gold from deep levels as Gold on the surface kept on reducing. This forced many to return to their homes although better off than when they started and they improved the economy back from where they came from especially those who came from within United States of America. Total amount of gold which was mined as from 1792 to 1842 was about 40 tones which were far less than what California produced in 1849. The annual production of Gold as from 1848 to the year 1857 was an average of 80 tones. During this time California gold constituted 1.8 percent in the Gross domestic production (GDP) this was the result of invention of technologies that improved production of gold this lead to the construction of new transport infrastructure including roads, steamships and railroads for transportation of gold and people. Churches, educational institutions were built the town redesigning it from a mere settlement scheme to a boomtown (Rawls and Orsi 1999, 157).

Other Competing Gold Rush in 19th century

The nineteenth century was a century of gold exploration which lead to the discovery of two major gold sites in with competed with California those were in Australia in 1851 and South Africa in 1886.there were other minor gold discoveries in British Columbia in 1858, South Dakota in 1876, Nevada and Colorado in 1859 and Canada in 1898. The Australian gold rush saw its population tripling to 1milion in a span of ten years. This helped in drawing the attention of many foreign merchants looking for gold to other parts of the world easing population tension in California and slowing of inflation (Holliday, Swain, and Lamar 2002, 146).

Deflation in 1850

Since the monetary systems in the nineteenth century used precious metals especially gold, these resulted in increase in its prices and thus increase in money supply with caused inflation. High outputs of gold from California lead to escalation of prices of major commodities by more than thirty percent as from 1850 to 1855. At the end of nineteenth century the United States of America’s economy and that of California experienced deflationary trends even though there was an increase in gold production from California and Australia. This was as a result of drawing dependence from too much reliance of gold by aiding indebted farmers and ending the influence of populist party on its call for Gold and silver money standard (Davis and Richards 1956, 221).

The Northwest Economy in 1849

California’s gold rush resulted in increase in demand for timber in construction of buildings, transport means and bridges. Pacific Northwest became the chief source of timber due to its strategic location with California as it offered easy transportation to San Francisco harbor because of its proximity to the Columbia River (Holliday, Swain, and Lamar 2002, 187). There was need for more transport facilities in California including construction of more ships, railroads and bridges which needed enormous amount of timber. Miners also built their houses from timbers thus making lumbering industry a boom for the rest of the century in the northwest. This triggered technological advancement such as use of geared locomotives, donkey engines and saw mills which caused an increase production of timber from 160 million board feet in 1880s to one billion board feet in 1890s (Davis and Richards 1956,127).

The completion of Transcontinental Railroad in 1880s which was meant to open the gold market to the rest of the world which in turn saw Northwest benefiting by opening its timber industry to the rest of the world. Therefore as California grew so did the timber industry and the economy of northwest (Whaples 2008)..

Agricultural Economic Development

The tremendous increase in population due to incoming miners resulted in lack of enough food to feed the hungry miners which helped agricultural sector to pickup in California. Agricultural laborers who turned to be miners again found their way to agricultural fields as gold in the mining field disappeared from the surface and it required those with huge wealth to incorporate technology in order to excavate gold from deep shafts. Also the mining fields started experiencing harassment and segregation especially to the Chinese people by the whites and being overtaxed by the government (Whaples 2008). By now, agriculture was a booming sector in California, farmers started commercial farming which included large scale plantation of cereals like wheat and rice and sheep ranching for the purpose of wool. Developed road and transport saw Chinese moving into agriculture proving themselves as skilled farm workers and enterprising operator of small garden farm of their own enabled them to export farm produce to the outside world. This resulted in agriculture employing many laborers and providing economic substitute to California (Rawls and Orsi 1999, 149)

Regional Economic Developments

Gold rush saw the development of California from an infamous small town to the center of global attention and a final destination to millions of people who sought wealth. The new immigration showed inventiveness capability and civic-mindedness. Three California cities were transformed by the Gold Rush to become magnificent cities and thus prompting California to be inducted as a state.

San Francisco developed form a mere rural community with very few populations of less than one thousand inhabitants to a booming city which became a commercial and financial center of the West Coast this was due mass movement of Chinese community into San Francisco who were running from harsh treatment and segregation that was practiced by the whites to the Chinese community both in the gold mining sites and in the agricultural sectors well, the Chinese moved to San Francisco where they started the city’s business community and established the first Chinatown in the United States of America. This saw an improvement in economy in terms of business in California (Holliday, Swain, and Lamar 2002, 210).

Sacramento also started off as a tiny settlement which was centered on Sutter’s great estate of New Helvetia developed into a very large modern city and thus became the state’s capital city in 1855. Sacramento growth sprang primarily from its position as a conduit for supplies from San Francisco up the Sacramento River to the northern diggings (Rawls and Orsi 1999, 215).

Stockton grew as enroute station for goods that were being transported to San Joaquin River in the Southern Diggings. Ironically, the cities that developed and thrived in California were cities whose economies were founded on gold, but those whose economies were founded on: trade, business, and finance. Towns that were based on gold wealth thrived; however, there wealth fell once the gold ores were depleted. Today the Mother Lode region represents one of the most economically under-developed regions of the state, still relying on the legacy of gold to lure tourist dollars (Holliday, Swain, and Lamar 2002, 173).


It is now approximately a century and half since the Gold vein was discovered in California. although this rare and expensive commodity has changed the economy of California and the united states at large and a source of income to millions of people in the united states of America, this mining legacy has his side effects the mining sites which were neglected due to depletion of Gold in them now pose a great environmental risks and safety hazards. Also wastes including acids and heavy discharged from mine sites are directed to rivers and thus contamination of water which affects aquatic life in the rivers and people who depended on this water for usage.

Works cited

Brands, Howard W. 2003.

The Age of Gold: The California Gold Rush and the New American Dream. New York: Anchor.

Brands, Howard W. 2002.

The Reckless Decade: America in the 1890s. 1st ed. Chicago: University Of Chicago Press.

Davis, Solman C., Richards, Brown B. 1956. California Gold Rush Merchant: The Journal of Stephen Chapin Davis. California: Huntington Library.

Holliday, Swain and others. 2002. The World Rushed in: The California Gold Rush Experience. Oklahoma: University of Oklahoma Press.

Rawls, Johnson J., Orsi. Revik. J. 1999. A Golden State: Mining and Economic Development in Gold Rush California. Los Angeles: California University Press.

Whaples, Richard. 2008. “California Gold Rush”. EH.Net Encyclopedia, ed. Robert Whaples. Web.

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