During the war Kentucky was a state divided. Officially, it had sought to avoid war by continuing Clay’s tradition of compromise (which Clay again exercised through his involvement with the Compromise of 1850). But once war erupted, some 76,000 soldiers, of which approximately 15,000 were Black, fought for the Union armies of the North, and about 34,000 fought for the Confederacy of the South—though after the war popular sentiment became strongly pro-South. Kentucky was invaded by both Union and Confederate forces. Following the defeat of the Confederate general Braxton Bragg at Perryville on October 8, 1862, the only military action in the state consisted of widespread guerrilla warfare.

The period of war brought far-reaching change to Kentucky. Slaves became freedmen, and what had been a slave issue became a racial one. The Southern market was bankrupt, and Kentucky was now forced to compete with the North for whatever trade remained. (At the close of the Civil War most of Kentucky’s virgin timber was still standing, and only a small portion of its mineral resources had been tapped.) Moreover, Kentucky was no longer in the path of migration but was being bypassed as settlers moved beyond the Mississippi River.

An array of social and socioeconomic conflicts agitated the state in the last decades of the 19th century. Although the Ku Klux Klan, a white-supremacist hate organization, cultivated fear and animosity, the freed slaves were given the right to vote, and most settled as tenant farmers or urban workers. Black Kentuckians, however, were not to become first-class citizens. Segregation was the norm, and numerous all-Black communities developed. Meanwhile, Lexington and the Ohio River cities—Louisville, Owensboro, Paducah, and Covington—grew rapidly, ultimately fueling the involvement of more rural areas in the populist agrarian politics of the period. Warfare between tobacco growers and tobacco trusts brought on an era of barn burning and similar attempts to keep tobacco prices up. In the period 1865–1910 vendettas in the Appalachian Mountains damaged Kentucky’s image. Among the most famous of these conflicts was the feud between the Hatfield and McCoy families. As summarized by the historian Thomas D. Clark in The Kentucky Encyclopedia (1992), “Kentucky in 1900 epitomized the conditions of an intensely rural agrarian state with a distinctively regional mind-set.”

Kentucky in the early 20th century

Continued diversification of the economy marked the early 20th century, though the Great Depression in the 1930s and strikes by the United Mine Workers of America brought serious problems and open strife in many sectors. The state followed the national trends toward the loss of rural population to industrial centres, both inside and outside the state. World War I (1914–18) triggered tremendous changes in the state’s economic and social affairs. Agriculture, industry, and general business flourished, and the coal industry was especially prosperous. With the arrival of the automobile and truck age after 1918, new roads became mandatory, shattering the physical, social, and economic isolation of many parts of the state.

The Great Depression had both negative and positive effects on Kentucky. The negative effects were, as in the rest of the country, unemployment and stunted economic growth. On the positive side, however, New Deal economic relief and reform programs provided for the construction of many schools, public buildings, and roads, as well as for the implementation of conservation initiatives. The federal government’s Tennessee Valley Authority (TVA) water-management system had an enormous impact on western Kentucky: through this program, the great Kentucky Dam on the Tennessee River in the state’s southwestern region was created, facilitating the supply of inexpensive electricity to local users.

From World War II into the 21st century

World War II (1939–45) ushered the age of technology into Kentucky. The latter half of the 20th century brought interstate highways and television. Meanwhile, in the early 1970s a countrywide energy shortage created a demand for more coal, and Kentucky’s coalfields prospered for nearly a decade. As petroleum prices stabilized, however, the demand for coal diminished. Moreover, layoffs in the automotive industry reduced the demand for steel, which in turn lowered the demand for coking-quality coal; environmental concerns added to the costs of coal production and use; and coal operators, in attempts to decrease production costs, introduced machinery that reduced the need for manpower. Unemployment in the coalfields became a major concern. In the coal-mining interior of eastern Kentucky, where there was little agriculture or manufacturing, the incomes of many families dropped below the poverty level.

The importance of agriculture also began to decline as the state became more industrialized. Kentucky’s farms, which had numbered some 279,000 in 1935, numbered less than 90,000 by the year 2000 as a result of the falling prices of agricultural products, labour shortages, increased mechanization, and periods of drought. Meanwhile, tobacco, long one of Kentucky’s most lucrative crops, was declared a health hazard, making the future for this crop uncertain.

The expansion of industry and educational reform were priorities of Kentucky’s administrations in the 1980s and 1990s, including that of the state’s first woman governor, Martha Layne Collins, elected in 1984. Since the late 20th century many manufacturing firms have left the state for areas where labour is less expensive, particularly Mexico. However, the state simultaneously has seen an influx of Japanese manufacturers, primarily in the automobile industry.