Fur trapping, Michigan's first big industry, gave way in the mid-19th century to commercial lumbering and to the mining of copper and iron in the upper peninsula. The existence of copper deposits and iron ore in the Lake Superior region had been known since the beginning of European exploration, but these natural resources remained untapped until the 1840's. A copper rush that took place on the upper peninsula during 1843-46 was America's first mining boom. Iron ore was discovered in 1844 at what is now Negaunee. The completion of a ship canal at Sault Ste. Marie in 1855 opened the Lake Superior area to development.

From the earliest days of white settlement, sawmills were usually built when a community was founded. By 1854 there were about 890 mills in Michigan, employing some 4,500 workers. Large-scale lumber production began in the Saginaw Valley and expanded rapidly. Despite the export of lumber and the mining of copper and iron, agriculture remained the mainstay of the state's economy. Population at mid-century was nearly 400,000.

The national debate over slavery in the 1850's gave rise to an abolition movement in the state and led to the formation of a new political party in Michigan. Antislavery Democrats, Whigs, and Free Soilers joined under the name Republican party at a convention in Jackson in July, 1854. The Republicans won control of the state in elections that year and were the dominant political power for decades. During the Civil War, more than 90,000 men from Michigan served in the Union army. About 25,000 died as a result of wounds or disease.

The state grew rapidly after the war. There was expanded demand for lumber, iron, copper, foodstuffs, and manufactured goods. Railroad lines were extended into the upper peninsula. The lower peninsula became a center for the production of salt and chemicals. Detroit, Grand Rapids, and other Michigan cities became important manufacturing hubs. For much of the late 19th century, the economy was dominated by the lumber industry and its “lumber barons" and the state government controlled by the Republican party. During 1870-1900, the population doubled, rising from about 1,200,000 to more than 2,400,000.

Automobile manufacturing started in the late 1890's. Both Ransom E. Olds of Lansing and Henry Ford of Detroit, working independently, perfected gasoline-powered autos in 1896. Both founded motorcar companies in the Detroit area in 1899. Eventually more than 100 auto companies were established in the state, including the “Big Three"—General Motors Corporation, Ford Motor Company, and Chrysler Corporation.

Development of the auto industry transformed Michigan from an agricultural state into an industrial one. It brought a constant influx of new residents from other states, particularly from the South, and from Canada and southern and eastern Europe. In addition, it caused a large shift in population from farms and small towns to the cities. Also during the early years of the 20th century, lumbering and mining declined in importance, and agriculture became mechanized and specialized.

Increased industrialization, immigration, and urbanization gave rise to the progressive movement in Michigan in the early 1900's. Governors Chase S. Osborn (1911-12), a Republican, and Woodbridge N. Ferris (1913-16), a Democrat, persuaded the legislature to adopt various progressive reform measures. Included were laws providing for workers' compensation, conservation, and railroad regulation, and the adoption of the initiative, referendum, and recall.

During and after World War I, industry boomed. However, the prosperity of the 1920's was followed by the Great Depression of the 1930's. Michigan was especially hard hit. The mining counties of the upper peninsula and the industrial cities of the lower peninsula suffered high unemployment. There was much labor unrest, particularly in the auto industry. Walter Reuther led strikes against automakers, seeking recognition of the United Auto Workers labor union. Some strikes met violent resistance, particularly those at General Motors and Ford, but eventually were successful. The depression also brought an end to the long domination of state politics by the Republican party.

With the outbreak of World War II, Michigan's industries geared to the production of war materials. The state produced one-eighth of all the nation's war equipment. The migration of large numbers of blacks from the South to work in factories in the state led to a serious racial clash in Detroit in 1943. Prosperity returned during the war.

In the postwar period, a liberal-labor coalition gained control of the Democratic party, won the governorship with G. Mennen Williams (1949-60), and saw to the enactment of many social reforms. Prosperity continued, as did racial tension. In 1967 the most destructive racial disorder in American history to that time took place in Detroit, when riots erupted in the city's black neighborhoods. There were also clashes in some other parts of the state over the use of busing to achieve school integration.

Recessions during the late 1970's and early 1980's caused severe economic hardship in Michigan. Detroit was particularly affected because automation and foreign competition had contributed to high unemployment in the auto industry. By 1985, however, the economy had begun to rebound, and in that year the state government balanced its budget for the first time in a decade. In the late 1980's, the government was seeking ways to lessen the economy's dependence on the chronically troubled auto industry. Another recession in the early 1990's produced a state budget crisis, as a result of which officials made substantial cuts in the state's welfare program.

Jennifer Granholm was elected governor in 2002. She was the first woman to hold the position.