1865- 1890 Economic Growth and rise in corporations; railways; oil; developments in agriculture and urbanisation. Flashcards
What were the economic effects of reconstruction?
Reconstruction had a positive effect on the economy of the USA.
Moreover, from 1867 to 1873 the South benefited from general US prosperity and from high cotton prices. Railroads were rebuilt and textile manufacturing expanded.
However, this expansion did not keep pace with the North, and the South remained an economically depressed region with considerable poverty. By 1870 the average white Southerner’s income had fallen to two-fifths that of a Northerner’s income. The South remained a predominantly agricultural area heavily dependent on the cotton plantations. A glut of cotton in the early 1870s led to a sharp fall in prices and even harder times for the workers on the plantations.
How did the impact of Civil war spark industrial growth?
The Civil War provided the initial impetus for great expansion in US industry. This was because it stimulated the demand for manufactured goods, as the army needed guns and clothing as well as transport. Mass production and methods of distribution had to be developed.
Moreover, the war provided the necessary financial infrastructure to stimulate economic growth. The government had to raise money to pay for the war and this led to the development of a sophisticated capital-raising system based on Wall Street in New York. Moreover, during the war the government introduced paper currency which was known as the United States Note. This, in turn, meant that a banking system had to evolve to cope with the growing amount of money in circulation as well as the government’s need to finance the war.
In addition, the introduction of tariffs, partly to provide income for the government, ensured the necessary protection for US-manufactured goods and greatly reduced competition from already industrialised nations such as Britain.
How did population growth influence industrial growth?
There was rapid growth in the population of the USA in the 1860s and 1870s, providing an ample source of cheap labour for economic expansion.
In 1860, the population of the USA was 31.5 million but this had increased to 50 million by 1880.
This was partly due to increased incomes which meant better food and housing as well as progress in public health and medical knowledge, which resulted in lower death rates.
The other reason was immigration, with 2.8 million moving to the USA during the 1870s. The majority, particularly those from eastern and southern parts of Europe, headed for the cities and provided the cheap labour force that the industrial revolution needed. In addition, as consumers, they stimulated further demand for coal, clothes and food.
How did transport influence industrial growth?
The USA experienced a revolution in transport, especially the railroads, which not only provided a fast and efficient means of transporting raw materials but also distributed the finished goods as well as cattle from Texas to the Chicago meatpacking plants. In 1869, the First Transcontinental Railroad opened up the far-west mining and ranching regions.
Railroad track mileage tripled between 1860 and 1880. Between 1868 and 1873, 53,000 km of new track was laid across the country.
Railroads also stimulated economic growth for other reasons:
They employed thousands of workers (1 million by 1900) all of whom were consumers.
They encouraged demand as railroads required a lot of steel which, in turn, needed much coal.
This encouraged competition which pushed down prices and led to technological improvements to improve quality.
Moreover, the rail centres needed roads in order to be able to distribute to outlying areas and this stimulated further growth.
How did the availability of capital influence industrial growth?
The availability of capital was essential as entrepreneurs would often need to borrow money in order to develop their businesses.
The huge profits generated by the Civil War had encouraged the emergence of a highly developed stock market in which these profits were invested. By 1865, the annual turnover of the New York Stock Exchange was over $6 billion and, by 1890, it had become the second largest money market in the world. Businessmen were able to raise the necessary finance from this stock exchange.
How did the role of the government impact industrial growth?
There was a long tradition of minimal government inteference in the economy. Indeed, the Constitution gave the federal government virtually no role in managing the economy. As a result, businessmen had substantial freedom in running their enterprises. For example, there were no laws restricting hours of labour and there were no taxes on profits. Indeed, there were no rules on how businesses should be run.
Moreover, as Congress and State governments were dominated by business interests, very little national or local legislation was passed which interfered with business and industry. In addition, the commercial policy of the federal government also helped expansion. Congress was happy to impose protective tariffs to ensure that foreign-manufactured goods were more expensive than home-produced goods. These duties could be as high as 50 per cent of the cost of the imported goods.Overall, tariffs ensured that US-manufactured goods were cheaper those from abroad.
Businesses also did not have to deal with trade unions and were generally free to manage their workforce any way that they wanted. There was no tradition of trade unions and those that existed were generally weak and divided. Also, in the event of industrial disputes, employers were often supported by state and federal authorities who would even use troops to deal with workers’ demands for better pay or shorter working hours.
How did corporations and trusts influence industrial growth?
Economic growth was also encouraged by new business methods including the corporation and trust, each of which emerged due to the lack of government control and regulation. One such example was the corporation, which proved to be the perfect model for the growth of big industries in the USA. This is because it could own a number of businesses and could hire the management it wanted to run the corporation.
The other favoured model for massive expansion was the trust. These emerged because in some states there were laws that stopped people from owning shares in more than one state or more than one company. Henry Flagler found a way of avoiding these laws. He was the secretary for Standard Oil, and he appointed himself as ‘trustee’ for stocks and property that the company was not allowed to own. Eventually, three employees of Standard Oil were told by the owner, John D Rockefeller, who had set up the Standard Oil Company in 1870, to act as trustees for all property and assets of the company outside the state. Rockefeller created the Standard Oil Company and dominated the oil industry in USA and became the first American billionaire. Other companies soon followed the Rockefeller example and set up trusts, which were a perfectly legal method of avoiding the state laws.
How did technological innovation impact industrial growth?
The rapid growth in industry was also due to important changes in technology and business methods brought about by key individuals such as Andrew Carnegie.
Steel had been costly to produce but in Britain a new process, the Bessemer Converter, made the process much cheaper. Carnegie brought the process to the USA and used it in his steel mills and his business rapidly expanded Carnegie kept prices as low as possible and constantly re-invested in new manufacturing plants and equipment. He was totally ruthless and refused to allow any unions to be set up in his factories, using his own armed guards to deal with any union activities.
What was the Depression of 1873?
The Depression of 1873 was partly due to a major economic reversal in Europe as well as the poor state of the American banking system. Anyone could set up a bank and operate it independently. Local banks generally kept their deposits in larger privately owned banks, especially in New York banks. The New York banks would invest these deposits, often unwisely, such as Jay Cooke and Company, a railroad speculator that went bankrupt. It was the principal investor of the Northern Pacific Railroad and its failure led to the collapse of hundreds of other companies and banks.
Factories closed their doors and thousands were laid off. One in four labourers in New York were out of work in the winter of 1873-74 and nationally a million became unemployed. Many of the major railroads failed and construction of new railroad lines declined drastically.
How was urbanisation impacted by industrial growth?
Industrial development also brought massive changes to towns and cities.
Before 1860, there were only sixteen cities in the USA with a population of 50,000 or more. This was to change rapidly. Chicago, which had 30,000 inhabitants in 1850, had over a million by 1890.
As industry grew, cities changed. Post-Civil War Atlanta, another railroad hub and commercial centre, also developed a diverse manufacturing sector. Cities quickly became identified with what they produced.
How did industrial growth effect living conditions?
Two problems emerged due to this rapid urban growth - the spread of slums and the corrupt systems of running these new cities.
The rapid influx of workers often led to the hasty construction of poor quality housing, often overcrowded and polluted slums. Those with wealth soon moved away from these slum areas into the suburbs. Moreover, many of these industrial cities were run by what became known as the “Boss’ system with the ‘Boss’ being the local mayor. He was often corrupt and would sell the rights to the highest local bidder. He would provide jobs and employment for immigrants or Alrican Americans from the South who, in turn, would vote for him in future elections.
How did industrial growth impact Agriculture?
For most farmers it was a life of subsistence farming and debt.
The Homestead Act of 1862 opened up huge areas of the West to settlement and farming. However, many farmers faced hardships for several reasons. They incurred debts due to borrowing for the purchase of land and mechanisation as well as being over-dependent on unreliable overseas markets.
Many small farmers tried, unsuccessfully, to compete with big ‘agribusinesses’ and some, especially in the South, were too dependent on a single cash crop, such as cotton. In addition, as prices kept dropping in the years after the Civil War, so did profits which, in turn, affected the ability to repay loans. For example, the price of a bushel of wheat fell from $1.45 in 1866 to only 76 cents three years later.
Who were the ‘robber barrons’?
Big businessmen, not politicians, controlled the new industrialised America of the Gilded Age. These so-called ‘captains of industry’ were not regulated by the government and did whatever they could to make as much money as possible.
These industrialists’ business practices were sometimes so unscrupulous that they were given the name robber barons. These men were able to gain direct political influence, especially within the Republican Party and over the emerging mass newspapers. They benefited from the prevailing belief in laissez-faire.
Who was Cornelius Vanderbilt and what did he do?
Cornelius Vanderbilt and his son, William, were perhaps the most famous railroad tycoons. Cornelius made his fortune through steamboat operations which were worth $11 million by 1862. He ploughed his profits into the great railroad boom and during the 1860s he bought out and consolidated many of the rail companies in the East, enabling them to cut operations costs. The Vanderbilts also established a standard track gauge and were among the first railroaders to replace iron rails with lighter, more durable steel. The Vanderbilt fortune swelled to more than $100 million during these boom years. When he died in 1877, at the age of 83, he was the richest man in America.
Who was Andrew Carnegie and what did he do?
Carnegie started work in a railroad company and by the Civil War was selling iron, the profits from which he invested in an ironworks. He began to use the new, British-invented Bessemer Converters to make better and cheaper steel from iron.
Initially, he mainly manufactured rails but, as the demand for these decreased, he changed production to provide for new markets in cities and industries such as bridges, machinery, wire, pipes and armour plating for the US navy. In 1900, he sold his empire to the banker J. P. Morgan for $480 million.
Carnegie rarely tried to buy out his competitors. He preferred to concentrate on production of good steel at a lower cost than others, selling at such prices as would give him the best advantages. He was able to monopolise steel production through vertical integration - in other words controlling all processes in production from extraction of iron ore to the making of finished products which, in turn, brought lower costs and greater profits.
Carnegie was typical of many self-made millionaires prepared to help those who helped themselves. Carnegie made donations to universities, hospitals, free libraries, parks, swimming baths and churches. Moreover, he
set up the Carnegie Endowment for International Peace for research and the advancement of knowledge.
However, he did attract criticism for both extremes.
On the one side, he was criticised by other businessmen for being a socialist because he gave money to help various people and societies. On the other hand, he was also criticised for making his fortune by exploiting his workforce through paying low wages and demanding long hours as well as being 100 ruthless in destroying rival businesses.
