4 | economic growth and development Flashcards
Agriculture and populations
After the civil war, agriculture was an important, still growing part of the American economy. Well over half the population lived in rural areas and the number of people living on farms rose from 10 million in 1865 to 25million in 1890. As industrialisation grew and railroads expanded, more and more land was brought under cultivation and the number of farms more than doubled. This was actively encouraged by the government under the homestead act, making hundreds of thousands of acres of land available as free land. Railroad companies bought large pieces of land and made profit selling it to settlers
Farm development
In 1865 most farms were small household farms. Steady increase in large scale commercial agriculture and the development of new markets assisted by technological advances like refrigeration, and new machinery like wire binders. Department of Agriculture carried out research and encouraged the spread of agricultural colleges. However, farmers had little control over prices and they depended more on finance from banks, railroad companies and local merchants for investment and moving their produce to markets. Vulnerable to fluctuations of the market, as shown by depression following the Panic of 1873.
Panic of 1873
Rapid economic development of the US outstripped the System of banking and finance. Both agriculture and industry depended on investment and loans in order to expand and innovate, but banks were mostly small and didn’t have enough money in reserve so went broke. There was little or no regulation and a lot of wild financial speculation. It was this speculation that led to a nationwide financial crash, the panic. Stock market prices collapsed, banks failed and economic enterprises were badly hit, leading to depression for years.
Agriculture in the northeast
Benefited from the expanding markets in the growing towns and cities. By 1880s, cities like Chicago and Pittsburgh were the hubs of a wide distribution network, shipping meat, cereal and canned food to urban northeast and timber for construction on the Great Plains. Wisconsin - dairy production. Railroads were an essential part of the process although the companies had monopoly power and set freight rates as high as they wanted. Agriculture was dependent on market forces it couldn’t control
Agriculture in the south
Slavery was ended but King Cotton still ruled. Political battles over reconstruction failed to break down the traditional structures of the southern economy and the dominance of the old white elite. Small farmers were in a difficult situation, often unable to buy or keep their own land and falling to being tenant farmers. They also struggled to get loans or get their produce to market directly without being exploited by big businesses. However, there was railroads expansion and cotton, tobacco and sugar remained major commodities for export. Trade and shipping expanded in ports like Charleston in South Carolina. But the southern agriculture like the economy generally, lagged behind the rest of the country. Few immigrants settled here. In 1879, thousands of black farmers moved to Kansas for new opportunity
Agriculture in the west
Wild West began with dizzying speed. Homestead Act accelerated the movement of settlers to the west. The first transcontinental railroad, Union Pacific, was complete in 1869, only took 6 days from New York to San Fran. The colonisation of Native American lands was virtually complete by 1877. The vast lands of the west were filled with railroads, ranches, farms and mining towns. Development of the west continued to be driven by land hungry settlers seeking homesteads. Vast tracts of land brought under cultivation in Missouri - 1870, 9.1 mil. 1890, 19.8mil
1860- 760,000 in western states. 1890- over 6million.
Total Native American population in 1860 was 500,000 and almost halved by 1890.
Oklahoma land rush
Late 1889. Massive response to the granting of free land in Oklahoma. Thousand of settlers joined to acquire farms in the land rush, after Congress granted 2 million acres of formerly Indian lands as free land for homesteaders. Race began on 22 April 1889, and 6000 new land claims were registered in 2 months. Railroads played a key role in this wave of settlement as they transported them and lend them money to acquire land and took cash crops like wheat in return.
Steel and rapid settlement of the west
Steel ploughs that broke through the hard crust of the prairie grasslands to get to the rich soil underneath, the miles of steel barbed wire that fenced off open spaces, steel rails of the railroads across the west, steel barrels of the rifles used to kill the buffalo and extinct it.
Difficulties for farmers in the west
Climate was harsh and prone to natural disasters like drought and grasshopper infestation. Many farms were on marginal, unproductive land. Prices fluctuated, sometimes upwards as in the sudden boom in wheat prices in 1870s, sometimes downwards in the years of drought from 1887 (extended period of above average rainfall gave a misleading impression of the prospects for farming productively as the rains failed in 1887 beginning years of drought). Caused many farmers to become bankrupt and move back east.
Farmers increasingly relied on loans they found hard to obtain and also hard to repay. Levels of investment were low and methods of farming on small farms were inefficient.
Industrial development post civil war
In 1865, large areas of US were rural and sparsely populated. Industrial development still lagged behind places like Britain and Germany. But modern industrial capitalism had already transformed north and east by 1861 and this process was accelerated by the demands of the north’s war economy during the civil war. After the war, favourable economic conditions enabled rapid expansion of trade and industry. Gilded age - age of industrial capitalism and big business. In every industry driving economic growth including railroads, copper and coal mining, steel and oil, size mattered. Small companies expanded into bigger ones, then merged with or bought other companies to form corporations that raised the huge investment finance necessary to control markets
American GDP
1860- $4.3 billion
1890- $15.2 billion
Urbanisation
In 1865, the us was still Largely rural. But industrialisation, mass immigration, and improvements in transport accelerated this process. Most of the larger towns and cities were located in the region east of the Mississippi River and north of Ohio river. Existing cities grew bigger and new big cities experienced population growth. Urbanisation created new markets, new business opportunities and a vast work force.
Population in thousands 1860-90 - New York (1,175 to 2,507), Philadelphia (566 to 1,043)
Industrialisation and the rise of corporations
There was a boom in extractive industrial industries - coal, iron, copper and oil. From 1859, oil wells were developed in west Pennsylvania, spreading into other parts of the Appalachian Basin (including west Virgina and west parts of New York). By 1874, smaller oil companies were merging into larger ones, especially Standard Oil. New techniques in the manufacturing of steel such as rolling mills were developed by the Bethlehem iron and steel company from 1860. Production of steel was greatly increased by the demands of the civil war (more equipment, weapons manufactured) and by the expansion of railroads. Industrial expansion was also pushed by important technological innovations by inventors like Thomas Edison.
New technological advances and industries
Improved in refrigeration from 1867, including refrigerated ships and railway cars, assisted rapid commercial expansion for ice making, breweries and meat packing. Railroad expansion boosted economic development. By late 1870s, many of the giant business empires like Rockefeller’s Standard Oil, Carnegie’s US Steel, Vanderbilt’s railroads and shipping, JP Morgan’s banking and Heinz’s canned food empire were taking shape. Panic of 1873 slowed the economy’s rapid expansion, leading to 5 years of recession and many firms went bankrupt. However, the depression in the long run weeded out less efficient businesses, opened opportunities for enterprising businessmen to buy failed companies and consolidate them (eg smaller railroad in Minnesota expanded into huge empire across northwest by Hill) and by 1877, the economy was posed for further expansion
Railroads
Powerhouse of American growth post civil war. In 1865, there were 35,000 miles in US, almost all in north and east. By 1893, there were almost 200,000 all over the continent. Included New York central, linking east coast to the Great Lakes and Chicago, and the Pennsylvania railroad. Spearhead of expansion into the west as Union Pacific was complete in 1869 and northern Pacific in 1883.
Remained at forefront of economy as steel and oil rose. Vital for supplying factories with raw materials and for distributing finished products. Closely associated with financing of industry and the implementation of policies to squeeze out competitors. Rockefeller had close involvement with Pennsylvania railroad and Carnegie early career was based on railroads. Steel - vital for railroad development and for machines in oil industry
Why was the railroad boom chaotic?
Fierce competing between rival companies and a lot of wild financial speculation. Many lines became economic backwaters or went bust but bigger companies swallowed up smaller ones and gained power. Where the railroads went or not was the making and breaking of big cities, like Chicago became main hub city of Midwest due to railroads. Companies emerged and established monopolies as they eliminated competition, took over ancillary business and bought up vast amounts of real estate. Levels they set freight rates at dictated the fate of many industries and also dominated local politics. Railroad barons became wealthy and influential, including Hill and Gould and Fisk. Main was Vanderbilt of New York central and Hudson River railroad, dominating railroads out of New York to Lake Erie and Chicago.
Rise of steel industry
Economic growth of 1880s- dominated by steel and oil. 1875- steel production was 360,000 tonnes and by 1900 it reached 60 mil annually, biggest in the world. Rate of growth 7% a year. One key reason for this was technology, iron and steel depended on old fashioned methods of puddling wrought iron so in 1880s, steel makers shifted to Bessemer process, enabling the mass production of good quality steel. Production soared higher after 1890 due to technical advances and discovery of mountains of high grade iron ore. Another reason was business organisation and size. Pittsburgh became hub of American steel industry. Many of early steel companies like Bethlehem steel were small and eventually grew.
Andrew Carnegie
Brought steel into the age of big business. Constructed his first steelworks at Braddock in Pennsylvania in 1870s. This was the foundation of a great steel empire as he bought out a chain of other steel companies and by 1892, consolidated his operations into the Carnegie Steel Company. This continued to expand until he sold out to rich financiers in 1901, forming the US steel company and making carniege one of the richest men in the world.
Rise of oil industry
Parallels rise of steel. Further wells developed in Appalachian Basin in 1860s and 1870s. Cleveland, Ohio became a major centre for oil refining. As with steel, one man donated the expansion and consolidation - Rockefeller and his partners founded the Standard Oil Company in 1870, beginning its rise to monopoly power. In 1872, it bought up 22 of 26 of its main competitors in the Cleveland Massacre. 1882/ established standard oil trust. Estimated 85% of oil refining in the world was controlled by Standard Oil in the 1880s.
Cartels and trusts
Emerged due to lack of government control. The corporations and combinations who controlled key markets and seemed increasingly beyond the control of politicians.
Trust - corporations formed when different companies merged or bought out to raise capital, reduce competition and come to dominate markets
Big business - stock market and bull market
Stock- where stocks and shares were traded located on Wall Street in New York
Bull- when share prices were rising and business confidence was high, contrasts with bear market where share prices were falling and confidence was down
Big business - monopoly
When one businessman or company owns the entire market within a particular industry. Joined to raise more capital to gain access to wider markets and to beat competitors.
Big business - stocks and shares
Investors held these so costs, losses and profits could be shared. (Investors from corporation when they joined forces)
Big business- protective tariff
Business persuading government to impose high customs duties (tariff) on imports to make them more expensive and so protect producers from cheaper competition
