Economic Policy 1865-1890

Question 1

What were the key developments to railroads in the era 1865-1890? (6)

Answer 1

1. Only 30,000 miles in 1863, this had doubled by 1873 and continued to grow to over 163,000 miles by 1890.
2. The construction of five transcontinental railroads across the period following the completion of the first in 1869 created millions of jobs and easy access to the West.
3. Technological developments to railroads such as track design and electric/diesel locomotives stimulated other technological development.
4. An increasingly connected America stimulated mining/industry/agriculture trade as well as urbanisation.
5. Railroads saw the emergence of ‘Robber Barons,’ such as Cornelius Vanderbilt and Jay Gould who made millions through the monopolisation of railroad industries and unfair worker treatment.
6. Response to concerns over these unfair practices inspired much reform that came later on as well as the Interstate Commerce Act of 1887.

Question 2

What were the negative economic impacts of the Civil War? (2)

Answer 2

1. Southern agriculture suffered during the war due to the Union implementing restriction on Southern trade with European markets.
2. The printing of money from both Confederate and Union states led to rapid inflation, decreasing purchasing power and costing thousands to individual citizens particularly in the South.

Question 3

What were the positive economic impacts of the Civil War? (3)

Answer 3

1. War created urgent demand for production of guns, manufactured goods, clothing and transport. Industry/production dramatically increased to accomodate these needs.
2. The war stimulated the growth of the New York stock exchange which was valued at $6billion in 1865 and, by 1890, was the second most valuable market in the world.
3. Post-war the US built upon ideas that emerged during wartime, most notably, entrepreneurship, borrowing money and a paper currency.

Question 4

What was the economic situation of America by the early 1870s?

Answer 4

The South:
* Remained an overwhelmingly agri-area dependant on exports which had been disrupted by Republican tariffs.
* The average Southerners income fell to 2/5ths that of a Northerner’s.
* A glut of cotton in the early 70s led to a sharp fall in farm prices and harder times for plantation workers.

The North:
* Continued development of financial systems revolutionised in the Civil War.
* Industries such as mining, textiles, iron/steel and processed food continued to rapidly expand.
* Mass internal urban integration and employment in industries.

Question 5

What were the causes of the Depression of 1873? (5)

Answer 5

1. The mass expansion of railroads inflated land value leading to over speculation in railroad companies.
2. The era preceeding the crash had scene lots of borrowing and financing to fund entrepreneurship/growing industry. Following the bursting of the speculation bubble, a credit crunch hit these borrowees hard.
3. Collapse of many major banks destroyed financial confidence.
4. The US depression was part of a wider international Long Depression which lasted from 1873-1879 and involved overproduction in industries and decreasing agriculture prices.
5. President Grant’s contracting of the money supply.

Question 6

What were the impacts of the 1873 Depression? (6)

Answer 6

1. Major fall in share/bank confidence.
2. Around 18000 businesses went bankrupt, including 89 railroads.
3. Many key banks which had financed railroad expansion, such as Jay Cooke & Co collapsed.
4. Unemployment hit high rates of 8.25% in 1878.
5. Farmers were hit particularly harshly, seeing a major decrease in crop prices as well as high debt.
6. The US became socially more divided as a result of disproportionate effects of the Panic.

Question 7

What was the response to the 1873 Depression?

Answer 7

Farmers: Formed agrarian movements demanding relief from creditors/railroad companies. Situation worsened by Coinage Act of 1873.
Workers: Labour unionists staged protests against significant pay cuts and mass unemployment.
Ulysses S. Grant: Faced significant pressure to intervene although Grant initially took a heavily laissez-faire approach, only introducing some public works programmes which were not on scale with the problem in hand.
Congress: Introduced the Coinage Act of 1873 as well as the Resumption Act of 1875 which initially removed $82million worth of greenbacks from circulation.
Individuals: Some states implemented debt relief policies to aid those strugglings whilst industrialists campaigned for protective tariffs to protect domestic industry.
Social: Fueled the Populist movement of the later era and led to some activism, notably the ‘Women’s Crusade’ of 1873/74, which protested against the dangers of alcohol and called for prohibition. Discussion increased surrounding the role of government.

Question 8

What happened between the 1873 Panic until recovery in 1879?

Answer 8

1. US population grew by 17.5% with Net National Product only growing by 1 or 2%.
2. Iron and steel production initially fell by 45%.
3. Durable goods production initially fell by 30%.