Economy 1865-1890 Flashcards
Homestead act of 1862
This legislation provided 160 acres of public land to settlers who lived on and improved the land for five years. It aimed to encourage westward expansion, settlement of the frontier, and agricultural development.
Sherman antitrust act (1890)
This landmark legislation aimed to curb the power of monopolistic trusts and promote fair competition. It prohibited certain business practices deemed anti-competitive, such as monopolies and restraints of trade.
Tariff Acts (1861, 1870, 1890)
Several tariff acts were passed during this period, including the Morrill Tariff of 1861, the Tariff Act of 1870, and the McKinley Tariff of 1890. These acts imposed tariffs on imported goods to protect domestic industries and generate revenue for the federal government. The tariffs were a source of contentious debate between protectionists and free traders.
Resumption Act (1875):
This act aimed to return the United States to the gold standard by redeeming Civil War greenbacks (paper currency not backed by gold) in gold. It sought to stabilize the currency and restore confidence in the government’s financial policies.
Rise of steel production (1875)
1875 US steel production per year: 360,000 tons; by 1900 it was 60m tons p.a. – the biggest in the world.
•The rate of growth was 7% p.a. due to:
–Improved technology – the Bessemer process replaced the puddling method
–Raw materials – mountains of iron ore discovered near Lake Superior.
–Business organisation & size – Pittsburgh in Western Pennsylvania became the hub of the US steel industry; companies grew rapidly e.g. Bethlehem Steel.
•Andrew Carnegie dominated with his Carnegie Steel Company
Rise of oil in 1860s/70s
1860s-70s – wells developed in the Appalachian Basin
•Cleveland, Ohio became a major oil refining centre.
•1870 - John D. Rockefeller founds the Standard Oil Company and rose to monopolise the industry.
•1872 – the ‘Cleveland Massacre’ Standard Oil bought 22 of its 26 main competitors à 1882 the Standard Oil Trust
•In the 1880s c.85% of the world’s oil refining was controlled by Standard Oil.
Panic of 1873
•Rapid economic expansion was slowed by the Panic of 1873, leading to 5 years of recession, and many firms went bankrupt.
•However the 1870s depression weeded out less efficient businesses and opened up opportunities for entrepreneurs to buy failed companies and improve them.
•E.g. James J. Hill bought up railroad companies in Minnesota to form one huge railroad empire in the Northwest.
•By 1877 the American economy had recovered and was poised for further expansion.
Industrialisation as a key factor for economic growth
Industrialisation
•In 1865 large areas of the US were rural and sparsely-populated.
•Industry lagged behind European nations like Britain and Germany.
•The civil war accelerated industrialisation, and favourable economic conditions post-war enabled the rapid expansion of trade and industry.
•The Gilded Age was the age of industrial capitalism.
•Companies expanded, merging with or buying out competitors to form corporations and raise investment.
Improvement in technology
•Improvements in refrigeration from 1867 assisted ice-making, breweries and meat-packing industries.
•The expansion of railroads also boosted development.
•Great US inventor Thomas Edison came up with a huge number of inventions including the light bulb, motion film camera and an electro-magnetic process for separating iron ore.
•Alexander Graham Bell invented the telephone 1876.
Andrew Carnegie
• Used British-invented Bessemer converters to make better, cheaper steel from iron ore.
• Established the Homestead Steelworks in Pennsylvania, brining all the processes of steel manufacturing together (smelting, refining, rolling).
• Initially manufactured rails; as demand declined, he switched to materials for bridges, machinery, wire, pipes and armour plating.
• 1900 sold his empire to banker J.P. Morgan for $480m
• Carnegie rarely tried to buy out competitors, preferring to focus on producing good steel at a lower cost to beat them on price.
• He grew to monopolise the steel industry through ‘vertical integration’ – expanding the business into areas that are at different points on the same production path e.g. when a manufacturer owns a supplier or distributor. For Carnegie this meant controlling the whole process of steel production from the extraction of iron ore to the making of finished products. This lowered costs and increased profits.
• 1889 Carnegie published ‘The Gospel of Wealth’ explaining his belief in philanthropy (care for the needy). He made donations to universities, hospitals, libraries, parks, swimming baths and churches.
• Criticised for making his fortune through exploiting his workforce through low wages, long hours and destroying rival businesses.
John D Rockefeller
Rockefeller observed in 1860 that the oil industry was incredibly disorganised and could be improved in a similar way to steel.
• He worked out the best way to make profit was not merely to produce oil but to refine and distribute it also (vertical integration). This undercut his rivals through cost-cutting measures like securing cheap transport.
• Bought his first refinery 1862 and set up Standard Oil in 1870 in Ohio.
• Ruthlessly eliminated competitors and by 1880s controlled 85% of all US oil production. By 1899 was worth $200m.
• Expanded into iron, copper, coal, shipping and banking – by 1913 world’s first billionaire.
• A philanthropist – gave c.$550m to medicine, African-American educational institutions and the Baptist Church.
• Hated for his secrecy and ruthlessness e.g. the ‘Cleveland Massacre’ 1872 – he bought out his competitors in Cleveland but kept it secret so companies associated with him pretended to be separate and competing.
• Supporters of Rockefeller argue his monopoly of the oil industry saved the industry from disaster. Critics argue his secret arrangements with railroads and others prevented free and fair competition, ruining rivals.
JP Morgan
• A skilful financier who inherited $12m but increased this greatly.
• 1862 set up Dabrey Moran, and made a fortune supplying the participants in the US civil war. In 2 years made the then vast sum of $50,000.
• 1871 began his own private banking company: J.P. Morgan & Co. which became a leading financial firm.
• Helped the US government refinance the crippling debts incurred during the civil war. His salary around this time is reported to be $500,000.
• 1893 British investors - who dominated the world economy at the time - pulled their capital out of America. The US economy was collapsing from a lack of liquidity. Morgan put together a syndicate of investors who bailed out the government and the economy was saved. However, the fact that Morgan and his investors also turned a handsome profit made him unpopular with the masses.
• Sold railroad stocks to European investors. He would often reorganise the rail company, reduce debt to avoid bankruptcy, and place men loyal to him in senior management positions.
• 1907 bailed out the US government again when there was a run on the banks. To stem the panic, Morgan organised a group of bankers to put money into an emergency pool available for banks who were experiencing cash withdrawals they could not pay.
• Criticised for price fixing à the Interstate Commerce Act and “anti-trust” legislation designed to reduce the power of big business
• Criticised for making monopolies which prevented fair competition.
Impact of westward expansion
- The Second Gold Rush In the mid-1870s a gold rush began in the Black Hills of Dakota.
1874 small gold deposits were found in Custer, South Dakota.
1875 much larger deposits were found in Deadwood Gulch
>thousands flocked there.
However, the government had recognised the Black Hills as belonging to the Native American Sioux tribe in the Treaty of Laramie 1868. This was ignored.
