T1 Economic

Question 1

Reconstruction Economic Effects (1866 - 1877)

Answer 1

• Reconstruction had a positive effect on the economy of the USA, which developed into a true
  industrial power.
• 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.

Question 2

The Economic Impact of the US Civil War

Answer 2

• The Civil War provided the initial impetus for great expansion in US industry.
• This was partly 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.
• 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.
• 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.

Question 3

The Economic Availability of Land (Westward Expansion)

Answer 3

• The USA greatly expanded especially with increased westward settlement during this period.
• This stimulated economic growth as it created a market for manufactured goods as well as
  encouraging further railroad development.
• Much of this land was very fertile and led to the mass production of wheat which, in turn, ensured
  that farming expanded and there was plenty of food for the population, especially the growing
  industrial cities.
• Greater demand for food, both at home and for a rapidly expanding export market, also
  encouraged greater mechanisation in agriculture which, in turn, led to increased demand for
  manufactured goods.

Question 4

Economic & Population Growth

Answer 4

• There was rapid growth in the population of the USA in the 1860s and 1870s which then provided
  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.
• People came from all over Europe and Asia in search of a better standard of living in the USA.
• 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.

Question 5

The Transport Revolution

Answer 5

• The USA also experienced a revolution in transport, especially the railroads, provided a fast and
  efficient means of transporting raw materials such as coal from the West Virginia coalfields to the
  factories of New England.
• The transport revolution also created a national market by enabling the distributing of 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.
• Travel from New York to San Francisco now took six days instead of six months.
• 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.
• Manufacturers were encouraged to produce engines and railroad vehicles and used the building
  industry to provide railroad stations.
• This encouraged competition which pushed down prices and led to technological improvements
  to improve quality.
• The rail centres needed roads in order to be able to distribute to outlying areas and this stimulated
  further growth.

Question 6

The Economic availability of Capital [Money]

Answer 6

• 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.

Question 7

The Economic Laissez-faire Role of Government

Answer 7

• There was a long tradition of minimal government interference 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.
• 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 than 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.

Question 8

Economic Growth of Corporations and Trusts

Answer 8

• 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.
• It could buy, sell and own property and take over even more companies.
• 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.

Question 9

The National Labour Union (1866 - 1877)

Answer 9

• Before 1877, union organisation had been sporadic and largely local. Small craft unions organised
  local workers around local concerns.
• The great exception was the National Labor Union, formed in 1866. Seventy-seven delegates
  representing 60,000 workers gathered at Baltimore to launch this national organisation and adopt
  a platform focused on securing legislation protecting the eight-hour day.
• However, the union was short-lived.
• The economic depression of 1873 drove millions of workers into unemployment and out of their
  unions.
• By 1877, the nation’s total union membership had fallen from a peak of 300,000 in 1872 to just
  50,000.

Question 10

The National Railroad Strike (1877)

Answer 10

• In 1877, when the owners of the Baltimore and Ohio (B&O) Railroad announced a pay cut – the
  fourth in as many years – workers walked off the job and were joined by workers from rival
  railroads, and even workers from entirely different industries who abandoned their jobs in
  sympathy.
• Together, this growing mass of workers attacked railroad yards, burning trains, and tearing up
  tracks.
• The violence was the worst in Pittsburgh, where a crowd of some 5,000 workers fought 650
  federal troops in a pitched battle.
• The workers laid waste to the railroad yard, burning more than 500 cars, 104 locomotives and 39
  buildings.
• The troops were brought in and 25 people were killed when they fired into the rioting crowd.
• Military force eventually restored order along the nation’s railroad lines, but not before strikers
  had destroyed more than $10 million worth of property and terrified middle-class observers of
  the events.
• The railroad strike of 1877 was therefore a terrifying shock to most Americans.
• For middle-class urbanites and small-town residents removed from many of the harsh realities of
  the new industrial order, the size, the rapid spread, the worker unity, and the extreme violence
  of the strike raised a horrible possibility of social warfare just a decade after the end of the Civil
  War.
• However, the strike also convinced workers that they needed to organise.
• They had no chance to prevail in a power struggle against the combined forces of industrial
  owners and the US government unless they built stronger unions and advanced their course by
  political activity.
• Conversely, the business community resolved to suppress labour association by any means
  necessary.
• This attitude was summed up in a newspaper article in August 1877.