The Rise Of The United States

Question 1

Question: was US success due to TFP growth, capital deepening or labour force participation?

Question 2

Graph shows sources stats, good to remember one, or one for each

Answer 2

Biggest rises in output to labour, and TFP growth.

Question 3

Highlights of US growth accounting (4)

Answer 3

Early 19C growth from greater hours rather than productivity. (Remember Saint Monday etc)

Later 19C growth due to labour productivity (due to capital deepening making it easier)

TFP 0.2-0.4% in 19C, not relatively exceptional

20C growth from labour productivity due to TFP (where human capital and R&D became important.

Question 4

Manufacturing Productivity hypothesis

Answer 4

Invest more in machinery= rapid growth

Workers master technologies.

Question 5

Describe US success in manufacturing in terms of manufacturing productivity hypothesis

2. What is ASM

Answer 5

US capital deepening was greater than Britain. Then human capital and business organisation sustained later growth.

American system of manufacturing

Question 6

Features of ASM (7)

Answer 6

1. Large scale production
2. Capital intensive
3. Division of labour/specialisation among assembly line
4. Labour had high general education but low skills (simple tasks anyways)
5. Standardised goods
6. Division of firm operations e.gmarketing, R&D
7. Interchangeable parts

Question 7

Examples of industries with ASM model

Answer 7

Colt revolver (interchangeable parts, assembly line produce
Singer sewing machines- mass production
Ford Model T- standardised product, mass production

Question 8

Graph shows approx % of automobile exports were from US in 1928.

Answer 8

70%

Supports idea of Ford Model T being first mass produced car at a low cost and quick. as part of American System of Manufacturing

Question 9

5 Reasons for the US rise (remember these)

Also remember the US market structure characteristics mentioned last time which contributed to the rise.

Answer 9

Cheap energy, expensive labour (Habakkuk thesis)

British capital flows (railroads, remember Britain FDI- a reason for their decline, no domestic investment as didn’t consider social benefits, only private benefits)

EU migration (incentivised by high wages) (homestead act-easy to apply for ownership of land)

Education (primary, secondary, tertiary)

Tariffs (infant industry argument)

Question 10

Habakkuk Thesis

Answer 10

US had cheaper capital, natural resources, land abundance and less people, so expensive labour

Question 11

David and Wright

Answer 11

Extended the Habakkuk thesis. US had the resources but was also exceptional in its use of resources. Good investment in extraction, transportation, geological knowledge and technology to take advantage of its resources.

(Resource sector had high ROI)

Question 12

2nd reason for US rise:

Access to British capital points (2)

Answer 12

Railroads were decisive in US rise. Fastest railway expansion internationally (Large share of British’s foreign capital went into US railroads)

Consider backward linkages , forward linkages and final demand linkages.

Improved geographical mobility.

Question 13

Backward linkages

Answer 13

Inputs-railcards, rails, construction, iron and steel

Question 14

Forward linkages

Answer 14

Processing and sales-services, farming, mining, railway stations

Question 15

Final demand linkages

Answer 15

Derived demand linkages-consumer goods, railway towns

Question 16

Graph shows UK portfolio investment: how much did they invest in transportation in 1910-14

Answer 16

38.2%

A lot going FDI in US to transport (railroads!!)

Remember 1/3 total investment in FDI

Question 17

EU migration-3rd reason for US success

Labour scarcity had direct effects on EU migrants (4)

Answer 17

EU migrants had above average productivity,
Transferred technology and knowledge,
Attracted to capital flows
Creating markets for goods and inventions

Question 18

Labour scarcity had indirect effects

Answer 18

Improved institutions to attract labour!

-Property rights improved, Homestead Act 1862.

-Government needed to be more democratic-secret voting

-Institutions needed to be egalitarian- constitutionalism.

Question 19

Homestead Act 1862 (still part of 3rd reason- EU migration)

Answer 19

$2 to $1.25 per acre

160 acres of free land

Question 20

Homestead act requirements

Answer 20

$18 fee
21 y/o
Farm it for 5 years

Question 21

4th reason for US rise:

US education (3)

Answer 21

High levels of enrolment

High levels of human capital (science and maths)

Unskilled labour with high general education vs Britain-skilled labour with low education

Question 22

5th reason for US rise:

Tariffs

Answer 22

High tariffs (protectionist) in late 19C

Most protectionist country before WW1

Question 23

Graph shows average US tariff across 1875-1914

Answer 23

25.4% average

Question 24

Infant industry effect

Answer 24

Low competition allowed inefficient firms to develop (locking foreigners out US markets)

Short term loss but long term better.

Question 25

Why might tariffs have impacted late 19C US growth? (4)

Answer 25

Import substitution- Tariffs allow I.I to grow, accelerate K accumulation.

Fiscal surpluses- and crowd in private investment (earn tax revenue)

Manu goods price>capital goods (cheaper capital goods promoted capital deepening, so invest more in machinery)

FDI into US- tariff jumping