The Rise Of The United States Flashcards
Question: was US success due to TFP growth, capital deepening or labour force participation?
Graph shows sources stats, good to remember one, or one for each
Biggest rises in output to labour, and TFP growth.
Highlights of US growth accounting (4)
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.
Manufacturing Productivity hypothesis
Invest more in machinery= rapid growth
Workers master technologies.
Describe US success in manufacturing in terms of manufacturing productivity hypothesis
- What is ASM
US capital deepening was greater than Britain. Then human capital and business organisation sustained later growth.
American system of manufacturing
Features of ASM (7)
- Large scale production
- Capital intensive
- Division of labour/specialisation among assembly line
- Labour had high general education but low skills (simple tasks anyways)
- Standardised goods
- Division of firm operations e.gmarketing, R&D
- Interchangeable parts
Examples of industries with ASM model
Colt revolver (interchangeable parts, assembly line produce
Singer sewing machines- mass production
Ford Model T- standardised product, mass production
Graph shows approx % of automobile exports were from US in 1928.
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
5 Reasons for the US rise (remember these)
Also remember the US market structure characteristics mentioned last time which contributed to the rise.
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)
Habakkuk Thesis
US had cheaper capital, natural resources, land abundance and less people, so expensive labour
David and Wright
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)
2nd reason for US rise:
Access to British capital points (2)
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.
Backward linkages
Inputs-railcards, rails, construction, iron and steel
Forward linkages
Processing and sales-services, farming, mining, railway stations
Final demand linkages
Derived demand linkages-consumer goods, railway towns
Graph shows UK portfolio investment: how much did they invest in transportation in 1910-14
38.2%
A lot going FDI in US to transport (railroads!!)
Remember 1/3 total investment in FDI
EU migration-3rd reason for US success
Labour scarcity had direct effects on EU migrants (4)
EU migrants had above average productivity,
Transferred technology and knowledge,
Attracted to capital flows
Creating markets for goods and inventions
Labour scarcity had indirect effects
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.
Homestead Act 1862 (still part of 3rd reason- EU migration)
$2 to $1.25 per acre
160 acres of free land
Homestead act requirements
$18 fee
21 y/o
Farm it for 5 years
4th reason for US rise:
US education (3)
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
5th reason for US rise:
Tariffs
High tariffs (protectionist) in late 19C
Most protectionist country before WW1
Graph shows average US tariff across 1875-1914
25.4% average
Infant industry effect
Low competition allowed inefficient firms to develop (locking foreigners out US markets)
Short term loss but long term better.
Why might tariffs have impacted late 19C US growth? (4)
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
