Topic 4: The Rise to Dominance of the United States of America

Question 1

What were the beginnings of settlement in the US?

Answer 1

• English settlements of North-East America began in the early 17C as private ventures, initially to grow tobacco as the cash crop and/or for fur trading. These colonies grew with arrivals from Europe.
  ○ Also grew from refugees from Europe
  ○ English, Dutch and German - often indentured servants or those seeking religious freedom (e.g. the Puritans), Quakers in Pennsylvania
  
  • The earliest colonies were Virginia (1607) - tobacco farming, Massachusetts (Plymouth 1620, Salem 1626, Massachusetts Bay 1630 - fur trading), Maryland (1634), Rhode Island (1644), Connecticut (1639), Pennsylvania (1681) - Quakers, Delaware (1702), North and South Carolina (1670); whilst New York and New Jersey were originally settled by Dutch and Swede settlers in 1620s and taken over by the English in 1664 and 1681 respectively.

Question 2

How were the American Colonies divided in 1750? What did each region specialise in?

Answer 2

• The 13 states before the war of independence
  
  • New England Region: Massachusetts, New Hampshire - major ports were there
    ○ Manufacturing, light handcrafts
    ○ Fur trading
  • Middle Region: New York, Pennsylvania, New Jersey
    ○ Fertile land for agriculture
    ○ Became bread basket for these colonies
  • Southern: Maryland, Virginia, North Carolina, South Carolina, Georgia
    ○ Relied on crop farming
    ○ Initially tobacco using slaves, and then later on cotton
    § West Africans used
    ○ These were the slave states
    ○ Free settlers avoided the southern states
    ○ European immigrants tended to avoid these states
  • These were separated with the Appalachians
  • On the other side was the Middle colonies and the southern colonies such as Ohio (British settlement)
  • The New England region colonies with poor land for agriculture but with ports well situated for trading became the major early manufacturing centres.
  • The Middle colonies of New York, Pennsylvania and New Jersey offered fertile land for agriculture and became the bread basket of the colonies.
    It was the Southern colonies of Maryland, Virginia and Georgia that were most suitable for growing the cash crops of tobacco on plantations using African slaves in labour gangs from the mid-18C. Along with North and South Carolina, these colonies became the slave plantation colonies. European immigrants avoided these colonies because of lack of opportunity.

Question 3

What was the growth of American colonies pre- American War of Independence? What were American colonies’ role in relation to Britain?

Answer 3

• By the eve of American War of Independence (1775-1783) the colonial population had grown to nearly two-and-half million, probably consisting of over 400,000 black slaves.
  
  • Because the living standards of the white population was relatively high, American colonies became a valuable foreign market for British manufactures in the 18C as well as a means to obtain needed raw materials and re-exports (i.e. tropical products, chiefly tobacco).
  • Britain fought and won the ‘French and Indian War’ (1754-62) in the Ohio Valley to ensure westward expansion of the American colonies.
    ○ British effectively defeated the French
    ○ George Washington fought in this war on the British side

Question 4

What was the nature of government of the Colonies?

Answer 4

• An important factor in the cause of the American War of Independence (1775-1783) is that all thirteen English colonies* were self-governing with their own charter in which there was an appointed Royal Governor, assisted by his Council of advisors and with elected assemblies whose delegates were elected by whites with property.
  ○ Already established governments
  ○ Probably more democratic than the British Parliament
  ○ Local and could deal with local issues
  
  • With enlightenment these assemblies, who could propose legislation, increasingly came into conflict with their British appointed Governors over policies affecting the rights of their colonial citizens.
    ○ Assemblies felt that their autonomy was being constrained over time
    
    • Delaware, Pennsylvania, New Jersey, New York, Georgia, Massachusetts, Connecticut, Maryland, North Carolina, New Hampshire, Virginia, North Carolina, Rhode Island.

Question 5

What were the major causes of the American War of Independence?

Answer 5

○ British land policy to deny colonies (in particular, Virginia) land for settlement west of the Appalachians via ‘The Quebec Act 1774’ secured by French and Indian War.
§ British decided the land open for expansion (towards the West)
§ Colonies, particularly Virginia, did not have access to it
§ Land sale was a major source of revenue for governments
○ British trade policy under the Navigation Acts constrained the colonial merchants as well as production of manufactures that could compete with British industry (e.g. prohibition against import of iron manufactures but not pig iron). This was a source of concern mainly for the New England colonies.
§ Source of tension - economic autonomy
○ After the expensive ‘Seven Years’ War’ in 1763 the British imposed greater taxation (i.e. on tea, glass and paper) on the colonies to pay for their defence and effectively curb the powers of the American colonies. It was an arrogant and stupid reaction by the British authorities to colonial protests to these measures which ignited the war.
§ E.g. the Stamp act of 1765, the Townshend Acts of 1767
§ The taxes imposed were less than those in Britain - but the Americans did not feel this way
○ 1774: coercive act by the British Government to end self-government in Massachusetts
§ This followed the Boston Tea Party - dumped 342 chests of tea from a ship that was ready into Boston harbour

Question 6

When was the Birth of the United States?

What was in the Constitution?

Answer 6

• The United States of America was officially born 4 March 1789 when Congress declared its Constitution effective.
  
  • The constitution ensured that all states would be forbidden to impose discriminatory interstate transit duties on goods and services with Federal government customs duties, taxes and regulations applied uniformly to states. Private property rights secured consistent with a prescribed system of land sales for settlement.
    ○ Government itself responsible for selling land to settlers
  • An independent nation with a government capable of acting in the best interests of its own peoples was clearly the most important event in the successful economic development of the United States of America. Without independence the economic development of the American colonies would over time have been considerably hampered by its subjugation to the interests of Britain and industrialisation much delayed.

Question 7

What was the territorial expansion of the US between 1790 and 1853?

Answer 7

• By treaty with Britain the territory of the original 13 colonies together with the westward land up to the Mississippi River, was about 890,00 square miles. The Louisiana Purchase of land from Napoleon in 1803 added 827,000 square miles.
  ○ Napoleon realised he was better off selling it
  ○ Nearly doubles the territory
  
  • In 1819, by treaty with Spain, Florida was acquired, adding another 72,000 square miles. In 1836 the Texans revolted against Mexico to become an independent nation, before joining the union in 1845, adding a further 390,000 square miles.
    ○ Texas used to be part of Mexico
  • Settlement of a longstanding dispute with Britain in 1846 added Oregon Country of 286,000 square miles to the Union. On settlement of the Mexican war in 1848, what became the states of California, Nevada, Utah, Colorado, Wyoming and New Mexico plus the Gadsden Purchase from Mexico in 1853 added another 556,000 square miles of territory. The total land area from the Atlantic to the Pacific was 1.9 billion square miles in 1853.

Question 8

When were the early stages of industrialisation in the US?

Answer 8

• When the USA became an independent nation in the 1780s the industrial revolution had begun in Britain.
  
  • On independence, the United States economy was agrarian-based with about 75% of the labour force employed in agriculture. Nevertheless, there was a small manufacturing-handcraft industry, mainly producing textiles and other household goods, and mainly situated in the north-east population centres (Boston, Massachusetts)
  • Modern technology was imported from Britain, often introduced by immigrants, and applied where profitable.
    Industrialisation only began in earnest from the 1820s onwards.

Question 9

What were the policies by Alexander Hamilton?

Answer 9

Policy of Protection
- Alexander Hamilton, as first secretary of US Treasury, released his Report of Manufactures in 1791 recommending government support of manufacturing by subsidies and import tariffs.
- Given Britain’s overwhelming competitive dominance in manufactures the ‘infant industry’ argument (later associated with Friedrich List) resonated and protectionist policy was firmly established.
○ Needed support until they were big enough to stand on their own two feet
- Tariffs started out in the 1790s at about 15% but rose sharply in the 1820s and peaking at 62% by 1830. By 1860 they declined to 20%.
○ On manufactured goods
- An important factor was that Federal Government revenue depended on customs duties.
○ Obtain fiscal revenue and protect industries

Question 10

What was Henry Clay’s guiding policy of economic development?

Answer 10

• The dominant political figure in the first half of the nineteenth century was Henry Clay, who developed a guiding policy of economic development by which to bind and unify the ‘Union’ which he called the ‘American System’. The policy basically consisted of three elements:
  1. A tariff of 20-25% on import goods to protect and develop domestic manufacturing. (imported manufactured goods)
  2. Federal government investment (including funding assistance to state investment) in infrastructure - a national transportation system of roads, bridges, harbors and canals to commercially and politically bind the union.
  3. A Federal Government national bank to hold and distribute federal funds, float government bonds and loans and print and distribute a national currency in place of state and private bank currencies (e.g. ‘Second Bank of the United States’ - chartered bank under congress).
  § America did not have a central bank for most of its industrialisation
  § This was also part of Alexander Hamilton’s policies
  § Why the first Bank was not renewed - believed it was state’s rights to have control over their currency and monetary systems - e.g. Jefferson opposed a national bank and militia

Question 11

Who was Henry Clay?

Answer 11

• Henry Clay (1777-1852), was a lawyer, politician and skilled orator who represented Kentucky in the United States Senate and House of Representatives. He served three terms as Speaker of the House and was Secretary of State from 1825 to 1829. He was the leading proponent of the ‘American System’ policy, fighting for an increase in tariffs to foster industry in the United States, the use of federal funding to build and maintain infrastructure, and a strong national bank. He was Abraham Lincoln’s mentor.
  • Lincoln would set the policy direction after the Civil War
  
  • Clay was the most important political force in keeping the ‘union’ together till the 1850s, enabling the North to become powerful enough to ultimately resolve the stain of slavery by civil war to establish a unified and genuinely free nation.
    • Probably becomes most important politician in America in first half of the 19th C
    • Never became president - probably had too many enemies

Question 12

What were Henry Clay’s Crucial Brokered Compromises?

Answer 12

• When new territories are brought into the union, there were problems
  
  • Missouri Compromise of 1820
    • Admitted Missouri as slave state and Maine as free state to maintain balance of free to slave state senators. Slavery forbidden in all westward territory above latitude 36◦30’, a line determined by the southern boundary of Missouri. It was undone by Kansas-Nebraska Act of 1854 that did open up tensions that led to civil war.
  • Tariff and Nullification Crisis of 1833
    • A compromise by gradual reduction of tariff over 10 years to a minimum of 10% ad valorum (to prevent Federal conflict with South Carolina).
    • Southern states began to acquire nearly majority in the house
    • Prevent them from leaving the union
  • Texas Annexation Crisis of 1836
    • Recognition of Texas independence but indefinite postponement of annexation to maintain Senate balance
    § Texas broke away from Mexico
    • Texas were not allowed to become part of the union until later
  • Compromise of 1850 over Slavery Question
    • California a free state, Nevada and Utah to decide on status; abolition of slave trade in District of Columbia but stricter Fugitive Slave Law.
    • Slaves would leave their state to go to the North - law - they had to be returned to their owners. Some Northern states started anti-slavery movements in the 1840s

Question 13

What was the impact of American Protectionist Policy?

Answer 13

• The protectionist policy created tensions between the North and the South (i.e. southern ‘slavery’ states). With the economy depending heavily on cotton exports (to Britain), the South wanted low tariffs. Tariff protection involved a deal between the North and Western states (mid-west today) in which high protection was given in exchange for Federal expenditures on land improvements in the west (key figure was Henry Clay, Senator/Congressman of Kentucky).
  
  • The tariff question was indeed a contributing factor to the civil war. When Abraham Lincoln was elected President in 1860, it was on the plank of maintaining increased protection. Lincoln himself was a strong protectionist who followed Henry Clay’s longstanding ‘American System’ policy, comprising industry protection together with infrastructure development.
    • Lincoln’s position: did not want slavery to expand further. Southern states did not accept him as president
  • During the Civil War the Lincoln administration raised tariffs in 1862 and then still higher in 1864 to raise revenue to meet rising war expenditures. Indeed, the victory of the North ensured the US continued with its longstanding protectionist policy of its manufacturing industry until the First World War.
  • US manufacturing enjoyed the greatest protection from foreign competition of any nation in the nineteenth century. After the civil war tariff rates on manufactured products usually varied between 40% to 50% and, in 1913, when the US was the mightiest industrial nation, it was still 40%.
    Although today there is much revisionist history suggesting protection was in fact counterproductive, the fact remains that under this protectionist umbrella US industry had sole access to the biggest and fastest growing national market in the world and grew at a faster rate and on a greater scale than ever before experienced.

Question 14

Describe the state of Antebellum industrial development in the US?

Answer 14

• By 1860 industrialisation in the US was well under way with only 56% of the population employed in agriculture and over 14% in manufacturing. Indeed, by the time of the Civil War (1860s) the US was the second largest industrial economy behind Britain, but a long way behind Britain and its iron and engineering industry was perhaps technologically inferior to that of Germany.
  
  • Led initially by the textiles sector, manufacturing industry progressively became more innovative and productive as the widening in markets provided profitable opportunities for enterprises to implement more mechanized techniques.
  • Along with the rapid growth in population, population density in the north-east and better transport infrastructure increased the market size for manufactures as well as lowered the transport costs of inputs.
    • Pattern of development is westward

Question 15

What was a main characteristic of american innovation?

Answer 15

• An early established feature of American innovation was the use of standardisation in the design of products and in the production process. The main emphasis in the design of machinery was to save on skilled labour that was short in supply even if this involved the wasteful use of raw material inputs that were by contrast in abundance.
  
  • An early example of this ‘system’ was in armoury production when the Federal Government in 1798 commissioned Eli Whitney to produce 10,000 muskets and Simeon North pistols for the militia. Both produced the arms by designing stamping and cutting machines to make identical interchangeable parts that with minimum hand filing by unskilled labour were assembled into final products. In this way they were able to overcome the shortage of skilled armourers and produce arms more cheaply with lower cost of maintenance.
    • Need less skilled labour
  • It is argued by some historians that a characteristic of American technological development is that it was labour-saving but material-consuming because skilled labour was in short supply whilst material resources were abundant.
  • An early established characteristic of innovation was the use of ‘standardisation’ American
  • Wood in machinery –etc wood coke in iron industry – but to further simplify production process along Adam Smith’ division of labour because of lack of skilled workers -

Question 16

What was the American System of manufacturing? What did it represent?

Answer 16

• What became known as the ‘American System of Manufacturing’ – simplicity of design, standardisation, interchangeable manufacture and large-scale output – had become common in the textile and light consumer goods industries by the mid-nineteenth century.
  
  • Within a couple of decades it was widely employed in the heavy industries of mining and metal-processing as well as the machine-making industry.
  • The American system was highly productive with labour productivity generally greater in US manufacturing than that in British and European industry.
    • Further sophistication of the division of labour
    • Reliant on large-scale demand for product and economies of scale
  • The American industry’s superior way of innovation in the organisation of assembly line production essentially represented a better application of Adam Smith’s division of labour in which simplification in the stages of the production process enabled greater labour-saving mechanization (i.e. machinery).
  • A reason why perhaps American innovation developed this character was the relatively higher cost of labour in the nineteenth century arising from the opportunity cost to workers of alternatively acquiring cheap land and becoming a settler/farmer on the frontier which helps explain the persistent shortage of skilled labour.

Question 17

What was the role of innovation on machine making?

Answer 17

• In the American way innovation became central to industry with an endless stream of profit-seeking entrepreneurs willing to try new methods and change machinery as well as to produce a better product for the consumer.
  
  • On the demand side, American consumers developed a want for factory-made products that were simple, functional and inexpensive and would readily change to new better products even before they used up existing ones (especially true of labour-saving tools such as shovels, axes etc).
    • Large amounts of obsolescence of consumer products
    • Also led to greater obsolescence of investment
    • Pressure to always innovate and produce new techniques
  • Product designs tended to be tailored to machine capabilities so that profit-making was dependent on technical innovation in machine design and production. The machine-making and tool industries became central to US industrial development.
  • Rapid consumer and machine obsolescence magnified both consumption and investment growth.

Question 18

What sorts of resources did the technologies use in US Industry?

Answer 18

• A feature of US industry is the ready use of raw materials, especially wood, that was in abundant supply and relatively cheap. Hence, up to the mid-nineteenth century wood was employed wherever possible as a substitute for metals in the production of tools, machinery and transport equipment and in construction. In 1860 the lumber industry was second only to cotton textiles.
  
  • The cheapness of wood also meant the iron industry continued to employ charcoal in small furnaces. With the development of transportation in the north-east linking ironworks to coal mines producing the right quality coking coal the American iron and steel industry quickly developed technologically.
    • Also no shortage of coal - Pennsylvania coal fields
  • Whilst the steam engine was widely in use, as late as 1869 nearly half the motive power used in industry was water. Steam power applied to manufacturing required the material of metal and wood was less useful.

Question 19

What was the state of antebellum industrial development?

Answer 19

• Industrialisation was well under way in the US by the time of the Civil War with the pattern of development well established:
  • Westward settlement of the country accommodating a fast growing population (at the expense of the indigenous Indians!)
  § Particularly the Prairie Territory: Indiana, Ohio
  • Higher population density and urbanisation in the north-east
  • Considerable development in transport and communications linking resources to production and the latter to markets
  • Highly innovative and dynamically productive manufacturing sector, led by the cotton textiles and consumer-producing industries – driven by a rapidly expanding internal market from population growth and transport development.
  
  • One impediment was over whether slavery should be allowed to spread from the South to any states westward – so undermining the demand-driven economic development of the US based on the consumption growth of ‘free labour’.
    • Slavery for internal development - not sustainable
    • Slaves didn’t generate much consumption/demand

Question 20

What were the implications of the American Civil War and when was it?

Answer 20

Implications of the American Civil War 1861-1865
- There are different views about the cause of the civil war, but the spread of slavery to westward states of America was certainly a key contributing factor which the north was not going to tolerate. Abraham Lincoln’s Gettysburg speech made abolition of slavery an objective of the war so giving the war a moral purpose (i.e. ‘honour’) in achieving union of the country ‘with a new birth of freedom’.
- It is estimated in 1860 there were 2.9 million black slaves in the Southern plantation states who would be freed in 1865.
- The war cost 600,000 lives, around 9% of the male population aged 15 to 39.
• New casualties from developments in new calibre rifles and their bullets
- The US was able to industrially develop according to the principles of free action without being weighed down by slavery and its moribund form of production.
- The postbellum South remained economically depressed into the twentieth century racked by poverty and racism.
• Cotton farming became much less profitable, breakdown of all the estates, new approach of sharecropping, raw cotton became more competitive in other parts of the world (e.g. Middle East)
• Jim Crowe policies introduced in the South - until the 1950s and 60s until Civil Rights legislations were introduced in the South

Question 21

What was the role of Transport and Communications in building a national market?

Answer 21

• It is difficult to underestimate how important transport and communications was to American 19C economic development of such a large and territorially expanding country. With settlers pouring continuously into ever western lands, transport infrastructure was necessary to bind the expanding population into an expanding national market that stimulated industrialisation.
  
  • Early in the 19C the development of transportation was in roads, canals and steamboats. In 1808 the Secretary of Treasury, Albert Gallatin, advanced a comprehensive system for internal land and water transport in the eastern part of country, called the ‘Gallatin Plan’, to be financed by the Federal Government. The plan was largely fulfilled by private entrepreneurs with state and Federal assistance to expand transport in the north-east and mid-west (under the tariff deal).

Question 22

When were turnpike roads built, what was their impact?

Answer 22

• Turnpike roads for inter-city travel were built in the early 19C. Over $25 million of private capital was invested in several hundred turnpike companies so that between 1810 and 1830 turnpike roads opened increased from around 4,600 miles to 27,800 miles.
  
  • Because the turnpike companies were typically small and relied on tolls on fairly short distances as part of a longer connecting road, profitability was poor. Their freight transport capacity, relying on horse drawn carriages, was not great.
  • By the 1830s turnpikes had been overtaken by canals, then by the railroads, and they were subsequently abandoned.

Question 23

When was the American canal-building era? What was its impact?

Answer 23

• The American canal-building era dates from 1815 to 1860 when it is estimated that nearly $100 million was invested, close to 70% coming from governments.
  
  • The first major canal was the Eerie Canal in 1825 that ran for 363 miles from the Hudson River to Lake Eerie in the mid-west. This canal reduced shipping costs by at least one-third and provided an important link between agricultural mid-west and the industrial urbanised north-east. The success of this canal, induced greater foreign investment, and led to a number of feeder canals built as well as to other states investing in canals such as the Main Line and the Wabash and Eerie along the Ohio River.
  • By 1860 the extensive canal network of north-east to mid-west America was quite impressive and provided the foundation in transport infrastructure for early industrialisation and urbanisation in the north-east.

Question 24

What was the role of Steamboats in the mid-west?

Answer 24

• On the great internal river system of the mid-west – the Ohio, Missouri and Mississippi rivers – water transport was critical to its economic development. Steamboats were highly effective in transporting freight. They gave farmers a cheap means of transporting their crops down river to New Orleans and the sea to the national market; whilst manufactures were shipped up river from New Orleans to the interior.
  • Mississippi: North-South -> agriculture developing along those rivers
  • New Orleans became an important entry point
  
  • The large carrying capacity of the steamboats was well suited to bulky commodities like grain and livestock. Improvements in their design as well as in docking facilities kept freight costs low. By 1860 over 800 steamboats operated in the western rivers.
  • After the Civil War railroad competition would lead to a decline in waterway transport, in canals and the steam boat.

Question 25

What was the role of Railways in America’s Industrialisation? What was total investment in railroads up to 1860s? What was their impact on other transport?

Answer 25

• Railways were critical to America’s industrialisation in the 19C by effectively making and expanding the national market as the population grew and settled its vast territory.
  
  • The first railway to be opened was 34 kilometres (or 23 miles) as part of a line (completed in 1852) from Baltimore to Ohio in 1830, initially using horses to pull cars. The first line to use steam-powered locomotives was the Charleston to Savannah River line in 1830.
  • Whilst the first locomotives to operate on American railways were British, a domestic locomotive manufacturing industry was quickly established in the 1830s and American built locomotives soon dominated rail operations.
    • Still importing a lot of rail -> impetus
    • They had all the resources
    Whereas the South started early to build railways, it concentrated on short lines linking cotton regions to river and coastal ports. By contrast, the North and Midwest constructed networks that linked every city by 1860.
  • It is estimated that total investment in railroads up to 1860 was more than $1 billion, over five times the amount invested in the canals. Nearly 50,000 kilometres (or 30,000 miles) of railroad had been built and opened by 1860, more than the combined railways of Britain, France and Germany. Yet, by 1913 there would be over 400,000 kilometres (260,000 miles) of railway in the United States.
  • Government financing of the railways, predominantly by the states, was greatest in the South at about 50% of total railway investment. In the North and Mid-West government financing of railways was as small as 10%.
    • Mostly relied on private capital raised on the NYSE
  • Over time railways displaced canals and eventually other inland waterway transport like steam boats. They offered a more reliable and flexible service, enabling the establishment of more industrial centres and promoted urbanisation.

Question 26

Describe the development of railways after the Civil War?

Answer 26

• After the Civil War railway construction increased apace westward, progressively linking the west to the east of the continental.
  
  • Between 1855 and 1871 the Federal Government operated a land grant scheme through which new railway companies were granted enormous tracts of uninhabited land (except for Indians!) in the west to build railways, consisting of 520,000 square kilometres. This was supplemented by 210,000 Km2 granted by states and through various government subsidies.
    • Use the land, sell the land to finance the railway
    • Railways sell land to settlers along the railway line
  • The scheme enabled the opening of numerous transcontinental railway lines, notably the ‘Union Pacific –Central Pacific’ with a rapid service from San Francisco to Omaha and east to Chicago. Consequently, Chicago became the hub of the US regional railway system with many rail centres, repair shops and railway engineering firms.

Question 27

Was Railway the ‘Leading Sector’ of American Industrialisation?

Answer 27

• The role of railways as a leading sector of nineteenth-century industrialisation in the United States was questioned by the research of historians, Fogel and Fishlow, who claimed that the backward linkage of railway construction, especially on iron and steel industries, was over-stated. But its direct and indirect demand for rails, pins, and other metals products remained highly significant to the iron and steel industry.
  • Backward linkage: Build railway -> created demand for iron and steel
  § Believed this was overstated
  
  • American industrialisation occurred on a wide front and that no single sector was predominant. Nevertheless, railways played a key role in opening up resources for industries and enabling settlement of a massive flow of migrating population as the country developed in a westward direction.
    By being built ‘ahead of demand’ the railways opened up the land for agricultural farming as well as the extractive industries to provide cheaper food and raw materials for manufacturing.
  • The construction of the American Railways in the nineteenth century probably involved over $10 billion in capital expenditure. This is a significant ongoing demand stimulus to the US economy.
  • By 1880 the nation had 17,800 freight locomotives carrying 23,600 tons of freight, and 22,200 passenger locomotives. The US railroad industry was the nation’s largest employer outside of the agricultural sector.
  • It is hard to conceive of America’s rapid sustained industrialisation, associated with the westward settlement of its rapidly growing white population, without the key role of the railways. It opened hundreds of millions of acres of very good farm land ready for mechanization, lowered the costs for food and all goods, enabled a huge growing national market, promoted a culture of engineering excellence, and, indeed, a modern system of management.
    • Investment banking developed out of railways

Question 28

What was the change in population in the nineteenth century US?

Answer 28

• A feature of American industrialisation in the nineteenth century is the rapid growth of population associated with a continuous large immigration of Europeans. Within the country, this population tended to migrate toward the western territories.
  
  • Based on census data, in 1790 the population was about 3.9 million, by 1830 it had grown to nearly 12.9 million and by 1860 it was 31.5 million, greater than the United Kingdom. This represented a trend 3.3% growth rate in population in the antebellum period caused by immigration and a high birth rate (attributed mainly to settler families).
    • Settler families - free labour to work the land
    After the Civil War the rate slowed with a slower birth rate partially offset by a lower death rate and by immigration. By 1880 the population was 50 million and by 1913 it was 97 million, representing a trend growth rate of 2.1% over the period.

Question 29

What were the trends in antebellum population growth? What was the role of immigration in this?

Answer 29

• A major reason for the high birth rate early in the 19C was the high fertility of a young population and that there was a desire for large families by settlers to assist farm plentiful land. Hence, the rural birth rate was considerably higher than the urban birth rate.
  
  • After American independence, immigration was unrestricted until after the Civil War.* It expanded rapidly in the 1830s and progressively made a larger contribution to the growth in population. In the period 1821-1825 the average annual number of immigrants was about 8,000; it rose to 50,000 in the period 1831-1835; and by the period 1851-1885 it was averaging over 350,000. The wave of immigration in the 1840s and 1850s consisted mainly of Irish escaping the ‘potato famine’, Germans following the political upheavals of 1848 European revolution and Scandinavians due to harvest failures.
• Note the Atlantic slave trade was suppressed by the British from 1820 so that only a trickle of African slaves thereafter entered the country.
  • After the Civil War immigrant numbers continued to grow in cycles coinciding with business cycle activity. Thus, the peaks in immigration in 1873, 1882, 1892, 1903, 1907 and 1910 occurred when the economy was in an upturn and employment opportunities greater. In the period 1871-1875 average yearly number of immigrants was 350,000; in the period 1881-1885 the average number was nearly 600,000; and in the period 1905-1913, prior to World War I, it was 990,000.
  • Over the period 1820 to 1913 it is estimated that over 30 million persons, overwhelmingly European, migrated to the United States.
  • The composition of immigration changed over the course of 19C. Whereas, early in the century it was dominated by immigrants from the British Isles, increasingly it was represented by immigrants from Central and Southern Europe. (especially Southern Italy)
  • Trying to shut out immigrants in the 1920s

Question 30

What was the role of immigration on labour?

Answer 30

• The large immigration of Europeans provided an endless supply of labour to American industry in the nineteenth century. It is likely to have kept wages lower than they otherwise would have been.
  
  • Immigrant workers were productive because they were well motivated to improve the life of themselves and their families. They also contributed to entrepreneurship as they were very willing to exploit business opportunities to lift their socio-economic standing in their new more ‘open’ society.
  • Most immigrants settled in urban regions (mainly north-east industrial areas) where initially there were better employment opportunities and could rely on family and close ethnic connections (‘ghettos’) to assist their settlement.
  • Immigration changed the political landscape in the Northern cities by supporting the Democrats against the Republicans who mainly gained support from the native white population.
    • Democrats
    • South: Democrats due to American Civil War

Question 31

What were the overall demographic changes of the 19th C?

Answer 31

• Urbanisation progressively intensified in the nineteenth century: whereas on 1790 only 5% of the population lived in urban areas (of 2,500 or more people), by 1830 it was 9%, by 1850 it was 15%, by 1880 it was 28% and by 1910 it was 46%.
  
  • The country progressively spread geographically westward toward the Pacific with the proportion of population in the East Coast declining whilst that in Mid-west, West and South-west increased. This process indeed continued, albeit more slowly, in the twentieth century.
    The percentage of foreign-born rose as European immigrants increasingly contributed to the net growth of the United States population. In the decade prior to the First World War immigrants accounted for over 50% of the net annual increase in population.

Question 32

What was the state of agricultural development pre-war and post-war in the North and South?

Answer 32

• Up until the Civil War there were two systems of agriculture: in the north there was the family farm of crops and livestock which was relatively capital-intensive because of the shortage of hired labour and in the south there was slave-based cotton (and tobacco) plantations which were labour-intensive though productive. During antebellum cotton was the major export of the United States.
  
  • After the Civil War in the South there was a conversion from slave-based plantation agriculture to sharecropping and a system of hired agricultural labour which was not successful and southern agriculture declined. A long lasting decline in cotton prices depressed the industry.
    In the North, as new land was farmed westward (along the prairie), there was increasingly dry-land farming of grains and livestock feeding.

Question 33

What was the development of agriculture towards the west after the Civil War?

Answer 33

• After the Civil War there was an enormous expansion in American agricultural production as there was continued extension in cultivation as the land was farmed westward.
  
  • Initially, the western railroads gave impetus to farming by selling their land grants to new settlers and assisted with settlement adjacent along their railway line.
  • The new prairie dry lands of the mid-west required farmers to learn new techniques to farm without irrigation. The westward extension of farming created what is called the ‘farm belt’ running centrally from Ohio through the Midwest to Nebraska-Kansas and there northward into the wheat country of Minnesota and the Dakotas.
    While the central north was dominated by grain production, the livestock industries, in particular, cattle farming, ran from Texas north-east to Illinois.

Question 34

Why did agricultural production increase over the second half of the 19C?

Answer 34

• The huge increase in agricultural production over the second half of the nineteenth century to 1913 was predominantly due to an expansion in land brought under cultivation with overall trend yield per acre only increasing marginally. From 1860 to 1900 agricultural exports account for 70-80% of America’s total exports.
  
  • Improved mechanized methods – consisting of better plows, steam-powered threshing, more effective reapers and cultivating equipment, better seed varieties and improved transport – increased farm productivity per worker. Hence, whilst output per acre remained nearly constant on trend (subject to cyclical seasonal variations), output per worker-hour rose considerably, contributing to farm profits.
  • From mid-1870s to the late-1890s depressed commodity prices limited farm profits and led to the rural populist movement to reduce farm input costs (e.g. monopoly rates on freight).
    • Concerns about monopoly rates on transport
    Led to anti-trust laws being introduced

Question 35

What was the growth in heavy industries after the Civil WAr?

Answer 35

• From the end of the Civil War heavy industries rapidly developed to make the United States the most powerful industrial power by the First World War.
  
  • While in 1870 the United States produced around 70,000 tons of crude steel, by 1913 it produced nearly 32 million tons, more than the United Kingdom and Germany combined. By 1913 the United States produced some 36% of the world’s manufactured goods. It also produced more coal than all of Europe and it produced half the world’s output of petroleum, a source of energy that was to assume greater economic importance in the twentieth century.
  • The enormous growth in the United States manufacturing industry – by a factor of nine between 1860 and 1910 – was driven by a sustained high rate of investment as well as a sustained strong growth in consumption afforded by the growth of income per capita.
  • As a gauge to the enormous growth in this key sector, from 1870 to 1913 it is estimated that the average annual growth of pig iron production was 9% and of steel production was 20%. The growth of the industry can be attributed to the general growth in factory production and to urbanisation, which generated an enormous demand for iron and steel.
    • Steel started in 1860s
  • The industry had easy access to iron ore and coal and by the 1860s it had experienced technicians and skilled workers able to innovate the production process. It was also well protected from foreign competition by a high tariff.
  • A key figure in the industry’s development was Andrew Carnegie who first adopted the ‘Bessemer Converter’ technique to produce steel on a large scale. He was highly innovative, rebuilding improved furnaces, and quick to employ Siemens ‘open hearth’ furnace in the 1880s.
    • Carnegie got his capital from insider trading in the railway industry
    • Benefitted during civil war
    • From providing supplies to the army
    • Formed largest steel conglomerate in the country

Question 36

What were the nineteenth century developments of the iron and steel industry?

Answer 36

• A feature of the 19C development of United States iron and steel industry was the scale economies employed by producers. Whereas blast furnaces were typically able to produce 7-10 tones of pig iron in 1860, by 1910 they produced around 500 tons and more efficiently with less waste.
  
  • While demand growth enabled large scale production, it was necessary to produce at low cost to survive in a highly competitive domestic industry. Indeed, as Carnegie showed, success required continuous technological innovation and firms who did not keep up failed and were subsumed by others. Competition progressively resulted in greater concentration to employ a greater scale of production that led to the ‘United States Steel’ conglomerate in 1901 with two-thirds of the industry’s steel ingot capacity.
    • United States Steel conglomerate: Carnegie’s firm

Question 37

What was a common feature of industries in the nineteenth century? What did American capitalist competition encourage?

Answer 37

• The expansion of the iron and steel industry is an index of the broadly-based industrial expansion after the Civil War to 1913. Hence, between 1860 and 1910, food production increased by a factor of 3; textiles by 3.7; total manufacturing by 9.
  
  • A common feature of industries was the adoption of large scale production to extract economies, an ongoing process of innovation to improve production processes together with a the redesign of the standard product. The ‘American system of Manufacturing’ – by way of standardization and interchangeability of component parts – was pervasive in not only reducing the reliance on skilled labour but was also capital-saving in the sense of being able to produce more output with given capital stock.
    American capitalist competition encouraged continuous technological innovation: what Schumpeter called ‘destructive creation’.

Question 38

If there is a leading sector of American 19th C Industrialisation - what is it?

Answer 38

• If there is a ‘leading sector’ of American 19C industrialisation then the machine tools industry – the industry designing and making machinery – is it. It was at the heart of technological innovation characterised by the ‘American System of Manufacturing’. The role of engineering design was crucial as was the scientific education of management and the supply of technicians.
  Reflecting the importance of the machinery industry, it was estimated in 1910 to have generated the highest value added of any industry, calculated by deducting from revenues the cost of material inputs to production. Whereas in 1860 it was the cotton textiles industry which generated the highest value added, in 1910 it was the machinery industry, followed by the lumber, printing and publishing, and iron and steel industries.

Question 39

What was the role of technological innovation in capital goods production?

Answer 39

• In a study by Rosenberg of American 19C technological innovation in the machine tools industry, he showed that originally machinery was designed and custom made to meet customer’s specialized needs. As it became evident that the technology could be applied to different industries (with perhaps minor design adjustments), the design of the machines could be standardised and, thereby, produced in volume at a lower cost. This enabled the greater diffusion of the technology.
  
  • Standardization of interchangeable parts enabled machines to have greater functional flexibility to be used in production processes of different industries. It also simplified the process of additive innovation itself.
    A feature of late-nineteenth century American industrialisation was the number of new consumer products supplied which, in turn, required investment in machinery embodying the new techniques to produce them.

Question 40

What was the role of structural change in industries?

Answer 40

• The process of ‘creative destruction’, as Schumpeter called it, involves structural change in which new industries emerge and old ones decline. In the United States, whereas the dominant antebellum industries were textiles and consumer goods (i.e. cotton, clothing, boots, leather), by the late nineteenth century it is the heavy industries of machinery, iron and steel, railroad cars which rise to prominence. Interestingly, the lumber industry remained prominent, indicating its great natural supply and the lavish use made of it in the United States.
  • E.g. housing construction with wood
  By World War I there were also new industries quickly emerging: petroleum, chemicals (fertilisers), electricity for lighting and power and the automobile industry. Aside from chemicals, in which Germany was world leader, the United States was at the technological forefront of all these industries and others.

Question 41

What was the growth in the United States based on Maddison Index and Mitchell-based GNP index in the 19th C?

Answer 41

- Growth estimates suggest that between 1870 to 1913 the United States grew at a trend annual rate of 4% to 4.5%, the highest historically achieved in the 19C by any nation.
	Maddison GDP Index
	1821-1913: 4.3% trend growth
	 1870-1913: 4.1% trend growth
	Mitchell-based GNP Index
	1820-1913: 4.7% trend growth
	1870-1913: 5.0% trend growth
	- The rate of capital formation associated with America’s capital-intensive growth was formidable. According to Kuznets (1961: 1-5) estimates, in the period 1869-1913 gross domestic investment as a proportion of GDP was 18.2% and net investment as a proportion of net domestic product was 11.8%.  
Not quite as high as Germany but not far

Question 42

What was the role of the external sector in nineteenth century American growth? What was their external relationship in the antebellum period and postbellum period?

Answer 42

• Unlike other large industrialising nations of the nineteenth century America was not as reliant on foreign demand for its growth. Whereas the United Kingdom, Germany and France relied on exports of 20% to 30% of GNP, United States exports were typically only 6% to 7% from 1820 to 1913.
  
  • A major reason for this was America was self-sufficient in nearly all raw material inputs as it exploited the abundant resources with its westward territorial settlement. Only in colonial times and then in independent America until the 1820s was trade significant (at over 10% of GNP), with exports, especially cotton, important to acquire mainly manufactures and household items.
  • Notwithstanding the small dependence on foreign demand, export growth trended over 5% between 1870 and 1913, higher than the United States growth in GNP (and GDP).
    • Grain exports play an important part of that
  • In the antebellum period the US external balance tended to move in cycles in sympathy with the economy: in upturns the trade account would run deficits and foreign (mainly British) investment would flow in to help finance the expansion in investment and in the downturns the trade account would go into surplus and investment funds flowed outwards.
    With industrialisation after the Civil War the United States export performance significantly improved – both of agricultural goods, especially of grain, and manufactures – so that by the mid-1870s the trade account was consistently in surplus. Nevertheless, the United States remained a ‘debtor’ nation until the First World War, with interest and dividend payments going to European nations, principally Britain, which lent considerable funds toward financing its industrialisation. By the end of the war the situation would be reversed and the US would emerge the largest international ‘creditor’ nation.

Question 43

What was a major contributor to economic instability in the US in the 19C?

Answer 43

• A particular feature of the United States nineteenth century strong growth and rapid development was its cyclical instability in which trend growth is characterised by considerable short-term volatility (see next slide). Its regular economic cycles were usually marked by speculative upturns in the financial markets followed by a collapse with bankruptcies of companies and financial institutions.
  
  • A major contributor to this economic instability was the unsound nature of the United States banking and financial system, which for most of the nineteenth century operated without a central bank. Indeed, the US Federal Reserve Bank, its current central bank, was only established in 1913.
    The capital market, which became centred on Wall Street, New York, functioned unregulated on the basis of liquidity constraints stemming from an insecure system of currency.

Question 44

What was the state of the United States Banking System?

Answer 44

• After independence in 1791, a central bank was established, called the ‘First Bank of the United States’, chartered for 20 years. Though effective its charter was not renewed in 1811. In 1816 a new central bank, the ‘Second Bank of United States’, was chartered but it was subsequently vetoed by President Andrew Jackson in 1832.
  
  • American banking was dominated by chartered state banks who issued their own bank notes. The United States went down the road of (regional) unit banking without a central money market secured by a central bank.
  • On a bimetallic standard but with a shortage of coinage, monetary circulation relied on paper money issued by state banks. This was inherently unstable as the banks tended to over-issue their notes when lending during the economic upturn which reduced the market value of notes, dependent largely on asset values not the metallic standard.

Question 45

What was the state of the United States Antebellum Financial System?

Answer 45

• By 1860 there were 1,562 state banks and around 10,000 different kinds of paper money in circulation. This meant that monetary circulation tended to be regionally localised. Whilst state banks supported and grew with local industry in the antebellum period, large scale financial funding of the railways and major manufacturing enterprises relied on share equities issued in stock markets.
  
  • A capital market relies on a short-term funds market to provide the liquidity for long-term borrowing (i.e. bonds) and equity sales, which emerged in commercial centres of New York, Boston, Philadelphia, Baltimore and New Orleans (cotton). In 1817 the New York Stock Exchange Board was established, reflecting the evolution toward New York becoming the centre of the nation’s capital market. The ‘Savings Banks’, in particular, were a major contributor of long-term saving funds to the US capital market.
    • Savings banks looking for returns -> would buy longer term assets
    • Bonds, debentures, equities -> contributed to the US capital market

Question 46

What was the state of the United States Postbellum Financial System?

Answer 46

• In 1863 the National Bank Act endeavoured to bring the state banks into a national system as a means by which the Federal Government could harness banks to finance the large Civil War debts of the Union. It was also a means by which to more uniformly regulate ‘national-based’ banks and establish a uniform ‘greenback’ currency nationally. This actually led to two systems: the national system, consisting of banks able to issue the greenback, and the state system, consisting of state ‘deposit banks’, who unable to issue bank notes, instead, employed cheques as a means of payment for customers.
  • Banks bought the government debt to issue currency
  • Wanted to wipe out the ability to issue notes by private banks
  • Issue: civil war saw inflation. Private notes became very valueless
  • Led to two systems. - state banks could not issue currency. They used cheques and b
  
  • National bank notes (Greenbacks), which were not convertible into silver or gold (fiat currency) until 1879, were issued on the basis of U.S. Government bonds whose prices declined from the late 1870s causing a contraction of this currency as the National Banks preferred higher earning commercial loans. This led to currency shortfalls until 1900 when bond prices rose again.
    Became basis of the Fed Reserve

Question 47

What was the role of Investment Banks?

Answer 47

• With the institution of the telegraph from the 1840’s the United States capital market centred in New York developed considerably by attracting saving funds from financial institutions around the vast country. A key institution in America was the ‘investment bank’ which initially developed from the railway projects and became instrumental financing industrialisation. Their intermediary function was to place stock and bonds with investors, mainly with banks, thereby, raising capital to finance corporate investment.
  The investment banks facilitated industrial mergers and reorganizations which led to a progressive concentration of American manufacturing and transport industries in the latter part of the nineteenth century. They were a major cog in the process of financing America’s industrialisation on the New York stock market.

Question 48

What underlay the New York Capital Market? When was the Gold Standard adopted?

Answer 48

• Underlying the New York capital market was the short-term market for liquid funds, called the ‘call-loan market’. This market, resulting from the pooled liquid funds of the nation, would ultimately come under the control of the Federal Reserve Bank as it acquired central banking functions over time. But in 1913 the Federal Reserve Bank was not ready to be a leading central bank of the international monetary system notwithstanding the United States was by far the largest industrial power with the largest capital market.
  In 1900 the United States formally adopted the gold standard, making the ‘dollar’ worth 25.8 grains of 0.9 fine gold. With the abandonment of bimetallism the currency was finally put on a stable gold-based footing.

Question 49

What was the role of the government after independence?

Answer 49

• The motto of government policy after independence could be called ‘self-reliance’ not only in relation to the nation but also for the individual. Federal and State Government policy was concerned with promoting business opportunities for Americans: (1) protective tariff; (2) land grants to railways and other business subsidies; (3) investment in transport infrastructure; (4) free immigration policy; (5) provision of public education (as well as technical colleges from 1870s); (6) social welfare programs in response to economic depression or war loss; (6) Anti-Trust laws (against anti-competitive behaviour) in late nineteenth century.
  
  • With urbanisation local (or metropolitan) government became responsible for social policy on health, housing, policing and education.
    1930s: Federal government starts to take much more control

Question 50

Describe labour movement in the 19C? What was the role of industrialisation on the labor force?

Answer 50

• In the nineteenth century the economic and social environment was hostile to labour organisation which genuinely threatened employers. Nevertheless, with industrialisation labour became better organized in the latter part of the century and exerted its influence over work conditions and wages of skilled male workers.
  
  • Unions were organized by enterprise and industry. At a national level the ‘Knights of Labour’ organization was established 1869; then the ‘Federation of Organised Trades and Labour Union’ in 1881 that was merged to form the ‘American Federation of Labor’ (AFL) in 1886.
  • From the 1880s union strikes over wages and conditions became routine with one estimate of some 37,000 strikes between 1881 and 1905. American labor unions would acquire more political and economic bargaining power in the twentieth century.
    • Especially in steel and iron industry in 1860s, Pittsburgh
    • Early days, employers tended to win
    By 1880s, unions became much stronger

Whereas in 1870 nearly half the American workforce were involved in farming, by 1910 this had fallen to 32.5% and 67.5% of the labour force were employed in non-agricultural industries in which income was predominantly earned by wage payments. Where especially skilled workers were brought together in production processes and had common interests, unions were naturally organised to collectively represent those interests. Agricultural industry still remained significant

Question 51

Summarise the Industrialisation of the US?

Answer 51

• Industrialization in the United States began in the 1820s and first occurred in the textiles and light consumer-goods industries. By time of the Civil War these industries had been well developed with modern-mechanised technology based on the ‘American System’ of factory production; whilst the foundations for rapid growth in the heavy metal-processing industries had been well established. The continued investment and expansion in transport infrastructure, particularly railway, played an important role in opening up and expanding the national market that grew with strong population growth.
  
  • The longstanding tariff protection given to American industries also played a very important role in their growth and development which, with healthy domestic competition, encouraged high rates of investment (supported by foreign lending) associated with rapid technical innovation.
    Market kept growing (population)

Question 52

What were the drivers of growth?

Answer 52

• The high rate of capital formation, especially in the second half of the nineteenth century, was much induced by ongoing optimistic expectations by producers (and entrepreneurs) of strong future demand that ultimately arose from a high growth in consumption.
  
  • A major driver of consumption growth in the United States was the strong growth of income per capita combined with strong population growth. The high rate of labour productivity in the United States that stemmed from technological progress, in turn, contributed significantly to high real income, predominantly through lower prices (or costs).
  • Although foreign trade only accounted for about 6-7% of GNP under the isolationist policy of tariff protection, nevertheless, strong foreign demand – with export growth greater than GNP growth – especially in the latter part of the nineteenth century, made a significant contribution.
    • Led to healthy domestic competition

Question 53

What does demand growth promote?

Answer 53

Technological Progress
- Complimenting the demand-led process, sustained expansion in the size of the domestic market greatly encouraged innovation by firms in which scale economies could be exploited to lower costs of production and, thereby, obtain higher profit rates. The development of transport and communications infrastructure played a major role in this process as also did the ‘free’ immigration policy.
- Internal competition (under the tariff umbrella) meant that firms had to innovate in this way just to survive so enhancing the proliferation of the best technology; whilst a higher rate of technological obsolescence itself contributed to a higher rate of investment.
The supportive role of government to industry as well as in its public provision of education as well as other social services contributed to demand and technological change.

Question 54

What was the state of the United States Economy in 1913?

Answer 54

• On the eve of the First World War the United States was by far the largest industrial power in the world, producing some 36% of manufactured goods. It produced more coal, iron and steel than Britain and Germany put together. The economy was also at the forefront of technology and most newly emerging industries.
  In 1913 American’s enjoyed the highest living standards on the planet with only British subjects enjoying a similar standard of life.
  • Notwithstanding its economic power, in 1913 the United States was not well integrated into the rest of the world. Its was by choice an isolated power.
  • Britain, with its large empire, remained the major trading and financial power with the centre of world finance situated in London. Britain was also the dominant naval power in the world.
    Whilst America began to flex its power by acquiring the Spanish colonies of Cuba, the Philippines, Guam, and Puerto Rico as well as Hawaii in the 1890s, it remained aloof from the European powers. The First World War would draw the country economically and politically into world affairs.

Question 55

What was Henry Clay’s ‘American System’ policy for United States development and appraise it by reference to the nineteenth-century historical experience?

Answer 55

• Tariff protection of manufacturing industry - allowed to grow by infant industry argument
  ○ Henry Clay argued tariff needed was 20-25% to allow growth of american industry
  ○ Tariff allowed us government to raise revenue
  ○ Could then spend on whatever purposes they needed
  
  • Then the government could invest in infrastructure - national transportation system (roads, harbours, canals)
    ○ To commercially bind the union
    ○ Create a national economy
  • Federal government national bank
    ○ National currency in place of state and private bank currencies
    ○ Chartered in 1816 but that bank itself was not renewed by Andrew Jackson
  • Protectionism became characteristic of the government
  • Provided transport infrastructure
  • Country characterised by Westward immigration
    ○ Characteristic: free immigration until the 20th C which was necessary for Westward settlement and development of the country
    ○ After the American civil war: land grants to companies to help finance the railways and promote agricultural expansion (settlements and railways moved westward)
  • Consistent with America’s attitude of self-reliance and independence

Question 56

What role did railways play in American industrialisation? Should we consider it the ‘leading’ sector of industrialisation and, if not, why?

Answer 56

• Importance of railways in American 19C development
  
  • Some historians of the 20C (Fogel & Fischler) - cliometricians
    ○ Use statistical information
    ○ Argue that in terms of backwards linkages - influence of railways has been overstated
  • Carnegie’s success: railway & steel
  • Large territory
  • Schumpeter
  • Railways along prairie areas
  • Important part in the development of the economy - economies of scale
    ○ Especially in industry
    ○ Last quarter of the 20th C
    ○ Could not have occurred without the role of railways
  • Involved a lot of construction
  • May not be a leading sector of american industrialisation but is still critical

Question 57

What is meant by the ‘American system’ of innovation that contributed to industrialisation of the United States in the long nineteenth century until 1913?

Answer 57

• Character of innovation which historians have believed has occurred due to the work of Nathan Rosenberg
  
  • Simplify production processes
  • Labour saving - mainly skilled labour (short supply in early 19C)
  • Intensive use of natural resources
    ○ Especially timber
  • Adopting division of labour - more refined way - simplifying the production processes into different stage
    ○ Standardisations -> more mechanisation
    ○ Machinery designed to be custom made to meet customers special needs
    ○ Technology could be applied to different industries with minor adjustments
    ○ Machines: greater functional flexibility
    ○ Can access a larger market size -> invest more (cost per unit declines)

Question 58

What were the causes of American Civil War 1861-65, and its economic and political implications?

Answer 58

• Main cause: slavery/whether slavery should spread to new states created westward
  ○ Cause of tensions in the union between the North and Western states and the south plantation states in first half of 19C
  
  • Had clearly different interests NorthWestern states (infrastructure), Southern states (plantation that wanted exports)
  • Political power depended on state representatives
  • As these new states settled - which way are they going to vote in the union - > tensions throughout the 19C
  • Compromise - California given a free state, Nevada had to decide on status - Appellachian slave trade in Washington
    ○ Fugitive slave law
  • Slaves: increasingly would run to the North
    ○ Law: had to be returned to their owners in the South
  • Kansas-Nebraska act: undid the Missouri compromise - allowing slaves in new territories by electoral determination
  • Limited to current states where it was
  • Democrat party basically limited to the South
  • Southern states - their economies disintegrated
    ○ Up until recent discovery of resources in some of those states
    ○ Even today, still politically conservative

Question 59

What are the significant characteristics of the United States financial system which accommodated the nation’s industrialization in the nineteenth century?

Answer 59

• Currency shortfalls
  
  • Large investment projects
    ○ Finance canals, railways, companies and firms
    ○ Relied on long term borrowing
    ○ Equity market was very important
    ○ NYSE emerged to be major capital market (first established 1817) & attract foreign capital in order to finance large projects
  • Controlled by conglomerate of banks
  • Fed reserve somewhat immature - when great depression occurred
  • Lack of prudential regulations - all found out during great depression
    Fraudulent activity occurring in banks, stockholders