US Economic Growth

Question 1

Impact of the Civil War

Answer 1

• Provided the initial impetus for great expansion in US industry
• Stimulated the demand for manufactured goods (mass production) e.g. guns and uniforms
• Provided the necessary financial infrastructure to stimulate economic growth
• Government had to raise money to pay for the war leading to a development of a sophisticated capital-raising system: Wall Street, New York
• The government introduced paper currency during the war and called it the US Note
• Banking system had to evolve to cope with the growing amount of money in circulation as well as the gov’s need to finance the war
• Introduction of tariffs: ensured the necessary protection for US manufactured goods, greatly reduced competition with already industrialised countries, e.g. Britain

Question 2

Availability of Land

Answer 2

• US greatly expanded especially with westward settlement during this period
• Stimulated economic growth, created a market for manufactured goods as well as encouraging further railroad development
• Lots of land was very fertile leading to a mass production of wheat ensuring that farming expanded and that there was plenty of food for the population, especially growing industrial cities
• Greater demand for food: both at home and for a rapidly expanding export market
  -> encouraged greater mechanisation in agriculture, led to increased demand for manufactured goods

Question 3

Population Growth

Answer 3

• Rapid growth, 1860: 31.5 million which increased by 1880: 50 million
• This provided an ample source for cheap labour for economic expansion
• Partly due to increased income meaning better food and housing
• There was also progress in public health and medical knowledge, resulting in lower death rates
• Immigration was also a key factor with 2.8 million moving to the US during the 1870s
• People came from Europe and Asia to find better standards of living
• Majority headed for cities and provided the cheap labour force needed to engage with an industrial revolution
• Additionally, as consumers, they stimulated further demand for coal, clothes and food

Question 4

Railroad Transport Expansion

Answer 4

• Experienced a revolution with transport, largely railroads
• Provided fast/efficient transport of raw materials, e.g. coal: West Virginia coalfields->New England factories
• Distributed finished goods, e.g. cattle->meat
• Travel from NYC to San Francisco took 6 days rather than 6 months
• 1869: the first Transcontinental Railroad opened far-west mining and ranching regions
• Railroad track mileage tripled 1860-1880
• Railroads employed thousands of all who were consumers
• Encouraged demand as railroads required a lot of steel and coal
• Encouraged competition which pushed down prices, led to tech improvements to improve quality
• Rail centres needed roads in order to distribute outlying areas, stimulating further growth

Question 5

Availability of Capital

Answer 5

• Availability of capital was essential as entrepreneurs would often need to borrow money in order to develop their businesses
• Huge profits generated by the Civil War had encouraged the emergence of a highly developed stock market in which these profits invested
• 1865: annual turnover of the New York Exchange was over $6 billion
• By 1890, it became the 2nd largest money market in the world
• Businessmen were able to raise the necessary finance from this stock exchange

Question 6

The Role of the Government

Answer 6

• Long tradition of minimal government interference in economy
• Constitution gave the federal government no role in managing the economy
• Businessmen had substantial freedom in running their enterprises, e.g. no laws restricting hours of labour and no taxes on profits
• Congress & State governments were dominated by business interests, very little national/local legislation was passed
• Commercial policy of the fed gov also helped expansion
• Congress was happy to impose tariffs to ensure that foreign goods were more expensive than US manufactured goods
• Businesses didn’t have to deal with trade unions and were generally free to manage their workforce however they wanted
  The trade unions that did exist were usually weak and divided
• In event of industrial disputes, employers were often supported with fed/state troops dealing with them

Question 7

Corporations & Trusts

Answer 7

• Economic growth was encouraged by these new methods
• Each emerged due to the lack of government control and regulation
• Corporation proved to be the perfect model for the growth of big industries in the US
• This is because it could own a number of businesses and could hire the management it wanted to run the corporation
• Trust: emerged in some states there were laws that stopped people from owning shares in more than one company/state
• Secretary for Standard Oil, Henry Flagler found a way around these laws
• Appointed himself as ‘trustee’ for stocks and property that the company was not allowed to own
• 3 employers of Standard Oil were told by the owner, Rockefeller, to act as trustees for all property and assets of the company outside the state
• Rockefeller dominated the oil industry and became America’s first billionaire
• Other companies followed this method with was perfectly legal

Question 8

Technological Innovations

Answer 8

• Brought around by individuals such as Andrew Carnegie
• Carnegie dominated the steel industry
• Steel had been costly to produce but in Britain a new process, the Bessemer Converter, made the process much cheaper
• Carngie brought the Bessemer Converter to the US and used in in his steel mills, rapidly expanding his business
• Carnegie kept prices as low as possible and constantly re-invested in new manufacturing plants/equipment
• He was totally ruthless and refused to allow any unions to be set up in his factories, using his own armed guards to deal with union activity