2Do Now: Define the term “Economy” or “Economics.”
3ObjectivesDefine the economies of the various sections of the US of the 1800sIdentify Samuel Slater and Eli WhitneyCompare and Contrast various elements of the North and South.Evaluate if sectional economic differences led to the Civil War
4US Economy IAt the beginning of the century, most Americans were farmersINDUSTRIAL REVOLUTION: use of machines powered by sources other than humans or animalsNorthern: emergence of factories in cities (industrial economy)Southern: few factories; mostly agrarian economy (cotton / tobacco)
5US Economy IIPost War of 1812 economy: the US economy dramatically improvedMarket Revolution: new generation of Americans make a living by:1. Buying and selling goods (merchants)2. Borrowing and circulating money to collect interest (bankers)3. Creating wealth (investors)
6SOUTH LEFT BEHINDMost economic changes between 1800 and 1860 occur in the NorthBiggest change: INDUSTRIALIZATIONThe process of turning from agriculture to machine made productsNow the United States no longer depended on other nations for manufactured goodsMost industrial centers are in the North and near major rivers… why?
7SAMUEL SLATERImmigrated to the US after learning how to build textile mills (Define)Built the first textile mills in the US near Pawtucket, RI in 1793Over the next 42 years in AmericaOwned part or all of 13 textile factoriesEarned close to $1 millionImpact: by mills in PA, NY, NE
8NORTHERN ECONOMY ILand in New England was more productive if used for manufacturing:The making of products by machineryFrancis Cabot Lowell: built the first centralized textile factory,meaning:all the tasks involved in making one product were done in one placeLowell was also special for hiring young women as workersWomen now could earn money and have some economic power
9NORTHERN ECONOMY II Market revolution leads to more changes Free enterprise system: companies compete against each other to make as much money as possibleThis system is also called capitalism, which rewards people (with money) who find a better, faster, and more efficient way to run their businessWhat would be some drawbacks to capitalism?
10NORTH: RISE OF CITIES IOne major effect of industrialization was the growth of American citiesAmericans moved to cities to workIncreased sizes of cities in area & populationPopulation density: amount of people within a given spaceOne side affect of this was that cities became overcrowded and full of the lower classes
11NORTH: RISE OF CITIES II 1810: 6% of Americans lived in cities1840: 12% of Americans lived in citiesSince most people worked all day there was need for public institutions like schools, hospitals, etc.Most lived in cheap, crowded, unsanitary apartments called tenementsMost infamous: The Five Points in NYC (featured in Gangs of New York)
13Do Now: Pop Quiz Define Free Enterprise/Capitalism… Why did industrialized economies make more than agricultural ones?Who brought the first textile mill to America in 1793?What is a textile mill?Define industrializationWhy did people want to open bank savings accounts?Define manufacturingDefine Population densityWhat is a tenement?
14ELI WHITNEY Skilled inventor: cotton gin and guns Interchangeable parts: produced parts made to an exact standardCotton Gin: a machine that separated the seeds from the raw fiber of the cottonImpact: by hand a worker could clean 1 pound of cotton per day… with the gin operated by water power a worker could clean 1,000 pounds of cotton per day*helped to increase production cotton
15COTTON GINA machine that separated the seeds from the raw fiber of the cottonInvented by Eli WhitneyRevolutionized cotton production in the South with four major impacts
165 EFFECTS OF COTTON GIN Large demand for cotton means: 1. Increased profits of cotton US exports boomed 6,000%2. South’s economy dependent on cotton possible problems?3. Planters looking for new farm land move to “new” South (AL, MS, LA, TX)The need for more labor slave population doubles from 750 K to 1.5 MNorthern cities like New York boom because of increased exports of cotton, about 40 cents of every dollar earned came from cotton in New York
17“KING COTTON” Why Cotton? Cotton clothed all of America and Europe 1820: South produced 160 million pounds1830: South produced 320 million pounds1840: South produced over one billion poundsBy 1860: Cotton (and cotton products) made up 2/3 of all American exportsCotton created wealth for both the North and the South because of the increased amount of textile factories.
18THE “NEW” SOUTH The South included 6 of the original 13 colonies The “old” South included: Delaware, Maryland, Virginia, North Carolina, South Carolina, and GeorgiaThe “New” South included: Kentucky, Tennessee, Alabama, Mississippi, Louisiana, Arkansas, and TexasWhile tobacco and rice did not grow well in the “new” South, cotton thrived
19SOUTH: RURAL FACTORS South was mostly rural: Made up of farms and countryside not citiesClimate: most areas warm and fertile200 to 290 “frost” free daysPlentiful rain fertile soilSouthern cities develop graduallyMajor cities: Charleston (SC), New Orleans (LA), and Richmond (VA)Few Southerners lived in cities or towns
20CAUSE OF CIVIL WAR? Economic differences linked to SECTIONALISM “While the southern states were becoming increasingly a part of the national and international capitalist world, they also remained less economically developed than their northern counterparts.” – my college textbook“the economic revolution was transforming the nation. It was also dividing it.”- ibidBasically, as the north kept getting more developed and as ‘free labor’ flourished, the south dug in their heels and became more stubborn in their defense of slavery
21Sectional Specialization Northwest: grain, dairy, meat, breweries, and slaughteringNortheast: early industry and banks; more cities and factoriesuse Southern cotton to make goodsSouth: farming and slaverysupply North cotton
22Review Questions IDefine and include examples when possible of the following terms:INDUSTRIAL REVOLUTIONMarket RevolutionINDUSTRIALIZATIONTextilesTenements“King Cotton”SECTIONALISM
23Review Questions IIWhat jobs were available in the North? In the South?Compare and contrast the economies of the two regions.Who was SAMUEL SLATER? Why was he important to the North?Who was Eli Whitney? Why was he important to the South?Why were there more Northern cities? Why did Americans move to cities (especially in the North)?Compare and contrast the “old” South with the “new” South.How did America’s varied economies lead to the Civil War?
25STEAMBOATS STEAM POWER: first used to power textile factories Inventors used steam to power boats up major rivers (like the Mississippi River)Called STEAM BOATSMAJOR IMPACT: Westernfarmers were able to sendtheir goods to all markets
26CANALS: MAN MADE RIVERS Waterways were the cheapest way to transport goods and people.However not all areas were connectedSo… innovators created man made rivers called CANALSBest known canal: ERIE CANALConnected Hudson River with Lake ErieIMPACT: the Northwest was able to trade goods with the NortheastSouth left behind
27ROADS / TURNPIKESEarly roads carved out of forests and were extremely bumpyCUMBERLAND ROAD:1st federally built road and well constructedStretched from Maryland to OhioTURNPIKES:Privately built roadsMade money from collecting tolls, after paying workers would turn the pike (similar to the subways) to let the driver through
28RAILROADS Developed first in England Used steam powered engine to create a STEAM LOCOMOTIVE:Self-propelled vehicle which pulled RR carsFirst RR connected Baltimore and OhioKnown as the B & O Railroad1840 America has more tracks than any other country in the worldMost RR’s are located in the North
29Railroads, Cont’d.Soon railroads became consolidated, where larger ones bought out smaller onesSome examples of these were the Pennsylvania Railroad, the New York Central, and the Erie.Railroads by 1890 were worth over $8 billion dollars (the government only made 400 million a year)Men like Cornelius Vanderbilt, Jay Gould, and James Hill became synonymous with railroads and the wealth that could be accumulated from them
30IMPACT OF TRANSPORTATION Most canals and RR’s in the NorthAnother example of SECTIONALISMImproved communication:More post offices and faster mailNewspapers now published dailyAble to link an expanding countryImproved literacy rateOverall, the nation becomes more interconnected and people that would ordinarily stay in one place are able to move around more effectively
33Rise of Banking Industry Banking Industry grew from economic changes during the Market RevolutionBanks provided entrepreneurs, or businessmen, with capital, or money, that was used to start up new businessesBanks made money by charging interest for the loans it madeSome banks were backed by the federal or state governments
341800s CURRENCY National Gov’t did not print paper money Most people preferred being paid in specie (gold or silver coins)Most common form of money: bank notePiece of paper issued by a bankProblem: values of bank notes were unpredictable and often times a $100 notes were worth $50 or $25*Despite problems, banks helped to expand America’s economy in the 1800s
35Problems with Banking There were no laws that regulated banks Private accounts and loans were not insuredBanks were not required to keep a certain amount of money in their bankPANICS occurred: When banks lost money from bad loans and people overreacted and took their money out of the bank.* Panics: led to depressions and public fear of the national bank
36Biggest Supporter: Alexander Hamilton Thought it would provide US with the ability to pay debts and make moneyMcCulloch v. Maryland (1819)Supreme Court Chief Justice John Marshall ruled that Congress has the right “to make all laws necessary and proper”In addition, he ruled that states could not destroy the national bank through measures like taxation.
37Against the Nat. BankGroups against the bank included: Democrats, Southerners, Westerners, and farmersBiggest Antagonist: Andrew JacksonFelt the bank was a “monster”Held the bank responsible for panicsAs President, Andrew Jackson vetoed the re-chartering the National BankIn addition, he decided in the Specie Circular to not allow any more payments with paper money, which lowered the income of the governmentWhen he did this, he didn’t realize how much it would impact the overall economic health of the country
38Panic of 1837Once the bank was eliminated, the government did not get all that involved in the economyPresident Jackson also did not like the idea of paying for public lands with paper money… why?Most banks did not have the specie to back up their banknotes, so they were unable to do business and the government also did not make any moneyAs a result many banks failed, and people lost what little specie they did have… over 300 banks failed across the countryEventually the government realized that they would have to find a way to regulate banks.
39Post War Economic Changes Commercial Agriculture emerged in the 1880s when farmers wished to raise their standard of living to those of the wealthy industrialistsThis usually meant that they didn’t grow crops for themselves, but rather sold them to either the domestic or international market.Competition was fierce, and because of overproduction of crops, prices dropped dramatically and many farmers (about 30 percent) were forced to mortgage their farmsFarmers were also reliant on railroads and shipping companies to send their goods to distant markets, and they had to pay steep prices for this as well.Pretty soon, farmers found themselves in a predicament because they realized they had no control over their future, and instead believed that it lay in the hands of the middlemen that enabled their goods to reach market
40Other ChangesThe years after the Civil War also saw the revitalization of cities and the emergence of suburbsElevated railways criscrossed New York City by the end of the century, and cable cars ran on the main streetsModern sewers, paved streets, electric lights, parks, and other internal improvements made city life safer, but not necessarily better for everyoneA huge influx of new immigrant groups also came ashore during this period from Southern and Eastern Europe (Russians, Italians, Greeks, Polish)
41New Inventions/Technology The latter part of the 19th Century saw an enormous amount of new inventions that we all take for granted todaySome of these inventors, like Charles Goodyear, Thomas Edison, Alexander Graham Bell, and others are icons today and often their legacies can be seen in the companies that bear their name or they founded.Edison invented the light bulb in 1879, and by 1882, New York City had the first electric power plant in the country.Goodyear and Harvey Firestone figured out how to galvanize rubber, which led to the development of tires (Goodyear Tires and Firestone Tires)Bell, in case you didn’t know, invented the telephone, and soon you could actually talk to someone across the country… he founded the Atlantic Telephone and Telegraph Company in 1876 (AT&T)
43Birth of Big Business: Railroads As mentioned previously, the nation’s railroad network grew exponentially in the years following the Civil War (52,000 miles in 1870 to 193,000 by 1900)Once the Transcontinental Railroad (Union Pacific) was completed in 1869, businessmen from across the country could now do their business in a much wider market.Railroads represented the first real modern American corporations: where people by stock in a company that they may not be involved in the day to day operations of the company and they also make millionsSoon, railroads helped spawn a whole new generation of American businesses the likes of which would never be repeated…
44Big Business 2: SteelRailroads required steel for its tracks, and soon companies began investing in small steel companies across the country and soon these steel companies began to take over the railroads as the biggest industry in the countryMost steel mills were found along the Great Lakes and around Pittsburgh.Steel was tedious to make until a man named Henry Bessemer perfected it in the 1850s when he realized if you blow air into molten iron ore, you remove the impurities with the oxygen burning them off.This was called the Bessemer process, and every skyscraper, bridge, highway, and railroad that we see and use today are a result of that innovation
45Andrew Carnegie: Epitome of the American Dream Andrew Carnegie was a Scottish immigrant who arrived in the US when he was 13. He got a job as a telegraph operator on the Pennsylvania Railroad and soon rose through the ranks.He bought his first steel mill outside Pittsburgh in 1873 and soon dominated the business by cutting prices so much that his competition couldn’t compete.When his competitors folded, he bought them up, and also bought shipping lines along the Great Lakes and a few small railroads that could ship the ore to his mills… in essence he controlled every aspect of the steel making processWhen he ‘retired’ in 1901, he sold his company to JP Morgan for over 450 million dollars (give or take he was worth almost as much as Bill Gates)JP Morgan was a financier, who would buy stock in companies and combine them into huge corporationsHe turned Carnegie’s operation into US Steel, which remains one of the biggest steel makers in the country… US Steel was the first billion dollar corporation the the country too.
46Big Business 3: OilFor centuries, oil had been seeping through the ground in western Pennsylvania… but there was no real use for it.That all changed when a process to refine it was developed in the mid 1800s.At first, oil was refined to make kerosene for lanterns, but soon other uses for it (gasoline for street lights) were found that made it even more profitable.As new inventions, such as the internal combustion engine (ie. Car or any motor) the demand for oil dramatically increased and oil wells sprung up across the countryMost of our products that we use every day come from oil… like plastics,
47John D. RockefellerJohn Rockefeller bought his first refinery in Cleveland, Ohio in the late 1860’s… like Carnegie, he began to buy out the competition, and in 1870 he formed the Standard Oil Company of Ohio, which became simply Standard Oil (now Exxon by the way)Rockefeller was different from Carnegie because he didn’t believe in what he called ‘cutthroat competition’… hence why he bought out the competitionHe felt that competition only brought ruin for a greater number of people, and that in turn affected the economic well being of the countryEventually, he became the first billionaire in the United States (he was worth over 3 or 4 times what Bill Gates is worth today)
49Poor Distribution of Wealth Men like Rockefeller, Carnegie, and Morgan dominated the American economy like no one has ever sinceRockefeller’s wealth alone represented over 1 percent of the entire US economy (remember this is only 1 person)Most of these men preached the idea of social Darwinism which basically means survival of the fittest in every aspect of life.Those who succeed in business are the ones that are the ‘fittest’ and the rest who suffer or fail are a part of a natural orderThe amount of power that these men and others like Jay Gould, Henry Frick, and others had was remarkable, but often they donated enormous amounts of money to charities, schools, and libraries
50Reaction to this… Labor Unions Because most of these powerful men wanted their factories to run efficiently, they didn’t want their employees in the mills and factories to have any control over their working environments… this earned them the nickname of Robber Barons.Often to cut costs, they hired unskilled laborers, children, and women to operate and maneuver the dangerous equipment in factoriesThey also never hesitated to fire someone that got too expensive or complained, because there was always an immigrant waiting for their job.Soon, workers began to strike in response to lower wages and terrible working conditions… often these early strikes were extremely violent and unsuccessful.Public perception was that these people were anarchists and extremists, and the first unions struggled to achieve anything.
51The First Unions and their Growing Pains One of the early successful unions was the Knights of Labor… but often they were too radical to achieve anything long termThe American Federation of Labor (AFL), which exists today, became the most powerful union because it incorporated a wide variety of skilled laboring jobs like carpentry, etc.However, after the Haymarket Affair in Chicago in which an anarchist threw a bomb at police who were dispersing a crowd of protesters, the AFL had to lay low for awhileAnother strike, the Homestead Strike at one of Carnegie’s mills in Pittsburgh resulted in bloodshed between a hired police force and the workers… it had to be dispersed by the National Guard.
52The Gospel of WealthCarnegie wrote a book called the “Gospel of Wealth” in which he said that a person with great wealth or power also had great responsibility… just like in Spiderman!!!In addition, he thought that whatever money you had beyond what you needed for your life should be put in ‘trust funds’ that would used for the good of the communityOver the course of their lives, Rockefeller and Carnegie donated more money to charity than any others… with exception to maybe Bill Gates todaySome of their philanthropic legacies can be seen today in the University of Chicago, Lincoln Center, Rockefeller Center, the United Nations, Carnegie Hall, Carnegie-Mellon University, and ironically the historically black Spelman College in Atlanta (Rockefeller provided the initial endowment, and it was named after his wife’s maiden name)
53Farmer’s Become Political Farmers realized that if they wanted to survive, they would have to form a strong political party or group that could counter the influence of the politicians from the citiesIn addition, they had to respond to the gradual decline in their standard of living… so they formed various ‘alliances’ and a party called the Grangers, which had some temporary success in the MidwestEventually, farmers and their rural colleagues formed a party called the Populists, who wanted to protect their simple agricultural livesThe most prominent Populist was William Jennings Bryan, who ran for President 3 times, and lost every time (God bless)They pushed for the addition of silver to be the basis of the monetary system along with gold
54Why the Populists didn’t Succeed Bryan and his followers failed to recognize the importance of mechanized farming… and therefore represented a way of life that was on the declineThey also failed to gain any support from the labor unions, who could have provided several thousand votes, but instead couldn’t attract their votes because labor and farmingIn the 1896 election, Bryan did rather well, but he lost every state that had an industrial base… in essence he only won the Midwest and the South.After this, the idea of silver being an important part of the monetary system slipped away.