2Colonial AmericaMercantilism - common economic policy among European kingdoms in the 17th century - saw trade, colonies and the accumulation of wealth as the basis for a country’s military and political strength.Government regulated trade and production in order to become self-sufficientPurpose of colonies was to provide raw materials to the parent countryColonies existed only for the purpose of enriching the parent country.
3Colonial America Navigation Acts (1650-1673) Mercantilistic policy Established three rules for colonial tradeTrade could only be carried by English or colonial built ships operated by English or colonial crewsAll imports (except a few perishables) had to come through English portsEnumerated goods from colonies had to be exported to England only. (at first tobacco, but list grew)
4Impact of Navigation Acts Helped New England ship-buildingChesapeake colonies had tobacco monopoly in EnglandColonial manufacturing was severely limitedFarmers got low prices for their cropsColonists had to pay high prices for manufactured goods from EnglandEnforcement was sometimes slack
5Colonial Labor Shortages led to: Indentured servants – contracted for 4-6 years, passage paid, work for room and boardHeadright system – 50 acres offered to each immigrant who paid own passage or to any plantation owner who paid for an immigrant’s passageSlavery – first Africans arrived in Virginia in 1619, brought by a Dutch trader.At first not held for life, roughly same status as indentured servantsBy 1650’s only about 400 African laborersBy 1660’s Va. House of Burgesses had passes laws that discriminated between blacks and whites. Africans and offspring to be slaves for life. White laborers to be freed after a certain period of time.
6Slavery By early 18th Century there were tens of thousands of slaves By 1750 half of Virginia’s population and two thirds of SC’s population were slavesSlave trade was profitable for New England merchants
7TRIANGULAR TRADEShip loaded with rum left New England, crossed the Atlantic to West AfricaTraded rum for hundreds of captive AfricansSet sail across Middle PassageThose who survived would be traded as slaves in West Indies for cargo of sugarcaneSugarcane would go back to New England where it would be made into rum.
9Government under Articles of Confederation Major economic problemsReduced foreign trade and limited credit b/c of war debts that hadn’t been paidNo national taxesStates printing worthless paper moneyStates suspicious of each other, competing for economic advantageTariffs and restrictions placed on movement of goods across state lines
10New Nation Alexander Hamilton (Washington’s Secretary of the Treasury) Plan to put the US on firm financial footingPay off national debt ($54 million) and have the government assume the war debts of the states ($25 million)Protect new and developing industries and collect revenues by imposing high tariffs on imported goodsCreate a national bank for depositing government funds and printing money, provide stable US currencyConflict between northern merchants who supported and state’s righters who thought states would lose power to new government
11Market RevolutionThe antebellum era was a time of great technological and economic innovation.The Industrial Revolution (England 1700’s) had produced new inventions and methods of production.American inventors transformed the U.S. economy with new innovations of their own.
121793 – Eli Whitney’s cotton gin Southern planters abandoned most other crops in favor of cottonGreater need for slave laborNorth built factories to spin the cottonFactories created richer merchant class as well as laborers who were paid by the hour to tend the machinery or the cloth
14Interchangeable Parts Whitney perfected interchangeable parts with musketsManufacturers in other industries took advantage of this idea
15John Deere’s horse pulled steel plow revolutionized farming Cyrus McCormick (1830s) invented a mechanical mower/reaper that made harvesting wheat more efficient.
16Regional Specialization the West farmed to feed the Northeast, the South grew cotton to ship to the Northeast, and the Northeast produced manufactured goods to sell in the West and South. The roads, canals, and other internal improvements made under Henry Clay’s American System made this nationwide trade possible.
17Factory System First US factory – 1791 Samuel Slater came to the US with British secrets for building cotton spinning machinesNew England became the leading US manfacturing center b/c of abundant water power for driving the new machines and ports for shipping goodsAlso had ready labor supply b/c farming was being taken over by the westFinancial businesses grew in New England as the factory system expanded (banking and insurance)
18LaborProblems at first b/c mills and factories had to compete with the availability of cheap land in the westLowell, MassachusettsRecruited young farm women and housed them in company dormitoriesOther factories followed this exampleExtensive use of child labor (as young as 7)Immigrants (toward the middle of the century)
19Unions 1790’s – trade or craft unions in major cities Increased in number as factory system took holdLong hours, low pay, poor working conditions led to widespread discontentPrime goal of early unionsReduce work day to 10 hoursObstacles to union successImmigrants (replacement workers)States outlawing unionsFrequent economic depressions with high unemployment
20Effects End of self-sufficient households Growing interdependence Farmers fed the workers in the citiesWorkers provided farm families with mass produced goodsStandard of living increased for most peopleWages improved for most urban workersGap between wealthy and poor increasedWomen in workplaceUsually single womenDomestic service or teaching in citiesFactory jobs like Lowell were uncommon
21Growth of cities Cities grew at key transportation points 1820 – Buffalo, Cleveland, Detroit and Chicago on the Great Lakes; Cincinatti and St. Louis on major rivers
22Expanding Economy Prior to 1840 After 1840 Factory production concentrated in textile mills of New EnglandAfter 1840Spread rapidly to other states of NortheastProduction of shoes, sewing machines, ready to wear clothing, firearms, precision tools, iron products for railroads, etc.Invention of sewing machine (Elias Howe) took production of clothing out of homes and into factories
23Panic of 1857 Boom at midcentury ended in panic Serious drop in prices, esp. for midwestern farmersIncreased unemployment in citiesSouth less affected – cotton prices remained highLed to southern belief that their economy was superior and union with north not needed
24Rise of Industrial America By 1900, the leading industrial power in the worldManufacturing exceeded three largest rivals – Britain, France and GermanyUS economy grew rapidly – 4% a yearWHY?
25Abundant labor supply (with plenty of immigrants coming in) Plenty of natural resources that were essential at the time (coal, iron ore, copper, lead, timber, oil)Abundant labor supply (with plenty of immigrants coming in)Growing population, advanced transportation network – largest market for industrial goods in the worldPlenty of capital (Europeans also willing to invest)Development of labor saving technologiesOver 440,000 new patents betweenFriendly government policies that helped businessProtection of private property, subsidized railroads with land grants and loans, protective tariffs, didn’t regulate businesses or heavily tax corporate profitsTalented entrepreneurs who were able to build and manage vast industrial and commercial enterprises
26Railroads – the nation’s first big business After Civil War, mileage increased more than five times!Impact on American economic life was greater than any other innovationCreated a market for goods on a national scaleEncouraged mass production, mass consumption, economic specializationResources used in railroad building promoted growth of other industries – esp. coal and steelAffected routines of daily lifeSoon led to division of country into four time zones (1883)Railroad time became standard time for all AmericansLed to creation of modern stock holder corporation and development of complex structures in finance, business management and regulation of competition
27Problems Overbuilt Mismanaged Fraud Panic of 1893 Speculators went into it for quick profits, made millions selling off assets and inflating the value of stocksRailroads scrambled to survive and offered rebates (discounts) and kickbacks to favored shippers. Charged high rates to smaller customers such as farmers.Tried to increase profits by forming pools – competing companies agreed to secretly and informally fix rates and share traffic.Panic of 1893J. Pierpont Morgan and other banks took over bankrupt railroads and consolidated them.Eliminated competition, stabilized rates, reduced debtsRailroads became more efficient, but control of powerful men who dominated boards of competing railroad corporations created regional monopolies.
28Industrial EmpiresSteelAndrew CarnegieOilJohn D. Rockefeller
29Steel IndustryHenry Bessemer of England and William Kelly in the US discovered that blasting air through molten iron produced high quality steel. (1850s)Great Lakes region emerged as leading steel producerAndrew Carnegie began manufacturing steel in Pittsburgh in the 1870sVertical integration – company would control every stage in the process from mining raw materials to transporting the finished product.By 1900, Carnegie Steel was top in industry20,000 workers, produced more steel than all of BritainSold his company in 1900 for over $400 millionNew steel combination headed by JP MorganUS Steel, first billion dollar corporation and largest enterprise in the world – 168,000 workers, controlled 3/5 of nation’s steel business
30Oil Industry First oil well - Titusville, PA. in 1859 Edwin Drake1863 John D. Rockefeller founded a company that would come to control most of the nation’s oil refineries by eliminating its competition.Applied the latest technologies and efficient practicesExtorted rebates from railroads, cut prices to force competitors out1881 Standard Oil Trust controlled 90% of the oil refinery business.Horizontal integration – former competitors brought under control of a single corporate umbrellaControlled supply and price of oil products$900 million fortune when he retired
31Antitrust Movement1880’s fear of trusts’ power and increasing influence of the rich led to demands for action1890 Sherman Antitrust ActProhibited any contract , combination, in the form of trust or otherwise, or conspiracy in restraint of trade or commerce.Vague wording failed to prevent development of trusts in the 1890’s.SC in US v. EC Knight Co. (1895) ruled that the act only applied to commerce, not to manufacturing.
32Social DarwinismIdeas of natural selection and survival of the fittest applied to the marketplace.Concentration of wealth in the hands of the “fit” was a benefit to all.Help for the poor was misguided because it interfered with the laws of nature and would weaken the evolution of the species by preserving the unfit.
33Gospel of Wealth Religion also used to justify wealth Applied the Protestant work ethicHard work and material success are signs of God’s favorPeople like Rockefeller believed this and said that “God gave me my riches”.The wealthy had a God-given responsibility to carry out projects of civic philanthropy for the benefit of society.Carnegie donated over $350 million of his fortune to support building libraries, universities, etc.
34Impact of Industrialization Sharper divisions among classesRichest 10% of US population controlled 9/10 of the nation’s wealth by 1890s.New class of millionaires – flaunted wealth, lavish parties, enormous homes, yachts – conspicuous consumptionHoratio Alger myth – ignored widening gap, looked at self-made men like Carnegie, American dream, Horatio Alger stories where young man of modest means became rich and successful through hard work and honesty, sometimes a little luck.
36Growing Middle ClassLarge corporations needed thousands of white collar workers to fill administrative jobsAccountants, clerical workers, salespersonsMiddle class employees increased demand for other middle class workers – professionals (doctors and lawyers), public employees, storekeepers.
37By 1900 2/3 of all Americans worked for wages Most worked in jobs that required 10 hour days, six days a weekWages were barely above subsistence b/c of huge availability of immigrant laborWorking class families depended on additional income of women and childrenIn 1890 families averaged less than $380 a year in income.One in five women was in the labor force in 1900Most were single and youngFactory work was limited to textiles, garment and food processing industriesMoved into clerical as demand increasedWages went down as occupations became feminized and lost status
38Labor DiscontentFactory work was highly structured and regulated to increase productivity – much different from the work that artisans did prior to Industrial Revolution.Assigned just one step in the processSemiskilled tasks, very repetitive and monotonousTyranny of the clockDangerous conditionsExposed to chemicals and pollutantsChanged jobs a lot – average of every three years
39Protest Absenteeism Quitting Most common forms of protestAbout 20% dropped out of industrial workforce, far higher than percentage that joined labor unionsLate 19th century – violent labor conflicts
40Tools of Employers in dealing with Organized Labor Surplus of cheap labor – easy to replace workers with strikebreakers or scabs.Lockouts – close factory to break movement before it could get organized.Blacklists – prounion workers on list, circulated.Yellow-dog contracts – workers had to sign agreement not to join union before they would be hired.Private guards/state militia – called in to put down strikesCourt injunctions – against strikesStirred up fear among the public against unions as un-AmericanPrior to 1900, won most battles with organized labor, could always count on government support, esp. if there was violence
41Tools of labor Divided on best methods to fight management Political actionStrikesPicketingBoycottsSlowdownsGoal to achieve union recognition and collective bargaining
42Attempts to Organize National Labor Union – 1866 Knights of Labor – 1869American Federation of Labor
43National Labor Union1866First attempt to organize all workers in all states, both skilled and unskilled, agricultural and industrialBlacks and women not allowed to joinGoals – higher wages, 8 hour dayBroad social program – equal rights for women and blacks, monetary reform, worker cooperativesLost support after depression in 1873 and unsuccessful strikes of 1877 (Great Railroad Strike)
44Knights of Labor 1869 Led by Terrence Powderly Began as secret society in 1869, went public in 1881Opened membership to all workers – African Americans and womenGoals – worker cooperatives to make each man his own employer, abolition of child labor, abolition of trusts and monopoliesDifficulty bargaining collectively b/c they represented such diverse groupsCouldn’t control local units that decided to strikeDeclined after violence of Haymarket riot in Chicago in 1886 turned public against the union.
45Knights of Labor Trade Card Seamstress and tailor (age and beauty) in Knights of Labor card designed to carry imprint of approved merchant on back.
46American Federation of Labor 1886Founded by Samuel GompersConcentrated on practical economic goalsUnlike KOL which had been idealistic and reform mindedWent after basicsHigher wages, improved working conditionsGompers ordered walkouts until employers would negotiate new contracts through collective bargaining.By 1901, the largest union in US, over 1 million membersDidn’t achieve major successes until early decades of 20th century
49Railroad Strike of 1877Why?B&O railroad announced 10% wage cut during depression, 2nd cut in 8 monthsWage cut to reduce costsAlso running extra long trains with two engines, workers laid off, dangerousStrike spread across 11 states and shut down 2/3 of the country’s railsWorkers joined by other industriesFIRST TIME in history – President Hayes sent in federal troops to end labor violenceStrike collapsedMore than 100 people killedEmployers began to rely on federal and state troops to keep unrest/strikes downSome employers began to address grievances by improving wages and conditions, others worked harder than ever to bust workers’ organizationsWorkers accepted the wage cut and went back to work.
51Haymarket 1886 1st May Day labor movement Demonstrating for 8 hour workdayMcCormick reaper factory in Chicago – police broke up fight between workers and scabs, several woundedProtest rally May 4Protesting treatment of workers by policeAnarchists joined the protest (advocated violent overthrow of governmentPolice attempted to break up the meeting at Haymarket SquareSomeone threw a bomb, killed 7 police officersBomb thrower never found8 anarchists were tried for conspiracy to commit murder – 4 hanged, 1 suicide in jail, 3 pardoned (no real evidence against them)Led many Americans to believe union movement was radical and violent.Knights of Labor lost popularity and membershipNo 8 hour day until FDR’s New Deal
53Homestead 1892Why?Wages cut 20% by manager of Carnegie’s steel plant near Pittsburgh (Henry Frick)Frick used the lockout, private guards and strikebreakers to defeat workers walkout after five months.Workers fought bloody battle and drove off 300 Pinkerton detectives hired to guard the plant and break the strike.Gov. of PA sent state militiaUnion’s resources were exhausted, strike collapsed, workers accepted the company’s terms.American sympathy was with the strikers until someone tried to kill Frick.Plant remained non-union until the late 1930s.
55Pullman 1894 Last of the great strikes Marked shift in government’s involvement with labor-employer relationsWhy?Company town for Pullman workers, bad conditionsWorkers laid off, wages cut 25%Rent/prices in company town at same levelDelegation protested, Pullman fired 3 of themLed to local union strikePullman closed the plant, wouldn’t bargain
56Pullman Eugene Debs (labor organizer) urged boycott of Pullman cars. Widespread local strikes120,000 railroad workers joined the strikeWestern railroad traffic disrupted, including mail deliveryRailroad turned to the federal governmentArgued the mail had to get throughCourt order forbidding all union activity that halted railroad traffic.President Cleveland sent troops to make sure strikers obeyed.Over in a week.Government helped limit union gains for over 30 years.Workers did not get lower rents.
58Grover Cleveland“If it takes the entire Army and Navy of the US to deliver a postcard in Chicago, that postcard will be delivered.”
59Regulation of Big Business - weak Sherman Anti-trust Act (1890)Vague language, lack of enforcementTeddy Roosevelt ( )First President to really enforce the Sherman Anti-trust ActBelieved growth of big business was inevitableApproved “good” trusts, tried to destroy “bad” trusts.Over 40 anti-trust casesWon a battle against a railroad trust that would have monopolized service in the Northwest.William Howard Taft (TR’s successor)Over 90 anti-trust casesMuckrakers helped regulate big business
60Regulation of Big Business MuckrakersIda Tarbell exposed business practices of Standard Oil Company in her History of the Standard Oil CompanyFrank Norris wrote about the struggle of wheat farmers against the railroads in The OctopusGustavus Myers wrote about corruption and exploitation practiced by leaders of big business in History of the Great American FortunesRay Stannard Baker wrote about railroad evils and abuses in Railroads on TrialUpton Sinclair wrote about the meat-packing industry in The Jungle
61Regulation of Big Business Woodrow WilsonGot Congress to enact several business reform lawsClayton Antitrust Act (1914)Tried to strengthen the Sherman Anti-trust Act by listing specific illegal practices and combinations: 1) price discrimination toward purchasers, 2) “tie-in” contracts by which merchants could buy goods from a company only on condition that he would not handle the products of that company’s competitors, 3) certain types of holding companies and interlocking directoratesDeclared these unlawful if they lessened competition or created a monopoly.Same problem with SC interpretation as with the Sherman Act – only restraint of trade that seemed “unreasonable” was considered illegal.Prohibited use of antitrust laws against farm cooperatives and labor unions.
62Wilson’s regulation of Big Business Federal Trade Commission Act (1914)Established the FTC to take reports and make investigations of business firms.Main purpose was to enforce Clayton Act prohibitions and prevent other unfair methods of competition.FTC has ruled as unfair:Misbranding goodsFalse and misleading advertisingSpying and bribery to secure trade secretsClosely imitating a competitor’s productIssues cease and desist orders to halt these practices.
63Problems that led to creation of Federal Reserve System: During times of crisis, the nation’s banking system lacked stabilityThe amount of money in circulation was not pegged to the investment needs of the countryNo central bank set banking practicesWall Street (powerful business men) controlled too much bank capital
64Federal Reserve System (1913) Federal Reserve Act divided the country into twelve districts, each with a Federal Reserve BankFederal Reserve BoardCentral board in Washington, D.C. directed US monetary policy and supervised Federal Reserve Banks and commercial banks that were members.All national banks were required to become members of the Federal Reserve system. States banks were invited to join.This reform transformed the control of US monetary policy – no longer in the hands of powerful private bankersProvided for an elastic money supply3 main tools: reserve ratio, discount rate, open-market operations
65BOOM of the 1920’sPlants were modernized and businesses expanded during WW I and the post-war yearsTechniques of production became more modernFactories achieved lower production costs per unit and greater productivity per worker
66Henry Ford Mass production methods/assembly line Just prior to WW I Workers stood along conveyor, moved steadily with units for assemblyEach worker performed a taskAt the end of the line, the completed cars were driven awayProduction methods reduced costs, millions could afford carsHelped other industries: rubber, aluminum, plastics, gas and repair stations, garages, parking lots, system of new and improved highways.
67New Industries Domestic chemical industry Entertainment Airplanes Germans had led in this industry, trade cut off in WW I, German patents confiscated during the warEntertainmentMovies – silent, then talkies (1927 – The Jazz Singer)Mickey Mouse – Steamboat Willie 1928Radio – first commerical broadcast 1920, KDKA in PittsburghBy 1927 there were over 700 stations across the countryStandardized news – news written by national press associations (Associated Press, United Press) and distributed across the countryTabloidsBanner headlines, revealing photos, stories about sex and violenceAirplanesInvented in 1903 (Orville and Wilbur Wright)Commercial development begins in 1920s1927 – Charles Lindbergh flew nonstop across the Atlantic from NY to Paris in 33 ½ hoursModern conveniences using electricityRefrigerators, radio, phonograph, vaccum cleaners, toasters
68Immigration – Early 1800’s Increased in the 1830’s Nearly 4 million people came to America from 1830s to 1850sArrived by ship in NY, Philadelphia, BostonMany stayed in the cities they arrived in, others scattered – few to the SouthWhy the increase?Development of inexpensive, fairly quick ocean transportationFamines and revolutions in EuropeGrowing reputation of US as land of opportunityAbout ½ of all immigrants were IrishPotato famine, tenant farmers – faced strong discrimination b/c of religionAbout 1 million were GermanA lot of artisans and farmers – came b/c of cheap, fertile farmland
69Last half of 19th Century US population increased more than 3 times! Pop. Of 23.2 million in 1850Pop. Was 76.2 million by 190016.2 million of those were immigrantsPeak immigration yearsWhy so many immigrants?Mechanization of farm work in Europe led to displacement of farmersOvercrowding and joblessness in Europe due to population boomReligious persecution – ex: Jews in RussiaReputation of US for political and religious freedom, economic opportunitiesLarge steamships for travel – relatively inexpensive
70Old v. New ImmigrantsOld – from northern and western Europe, mostly Protestant, mostly English speaking, high level of literacy, blend in wellNew – beginning in the 1890s, came from southern and eastern Europe – Italians, Greeks, Croats, Slovaks, Poles and Russians. Poor, illiterate – left autocratic countries – not used to democratic traditions. Mostly Catholic, Greek Orthodox, Russian Orthodox or Jewish. Crowded into poor, ethnic neighborhoods in major US cities.About 25% were young men contracted for unskilled factory work, mining, construction jobs – would go back to native land after saving money to bring their families.
71Restrictions on Immigration 1882 – Chinese Exclusion Act – ban on all new immigrants from ChinaNext came restrictions on undesirables – those convicted of criminal acts, mentally incompetent1885 – prohibited contract labor in order to protect American workers1892 – Ellis Island opened – immigration center – new arrivals had to pass medical and document examinations, pay entry tax to enterAll of these efforts were supported by labor unions – afraid immigrants would depress wages and break strikes. Supported by nativist groups who saw immigrants as inferior. (American Protective Association)
721920’s quotas1921 – limited immigration to 3% of the number of foreign born persons from a nation counted in the 1910 census (a maximum of 375,000)1924 – second act passed to make sure that the law would discriminate against immigrants from southern and eastern Europe - set the quotas based on based on the 1890 census prior to the arrival of the “new immigrants”. Only 2% of that number could come to US.By 1927 the quota for all Asian and eastern and southern Europeans had been limited to 150,000, with all Japanese immigrants barred.With all of these acts – the tradition of unlimited immigration to the US ended.Canada and Mexico were not included in the restrictions.Almost 500,000 Mexicans immigrated legally to the southwest in the 1920s.