Economic History of the United States – A Review But not including slavery

Early Years Navigation Laws –From Britain – begin in 1651 –Purpose – to enforce British mercantilist system –What is mercantilism? Salutary neglect –Why?

Revolutionary Period Colonial boycotts and non-importation agreements –Why?

Articles of Confederation Trade and Commerce –No jurisdiction No taxation power

The Critical Period – Accomplishments under the Articles Land Ordinance of 1785 –What is the significance of section 16? Northwest Ordinance of 1787

Land Ordinance of 1785

Northwest Ordinance of 1787 A major accomplishment of the Confederation Congress! Forbade slavery in the Northwest Territory Statehood achieved in three stages: 1.Congress appointed 3 judges & a governor to govern the territory. 2.When population reached 5,000 adult male landowners  elect territorial legislature. 3.When population reached 60,000  elect delegates to a state constitutional convention.

The New Constitution Power to tax Regulating trade and commerce –Between the states –Between the US and foreign nations

The New Country Hamilton’s Plan Based on: –Report of Manufactures –Report on Credit Details of the plan

Economic History Review Five Components in Hamilton’s Plan (1) –Funding at Par Define Why? The good and the bad

Economic History Review Five Components in Hamilton’s Plan (2) –Assumption of state debts Underlying motive Problems –The Compromise

Economic History Review Five Components in Hamilton’s Plan (3) –Tariff What is a tariff? Main purpose? Secondary goal Hamilton's Financial Structure Supported by Revenues

Economic History Review Five Components in Hamilton’s Plan (4) –Excise taxes Define and give examples from today Whiskey

Economic History Review Five Components in Hamilton’s Plan (5) –National Bank – the foundation of the whole plan –How would it work? –Opposition Jefferson Madison Original National Bank

Washington’s Administration Loose construction vs. strict construction –Define –“Elastic clause”

Economic & Social Changes Eli Whitney – cotton gin –1793 –Significance –How did it work?

Economic & Social Changes Economy –1800 – typical family had 7 kids – farmers –NE – new businesses –Samuel Slater – “Father of the American factory system” – why? (1790)

Jefferson’s Presidency Embargo Act – 1807 –Define – What was its purpose? –Effects/ Significance Long term vs. short term effects

“Era of Good Feelings” – Henry Clay’s American System –National bank Second BUS – 1816 Why? –Protective Tariff Tariff of 1816 Effects –Internal Improvements Examples

Monroe’s Presidency Panic of 1819 –Causes –Define overspeculation –Define specie

Supreme Court John Marshall – Chief Justice – Federalist Key economic cases –McCulloch v. Maryland – 1819 The national government is supreme over the states The national bank is constitutional Role of the elastic clause –Gibbons v. Ogden – 1824 (steamboat case) Only the national government can regulate interstate trade and commerce Why is Marshall’s role so significant?

The Market Economy in Antebellum America Define: antebellum What was the Market Revolution? –Encompasses about eight areas –Define: subsistence farming Not the same as the Industrial Revolution –1 st Industrial Revolution (before Civil War ) textiles, railroads, iron, coal –2 nd Industrial Revolution (after Civil War) railroads (transcontinental), oil, steel, electricity

Market Revolution The "Market Revolution" in antebellum America encompassed several areas: –Industrial Revolution (and its impact on American society) –Transportation Revolution: roads, canals, steamboat, railroad –Change from subsistence farming to large-scale cash-crop farming. –Creation of a national market economy –Regional specialization: East, West and South –Immigration: Irish and German (U.S. need for labor) –Westward movement –Growth of cities

The Transportation Revolution Why? –Desire of the East to access the West (why?) Roads Turnpikes

Cumberland (National Road), 1811 What is the purpose of this road?

The Transportation Revolution Steamboat –Robert Livingston & Robert Fulton The Clermont (below) – 1807 Gibbons v. Ogden – 1824 –Significance of the steamboat

The Transportation Revolution Canals The Erie Canal –Where is it? –What did it connect? Significance? –What was its effect on New York City?

The Transportation Revolution Railroads Significance The Mohawk and Hudson Railroad’s DeWitt Clinton began service in 1831

The Railroad Revolution, 1850s p Immigrant labor built the Northern Railroads. p Slave labor built the Southern Railroads – 3000 miles of track; 1860 – 30,000 miles of track

Growth of Cities Why did some cities grow more than others? What was the role of rivers? How did canals change the patterns of growth? How did railroads change this pattern of growth? –Railroads are America’s first big business. Why?

Growth of Cities - Railroads T or F - By 1860, the US has more railroad track than the rest of the world combined Rails link the East and Midwest Creates cities like Atlanta

Growth of Cities - Railroads Mega Growth – Chicago –1849 – a few hundred people –1860 – over 100,000 served by 11 railroads –Becomes the main commercial hub for the Midwest, supplanting New Orleans Railroad financial center – New York –Wall Street – NYC becomes the investment center –Money is power!

Industrialization Samuel Slater New England –First textile mill is in Pawtucket, RI –Much cloth still produced in the home Causes –Embargo –Protective tariff –Waterpower-why? Samuel Slater - Father of the American Factory System

Industrialization Eli Whitney –Interchangeable parts –Gun Factory New England is the center of the American gun industry Samuel Colt Smith & Wesson Textiles in New England –Waltham & Lowell mills –Lowell girls – where do they come from? Why? –Are they typical?

New England Textile Centers: 1830s

Industrialization What was the effect of industrialization on consumer prices? Why? –Ex.- Clocks – in 1800 cost $50 (made by hand), in 1850 cost 50 cents (made by machine) Why did the growth of towns lead to an increase in wages? –Steam engines allowed factories to remain open in very cold weather – why? –More jobs, year-round work (compare to farms)

Industrialization Quality of life –Cities – most live in Row Houses – define Smaller for working class than middle class Subdivided row houses become tenements (?) Who lived in tenements? Free blacks & Irish immigrants –Rural areas – one-room log cabins Windows covered by paper or cloth

Industrialization Conveniences/ Inconveniences –Coal-burning stoves (pollution?) –Railroads bring in fresh vegetables –Cities have water (at the street hydrant) Baths? Infrequent, so you smell bad! –Flush toilets still rare A sign of wealth –Sanitation – the hog department –Horses in cities–manure cleanup?

Boom/Bust Cycles: The blue line shows, for comparison, the price of a year’s tuition at Harvard College. In 1790 it was $24, but by 1860 had risen to $104.

Regional Specialization EAST  Industrial SOUTH  Cotton & Slavery WEST  The Nation’s “Breadbasket”

John Quincy Adams Tariff of 1828 – “Tariff of Abominations” –What was it? –Why an abomination? “The South Carolina Exposition” –John C. Calhoun Nullification –What does this remind you of?

Jackson and the Bank Nicholas Biddle Pet banks

Economic History Jackson’s Specie Circular Panic of 1837 –Causes –Results Treasury Bill of 1840 Panic of 1857 – notice any trends? –Causes

More Economic History Commonwealth v. Hunt –Massachusetts SC ruled unions are legal as long as they are peaceful Independent Treasury –Van Buren & Polk –Government deposited $ in private banks

Finances of the Civil War Raising money – North –First income tax –Excise taxes increased What is an excise tax? Morrill Tariff of 1861 –What did it do? (protective) –Which party is associate with the protective tariff?

Finances of the War Greenbacks –Define –Backed by gold Bonds

Westward Movement Homestead Act of 1862 –Details –Why move west? Morrill Land Grant Act of 1862 –Details –Some examples Kansas State, Iowa State, Michigan State Pacific Railway Act – 1863 –To build a transcontinental railroad

The Southern Economy after the War - Life for the Freedmen Sharecropping –Why? Tenant Farming –Why? Crop lien system –How did this work?

Sharecropping

Tenancy & the Crop Lien System Furnishing MerchantTenant FarmerLandowner  Loan tools and seed up to 60% interest to tenant farmer to plant spring crop.  Farmer also secures food, clothing, and other necessities on credit from merchant until the harvest.  Merchant holds “lien” {mortgage} on part of tenant’s future crops as repayment of debt.  Plants crop, harvests in autumn.  Turns over up to ½ of crop to land owner as payment of rent.  Tenant gives remainder of crop to merchant in payment of debt.  Rents land to tenant in exchange for ¼ to ½ of tenant farmer’s future crop.

Economic Issues Panic of 1873 Greenback issues Specie Resumption Act of 1875 Push for silver – why? –Bland-Allison Act 1878 –Greenback Party formed – why?

Overview – What does this reveal?

Characteristics of Industrial Change Cheap energy – coal Technological innovation Need for workers – a lot of them! Competition Decline in prices Failure of the money supply to keep up with productivity

Railroads Growth Where? Leaders Collis Huntington Central Pacific Jay Gould Union Pacific James J. Hill Northern Pacific Cornelius Vanderbilt NY Central Funding and debt

Railroads - Significance Spurred the industrialization of the post-Civil War years (especially steel) Sprawling nation became united physically. Created huge domestic market for US raw materials and manufactured goods. -- Probably the largest integrated market in the world. Stimulated creation of 3 Western frontiers: mining, agriculture, and ranching Led to great exodus to cities from rural areas in late 19th century -- Railways could feed huge cities; supply raw materials & markets Facilitated large influx of immigrants. -- Railroads advertised in Europe free travel to new farms in the West Spurred investment from abroad Creation of distinct "time zones" from coast to coast. Maker of millionaires; a new railroad aristocracy emerged Native Americans displaced and herded into ever-shrinking reservations.

Railroads - Regulation Laissez-faire – define? Regulation from Washington –Interstate Commerce Act – 1887 Creates the ICC Bans monopolistic behaviors like pooling and rebates First large-scale legislation passed by the federal government to regulate corporations in the interest of society But no real enforcement powers

Oil and Steel The cornerstone of the Second Industrial Revolution –Steel – skyscrapers to railroad tracks –Bessemer Process –Andrew Carnegie – sold out to JP Morgan Oil –Would create far more wealth than all the gold mined in the West –Kerosene for lamps

Impact of the Second Industrial Revolution -Standard of living rose sharply and remained highest in the world -Urban centers mushroomed as factories increasingly demanded more labor -American agriculture eclipsed by industrialism: railroads, steel, oil, electricity -Free-enterprise eclipsed by monopoly -The work-place became regimented and impersonal

Impact of the Second Industrial Revolution -Women achieved social and economic independence in new careers as typing, stenography, and switchboard operating -- Marriages delayed, smaller families resulted -Social stratification most pronounced in U.S. history 1. By 1900, about 10% controlled 90% of the nation’s wealth. 2. Lower classes envious and resentful of the nouveau riche -Foreign trade developed as high U.S. productivity resulted in overproduction.

Steel Andrew Carnegie “Watch the costs…” Vertical integration –One of the most famous examples of vertical integration was the Carnegie Steel company. The company controlled not only the mills where the steel was manufactured but also the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the railroads that transported the coal to the factory, the coke ovens where the coal was cooked, etc. –Control every aspect of the production process –Improve efficiency, reduce costs

Oil and John D. Rockefeller Origins (Western PA) Standard Oil Trusts –Define –Purpose Consolidated operations of previously competing enterprises Horizontal integration –Consolidate with competitors to monopolize a given market

Trusts More trusts –Copper, sugar, whiskey, lead… Congressional reaction –Sherman Anti-Trust Act – 1890 Sought to prevent trusts from consolidating and restricting trade Courts will use it against labor (strikes)

More Robber Barons J. P. Morgan –Banking Gustavus Swift & Philip Armour –Meatpacking Andrew Mellon –Financier

New Business Culture 1.Laissez Faire  the ideology of the Industrial Age.  Individual as a moral and economic ideal.  Individuals should compete freely in the marketplace.  The market was not man-made or invented.  No room for government in the market!  Individual as a moral and economic ideal.  Individuals should compete freely in the marketplace.  The market was not man-made or invented.  No room for government in the market!

The Gospel of Wealth: Religion in the Era of Industrialization Russell H. Conwell $ Wealth no longer looked upon as bad. $ Viewed as a sign of God’s approval. $ Christian duty to accumulate wealth. $ Should not help the poor. $ Wealth no longer looked upon as bad. $ Viewed as a sign of God’s approval. $ Christian duty to accumulate wealth. $ Should not help the poor.

“On Wealth” Andrew Carnegie $ The Anglo-Saxon race is superior. $ “Gospel of Wealth” (1901). $ Inequality is inevitable and good. $ Wealthy should act as “trustees” for their “poorer brethren.” $ The Anglo-Saxon race is superior. $ “Gospel of Wealth” (1901). $ Inequality is inevitable and good. $ Wealthy should act as “trustees” for their “poorer brethren.”

Rise of Labor Knights of Labor –Terence Powderly –“one big union” including blacks and women –Beliefs and Goals –Demise Haymarket Square bombing – 1886 –Effects

Terence V. Powderly of the Knights of Labor Copyright by Harcourt Brace & Company All rights reserved

Rise of Labor Working Conditions –How does the existence of low-skilled jobs affect workers when there are technological advances? –Low wages, long hours –Poor working conditions –Role of immigrants Key terms –Injunction, collective bargaining, strike, scabs

Rise of Labor American Federation of Labor –Samuel Gompers –Association of self-governing unions –Goals –Skilled workers –Belief in Closed Shop

Samuel Gompers of the American Federation of Labor Copyright by Harcourt Brace & Company All rights reserved

Rise of Labor Major strikes –Homestead Strike – 1892 Carnegie’s steel plant Result –Pullman Strike – 1894 Role of Eugene V. Debs Results Role of government

Pennsylvania Militia at Carnegie’s Homestead Steel Mill, 1892 Copyright by Harcourt Brace & Company All rights reserved

Rise of Labor Long term effects –Acceptance of workers’ right to organize, bargain collectively, and strike –Which political party is more supportive of labor? Why? –Labor Day made a holiday by Congress

Causes of the 1893 Panic  Worst of the century  Begun 10 days after Cleveland took office. 1. Several major corporations went bankrupt.  Over 16,000 businesses disappeared.  Triggered a stock market crash.  Over-extended investments. 2. Bank failures followed causing a contraction of credit [nearly 500 banks closed]. 3. By 1895, unemployment reached 3 million.  Americans cried out for relief, but the Government continued its laissez faire policies!!

Coxey’s Army, 1894  Jacob Coxey & his “Army of the Commonweal of Christ.”  March on Washington  “hayseed socialists!”  Wanted a public works program – Why?

Bryan’s “Cross of Gold” Speech You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold!

Gold Triumphs Over Silver  1900  Gold Standard Act  Confirmed the nation’s commitment to the gold standard.  A victory for the forces of conservatism.

Copyright by Harcourt Brace & Company All rights reserved

TR as President - Corporations Anthracite Coal Strike – 1902 –Miners vs. owners –TR’s mediation - Significance? Created the Dept. of Commerce and Labor in 1903 – Why?

TR as President - Corporations TR as Trustbuster –Northern Securities Company –Elkins Act – 1903 –Hepburn Act – 1906 –Good trusts vs. bad trusts –Compared with Taft as a trustbuster Taming the good trusts

Taft Trustbuster –Compare with TR –Standard Oil broken up

Federal Reserve Act – 1913 –Most significant economic legislation between the Civil War and New Deal –Established the modern Federal Reserve system Clayton Anti-Trust Act of 1914

“Black Tuesday” October 29, 1929

Causes Buying on margin/ Credit structure Overspeculation/ Unstable banks Weakened Industries (Railroads, cotton) Overproduction/ Underconsumption Lack of diversification Uneven distribution of income Weak international economy –International debt –Hawley-Smoot Tariff 1930 –This exacerbates the problem

Effects of the Depression by % - 33% unemployment About 25% of banks had failed About 25% of farmers had lost their farms Thousands of businesses failed But, before the inauguration, –Congress passed bill to repeal prohibition –21 st amendment ratified later that year (1933) by the states

FDR Begins Experimentation – First “Hundred Days” Fireside Chats Relief, Recovery, Reform – – First New Deal Banking Crisis –Banking Holiday –Off the gold standard –Emergency Banking Relief Act 1933 –Home Owner’s Loan Corporation –Glass-Steagall Banking Reform Act 1933 Created the Federal Deposit Insurance Corp. (FDIC) –SEC - Securities and Exchange Commission –1934 – more reform of the stock market

Industry Wagner Act – National Labor Relations Act of 1935 (2 nd New Deal) –After NRA declared unconstitutional, this restored collective bargaining rights to unions

The Growth of Labor Union Membership, 1933–1946

Social Changes - Labor John L. Lewis –CIO Strikes –US Steel –GM (sit-down strike) –Ford Why did the biggest corporations finally yield to the unions? (Hint: what was the attitude of the federal government?)

Truman’s Domestic Policy Taft-Hartley Act – 1947 –Passed over Truman’s veto (how?) –No more closed shop –Added “cooling off” period Strikes and John L. Lewis –United Mine Workers –Truman’s Response

1950s Union Politics Labor Unions Merger of AFL-CIO Jimmy Hoffa - Teamsters Landrum-Griffin Act – 1959 –Tries to reduce political influence of unions 1959

Economic Issues Union membership (35%) peaks in 1970 Inflation Wage and Price Controls under Nixon –What happened? Stagflation –Slowing productivity and rising inflation – a rare combination – will plague the Ford and Carter presidencies

Reagan’s Domestic Policies Supply-side economics (Reaganomics) –Define –Trickle-down effect –Tax cut –More defense spending –Results (big deficits)

Social Trends – How has the workforce changed?