Econ History Study Guide 70-140

Agricultural Bad Times

farm debts to commercial banks had more than doubled from 1915 to 1922 wholesale prices of farmers fell by 43% from 1919 to 1922 taxes on farm property increased farmers' per capita income rose slightly in the 20s because farm population fell farm incomes were much higher in the 1916 1920 period and the farmers compared themselves to that period, feeling they were much worse off

Black Literacy Rates

1870 30% 1910 70%

Criticisms of "Time on the Cross"

1) Measure of efficiency in slave and free agriculture -output per slave in agriculture was measured in monetary terms and not in quantity of crops. -Fogel & Engerman used 1860 as a base year when they used agricultural prices. Cotton prices were unusually high in 1860 and made a poor year to compare production. These high prices overstated productivity on slave plantations -slaves worked longer hours and more days than free labor. 2) Calculation of the degree of slave exploitation -Fogel & Engerman said there was only a 10% exploitation rate, 90% of the slave's marginal product returning to him. -Richard Vedder suggested that the marginal product of the slave was $75 (1860$) but wages were the equivalent of about $30 (clothing, food, housing) so exploitation rate was 60%. Most economic historians agree with Vedder. 3) Evidence of the treatment and material conditions of slaves - Fogel & Engerman compared the most generous of plantation owners with the most miserable and destitute of free labor. -Faulty procedures such as slaves sales were based on information in one county and the problem with whippings based on the records of one plantation. Another criticism: about diet, Fogel & Engerman said that slaves ate large amount of sweet potatoes and they were high in energy value. They neglected the issue of choice (very important), people prefer white potatoes.

The King Cotton Theory Cycle

1) The British demand more cotton 2) relative price of cotton increases 3) new plantations are started in response to this greater demand 4) supply of cotton rises with the increase of cultivation 5) relative price of cotton decreased due to the oversupply 6) some plantations shift to other crops such as corn 7) British demand for cotton increases again 8) relative prices of cotton increases again 9) new cycle begins This would all take place over a span of 10-15 years. As cotton profits rose it stimulated growth in the West and the East because the South demanded more food and more manufactured goods as more of their resources were used towards production of cotton.

Why the high birth rate in the early 19th century?

1) abundant land. Many children were needed to work the land. Also, there was ample land to pass on to the next generation, so there was high fertility in the rural areas compared to the urban. 2) a large part of the population (about 50%) was in the childbearing years (median age was 15.9 in 1790; today it's 30).

Congress had to address two issues regarding new lands, disposing the public domain

1) at what price should the land be sold? What the terms should be, either cash or credit? 2) how do you keep squatters from moving onto the lands. President Jackson went so far as to use the army to evict squatters which was not very successful Price of the land was somewhat uniform, regardless of the quality of land. This was done for ease of information and administration costs. From 1785- 1854 we saw falling prices and falling minimum acreage that was purchasable

Why the trend toward lower birth rates after 1860?

1) availability and fertility of land decreasing 2) family size drops Look at the three graphs

There were three major land surges in land sales

1818-1819 1835-1836 1854-1855 We don't know exactly what caused these surges but here are the three best guesses 1) Food prices rose in 1835-1854, but not in 1818 2) Speculation goes in psychological waves 3) Immigration, but most went to cities

Land Acts `

1836 The Specie Circular of 1836 required that all purchasers of land had to pay in specie (gold and silver). 1841 The General Preemption Act. This gave squatters first right to buy the land upon which they were squatting for the minimum price. Lower minimum size and price per acre. Most was sold at minimum price at auction. Squatters would get together and intimidate others not to bid. This was a big factor in the passing of the Act. *160 acres maximum if purchased at minimum price. 1854 The Graduation Act. Land unsold for 10 years was reduced to $1.00 per acre and land that had not sold for 30 years was reduced to 12.5 per acre. 1862 The Homestead Act. This gave 160 acres free if you agreed to build a house and live there for 5 years or 6 months and $1.25/acre. 160 acres wasn't much out west, not large enough for a ranch with grazing cattle. The South was opposed to the Homestead Act as they felt 160 acres was not large enough for a plantation, so it was passed during the Civil War when the South did not have any say. 1873 The Timber Culture Act. 160 acres free if you planted 40 acres with trees.

Source of Economic Growth 1870-1910

1.9% average annual growth implies 110% increase in per capita income 1870 1910. 1.0% average annual growth implies 49% increase in per capita income 1870 1910. Labor 46% women and blacks enter the workforce Land- 9% new land and natural resources open up Capital- 23% manufacturing Productivity all increased during this time period increasing per capita income.

In 1850...

1/3 of Great Lake tonnage was by steamboat 1/10 if tonnage by coastal routes was by steamboat 1/20 of tonnage of transoceanic/international routes was by steamboat Why sail over steam? construction costs were higher for steamboats ratio of cargo space/total ship tonnage was greater for sailing vessels

Herbert Hoover

1928-1932 In his first years, he initiated many government programs: expanded public works, relief programs, even had asked industrialists and financiers to keep wages high. However, this was not great enough to prevent the depression.

20th Century Demographics

20th Century Immigration 1/4 to 1/3 of the total population growth came from immigration. In the 20th century, we see most immigrants coming from Latin America, particularly Mexico, Puerto Rico and Central America, with many coming from Southeast Asia recently.

Time on the Cross

A large and controversial work on the theory of 'rational benevolence' The authors of the study, Fogel and Engerman, suggested that it made sense to take care of the slaves, to keep them healthy, stable and content the theory was that slaves were more productive when taken care of and that slave-owners were protecting their investments Their arguments opposed traditional wisdom. They say that the lives of slaves just wasn't that bad. They also agreed with others that slavery was profitable and was not dying out. Points made to back their position: 1)Slave agriculture was efficient. This was probably true. 35% more efficient than Northern agriculture due to economies of scale, effective management, specialization, slaves were made to work harder, system of incentives (cash, clothing, food, whiskey, extra days off, holiday gifts, etc.). So the more slaves you had, the more efficient the farm. If you had over 51 slaves, your production was 48% more efficient than if you had none. 2) Slaves were not lazy and inept as previously thought. More efficient on the average than white counterpart. 3) Very heavy workloads on sugar plantation in the Caribbean. Higher mortality rate because of the difficult work and malaria, other diseases and poor diet. Material conditions were much better in the U.S. than the Carribean. Birth rates were lower in the Caribbean than in the South. The hard work in the Caribbean also made death rates higher, as did the tropical diseases 4) 25% of male slaves were in different occupations than just field work. Some were actually gang overseers, some moved into the main house. Fogel and Engerman said that there was a reward system as slaves grew older. 5) Economic inducements for slaves to marry. The slave owner wanted happy and content slaves. Married slaves might be granted a parcel of land or other gifts. This was better than forced breeding because their offspring would become slaves 6) Slave divorces were uncommon. Slave families were stable, they were not broken up by sales. Owners wanted to create atmosphere of strong family values 7) Most slaves moved with their owners. They were not abandoned 8) Slave diet was healthy. Corn and pork were core of slaves' diet, along with beef, mutton and sweet potatoes. . Slaves' diet energy value was 10% higher than white diet, but again, they needed it. 9) Single family households were the rule, not multifamily households. There was not much slave promiscuity. 10) Slave cabins and sleeping space, per person, was greater than for whites had at the turn of 20th century, not more than five adults in a 18 x 20 foot cabin, with plank floors and fireplace. 11) Owners had large incentives to keep slaves healthy, but watch out for those antebellum doctor. Good diet, sewage systems, etc., kept slaves healthy and happy. Large plantations often had full time nurses or doctors, but often not helpful or beneficial. This includes infant mortality rate. Life Expectancy at Birth blacks 36 years Life Expectancy at Birth whites 40 years 12) Slave infant mortality rate was low because of the medical attention provided and that pregnant slaves were given less work. Slave infant mortality rate was lower than Southern whites. 13) Whipping and Beating were Infrequent. Big mistake here was that Fogel and Engerman only used one plantation for this sample. . They claimed that overall whippings averaged just 0.7 per slave per year, but with the number of slaves on this plantation there was a whipping once every four days. Whipping was not a crime. Wives and children of whites were often whipped by their husbands and fathers. Other punishments: isolation, stocks, fewer privileges, more work. Major infractions were: #1 running away #2stealing #3 poor work The threat of whippings was very real, psychological punishment 14)Slave clothing four cotton shirts, four pants/dresses, a pair or two of leather shoes, enough coats and wool blankets. Again Fogel and Engerman contend that this is better than many whites. Again compared to very poor urban dwellers.

Land

Acquisition of land by the U.S. between 1803 and 1853 more than tripled the size of the U.S. 1783- Treaty of Paris gave the U.S. rights to all the land between the Appalachians and Mississippi 1803 Louisiana purchase from France provided outlet for the Mississippi. It made sense that the U.S. had this land and not a foreign power. 1818- settlement of large bounty dispute with England in Minnesota and North Dakota 1819- Florida purchase from Spain 1845- Texas becomes a state 1846- Oregon Territory 1848- Treaty of Guadalupe (California, Nevada, Arizona, New Mexico, Utah, Southern Oregon) 1853- Gasden Purchase

Shipping and Trading after the War

After the war, the first priority was to re-establish trade. Exports were hurting because they no longer had a strong relationship with Britain, and other countries were still subject to mercantilist restrictions that Britain imposed The British West Indies were now receiving their foodstuffs and other resources from Canada. Shipbuilding was hurt as was rice and indigo The U.s. market was flooded with British and European goods after the war, creating a deficit in the balance of trade that was paid with gold and silver.

Antebellum Period vs. PostBellum Period

Antebellum Period 1815-1860 the big industries were cotton, textiles, flour, iron, leather, lumber, etc. Notice how they are all natural resource intensive. There were many inventions before the Civil War, such as the spinning jenny, power loom, cotton gin, sewing machine, steam engine, interchangeable parts, etc. Postbellum Period late 1860s-1890s In the postbellum period it was steel, machinery, chemicals, metals, etc. Notice that these become more K intensive. There were many inventions after the Civil War, the rush to industrialize brought many about, among them vulcanized (Leonard Firestone) rubbers, better and higher compression engines, Bessemer process for steel, a much improved spinning jenny and sewing machine, etc.

Mountain Men

Approximately 3,000 mountain men ranged the mountains between 1820 and 1840, the peak beaver-harvesting period. Most mountain men were employed by major fur companies Donald Mckenzie represented the North West Company held a rendezvous in the Boise Valley in 1819 The rendezvous system was later implemented by William Henry Ashley of the Rocky Mountain Fur Company A free trapper was a mountain man who, in today's terms, would be called a free agent. He was independent and traded his pelts to whoever would provide him with the best price. This contrasts with a "company man," typically in debt to one fur company for the cost of his gear, who traded only with them

Tenancy and Sharecropping 1860s

Attempts were made after the Civil War to reestablish plantation agriculture by hiring blacks on contract to low wages with the same benefits as before (housing, clothes, etc.). Blacks did not like the low wage with poor conditions and the gang labor system. Due to the price of cotton falling, plantation were broken into small units and operated by black and white tenants. By 1880 over half the number of Southern farms were operated by tenants. Only 5% of farms were over 100 acres in 1880. The landowner provided the seed, equipment and land in exchange for 50% of the tenants production. However, it is actually stated that the landowners pockets more than just a 50/50 split so wasnt as awesome as we all thought.

Why was slavery thought to be actually detrimental to Southern economic growth?

Because of the increase in slave prices during the cotton years 1800-1860 Slave Prices rose because: 1)there was an increase in the cost on maintaining slaves (food, clothing,shelter) 2)There was an increase in demand for slaves especially from plantations capturing economies of scale 3) there was prestige demand for slaves given the change in status that it brought to the owner Phillips missed the fact that 1)slave productivity increased. 2) after 1808, slave importation outlawed, the supply curve becomes almost vertical Theres a graph Phillips felt that slaves were overpriced but what he failed to capture was that this meant they were more productive. He also took figures at a time when slave prices were usually high and cotton prices were unusually low

What ruined cotton?

Boll Weevil. Sharecroppers and small independent farmers ruined. This may have been exaggerated as cotton had an inelastic demand curve so if supply were to fall, prices and therefore revenue would have offset the drop in production. a push effect if the Boll Weevil caused people to move

Importance of the Railroad

Capital formation increased rapidly in the decades after the Civil War. By 1890, $6 billion had been invested in railroads. From 1863 1895 foreign investment continued to play an important role, accounting for more than 1/3 of capital formation in railroad. Another major source was the internal funds generated by railroad profits. Railroads were responding to the increase in demand for transportation services resulting from population growth and economic development. They were not built ahead of demand according to Rostow

Natural Limit Hypothesis

Charles Ramsdal supported the traditional view that slavery would have died out on its own even without the Civil War. He believed that by 1860, slavery had reached its limit. High slave birth rates couples with a fixes supply of land implied an increase in the ratio of slave labor to land, therefore slave maintenance costs would exceed slave earnings This suggested the principle of diminishing marginal returns, thus lower productivity and dying of slavery

*Slavery: Traditional versus New Views

Conrad and Meyer contended slavery was profitable and contrasted it with alternative investments. They found a rate of return on male slaves of 8% on most plantations with 13% being the highest return seen. Fogel and Engerman came up with a 10% return for all slaves, both male and female. These returns show that slavery was profitable and thus why get rid of it Additionally, a guy named Yasuba discussed capitalized rents which was another way of showing that the institution of slavery was not dying out. Yasuba said slavery would continue as long as owners had incentive to: 1)keep slaves they already own 2)allow slave population to reproduce as long as capital rents are positive then slave owners would raise more slaves

How was the distribution of public and private wealth affected by the distribution of these lands?

Did free land entice many people out west? Not many poor people moved out west even with this incentive because it was expensive to develop the land Chain migration was involved(safety valve) It has been suggested that the West acted as a safety valve. Attribute this theory to Frederick Jackson Turner (1920). If the West had not been there, labor would have glutted the Northeast, depressing the wages, but with the availability of the West, the employees had leverage as to wages, a choice to stay or go west. The problem with this is that the move to the west was very expensive (moving expenses, setting up expenses, etc.) and the poor laborer couldn't afford it. This theory was shot because of the fact that during this period urban wages were higher

Cotton and Interregional Trade

Douglas north has a theory about economic growth in the 1800s. he attributes all the importance to the cotton industry. Cotton accounted for 63% of exports in the 1830s. North thought the three regions were strongly interdependent. He claims that the South was mainly concerned with cotton production thus was dependent on the west for foodstuff and the east for manufactured good. This is called the King Cotton Theory This theory states that the three regions heavily traded with each other.

Human Capital

Education, on the job (informal) training (very important), medical care, all these are investments because they increase future earnings by increased productivity. -Public schools were widespread in the North but rare in the South in the early 19th century. In 1850, the U.S. was #1 in the world in terms of population percentage in school (18%), with the Northeast leading the country. -In 1870, the average school child was only in school three months out of the year. When considering education, you have to look at the social benefits and the social costs. One of the major costs of higher education is opportunity costs.

Did the railroad pull the economy westward?

Fishlow says No Way. Antebellum railroad construction lagged behind western development meaning that population was growing faster. Railroads were profitable but not indispensable as Rostow thinks.

criticisms of cotton theory cycle

Fislow- said much of the Western foodstuffs was shipped down the Mississippi to New Orleans and then reexported to other areas. Fogel- disagrees with Fislow says that food was shipped to the East and then reexported to Southern ports. Both Fislow and Fogel agree that the Sotuth was not dependent as once thought. Sexton suggests that its all how you define the South. Conclusion: south probably wasn't dependent on west. many plantation were self sufficient.

Industrial Slavery

Fogel and Engerman said that demand for slaves increased in the cities for industrial work but at this time, slaves were actually leaving. Industrial slavery employed about 160,000 to 200,000 slaves. About 80% were owned by industrialists, the remaining 20% were rented from slave-owners for a specific time period. Why were they leaving if demand was increasing? 1840-1860 They were pulled to rural areas by the profits to be made in cotton. Demand for slaves was elastic in the urban areas since there were good substitutes, e.g., free (non slave) labor represented by poor immigrants, women, and children which led to a small increase in slave hire rates caused by switching to free (white) labor. In the rural areas, substitutes were not easy to find because free labor did not want to work in the gang labor system. So demand was inelastic in the rural areas.

Ocean Transportation

From 1820-1860 there were some design changes leading to increased tonnage efficiency Clipper ships were the fastest ships on the open ocean. Popular ships during the Gold Rush A letter from Philly to Boston would take about 5 days at best. A letter by express riders from Philly to Nashville would take about the same amount of time as today 2-3 weeks

Franklin Roosevelt

He has a strong reputation for massive relief and expansionary policies but this just wasn't true. He initiated a lot of programs, pushing through massive amounts of legislation in the first 100 days but paid for these with increased taxes, the last thing you want to do during a recession. Taxes were increased, the largest peace time tax increase up to that time was enacted, both corporate and individual. FDR also started many public works and relief programs but his administration was only expansionary in 1931 and 1936. The deficits were very small during the depression and there was actually a surplus in 1937. Roosevelt actually raised taxes and in 1935 the largest peacetime tax increase in history was passed, topping Hoover's Revenue Act.

Health

Health Care before the civil war was lacking. There were vast increases in health care in the latter half of the 19th century Investments in health translated to increase productivity. Health conditions improve which translates to less days off Some of the major advances -improved sewage systems -improved drinking water -pasteurization of milk The results were lower death rates. in 1915, the death rate was 60% of its 1870 level

Immigration

Immigration was a minor source of population increase until the 1830s. It then became important. It increased even more in the 1840s and 1850s, especially with the Irish potato famine. About a thousand people a day on the average immigrated to the U.S. (mostly through Ellis Island after 1889) between 1820 to 1920. There were no federal immigration controls until 1882. Midwest and Western states actually recruited immigrants while the Eastern states had some light regulations. In 1882, the federal government imposed a head tax you had to pay upon entering the country Later, in 1917, you had to pass a literacy test to enter. This was during World War I at a height of xenophobia and was to discriminate against non-English speaking peoples.

Post War Industrial Growth

Increase in manufacturing with much of it in the Great Lakes area endowed with raw materials (coal & iron) natural waterways provided cheap transportation industry in Great Lakes area grew faster than Northeast or Middle Atlantic

1910 Leading Industries

Machinery 690 Lumber 650 Printing & Publishing 540 Iron & Steel 330 Malt Liquor 280 Men's Clothing 270 Cotton Goods 260 Tobacco 240 Railroad Cars 210 Boots & Shoes 180

Competitive Advantages of Railroad vs. Steamboay

Main two advantages of railroad was speed and flexibility. Railroads traveled in straight lines and operated year around (not affected by weather conditions). They were also not affected by droughts as steamboats were. Freight rates also dropped with increases in efficiency RailRoad Freight Rates 1830: $.07 per 1/2 ton 1899: $.02 per ton Steamboat freight rates were still a cent cheaper. However, efficiency of travel by railroad still captured the higher rate. The benefits of speed and flexibility outweighed costs. Supply increased much more rapidly than demand. Increases in supply were due to technology such as airbrakes (Westinghouse), sleeping cars (Pullman), speed etc Increases in demand came from population and income

Source of Growth 1920s

Manufacturing and construction older and less efficient plants were abandoned or rebuilt new factories were located closer to markets, inputs or both This led to manufacturing production rose nearly two thirds from 1919 to 1929. with no change in manufacturers employment increase in manufacturing productivity allowed new labor force entrants to enter other sectors such as trade services and construction. There was a large construction boom in residential housing, peaking out in 1926.

19th Century Manufacturing

Manufacturing was rather primitive in the colonial period, mostly in small shops and at home. But less than a century later, before the turn of the 20th century, the U.S. was the world leader in manufacturing. The first R&D lab was in the U.S. at Menlo Park, New Jersey (Thomas Alva Edison). 1810 15% of total output of U.S. economy were manufactured goods. 1919 30% of total output of U.S. economy were manufactured goods.

Demographic Change 1920-1945

Population rose but the rate of increase fell for most of the period. The Roaring in the birthrate. from 1920 to 1945, life expectancy increased 54 years at birth 1920 66 years at birth 1945 Twenties saw a decline infant mortality (per 1000) fell dramatically. Falling birthrates may be associated with urbanization. Children become more expensive in cities with the increased cost of housing and food, and they are not productive. 85.8 1920 38.3 1945

Migration was influenced by three factors

Migration was influenced by three conditions/factors: 1) characteristics of origin and destination wages and employment most important, especially in interstate and inter county moves 50% of intra county moves have to do with housing (upgrading especially, also affordability) weather 2) difficulty of journey physical distances between origin and destination (moving costs, etc.) social distances, e.g., moving from Manhattan, New York (the big city) to Manhattan, Kansas (the farm) Beaten Path. After a few have blazed a trail, others will follow (e.g., Puerto Ricans moving to New York) 3) characteristics of migrant, i.e., where you are in life marital status. If single, more likely to move parenthood. If one has children of school age, one is less likely to move level of education. The more education one has, the greater the mobility

Standard of Living Immigrants

Most had rural backgrounds yet ended up working in the cities. They concentrated in the Eastern and Midwestern cities. About 1/3 of those that immigrated over to the United States eventually returned home. Some were disappointed, some due to cultural shock, others because they made money and returned richer.

Robber Barons

Muckrakers railed against these people: Carnegie steel Rockefeller oil Morgan finance Vanderbilt railroad Huntington railroad Gould railroad Harriman railroad The gain made by these men came at the expense of the rest of the population. Business tactics included fraud, bribery, forgery, mob violence, arson, murders. The business world at this time was a true jungle. But workers real wage increased as hours of labor decreased, therefore all gains not restricted to the rich. From 1890-1914, real wage increased about 30%.

Immigration Continued

Net immigration as a proportion of Years population increase 1800-10 3.3 1810-20 2.6 1820-30 3.8 1830-40 11.7 1840-50 23.3 1850-60 31.1 Europe (basically non English speaking peoples) supplied most of the immigrants. The majority were working age males, causing a large increase in the Labor Force Participation rate. Most went to the large cities of the Midwest and East, entering manufacturing jobs, even though most came from rural backgrounds. Push effects are things in the home country that would cause someone to leave, like lack of freedom, revolution, etc. Pull effects are items that would cause someone to go to another country, such as a healthier job climate and the availability of land. Pull effects were the main cause in American immigration. About 1/3 eventually went back home, either because they were disillusioned and did not find the country to be what they expected, or it was because they were successful and went home with money, either to retire or invest.

Was Sharecropping efficient?

No. After the split you barely made money. The only bonus that kept people in sharecropping was the fact that they could renegotiate contracts annually due to competition.

Transportation Revolution

Overland transportations was the largest obstacle in economic growth in the early 19th century. Coastal transportation was the cheapest but the slowest Turnpikes- first in the transportation revolution but has the least impact. Most turnpikes were funded privately. A notable exception was the "National Road" which was federally funded. tolls were collected to maintain roads but few made money. Most were in New England Plank Roads subsection of turnpikes, tried to pave roads with wooden planks to avoid the problem of mud mostly in the middle Atlantic region, the first was SYRACUSE in 1837 Popular for short heavy hauling for truckers and farmers Canals opened up whole new market most (2/3) canals were publicly funded at the state level The Erie Canal was a huge financial success with an 8% private rate of return the social return rate was much higher. It took 8 years to build There were many failures, nonetheless, the most spectacular being the "Mainline Canal" linking Philly to Ohio River Steamboats the steamboat era began in 1815 with the first successful run in the Mississippi River. Robert J. Fulton developed the steamboat and the CLAREMONT first sailed in the Hudson in 1807. Steamboats were privately owned, mostly by partnerships and were very successful Significant increases in steamboat productivity between 1815-1850 because: 1)average size and carrying capacity increased 2) more powerful, yet smaller and lighter engine 3) improved hull design, giving increased speed and maneuverability 4) Increased engine safety, lowering costs of insurance 5) lowered learning curve with new technology 6) learned to operate at night These productivity improvements led to decreased freight rates 1816:$.45 per ton 1850: less than $.01 per ton Most of the improvements did not stem from technological advancement, only the initial introduction of steam power. The rest came from lowering the learning curve. Before the steamboat was invented flatboats(downstream) and keelboats(upstream) were used.

What is the economic significance of migration?

People migrate to get more, to become better off, or else they would not move. Society as a whole benefits as human resources move to more productive areas.

Merger Movement 1880s-1905

Phase I Horizontal Mergers Firms merged with other firms in the same line of production. Horizontal mergers did not necessarily lower production costs as large firms were acquiring firms with higher average costs, those with the urge to merge . With so many small firms merging with others in same line of production that: 1) standardized manufacturing process 2) close down inefficient plants 3) consolidate their equipment Much of this ended with a very sharp recession in 1893. Phase II Vertical Mergers These merger involved firms that previously bought and sold each other. In 1905, merger activities declined. Some mergers failed, some had disappointing profits. The federal government broke up Standard Oil and American Tobacco. Puth suggests legal pressures had less to do with it than economic pressure.

Distribution of slaveholding families in 1850 and how many slaves that they held

Plantations are considered to be those that hold 20 or more slaves. This represents 11.3% of slaveholding families. About 1/2 of all the slaves were on plantations. about half of the slaveholding families held 5 or fewer slaves but these families owned only 10% of all slaves. Only 1/4 of all Southern white families owned slaves at all.

Income Distribution

Postwar income distribution became more equal as many middle and low income groups shared in the prosperity. There were two reasons: war increased the demand for unskilled workers low income groups benefit more from full employment In addition, this prosperity brought and more equitable income distribution brought increases in single family homes central heating, indoor plumbing, electricity ownership of consumer durables increased real wages increased work week fell life expectancy increased

Welfare of Blacks Postbellum

Quality of life improved because of freedom of choice. However quality of life during the high rates of industrialization may have had a negative impact on urban communities.Pollution, congestion, crowing, social and racial tensions.

Monopoly Dynamic vs. Static

Question: Did firms actually gain market power or did they merely operate in new and larger markets? 1) It is the firm's size relative to the market not the absolute size that determines monopoly power. 2) It is a mistake to think of the antebellum economy as perfectly competitive just because the average size of the firms was small. Before 1865, most firms served local markets with few if any substitutes. As transportation and communication costs declined, these regional monopolies came under market pressures, therefore competition may have increased despite the growth in firm size. 3) Although many firms sought monopoly power, few attained it and even fewer managed to retain profitable monopoly position for longer. 4) The actual impact of monopoly power on the economy was small. At best the costs were 6% of national income.

Railroads

Railroad construction began in the 1830s concentrated on the eastern seaboard. There were initial problems with the lack of a uniform gauge. 1850s railroad mileage went from 9,000 to 31,000 miles Most new construction was now in the Midwest and South The railroad was particularly important to the South as it linked the interior plantations growing commodities with the sea 1868-1873 another boom in railroad construction occurred. Transcontinental time, with the Union Pacific and Central Pacific connecting at Promontory Utah 1869 1880- the most vigorous growth, much of tis transcontinental in nature.

Paul Stanford vs. Walt Rostow

Rostow believes that 1843 was the takeoff period and it abruptly took off. Paul David disagrees and claims cycles of expansion and contraction rather than a takeoff. David suggests three period of growth 1)1790-1807 1.6% 2) 1820-1830 2.5% 3) 1840-1850 2.1% This info strongly refuted Rostow Over the entire period, David claims a growth rate of 1.3 % per year. David used the formula to come up with this figure. look at essay

Extra Credit Questions

Sexton Got all his notes from Cedar City Sexton believes John Hanson was the first official president of the U.S. His body was never found. Paul Revere Famous Ride Discussion: Paul Revere- manufacture gunpowder during the war. After war he returned to work as a silversmith. Israel Bissel ( the human missile)- he did more writing than all the other colonists combined. He warned that the british were riding towards the freedom riders. He covered more than 300 miles before reaching Philadelphia. Roy Palmer, Tom Morgan

The Great Depression

Short but severe recession in 1921. Unemployment was at a high 11% from 1922- 1929 real GNP per capita increased over 2% per year. 30 million cars purchased. Almost every family had an automobile now. The stock of automobiles tripled in the 20s. prices were amazingly stable unemployment was low (virtual full employment) with the single exception of 5% in 1924 (so that 11% looks even worse). 1925- fall in construction stock market was booming; average share was 280% higher in 1929 than in 1921. It was consistent growth, rising in every period from late 1921 to 1929. fall in construction and automobile production in 1929 were hints to the coming depression in October. Lots of loans were being given to people buying stocks on the margin. Banks were forced to shut there doors. Bank failures came in three waves. The federal reserve did not act as the lender of last resort which could have stopped so many bank forclosures. Farming was also not doing well. The Dust Bowl caused a severe drought in the Midwest causing a shortage in crops. Smooth Hawley tariff was also a large impediment on trade.

Revolutionary War began in 1775

The British could have easily won the war if they had devote all resource to it. If enough ships were provide to close all six ports (Boston, Charleston, Philadelphia, Norfolk, Newport, New York) the British would have won. The British also did not send their strongest military England faced huge transportation costs to cross the Atlantic It was estimated that 1/3 of colonial population did not want independence. These people were called Tories or Loyalists. An important tool for the colonists was privateering or legally chartered piracy, where Colonial civilians would use their ships to attack British merchant ships avoiding the British men of war. During the war, trade with England dropped dramatically though there was still some being routed through other foreign ports. In 1775, the Continental Congress outlawed trade with Great Britain and the English reciprocated. Treat of Paris ended war 1783

Merchant/Creditors and Tenant Farmer Relationship

The Civil War destroyed much of the banking and financial structure of the South. Financial services were extremely limited, especially in the rural areas. The South had 25% of the population yet only 2% of the banks In many rural areas, the merchant became the chief source of credit, providing the farmer with food, clothing, seed, tools, etc. until harvest time. The interest rates they charged were exorbitant, often up to 60%. If you were a landlord or creditor merchant, you were able to exercise great control over the tenant farmers. Both wanted cash crops, especially cotton, grown because kept farmer dependent on both the landlord and merchant creditor for food products. The tenant farmer was unable to find time and energy to grow foodstuffs and livestock so they were stuck at the hands of the merchant.

New Deal

The New Deal, as we have seen, was a mixture of sometimes-conflicting programs: some aimed at relieving distress, some aimed at restoring full employment, and some aimed at preventing a recurrence of the Great Depression. In any case, the New Deal left an indelible imprint. First, it created a wide array of institutions and programs that continue to shape our economic life: the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, mini- mum wages and other workplace regulations, Social Security, unemployment compensa- tion, and so on. Some of these institutions were small and achieved their goals mainly by imposing rules and regulations; others such as Social Security and agricultural price sup- ports meant vast new expenditures. Second, the New Deal created an idealistic spirit among young people that would bear fruit in the form of additional liberal legislation passed years later, especially during the Kennedy- Johnson years. Third, the New Deal created the presumption that people could look to Washington for solutions to their economic difficulties. The fourth and perhaps most important legacy of the New Deal is, paradoxically, what it did not do: It did not try to overthrow capitalism. With the nation in turmoil and its economy in ruins, socialism or at least widespread nationalization of commerce and industry might have been instituted in 1933.

South after the Civil War

The Southern economy was severely affected by the Civil War. The traditional view was that the great human and physical destruction of the Civil War fought mostly on Southern soil was the reason for this. The traditional view was that the trauma of the war caused all the South's economic problems. This is what the historians (but not the economic historians) say. Many cities were destroyed, among them Charleston, Atlanta and Richmond. 6% of the labor force was killed. This was greater than any other war the U.S. participated in, even WWII or Vietnam. Real estate values declined from $4.4 billion to $1.6 billion in the South. Banking and credit markets (financial and capital markets) were disrupted, even destroyed. 90% of state banks in the South did not survive the war. This was further aggravated by the lack of investment from the North. Southern manufacturing affected through both physical and human capital destroyed. Per capita agriculture fell dramatically, especially in cotton and in five major cotton producing states (South Carolina, Mississippi, Alabama, Georgia, and Louisiana) There was a 28% decrease in the black labor input after emancipation and the end of the war. rate of growth in demand for South Cotton decreased. Europe went to India, Egypt and Brazil Demand for Southern Cotton did not pick up again until the late 1870s

Overview of Economy 1920-1945

The U.S. was the only major industrial power to emerge from WWI with all dimensions of its productive capacity not only unscathed but enhanced. Europe had lost substantial amounts of human and physical capital. real growth rates showed large variances (instability) 14.8% 1932 16.1% 1941 consumer prices 10.7% 1921 12.3% 1941 unemployment rates 25 %1933 (this did not include discourage workers , those that gave up trying to find a job and was devastating because of the single wage earner family) 1.2% 1944

Distribution of Income and Wealth and Quality of Life

The antebellum period saw a shift towards greater wealth inequality. Soltow and Gallman estimated that in 1860, the top 10% of wealth holders controlled over 70% of the total wealth. Major factor for greater inequality in the South was slavery. Even among the free population the distribution of wealth was probably more unequal in Southern rural areas than Northern rural areas due to great disparities in land holdings such as the Louisiana sugar plantations and the Southeastern rice areas.

The economy after the Civil War

The costs of fighting the war were hugeee. Direct costs to both sides were $6.6 billion dollars. That is 11/2 of annual GNP in the late 1850s.Banking and other financial intermediaries were destroyed, along with many hundreds of miles of railroad. Agriculture was heavily damaged. 6% of the labor force was killed. That's 600,00 killed and 500,00 wounded.

Urbanization

The percentage of the population living in the cities increased from 25% in 1870 to 50% in 1920. Land values rose dramatically in the cities, showing their greater economic importance. For example, the land values of inner-city Chicago increased 700% from 1873 to 1910 -The advantage of urban economies lays in the fact that they are agglomeration economies with substantial concentration This represents economies of scale for: 1) services such as public utilities, police, fire, postal services and sewage 2) communications (costs fall) 3) greater specialization of services and manufacturing All of these represent greater efficiency due to costs falling with a greater concentration of people.

Agrarian Unrest 1865-1896

The period of 1865 1896 was one of deflation ( The Great Deflation ), with prices steadily falling. There was agricultural distress, with farmers complaining that they were being exploited by the railroads, financial intermediaries, grain millers, meatpackers, and commodity buyers, charging high rates and interest. The Unrest spawns from the farmers having to deal with other markets (transportation, capital, tools, labor) The U.S. is becoming involved in world trade during the 1870s-1890s which wheat and meat. So farmers feel a great uncertain with this exploitation and prices falling.

Post Bellum Black Migration

The question: why didn't the blacks migrate north after their emancipation/manumission for the higher wages? A large scale black migration did not occur until 1915: We see black migration due to World War 1 creating a demand for black industrial labor, thus higher wages. From 1910-1919, wages increased 124%. From 1915-1920, manufacturing employed increased 30% Blacks were also recruited in the North by industrialists. HOWEVER** Black were not able to migrate North after their emancipation because of higher transportation costs. They eventually fall. After the Civil War, there were high transportation costs because of the destruction of the railroad system. There were also high costs associated with searching for a new job. High psychic costs of leaving home area. The final explanation for why Blacks did not migrate North deals with real vs. nominal wages. Real wages take into account preferences and these wages were higher in the South which increased black utility. As long as these options were available blacks were not incentivized enough to move because they valued preference over money. Spatial Equilibrium- when slaves were emancipated, real utility differences and movement occurred to equalize real income in all locations.

Extra Credit Steamboat building video

Was about Roy Palmer and Tom Morgan The importance of the video was showing how the flatboat was used for downstream transportation in the Mississippi

Technology and Labor Scarcity

The shortage of labor spurred technological innovation in the U.S. The Crystal Palace exhibition (London, 1851) was like a coming out party -interchangeable parts (in the firearms industry). Credit Eli Whitney with this invention. This innovation was a tremendous labor saver. - machine tool industry. Firms that produced only tools for other manufacturers. Greater specialization. Vast improvements made. - mass production techniques, assembly lines. Slaughter houses, grain mills (the first use of these techniques in the U.S., by Oliver Evans), U.S. did not invent but did adopt widely first. -technical diffusion. Borrowing/adapting previous inventions such as steam engine to the steamboat. Where the Japanese excel.

Levels of Income

The standard of living increased rapidly during the antebellum period 1820 1850 real earnings increased by 50% 1860 1900 real earnings increased by 25% The average workday in manufacturing decreased from 12 hours a day in 1840 to 10 hours a day in 1900.

Farm technology

There was a constant shortage in the supply of labor so important innovations were developed. Obed Hussey (1833) and Cyrus McCormick (1834) patented types of reapers, but by 1850, only 3400 had been sold.

Capital in the marketplace 19th century

There was a sharp acceleration in capital formation in the 19th century, especially in the latter half. Capital grew faster than any other input. Capital growth accounted for one third of output per capita. In 1840, capital (K) was scarce but by 1920, the accumulation of K was the highest in the world. 1845-1860 about 15% of GNP late 19th century about 25% of GNP There were large improvements in capital markets, especially in banks and investment houses. With this large increase in capital formation, that meant people must have been saving as well. In fact, the large increase in savings was the largest single factor. Capital stock was 40 times larger in 1914 than in 1840.

Economic Indicators of the Great Depression

There were two major factors that contributed to the depth and severity of the depression: the very low margins required for stock purchases. When the market began to show weaknesses and dropped a little, banks and brokers began to call in the margins. Owners of stock, including banks and brokers along with Joe Citizen, began to sell stock to meet the margin calls. This had a snowball effect as people began to sell more and more. the Smoot Hawley Tariff (1930). This protectionist tariff set off retaliatory moves throughout the world, effectively cutting off at the knees the fledgling yet important international trade sector.

Regional Differences Antebellum 1815-1860

Three Distinct Regions East: Trade, Commerce, and manufacturing were their comparative advantage. The East was responsible for 75% of U.S. manufacturing in 1850. Why? they had people. They placed the poor in agricultural bases for trade, commerce and manufacturing. the Northeast enjoyed comparative advantages in ship construction and services, banks and insurance. West: Consisted of the old Northwest: Michigan, Minnesota, Wisconsin, Indiana, Illinois, and Ohio. Other states considered the west included Iowa, Missouri and Pennsylvania (see below). Big in corn, wheat and livestock, probably 70% of the U.S. total. This is substantial, remember that for some time the West was relatively small, any change in trading patterns (especially with the South) made a large impact. Lumber and lead were big in Missouri Between 1840-60, more of the West's products went to the East and to Europe with relatively less going to the South. From 1815 1840, much went to the South. Associated with this is a decrease in the West's self sufficiency with more diversification and market oriented production. Agricultural machinery was developed in the West. South: Cotton replaces tobacco as #1 in terms of dollar value Crop Rankings #1 Cotton #2 Tobacco #3 Sugar #4 Rice #5 Corn

How did American and British Technology differ?

Three Reasons: 1) One reason was a difference in demand. Americans were willing to accept inexpensively (mass) produced standardized products, while the British wanted custom made goods. 2) On the supply side, British labor was cheaper and more abundant, whereas in the U.S. labor was scarce. Americans built cheaper machines (meant to be scrapped sooner but this also meant that newer technology would be more easily implemented) and the British had the labor to repair old machines, they were also made more durable there. 3)) The different factor endowments in Britain and America led to different modes of production. The technology of a country adapts to its resource endowments. In America, wood was plentiful and cheap. The fastest technology was adapted, even if it meant wasting wood, woodworking was the number two industry in the U.S. at this time behind textiles. Not so in England. Wood also was used as fuel, coal was too expensive to mine with the shortage of labor, unlike in Britain.

Traditional View on Slavery

Traditional view held that slavery was a dying institution and destroying itself, and would die without the help of the Civil War and Emancipation. This was laid down by Ulrich B. Phillips in the 1920s. Many felt that slavery was a dying institution. Continued expansion of the cotton industry was needed to support slavery, both in the marketplace and inputs such as land. There was a large expansion in the cotton markets in the first half of the 19th century. The moral distaste of slavery by Northerners kept it out of the North. This just wasn't true as slavery was tried in the North and failed, it just wasn't profitable there. Phillips suggested that these two conditions were the cause and effect of 1) an unprofitable institution to slave-owners 2) major factor in retarding growth in the Southern economy

Slavery and History

Two Conditions to look at: 1)Background conditions - colonial slavery developed out of a shortage of labor, much like indentured servitude. 2)Conditions that continually motivated the institution of slavery was high demand for raw cotton, the demand coming mostly from England and New England. This kept slavery profitable decade after decade (Conrad & Meyer). Profit was obviously the motive for slavery because it was much cheaper than indenture servitude. Slave labor was tried in the North on wheat but didn't work. Slaves worked better in the South

Economic Growth After The Civil War

Two Views: Charles Beard and Lewis Hacker suggested that the Civil War was a major positive influence on the economic growth of the nation. Three main reasons 1) Politically- power shifted from South to North 2) Socially- Southern economy was stagnant under the inefficient labor system. 3) Economically- the war was stimulating. Technological development and war industry gave increased profits activity. The Social and economic reasons don't hold so the Beard Hacker Hypothesis is not worth much. Gallman on the other hand suggested that the Civil War decade featured very little growth and manufacturing did not boom. He uses figures for annual rate of growth to back his argument. His figures refute Beard and Hacker, and find that the rate of growth was .07% during the 1860-1870s. Economists prefer Gallmans theory

Population Demographics in the Post Revolutionary and Antebellum Periods

Two major trends between 1776 and 1860 1) Very rapid growth in population (still 3+% per annum) 2) Urban population increasing Natural increases Births rates in the early 19th century were 55/1000 per annum. This ratio fell to 40/1000 per annum by 1860. Today it is 15/1000. Death rates were also falling.

Technological Advance in the 20th Century

Two types of technological advance 1) Process Innovation increasing efficiency in the productive process. Increased productivity. Productivity from 1929 1969 represented the lion's share of growth compared to other inputs of Labor, Capital and Land. 2) Consumer Product Innovation This increases the quality and quantity of consumption.

World War 1

War broke out April 4, 1914. People did not expect the war would last for long because they thought a sustained modern war would be prohibitively expensive and destructive (it was). But as war costs escalated, the U.S. was called upon to supply much of the material. In 1916, the U.S. began sending significant amounts of munitions and food with a rapid rise in U.S. exports. This was similar to the Napoleonic Wars as the U.S. profited handsomely from a war in Europe through increased exports and taking over former European export markets such as Latin America. U.S. exports doubled while imports rose only 55%. There was no way that the importing countries could pay for their imports with exports so they paid with gold bullion and sold their portfolios of American securities. British and French bonds were sold to U.S. citizens and the U.S. government directly loaned the Allies $9.5 billion.

Couterfactual with Railroad System

We look at social savings, the difference between actual level of income in 1890 (the peak of the railroad's influence) and the level of national income that would have prevailed without railroads (by using wagons and canals). This is an example of a counterfactual to deduce the importance of the railroad. Fogel estimated the social savings was 5% of GNP, concluding that the railroad was important, but not indispensable. 3/4 of farm output was within 40 miles of potentially navigable waterway. Water had lower rates on the average. But there are some extra costs associated with water transport (and wagon transport) 1) inventory costs (i.e., slower deliveries tying up capital from requiring larger inventories due to imperfections in delivery)) 2) more cargo was lost in transit because of greater transit times, higher damage rates therefore higher insurance rates 3) limited seasons for navigation. Frozen waterways, floods, droughts, etc. 4) wagon hauling costs to secondary markets. All markets weren't on waterways. Important most of net contribution of railroad was when it was substituted for wagons, not canals. Willamson claims that the social savings due to railroads was 21% higher than Fogel. The reason is that Willamson included indirect effects. One problem with Williamsons study was that he was not able to reproduce them. Boyd and Walton also did the study and found social savings rate to be 7.5% when including passenger travel Railroads may not be as indispensable as Rostow thought, but that the railroad contribution to the economy and growth of the country was bigger than any other industry. No industry accounts for near 5% of GDP today—not auto or oil.

Economic Growth 1790-1815

between 1790-1807 there was a period of strong economic growth, a trade boom. This was a result of the Napoleonic Wars between France and great Britain. The U.S. remained neutral and was able to trade with all belligerents during the war and benefited greatly.

Salient/ distinguishing features of the South

concentrated on production of staples/ commodities for market such as sending cotton to New England and Great Britain. This concentration caused the South to be dependent on other regions for foodstuffs and manufactured goods The South lacked urbanization There was economies of scale in the south with the presence of larger plantations The Southern industry was underdeveloped because they only focused on specific staples (tobacco/ cotton) They had a low investment on education The Southern economy was growing more rapidly than the North. looking at total population, income is higher in the North, both in 1840 and 1860. But if we look at free population only, the South had a higher income in 1860. looking at total population, income is higher in the North, both in 1840 and 1860. But if we look at free population only, the South had a higher income in 1860. look at chart from class

Genovese(Marxist Historian)

concluded that slave resistance was minor in the Southern U.S. compared to the Caribbean and South America. The South was less rebellious because: 1) ratio of blacks to whites was lower. In the parts of the Caribbean and South America it was 90%, and sometimes more, black. 2) presence of slave-owners at the work site in the U.S. whereas in the Caribbean and South America it was mostly a case of absentee slaveholders, just uninspired managers and overseers 3) better working and economic conditions

The Constitution and Federalist policies

constitution gave power to 1) levy taxes to pay off state debts 2) right to coin and print money and regulate its values 3) authority over foreign affairs wars, treaties, tariffs. 4) regulation of interstate commerce thus states could impose tariffs or other barriers, promoting national trade and encouraged growth on national markets 5) defined private property rights and enforcement of contracts

Impact of the War on the U.S.

financial markets panicked with stock and bond prices tumbling U.s. unemployment decreased with the increase in manufacturing Unemployment was highest in 1915 the American farmer greatly benefited with the European demand for meat and grain April 6, 1917 declared war on the Central Powers First modern war with large capital and manpower expenditures. It was very expensive. $ 3.56 billion Civil War cost to the Union $33.46 billion Great War cost to the U.S. alone. European costs much greater This increased in governmental expenditures caused a corresponding increase in revenue. revenues were $750 million before the war $5.0 billion after the war The war ended on November 11, 1918

New Competitive Patterns

many of the new methods of production involved high fixed costs, such as the Bessemer process in steel, so many firms had to expand and increase output to be competitive. This growth in firm size had many advantages: 1) only way to employ new highly capitalized production methods 2) if firm size increased relative to the market they could gain some monopoly power 3) economies of scale 4) improvement in transportation increased the optimum size of the firm by expanding the market Cutthroat competition only works if you have lower costs than your competition or the resources to absorb short run losses. If your rival has been driven out, you must acquire the assets or someone else may pick it up in bankruptcy at low cost and you have a new competitor.

Postwar Boom

resource shifted to peacetime production causes of boom pent up demand by business for capital goods for replacement and expansion (rush to expand output and accumulate inventories) pent up demand by individuals for consumer goods (housing, autos, etc., not available during the war) abnormally high level of foreign demand for American goods

Immigration

sharply dropped after 1921 declined still more in the 30s There was postponement of marriage and childbirth because of poor economic conditions. this led to the baby boom in post WWII

Declining Sectors

shipping coal giving way to oil and natural gas cotton and wool production falls railroad has to now compete with cars Transportation Act of 1920 profitable railroads were required to contribute support to railroad lines with minimal returns. This: penalized efficient carriers railway industry as a whole failed to earn enough profits to cover costs