AEH Quiz 3

3 most severe union disputes

1. Haymarket affair in 1886-> tragic climax of efforts of the Knights of Labor to secure a general strike of workers in the Chicago area-> bomb thrown at police officers-> seven men who were probably innocent were executed for murder-> anti-labor agitators used the incident as an example 2. 1872 management of the Carnegie Homestead Works at Pittsburgh decided to oust the Amalgamated Association of Iron and Steel Workers-> the state militia was called out to restore order, and the union suffered a defeat that set the organization of labor in steel mills back several decades 3. Pullman strike of 1894-> led by Eugene V Debs-> the seriousness of the labor problem became a matter for widespread concern and the basis of opposition-> any long-term strategy would have to include efforts both to pacify voters and to strengthen labor's position in the court

Federal reserve act

1913 by Wilson, 12 branches, permanent Representation on the board Made membership in the system compulsory for national banks-> upon compliance with certain requirements, state banks might also become members Members of the banks nominally owned them After 1917, all legal reserves of member banks were to be in the form of deposit with the Federal Reserve Bank It was hoped that if the Federal Reserve act were carefully followed, monetary disturbances would become a thing of the past-> didn't-> Indeed, the Great Depression was partly a result of the failure at the Fed

The Federal Trade Commission

1914 Clayton Act by Wilson-> intended to remove ambiguities in existing antitrust law and force courts to take stronger actions against big corporations by making certain specific practices illegal-> so weakly drawn that it added little to the gov's power to enforce competition FTC made to enforce the act and carry out investigations By 1920, about the only practice the courts would consider consistently a restraint of trade was explicit collusion among independent producers or sellers Not until it could take action on the basis of injury to consumers instead of on the basis of injury to a competitor would the public gain much advantage from the FTC's efforts Thus, the one great pre-1920 experiment in the social control of business, the Sherman Antitrust Act, achieved little When vigorous enforcement of antitrust was taken in 1930s, it was too late

The transcontinentals

3 ways to get to the pacific coast for the Gold Rush 1. Wagon trains along trails to California and the Pacific NW 2. Sea route via the Isthmus Canal 3. Clipper ship= best way By the Pacific Railway Act of 1862, Congress granted a charter of incorporation to the Union Pacific Railroad-> Northern Platte River used because it already there bc of the Pony Express-> Council Bluffs to Cali The Central Pacific was incorporated under the laws of California in 1861 The gov furnished financial assistance in 2 ways 1. Grants of public land 2. Loans for each mile of track completed The last 2 years of construction were marker by a storied race between the two companies to lay the most track Union Pacific relied on ex-soldiers and Irish immigrants= 1086 miles of track Central Pacific relied on Chinese immigrants= 689 miles Joining of the two= Promontory Summit in Utah in 1869-> golden spike Perspective: the RR and mormon handcarters (carried belongings on hand-pulled flatbed carts)-> Hit a bad storm-> greatest disaster of voluntary western migration in US history-> Not ended until RR

Product differentiation and advertising

Advertising was limited and local before Civil War Patent medicine manufacturers were the first sellers in America to advertise on a national scale After the Civil War, advertising on a national scale finally became a widely accepted practice-> with the trusts came truly national firms whose brand names and trademarks became impressed on the minds of consumers-> trusts used advertising to reassure households about the quality of goods being purveyed Billion dollar industry by 1920 Large firms helped the growth of advertising and vice versa Monopolistic competition (economic insight)-> the growth of brand names, advertising, and product differentiation led economists to develop a new theory: monopolistic competition-> even if a firm raises its prices, it will not lose all of it customers bc it produces a differentiated product-> bc steep demand curve-> high profits only in short term bc new entrants will be attracted Advertising seen as necessary to maintain share Two changes were to loom large in the future of American advertising-> radio and the change in the kind of consumer durables people bought-> after 1910, as the first automobile and then electrical appliances revolutionized American life, the share of furniture and household furnishings in the output of consumer durables declined rapidly

Women in the postbellum period

American women were highly responsive to legal and institutional changes that opened doors for their creativity and commercial and market participation 1880= 15% of workforce; 1900= 18%; 1920= 20% By the turn of the century, the typewriter and other office equipment had created a major field of employment for young women The office, however, remained segregated by sex-> women were confined to routine clerical jobs-> also segregated by race Some firms that did not want to invest in training workers who would soon leave and found it convenient to treat men and women as separate classes-> but the main sources of sex and race segregation were powerful social norms These social norms were gradually being eroded by economic forces and political opposition-> urged to employ women as replacements for men lost to armed services, employes discovered that women performed a wide range of occupations as satisfactorily as men and that in some jobs their performance was often superior Statues prescribing maximum hours and min wage were common at the state level by 1920-> effect on women's employment was negligible-> few employers decided not to hire women simply bc their hours were regulated

New areas and methods of cultivation

As areas became settled, they tended to specialize in certain crops-> wheat and corn belt continued western advance over the century Cotton leapfrogged the Mississippi-> by 1900, texas was the leading cotton producer as well as major source of cattle Dairy farming in New England/ Great Lakes; Fruits and veggies in warmer climates The 19th and early 20th centuries witnessed a stream of biological innovations, many of which successfully modified the planting and growing environment 1. The discovery of new wheat varieties (and hybrids) which allowed the North American wheat belt to push hundreds of miles northward and westward 2. New methods of combating insects and diseases Land productivity didn't change much, but labor productivity grew dramatically in wheat and corn between 1870-1910 McCormick patented the reaper in 1834-> moved plant to Chicago (Midwest) in 1848 Increased amounts of capital per worker, along with new technologies embodied in the capital equipment, raised labor's productivity Even though yields per acre changed little, mechanization allowed farmers to add more acres to their farms, thus expanding output per farm 1858= John Deere's producing more steel plows, eclipsing the iron plow Between 1860 and 1920, the number of mouths fed per farmer nearly doubled, freeing labor for industry, but not without economic dislocations and personal hardships

Retailing

As cities became bigger and more congested, the convenience of being able to shop for all personal necessities in a single store had increasing appeal-> the result was the department store-> larger stores such as Macy's took advantage of their growing size to obtain price reductions by going directly to manufacturers or their agents (not through wholesalers) Haggling with merchants over the price of an article was soon a thing of the past By 1920, even small cities could usually boast a department store Smaller, specialized retail outlets lacked buying power to match department stores-> but high sales volume could be obtained by combining many spatially separate outlets in "chains"-> one of the earliest= Great Atlantic and Pacific Tea Company (groceries) By 1920, grocery, drug, and variety chains were firmly established as a part of the American retail scene For many American families in the decades before WWI, the annual arrival of a catalog was an event awaited with great anticipation The establishment of rural free delivery (1896) and parcel post (1913) by the US Post Office were godsends to mail-order houses

Changing composition of exports and imports

Between 1850-1900, the shift in US comparative advantage internationally away from agriculture and towards manufacturers Export side-> most striking change was the decline in raw materials (like cotton)-> ⅗ to ¼-> manufactured goods rose Import side-> crude materials rose from 1/12 to 1/3 -> those materials necessary to support industrial structure but not found in US-> manufactured goods declined American exports to Europe began to decline relatively after 1885-> America found new customers in Asia and Canada, and their interest in the Latin American market was just beginning Source of American preeminence in manufacturing?-> not so much from a relative abundance of capital or skilled labor or technical knowledge, but from the relative abundance of non reproducible natural resources-> the large and stable internal market for manufacturers, combined with a flexible system for establishing property rights, promoted intensive exploration for and exploitation of natural resources-> didn't become dependent on these raw materials though

overview of the emergence of america's labor consciousness

Between the Civil War and WWI, the supply of labor grew rapidly bc of immigration and natural increase The demand for labor grew even faster bc of capital accumulation and technological and other productivity advances Real wages rose Unemployment and real incomes moved with the economic cycle

the rise of investment banking

British industrialists could visit their local branch banks and draw capital from a huge international system-> American firms encountered banks with restricted resources, most importantly bc banking across state lines was prohibited For this reason, investment banking in the US emerged to provide capital for the expansion of railroads, mining companies, and large-scale manufacturers-> acted as intermediaries, bringing together lenders and borrowers J.P. Morgan and Company helped Carnegie raise large sums of capital that he couldn't before-> led to US Steel Corporation, the first billion dollar corporation The close links bw investment bankers and big business were strengthened by the practice of placing representatives of the investment banks on the board of directors of the firms-> critics of investment bankers complained that this practice stifled competition Also a positive side to Morgan's links with industrial firms: investment bankers helped informed investors about how best to invest their funds Another important force helping finance industrial growth was the rapid, steady retirement of national debt-> retired completely by 1835-> collections of tariffs supplied gov with continued surpluses that permitted debt retirement-> this inflow of gov funds to buy up old bonds lowered yields on private assets and stimulated capital formation in the private sector

New forms of currency

By 1862, gold was flowing out of the banking system so fast that the government and banks were forced to suspend gold payments-> silver had virtually no circulation-> treasury issued a new fiat currency called "greenbacks" 1863- National Bank Act-> created a new set of banking institutions (national banks) and new money (national bank notes) Collectively, greenbacks, national bank notes, and silver and gold specie or their certificates, plus small subsidiary coins made up the currency Most of the increase in the total money supply after the Civil War was created by the growth of bank deposits-> monetary base = high-powered money-> the growth of reserves allowed the growth of bank deposits and the total money supply Greenbacks solved two problems-> the immediate problem of providing additional revenue for the government during the war and the longer-run problem of providing a currency of uniform value throughout the country-> Congress still created the national banking system bc Conservative Republicans worried that making the greenbacks permanent would create a temptation for weak administration to issue too many notes To secure its note issue, each national bank was required to buy US gov bonds A dual banking system

The unions and the courts

By the end of the 19th C, the right of labor unions to exist had been established; yet the right of employers to force employees to enter into antiunion contracts was upheld by courts to the very end of this period 1912 Coppage vs Kansas-> court overturned a state law passed to outlaw antiunion contracts-> "yellow dog contracts" as referred to by workers perhaps because they reduced a worker who signed one to the status of a mangy dog State and federal govs typically stood firmly on the sided of business against labor unions-> calling out troops to break strikes was considered a legitimate use of police power-> employers could of to court to have labor leaders enjoined from calling or continuing a strike

Total construction: pace and patterns

Chicago was chief terminal spot From 1864-1900, ⅓-½ of construction in the Great Planes Sparseness of population and war induced poverty accounted in part for the backwardness of the SE, but the competition of coastal shipping was also a deterrent to RR growth Rapid industrialization was typically followed by a tapering off in the growth rate RR construction has a strong influence on aggregate demand and business cycles-> these investments reinforced and responded to swings in the business cycles Reached its peak in 1920 with 1 in 20 workers All construction booms ended when financial crises began Productivity advance and slowdown 1. Rapid but slowing pace in construction is also seen in the gains in RR productivity 2. Sustained rapid growth in output relative to inputs was due primarily to 2 sources of productivity advance -Additional gains in economies of scale in operation, accounting for nearly ½ of the productivity advance -4 innovations ~More powerful locomotives and more efficient freight cars (tripled capacity) ~Stronger steel rails (permitted heavier loads) ~Automatic couplers & Air brakes (greater speed and safety) ~Productivity of RRs at 2% exceeded that of the general economy 1.5% Not the cause of economic progress

Structural change and industry composition

Continuing rise of manufacturing after the Civil War-> come to be known as 2nd IR Exact flip flop between manufacturing and agriculture in the percentage distribution of commodities produced in 1869 and 1899-> switched between 53 and 33% Manufacturing output doubled compared to labor input American gains in manufacturing output were also phenomenal relative to the rest of the world. By the mid 1890s, the US became the lead industrial power-> In 1913, the US accounted for more than ⅓ of the world's industrial production 4 new industries new in 1910-> printing/publishing, malt liquor, tobacco, and RR cars It is clear that the "make-up" of manufacturers altered significantly as industrial expansion unfolded. The push and pull of market forces and a high degree of resource mobility rendered such change possible-> accompanied by social change-> cotton goods dropped; machinery industry increased New technologies, new sources and forms of energy

Overview of agriculture's western advance

During the 25 years following the Civil War, the American frontier moved steadily west Spearheading the drive into the western territories were miners and cowboys/ cattlemen

overview of industrial expansion and concentration

During the ½ century between the civil war and WWI, the American economy assumed many of its modern characteristics The most impressive changes were the shift from an agricultural economy to an industrial economy and the speed of productivity advance, especially in manufacturers Agriculture remained the chief generator of income until the 1880s in the US

Returning to the gold standard after the civil war

During= on the greenback standard-> not backed by gold or silver, joked only backed by the green ink Prices in the US had to come down before the US could successfully resume at the prewar exchange rate-> otherwise would have been a rush to buy the relatively cheaper British goods Against return= Democrats and other radical parties-> debtors would suffer during the deflation, and working people would suffer from unemployment For return= Republicans (who had political power) 1. only fair that creditors be paid in gold (bond prices remained strong during the war bc they had received an implicit promise they would be repaid in gold) 2. to leave the monetary base tied permanently to paper money would be dangerous bc the gov can't be trusted with that power 3. Necessary to maintain credibility of the US abroad and access to foreign capital markets, especially London-> adopting the gold standard was typically viewed by investors as evidence of prudent fiscal management and rewarded with lower interest rates Treasury officials had recourse to two courses of action to lower the price level 1. Contracting supply of paper money by running a budget surplus and burning up greenbacks as they came in-> quick-> Contraction Act in 1865 by McCulloch-> led to too severe of deflation 2. Holding money supply constant and allowing the growth of the economy to bring about a gradual decline in prices-> slower and less painful-> gradualist policy-> followed by Boutwell Continuous deflation restored (appx) the 1861 relationship bw US and British prices-> made it possible to resume conversion of greenbacks into gold at the prewar exchange rate Never fully committed to gold until 1900-> 1879-1900= de facto gold standard

Economies of scale and industry concentration

Early business combinations -The first attempts at combination were two simple devices: 1. Gentleman's agreements usually used for setting and maintaining prices 2. Pooling-> dividing a market and assigning each seller a portion -Although these both worked temporarily, typically they were not durable bc high profits encouraged entrants and the temptation to cheat Trust and holding companies -Trust agreement-> the stockholders of several operating companies formerly in competition turned over their shares to a group of trustees and received "certificates of trust" in exchange-> trustees had voting control of the operating companies-> successful as a means of centralizing control of an entire industry -Had to be public records -Once their purpose was clearly understood, such a clamor arose that both state and federal legislation was passed outlawing them -When trusts were declared illegal in several states, many of them simply obtained charters in NJ as "holding companies"-> the prime objective of centralizing control while leaving individual companies free to operate under their several charters, therefore, could be achieved by a relatively simple device

Federal Regulation of RRs

Early in 1887, Congress passed and President Cleveland signed the Act to Regulate Commerce-> chief purpose was to bring all RRs engaged in interstate commerce under federal regulation Interstate Commerce Commission (ICC)-> examined business of RRs, charged with hearing complaints about possible violations, required RRs to submit annual reports, and submit reports of its own to Congress Section 1= RR rates must be reasonable and just Section 2= Prohibited personal discrimination Section 3= Prohibited place discrimination Section 4= Prohibited discrimination against property/ distances The ICC was the first permanent independent regulatory federal agency Elinks Act of 1903-> personal discrimination-> up to this time, only officials/ employees liable for discriminatory actions, now the whole corporation was To close remaining loopholes, Congress passed the Hepburn Act of 1906-> put the burden of proof in court cases on carriers

Agrarian political organizations

Farmers in the West and South dominated 4 rather clearly distinguishable movements 1. The grangers -Formally organized in 1867 and grew rapidly, declined after about 7 years, and virtually disappeared by 1880 -Members held informal political meetings and worked with reform parties to secure passage of regulatory legislation -Successful in several western states for setting an upper limit on the charges of RRs and warehouse/ elevator companies and in establishing regulation of such companies, a new concept in American politics -Munn vs Illinois-> such regulation was constitutional if the business -was "clothed with the public interest" -However, found that states couldn't regulate interstate commerce so turned to federal gov to regulate RRs-> ICC in 1887 -If businesses charged prices that were too high, then farmers would go into business themselves-> most successful type of business they formed= cooperative which formed for the sale of general merchandise and farm implements to Grange member owners-> established to process farm products, and the first large mail-order house was established -Against big cities, monopolies, tariffs, and low prices 2. The Greenback Movement -Disappointed in Grange for not making more decisive gains -Centered on the demands for inflationary action -Received a very small percentage of popular vote in election of 1880 -Worth remembering for 2 reasons 1. Constituted the first attempt made by farmers to act politically on a national scale 2. Central tenets later became the most important part of the Populists' appeal in the 1890s 3. The Alliances -Independent clubs that coalesced into state "alliances" -Northwestern Alliance & Southern Alliance-> attempt to merge in 1889 but failed -Advocated monetary reforms similar to the Greenback parties and favored gov regulation and cooperative business ventures like the grangers -Favored gov ownership of transportation and communication facilities 4. The Populists -General James Weaver -Emerged from 30 yrs of unrest that was chiefly agricultural but had urban connections -To its supports, it was something more than an agitation for economic betterment: it was a faith -Agitation against monopoly control-> felt that only through gov control of the monetary system and through government ownership of banks, RRs, and the means of communication could the evils of monopoly be put down -Gov-owned firm would provide the "yardstick" by which to measure the performance of private firms

The beginnings of federal assistance to agriculture

Federal assistance to agriculture before WWI was designed to compile and disseminate information to help the individual farmer increase productivity; it was not designed to alleviate distress, as was the later New Deal legislation The department of agriculture -Until 1920, had three principal functions 1. Research and experimentation in plant exploration, plant and animal breeding, and insect and disease control 2. Distribution of agricultural information (education) 3. Regulation of the quality of products through the authority -Chief contribution= ability to convince farmers of the value of "scientific" farming Agricultural education -Attempts to incorporate the teaching of ag subjects into the education system began locally, but federal assistance was necessary to maintain adequate programs -Morill Act of 1862-> gave impetus to ag training at the university level -Hatch Act of 1887-> federal assistance to state agricultural experiment stations -Smith hughes vocational education Act of 1917-> funds to states that agreed to expand vocational training at the high-school level in ag, trades, and home ec

Bank panics and depressions

First postwar panic occurred in 1873-> failure of the Jay Cooke and company in September-> excessive advances to the Northern Pacific Railroad and deposit losses forced the company to close-> recession= 65 months, one of the longest on record Minor banking panic in 1884 and 1890 More severe financial panic in 1893-> failure of the Philadelphia and Reading RR & the National Cordage Company-> sent stock market into a tailspin-> wave of bank failures hit the South and West-> excessive real estate speculation in preceding years played a role in undermining banks-> referred to the Great Depression before the real one Coxey's Army-> unemployed marched from the Midwest to Washington demanding a public works program to provide jobs and for the issue of paper money-> didn't happen-> but the discovery of new supplies of gold in South Africa and other places did produce a significant monetary stimulus that helped the economy recover Banking panic of 1907-> San Francisco earthquake-> British fire insurance companies had to pay out large sums of gold-> Bank of England raised its interest rate to replenish its gold reserves, starting a cascade of rising interest rates and slowing economies around the world-> Knickerbocker Trust Company in NY failed bc of the growing apprehension about the state of the economy-> soon other institutions with connections to Knickerbocker closed their doors-> JP Morgan tried to help-> specie suspension= longer than ever before-> recovery went much better than the one from 1893 for some reason

State regulation of the RR

First waves of RR regulation came at the state level in the early 1870s, largely in response to increasing evidence of discrimination agains persons and places Granger movement: the demand for passage of measures regulating RRs, grain elevators, and public warehouses The pro rate clause in the Granger laws prohibited RRs from charging short shippers more than their fair share of costs. Both personal and place discrimination were generally outlawed, although product discrimination was not Opposition-> grain elevators argued restrictions lead to loss of wealth-> settled in the Munn cases where Supreme court said that state regulation of public utilities was constitutional Wabash, STL Pacific Railway Company vs Illinois-> severely limited what states could regulate

Unions, employers, and conflict 1860-1914

Following the civil war, unions grew in numbers and strength American Federation of Labor captured leadership of most union workers after failure of Knights of Labor 1. AFL was an amalgamation of two federations:Federation of Organized Trades and Labor Unions & American Federation of Labor 2.Under Samuel Gompers, the AFL's first president, membership rose to 1.5 million in 1905 3. Underlying principle was to control job opportunities in each craft Labor's organizational gains were won as a result of prolonged, sometimes violent struggle, which was still unresolved by 1920 The most violent conflicts between management and labor occurred in the last quarter of the 19th C-> the climax of this series occurred in 1877, a zenith of turmoil that had begun with RR strikes in Pittsburgh and had spread throughout the country-> "Molly Maguires"-> secret society of Irish American miners who were blamed for numerous murders and other outrages Beginning in 1902, employers began a serious drive to sell Americans on benefits of the "open shop" (factories where workers were not required to join the union)-> in response, Samuel Gompers and other labor leaders began a counteroffensive through education and propaganda-> affiliating with the National Civic Federation (an association that included wealthy eastern capitalists, corporate officers, editors, professionals, and labor representatives), AFL leaders sought to elicit a more favorable attitude from the electorate-> effectiveness= difficult to say-> at any rate, the core of employer opposition remained almost as solid as ever, particularly among industrialists of the Midwest Union activity in the US was in general largely apolitical, at least at the national level (especially compared to Europe)-> no National Labor Party emerged as a political entity, and until the New Deal, unions could rarely rely on help from the federal gov

Federal land policy

Homestead act in 1862-> however, homestead was impractical for farming (not big enough)-> between 1870 and 1900, less than 1 acre in 5 added to farming belonged to homesteads-> later versions of homestead acts fixed this-> ratio jumped to 9 in 10 between 1900 and 1920 Timber-Culture Act of 1873-> passed ostensibly to encourage the growth of timber in arid regions-> made 160 acres of free land to anyone who would agree to plant trees on 40 acres of it Desert Land Act of 1877-> 640 acres at $1.25 an acre could be purchased by anyone who would agree to irrigate the land within 3 years-> lacked clear definition of irrigation Timber and Stone Act of 1878-> sale at $2.50 an acre of valuable timber and stone lands in Nevada, Cali, Oregon, and Washington Timber Cutting Act of 1878-> authorized residents of certain areas to cut trees on gov lands without charge if the timber was to be used for agriculture, mining, or domestic building purposes-> later removed because greatly abused General Revision Act of 1891-> made the changes Preemption Act-> squatting-> allowed the first rights of sale to settlers who arrived and worked the land before public sales were offered Dawes Act-> nearly 100 million acres from Indian territories were opened for purchase Between 1862 and 1904, acres homestead exceeded gov cash sales to individuals-> however, if you count purchases from RRs and states, ultimate holders of land bought twice as much in that time as they obtained free through homesteading

Phase 1: Horizontal Mergers (1879-1893)

Horizontal combination of industries that produced old staples of consumption Horizontal mergers combine firms that produce identical or similar products Many small manufacturers merged to prevent ultimate failure-> failure coming from: RRs-> demand for consumer goods-> expansion of facilities-> excess capacity/ production-> prices drop a lot Standard Oil Company of Ohio, American Sugar Refining Company, and US Rubber company formed this way Of the firms that became large during the first wave of concentration, the most spectacular was Standard Oil -Rockefeller entered in oil business in 1862, forming a series of partnerships before consolidating them as the Standard Oil Company in 1869 -By 1878, Standard Oil either owned or leased 90% of the refining capacity of the country -To consolidate the company's position, a trust agreement was drawn in 1879 according to which 3 trustees were to manage the properties of Standard Oil for the benefits of the stockholders -Went from trust to a holding company after Supreme Court broke up trust Standard oil and predatory pricing (economic insight)-> Ida Tarbell was Rockefeller's biggest critic-> publish The History of the Standard Oil Company in 1904-> public outcry to this led to Supreme Court's decision to break up trust-> claimed it used predatory pricing-> Rockefeller systematically ruined his competitors by selling kerosene at a price below the average cost of production until his competitors were driven into bankruptcy-> he would then buy those competitors for cheap and make back everything he lost selling at such low prices-> counterargument: why not offer to buy the competitor at a price that includes part of the increased profits from monopoly?

Labor's gains and the unions

In 1920, the American factory worker could look back on 66 years of substantial improvement-> real wages risen, shorter hours, more laborers protected by law, ideas of social security being discussed, reduced hardships from industrial accidents At its peak in 1886, Unions had organized about 8% of nonfarm labor force-> unions could do little to directly raise the avg level of real wages or improve the typical conditions of work-> could raise wages in unionized sectors, but by restricting the supply of labor in those sectors, they had the undesired effect of increasing the supply of labor and lowering wages in non unionized sectors On the eve of WWI, unions could lay claim to some important gains for their members-> power of foreman, reduce arbitrariness in hiring and firing, substantial wage differentials for their members (higher for skilled), and became an important voice for labor in the political system-> Labor Day in 1894; Department of Labor in 1913 Perhaps the most important result of the growing political power of labor was the change in rules governing compensation to workers for injuries received on the job-> employer previously had 3 powerful defenses -Worker had known and accepted the risk -Worker had not been reasonably careful -Worker had been injured bc of the negligence of a fellow coworker Between 1910 and 1930, labor won changes in state laws that first eliminated these defenses and eventually required that all workers be compensated-> insurance programs established-> employers often approved because the laws reduced conflict with workers and could force some of the cost of insurance back on the workers in the form of lower wages Side effects sometimes differed from what was intended-> ex. Rate of fatal coal accidents increased bc workers had a smaller incentive to avoid accidents and bc employers found it cheaper to pay the additional claims than to try to reduce accident rates For labor as a whole, it is fair to conclude that labor's 19th C progress owed more to economic growth and rising productivity than to the unions' strength

The supreme court as a trust buster

In Roosevelt's campaign of 1904 he promised vigorous prosecution of monopolies-> during his administration, suits were filed against several great companies (ex. American Tobacco Company and Standard Oil)-> decision in 1911 1. Gave great weight to evidence of intent to monopolize-> ex. Oil trust had achieved its powerful position in the market by unfairly obtaining rebates from the RRs and by acquiring refining companies brought to terms after price wars 2. Established "rule of reason" with respect to restraints of trade-> gave Court ability to exercise judgement 2 decisions by Court made position of large corporations safer 1. US vs US Shoe machinery company of NJ-> court held that the company's power was not illegal bc the constituent companies it had acquired had not been competitive 2. US vs US steel corporation-> court found that the corporation possessed neither the power nor the intent to exert monopoly control The Gary Dinners 1907-> price leadership, even if it lead to higher prices, was not the same, the court decided, as a monopoly-> the gov's assertion that the size of the corporation made it a potential threat to competition in the industry was denied

Land grants, financial assistance, and private capital

In contrast to the antebellum period, subsequent financial aid from the federal government exceeded the aid from states and municipalities Most signficant kind of federal subsidy was the grant of lands from the public domain The alternate-section provision was made in the expectation that the gov would share in the increased land values that would result from the new transportation facilities Congress required that companies that received grants transport mail, troops, and government property at reduced rates-> made its money back this way (estimated reducations of more than $500 million) Subsidies added to the profits and, thus, to the incentives of RR builders until the early 1870s, but the bulk of both new and replacement capital came from private sources From the 1850s on, the investment banker played a crucial role in American finance, allocating capital that originated in wealthy areas among those seeking it-> ex. J.P. Morgan's house grew rich and powerful by selling RR securities particularly in foreign markets In 1914 ⅕ of the RR securities were owned by England

Natural resource conservation: the first stages

In most areas of new settlement, standing timber was often an impediment rather than a valued resource (dif then Europe)-> as late as 1850, more than 90% of all fuel-based energy came from wood-> by 1915, less than 10% as timber grew increasingly scarce Western advance of the RR and western shift of population brought new pressures on limited western and distant easetern supplies-> moreover, the price of uncut marketable timber on public lands was zero for all practical purposes-> as a result, much waste occurred, and various environmental hazards were made more extreme Land, water, and timber conservation -General revision act of 1891-> repealed measures that had been an open invitation to land fraud, making it more difficult for corporations and wealthy individuals to steal timber and minerals -Roosevelt presidency in 1901-> widespread concern in Congress and throughout the nation over the problem of conservation-> several major achievements 1. Bureau of Forestry (became US Forest Service)-> national forests-> conservation 2. Lands containing 75 million acres of mineral wealth were reserved from sale and settlement 3. Explicit recognition of the future importance of waterpower sites 4. Principle was accepted that it was a proper function of the federal gov to implement a program of public works for the purpose of controlling stream flows -Although such achievements seem modest, it should be recalled that in the first decade of the 20th C, many people bitterly opposed any interference with the private exploitation of the remaining public domain -Considerable taxpayer cost

Immigration: politics and economics

In the 1870s, more than 80% of immigrants came to America from northern and western Europe-> by 1910, 80% was arriving each year from southern and eastern Europe 20th C Americans seized on the assumed "inferiority" of southern and eastern Europeans as an argument for excluding them The new immigrants supplanted the old for two reasons 1. As soon as economic opportunity grew in the old areas, America became less attractive to the nationals of those countries 2. Rapid improvement in transportation during 1860s and 1870s-> opportunities created by the removal of transportation barriers were irresistible New arrivals, whatever their national origins, usually filled the ranks of unskilled labor Foreign workers and american labor

Phase 2: The Vertical Mergers (1898-1904)- The "Chandler Thesis"

In the latter part of the 19th C, industry after industry became dominated by giant vertically integrated firms Ex. meat packing and cigs In steel, the Carnegie Company had by early 1890s consolidated its several manufacturing properties into integrated firm that owned vast coal and iron deposits-> When Carnegie threatened to integrate forward into finish products, he precipitated action toward a merger by the Morgan interests (Federal Steel company was J.P. Morgan's started in 1898)-> result= US Steel Corporation-> largest corporation in the world Why did these giant, vertically integrated firms come to dominate so much of American manufacturing? (Alfred Chandler answers) -Technology-> factories constructed to take advantage od continuous flow technologies minimized costs of production when they could operate continuously, any interruption of the inflow of raw materials or the sale of the final products sent costs upward -If a firm was successful in building a monopoly position in an industry, it could increase its profits further by restricting output and raising prices US led the way in the development of these giant corporations bc -Huge internal market that was continuously expanding -Population growth/ urbanization -Successful new technologies -Abundance of natural resources-> other countries didn't have -Patent system

The expansion of land under cultivation

Kansas, Nebraska, Dakotas-> later Montana and Colorado-> probs didn't travel far Total number of farms and farm acres rose from 1860- 1920-> the decades of the sharpest advance were the 1870s and 1890s-> made possible by a policy of rapidly transferring ownership of land to farmers and other users- by rapidly "privatizing" government land

The commitment to the gold standard

Only countries on the silver standard experienced rising prices Why did prices fall?-> the basic problem was the the demand for money (and ultimately gold) was growing faster than the supply-> the rapid increase in economic activity, growing financial sophistication, and the addition of more countries to the gold standard all increased the demand for gold Although the silver acts of 1878 and 1890 made certificates redeemable in either gold or silver, in practice, Treasury authorities redeemed them in gold if it were demanded By early 1893, the gold drain had become serious-> appeared certain that the de facto gold standard would have to be abandoned-> chiefly by selling bonds for gold, the administration replenished the gov's reserve when it appeared the standard was about to be lost-> increasing commodity exports at last brought an influx of gold from abroad in the summer of 1896, improving confidence to the point that the gold standard was saved 1896 election-> WIlliam Jennings Bryan (Democrat) stood for the free coinage of silver gained support in West and South-> "Cross of Gold" speech->opposed high tariffs which cost him the urban vote-> McKinley (Republicans- "gold bugs") stood solidly for the gold standard gained support in North and East The Republican victory of 1896 was not followed immediately by legislation ending the controversy bc free silver advocates still held the majority in Congress Ironically, the increase in the supply of gold after the election (from South Africa and many other areas of the world along with new methods for processing) accomplished the goal of the silverites- expansion of the money supply and inflation Gold Standard Act of 1900-> dollar was defined solely in terms of gold, and all other forms of money were to be convertible into gold Milton Friedman argued that eliminating the silver dollar in 1873 was a mistake the produced unnecessary deflation, but that by Bryan's time, it was probably too late to do much about it-> a firm commitment to either standard would've been better than the long, drawn-out battle that took place

Hard times on the farm 1864-1896

Period of agricultural hardship and political unrest- as opposed to 1896 to 1920 which was a period of sustained improvement Rates of increase in this time were painfully slow Conditions were particularly hard on the frontier, where the combination of dreary surroundings and physical hardship compounded the difficulties of economic life, which included declining prices, indebtedness, and the necessity of purchasing many g/s from industries in which there appeared to be a growing concentration of economic power The price of farm products was falling relative to other products from 1875-1895-> doesn't mean real farm income was falling bc the terms of trade refer only to price and doesn't take productivity into account Why were terms of trade worsening?-> one reason was rapid increase in the supply of agricultural products-> all over the world, new areas were entering the competitive fray->demand change= continued increase in the domestic population (but proportion of income spent on farming products dropped)-> demand change= rise in demand abroad for US crops-> exports of farm products during these decades helped expand agricultural markets, but they were far from sufficient to alleviate the hard times on the farm Farmers not inclined to see challenges as a result of impersonal market forces-> instead traced their problems to monopolies and conspiracies 1. Bankers who raised interest rates, manipulated currency, and then foreclosed farm mortgages 2. Grain elevator operators who charge unaffordable rates Industrialists who charged high prices for farm machinery and consumer goods 3. RRs that charged monopoly rates on freight Farmers complaints largely unsupported-> prices of industrial products and freight costs fell relative to prices of farm products (although was some discriminatory monopoly pricing on some short hauls)-> interest rates charged on midwestern farm mortgages declined over the decades-> high interest rates were a cause of high lending risks rather than monopoly power Part of the explanation for agricultural discontent in this era was the process of commercialization and globalization that created a world in which the farmer was subject to economic fluctuations that he could neither control nor even fully comprehend

The impact of federal land policy

Principal goals of federal land policy= gov revenues, wide accessibility (fairness), and rapid economic growth-> varied in importance overtime with the latter two gaining significance Most outstanding feature of American land policy= rapidity with which valuable agricultural, mineral, and timber lands were transferred to private hands The goal of making land widely accessible was largely achieved (especially in later 1800s), but large tracts of land did go to corporations and wealthy individuals-> special interests favored and large grants often rationalized Good land often fraudulently obtained by mining and lumber companies-> however, ultimately helped transfer resources to large companies that could take advantage of economies of scale Until 1970s, people thought this federal land policy was inefficient-> high rate of failure among the least competent on the land & rapid distribution of the public domain laid the groundwork for modern agricultural problems by inducing too much capital and labor into agriculture, thereby impeding the process of industrialization-> now seen as not too bad-> real incomes in the new agricultural areas outside the South grew at rates comparable with those in manufacturing and average rates of return on investments in these areas equaled or exceeded returns on other contemporary investments A national market (economic insight)-> one should at least recognize the powerful economic argument that the right policy was the one followed: getting federal land rapidly into the hands of those who could use it productively

The first steps towards consumer protection

Pure Food and Drug Act and Meat Inspection Act passed in 1906-> both dramatic interventions by federal gov to ensure quality standards of products for unwary customers-> partly spurred from Upton Sinclair's novel the Jungle which pointed out lack of sanitation in meat facilities Pure food and drug act-> initially trivial in effect, calling simply of federal regulation of the content and labeling of certain food and medicinal products 1906 Meat inspection act was an amendment to the one of 1891-> bc the new refrigeration technology dramatically lowered the costs of shipments, Chicago meatpacking companies vastly undercut local butchers' prices-> to fight back, local butchers attempted to discredit refrigerated beef Big packers welcomed gov response-> augmented their own quality assurances and gave each firm clear and accurate public information on the shipments of every other firm-> allowed firms to engage in pooling and market sharing arrangements

Capturing the regulators?

RR industry initially not pleased with ICC Richard Olney said take advantage of it RR managers did eventually use the ICC to stabilize profit rates and secure other advantages of cartel management The capture thesis is most likely to apply when the costs of a decision favoring the regulated industry are widely diffused

Unscrupulous financial practices

RR promoters sometimes indulged in questionable, even fraudulent, practices Funds raised by RRs could be directly transferred to Construction companies The owners of the construction companies were often "insiders"- that is, officers and directors of the RR corporation Common-> all the transcontinentals used it Most notorious inside company= Credit Mobilier which built the Union Pacific By inflating the cost of construction, the insider construction companies saddled the RRs with large debt burdens that came back to haunt them, especially in the depressed 1890s James Garfield was Pres-> Congress paid off to turn their heads in forms of cheaper stocks

RRs and economic growth

Shumpeter argued that growth was a dynamic process of applying major technological advances, both invention and innovation, and that the RR epitomized these growth-generating forces Fogel studied "axiom of indispensability"-> "the indispensability of the RRs to American economic growth was elevated to the status of an axiomatic truth" Furlow and Fogel showed the RR didn't make or break the economy Social savings from rail transport (economic insight)-> total RR revenues were less than 10% of GNP in 1890, so it would take some extreme assumption about the elasticity of demand and the increased costs of water transport to push the social savings to a significant share of GNP The higher costs of carrying RR passengers and freight by older technologies was figured to be about 4% (in the test year) When looking only at direct transport costs, one finds that the costs of shipping goods by water were often lower than shipping them by rail-> the most important additional cost of water, however, was that is was slower in all seasons and not available at all in winter Fogel-> social savings should be measured as the difference between GNP in the US and GNP in the "counterfactual" US that had fully adjusted to the absence of the RR -Did find that the "boundary of feasible agriculture" had been pushed outward by the RRs -Canals are built, roads improved, development of trucks and automobiles accelerated= counterfactual world -Lively debate Overall, found an upper-bound estimate of the social savings came to about 7.3% of GNP in 1890 -Transportation of agriculture products= 1.4% -Rail passengers= 3.1% -Savings over water= 2.8% Failure to build the RR would have simply postponed growth for 2 years

The income tax

South and west's answer for raising federal revenues= income tax, not tariff In 1894, Congress passed income tax legislation, only to have it declared unconstitutional in 1895-> overcoming the supreme court would require an amendment to the Constitution, which became possible as support for the income tax continued to grow Two categories of spending proved extremely popular and increased support for a tax to fund them-> more generous army pensions and increased military spending, particularly on the navy In 1909, Congress passed an amendment to the Constitution providing for an income tax-> ratified in 1913-> didn't cause the great expansion of gov spending that occurred later in the century, but did make it possible

New technologies

Technological changes, investments in human capital, new energy sources that widened markets and brought new organizational business structures and economies of scale, and shifts in resources from lower to high productivity uses (ag to mftg.) all combined to produce these exceptional long-term trends The advance of each industry was based on invention and innovation, the dual components of technological change Adding to these advances in plant size and productivity were the infrastructure of a transcontinental RR system and a national telegraph network Steel industry innovations of the 1860s (economic insight)-> new technologies often diffuse slowly-> by 1870, more than half of all steel was produced by the new methods-> open-hearth lagged behind until 1900 and surpassed Bessemer in 1910-> Bessemer process (1st in 1850s) and the open-hearth process-> several considerations made the open-hearth process more economical than the Bessemer process (dramatic increases in furnace size and efficiency of operation; integration of process that produced great savings in heat) The most rapid advance per worker was in men's clothing-> during the civil war, mechanization of men's clothing increased rapidly as standardized sizes were derived from measurements taken by the army for soldiers' uniforms Boot and shoe industry= 2nd fast growing-> goodyear welt process for attaching soles in 1875-> increasingly mechanized after that Improvements in steel processing and in nonferrous metals made possible rapid advances in metalworking machinery During the 1890s, there were two major technological advances 1. Machine tools became automatic or semiautomatic 2. Compressed air and electricity were used to drive high-speed cutting tools and presses By 1919, metalworking industry had increased in power as well as precision The industry played the central role in diffusing technical knowledge from its point of origin to other sectors of the economy

National monetary commission

Temporary suspension of cash payments and issuing clearinghouse certificates helped dampen panics, but they did not prevent them Fluctuations in interest rates angered farmers-> seasonal fluctuation-> rates rose just when the farmers had the greatest need to borrow Aldrich-Vreeland Act of 1908-> provided for the organization of "National currency associations" composed of 10+ banks in sound financial condition-> purpose to issue emergency bank notes against the security of bonds and commercial paper in their portfolios-> established National Monetary Commission who recommended a central bank along the lines of the Bank of England and other European central banks-> would hold the reserves of commercial banks and have the power to increase those reserves through its own credit-granting powers

Government regulation of the RRs

The RRs engaged in a variety of discriminatory pricing policies that while understandable and sometimes justifiable from an economic viewpoint, nevertheless stirred considerable opposition from customers who felt victimized for discrimination Forms of discrimination -Long haul vs short haul -Backhaul problem: if traffic was predominantly in one direction, shipments on the return route could be made at much lower rates because receiving any revenue was better than receiving nothing for hauling empty cars -Industry and location Possible economic justification for these practices: by discriminating among customers, the RR may have been able to increase its total output and lowered costs Oppositions to the RRs was heightened by the trend towards price fixing To provide a stronger basis for maintaining prices, Albert Fink took the lead in forming regional federations to pool either traffic or profits Shippers and the general public naturally resented pooling as well as price discrimination-> the result was widespread support for gov regulations of the RRs

The crime of 73

The failure to include the silver dollar in the act of 1873 began a furor that was to last for a quarter century Congress passed several compromises -Bland-Allison Act of 1878-> provided for the coinage of silver in limited amounts-> for the next 12 years, silver prices consistently fell despite US purchases-> neither the producers of silver or the debtors who wanted inflation were appeased -Sherman Silver Purchase Law in 1890-> secretary of treasury directed to make a monthly purchase-> issued treasury notes to pay for this which were redeemable in gold or silver-> authorized the purchase of almost double that of the previous law-> world silver supplies kept expanding so rapidly that the market price of silver resumed further sharp declines almost immediately-> repealed in 1893 by Cleveland The Fisher Effect (economic insight)-> as debtors, farmers would benefit from inflation, but perhaps not by as much as they hoped-> inflation would lead to higher interest rates-> i= r +p -> where i= market interest rate, r= real rate of interest, p= rate or price exchange

Wholesaling

The full service wholesale houses that evolved after 1840 bought goods on their own account from manufacturers and importers to sell to retailers, frequently on credit From 1860 to 1890, full-line, full-service wholesale houses were without serious competitors in the business of distributing goods from manufacturers to retailers-> in the 1880s and increasingly after 1900, they faced competition from the marketing departments of large manufacturers The reason for the relative decline in wholesaling lay in the structure of emerging large-scale producers-> continuous processing-> ex. James B Duke installed two Bonsack cigarette making machines that worked continuously and built an extensive sales network that kept an eye on local advertising and worked closely with the other departments in the firm to schedule the flow of cigs from machine to consumer The marketing departments of firms like Duke's helped to establish and maintain the brand name of the product, particularly by stressing better quality or unique services Brand names were the way the market protected consumers, far removed from producers, from inferior merchandise Credit, installment purchases, and race (perspective)-> although purchase on credit from country stores was common in the 19th century, buying on installment was uncommon until the early 20th C-> blacks took on more debt than whites, and blacks were much more likely to use installment payments-> because merchants were reluctant to give blacks store credit-> such credit was informal and not tied to specific items that could be repossessed-> installment contracts were formal and could be used for legal repossession

Foreign workers and american labor

The great majority of immigrants entered the labor markets of New England, the Middle Atlantic states, and Ohio, Michigan, and Illinois, where they concentrated in the great industrial cities Working for low wages and in crowded factories and sweatshops and living in unsanitary tenements, immigrants complicated such urban social problems as slums, crime and delinquency, and municipal corruption Difficulties did not result from discrimination in hiring/ wages-> relative earnings were approximately equal when adjusted for skill differences-> European immigrants who worked in American mines were the exception (paid in scrip that could only be used at company stores) American business profited greatly from an inexhaustible supply of unskilled and semiskilled workers-> manufacturing and mining companies profited most of all: immigration enabled them to expand their operations to supply growing markets-> also meant more customers for American retailers The rapidly increasing supply of unskilled labor, however, kept wage levels for great number of workers from rising as fast as they would have otherwise Promotion ladders were common-> unskilled to semi to skilled American workers gained as consumers of the lower-priced manufactured products made possible by cheap labor In some cases, the fear that immigrants posed a threat to the wages of American workers led to repeated efforts to restrict immigration Contemporary issues and lessons from history (new views)-> 2000-2010 Mexican and Latin American immigrants-> many argued these new immigrants haven't made the kinds of advances that past European immigrants made because of their resistance to assimilation-> not so much true Immigration in terms of supply and demand (economic insight)-> most workers probably opposed immigration bc they presumed that skilled and unskilled workers were substitutes in production instead of complements

Urbanization

The percentage of the population living in urban centers nearly doubled between 1800 and 1840, and again between 1840-1860, and again from 1860-1900 By 1900, 10% of the population lived in NYC, Chicago, and Philadelphia Before 1860, urbanization resulted primarily from growth of interregional trade spurred by the transportation revolution Urbanization after the Civil War was different-> the RR and other advances in transportation and communication made factories and cities nearly synonymous by the late 19th C-> many people coming from abroad Cities in the Midwest and the South grew phenomenally As automobile came into common use after 1910, large towns and cities gained at the expense of small towns and villages; by 1920, retailers in urban centers were attracting customers from distances that had been unimaginable just a few years earlier-> reflected new ways of distributing goods

Tariffs for revenue and protection

The tariff declined in the years leading up to the civil war, ratcheted upward during the civil war, remained at a high level until the turn of the century, and then declined once again This patterns is explained by two factors-> the need of the federal government for revenue and political pressure to maintain high tariff rates to protect American producers from foreign competition Revenues-> for the war and late for paying back bonds that financed the war and veterans benefits Republicans favored a high tariff which protected American manufacturers and provided revenues for Union veterans and their widows Democrats favored lower tariffs because farmers and small business people who supported the party saw tariffs simply as a policy that raised the cost of living The national prosperity of the 15 years before the Civil War seemed to refute protectionists' argument that a healthy economy required high tariffs For 25 years after the war, Dems tried to reduce war tariffs with little success-> yet there was a growing suspicion that high levels of protection not only made consumer goods cost more, but also fostered the rapid growth of business monopolies and oligopolies The prosperity between 1897 and 1914 made it easy to defend high tariffs-> protectionists argued that the country was experiencing a high level of employment and economic activity because tariffs were high-> not really true As the populace felt the pressures of rising living costs in the first decade of the century, voters blamed tariffs In the campaign of 1912, the Dems promised a downward revision of import duties, which was carried out in the Underwood Simmons Bill of 1913-> result was a simplified tariff structure, still of protective significance, with avg duties about half of what they had been for several decades Infant industry debate-> helps protect but may never grow up-> tariffs were largely profit motivated from special interest groups rather than protectionist While the overall loss from tariffs was small, the gains and losses for particular interest groups resulting from changes in the tariff could be large

the international gold standard

The years bw 1896 and WWI were the heyday of the gold standard Encouragement of free flow of goods across international borders 1. Prices rose at a moderate rate of about 2% per year 2. There was really only one international currency- gold Deflation (new view)-> the experience of the US after the Civil War shows that deflation, at least a mild form of it, may not be such a bad thing-> real GDP per capita rose at an annual rate of 1.4% per year and total industrial output rose at 4.8% per year-> if a lender and a borrower entered into a contract without factoring in the deflation, the lender would receive an unanticipated profit at the expense of the borrower Costs 1. Resources used to mine gold could have been used elsewhere under a paper standard 2. During the financial crisis, adherence to the gold standard made it difficult to supply additional money to financial markets

Dual banking system

To make the national banks appear more sound than state banks, stiff legal reserve requirements were mandated, and double the liability was imposed on the stock of national banks (if the bank failed, stock holders would have to contribute a second time to reimburse the creditors of the bank)-> important second layer of protection for noteholders Initial conversion from state to national status was low-> levied taxes against state bank notes-> up to 10% by March 1865-> then the pace of conversion soared Now, state banks could do well issuing only deposits (and not bank notes)-> less onerous regulation now too-> US ended up with a dual banking system (national and state) Bankers weighed the advantages of membership in the national system (prestige that attracted depositors and the right to issue notes) against the costs (stricter regulations) and chose the charter that promised the most profits-> state and federal legislators had to make this decision as well The state banks got along without issuing bank notes, and many national banks decided not to issue any-> debate whether the ability of ntl banks to issue notes led to higher profits Interest rates in different parts of the US differed considerably in the years following the Civil War with rates in rural ares considerably above those in financial centers-> the rates fell and differences narrowed for a number of reasons 1. The recovery of the southern financial system 2. Increased competition gradually eroded the monopolies in the rural national banks-> some increased competition from state banks

Overview of money, prices, and finances in the postbellum era

Two issues- deflation and banking panics- overshadowed all others and produced repeated attempts to reform the monetary system. Debtors suffered from protracted deflation, and farmers were particularly hit hard-> wanted inflationary schemes Era of the classical gold standard-> benefits= fixed exchange rates and confidence in the long-run value of money-> costs= it was difficult to adjust the money supply in response to adverse trends in prices or incomes Although the problems in the financial system were easy to identify, reaching agreed on solutions was far harder The legal restrictions on banking had an important impact on the growth of industrial firms hungry for financial capital By the end of 1913, Wilson signed the Federal Reserve Act-> not a foolproof answer to the nation's problems

Mass production

Two relatively new ideas spread like wildfire after the Civil war: 1. Continuous flow production -Some say this is the distinguishing factor from 1st IR -Ex. Chicago meatpackers set up long "disassembly" lines in which the carcasses were continuously moved past fixed stations where they were butchered and turned into a wide range of final products -Henry Ford devised the first progressive, moving assembly line systems for large, complex final products 2. Scientific management -Large scale new industrial giants required new forms of management-> RRs led the way -Daniel McCallum, president of the Erie RR-> managers' authority to make decisions should match their level of responsibility, internal reporting systems (accounting), performance evaluations -Frederick W Taylor argued worker efficiency could be improved by ~Analyzing in detail the movements required to perform a job ~Carrying out experiments to determine the optimum size and weight of tools and optimum lifts ~Offering incentives for superior performance These productivity enhancing improvements helped push real wages upward, softening somewhat workers' resentment to change and faster product processing

New forms and sources of energy

Between 1860 and WW1, there was a remarkable transition from reliance on the power of wind and water and the physical exertion of humans and animals to other sources of energy During the 1870s, steam surpassed water as a source of power-> because of the ever increasing efficiency of steam engine and the opening up of vast and apparently inexhaustible supplies of coal as a result of the transportation revolution At the time when steam engines had gained unquestioned ascendancy, electricity appeared on the scene-> brought about a remarkable improvement in the utilization of the older sources of energy By WWI, ⅓ of the nation's industrial power was provided by electricity, far more than any other country The raw materials that produced energy were changing as well as the forms in which it was used- -1890- coal was source of 90% of energy for manufacturing -But petroleum was rapidly growing more important, and hydropower was recovering

Overview of commerce at home and abroad

Between 1880 and 1920, the US became the leading manufacturer in the world in terms of total production and output per worker Dependable brand name products, heavily promoted through advertising, played an increasingly important role in the distribution of goods

Children as workers in the postbellum era

Concerns about the employment of children also increased in pre-WWI years The conditions in which children worked were sometimes unsafe and harsh by modern standards The employment of children deceased primarily bc advocates for children, including religious groups and trade unions, worked to obtain protective legislation at the state level State regulation common in 1920s Federal legislation attempt in 1916 (Supreme Court struck down)-> not effectively controlled by the federal gov until the 1930s when the Supreme Court reversed its earlier decision

Hours and wages in postbellum

Considerable progress 1910= 55 hr weeks-> 1920= 50-> skilled trades fared better (reached 40 hr weeks by 1920s) Both daily and annual earning in manufacturing increased about 50% between 1860 and 1890-> same with real wages and earnings Wage differentials among industries were great in both 1860 and 1890-> the highest wage industries paid more than twice as much as the lowest-> reflected differences in skill and in the terms and conditions of work In the decades after 1890, real wages continued to march upward In the long run, the growth of real income was strong despite the rapid growth of the labor force from natural increase and immigration Restricting immigration (perspective)-> 1864 Contract Labor Law: had the practical effect of bringing in laborers whose status could be scarcely distinguished from that of indentured servants-> first to feel the effects of the campaign for immigration restriction were the Chinese bc Californians feared cheap and unfair competition-> Chinese Exclusion Act of 1882-> Literacy requirement in 1917 and permanent bars to the free flow of migrants into the US in 1920

The US in an imperialist world

In the early 1880s, western europeans, although never shy about extending their control over other peoples, became obsessed with a desire to own more of earth's surface-> by the end of the 19th C, not much of the world was left to colonize-> the costs of the British Empire to the British people outweighed the economic benefits Through most of the 19th C, the US remained somewhat apart from the race to acquire colonies in other parts of the world-> concentrated on westward expansion in North America American imperialism began with the Spanish-American War in 1898 -American sympathy for the Cuban revolutionaries fighting for independence from Spain rose in the late 1890s -Considerable opposition going to war, especially in the business and financial communities-> worried about the value of Spanish securities held by American banks, the value of American investments in the Cuban sugar industry, and that inflation would undermine America's commitment to the gold standard -Decisions to be made about Cuba, Puerto Rico, Guam, and the Philippines Phillipine-American War 1899-1902 -It was important to America's economic interests to maintain an "open door" in China and to have an American flag only 500 miles from China -Didn't win In the Western Hemisphere, the US in 1903 acquired a perpetual lease of the Panama Canal Zone Roosevelt Corollary -The US might be forced to exercise police power in flagrant cases of wrongdoing or impotence by countries in Latin America-> Otherwise, Europeans might intervene -Ex. Stepped in when Dominican Republic could not meet its financial obligations Mexican Revolution -Troops crossed onto Mexican soil in 1914 and 1917 -1917- seized Pancho Villa -Turmoil subsided temporarily with Mexican constitution in 1917 The impact of the Spanish-American war, the Phillipine-American war, and the Roosevelt Corollary are clearly visible on spending-> spending ratchets upward with the Spanish-American war, but never falls back to what it was before Economic motives invoked to justify imperialism-> provided an outlet for American capital and a cheap source of raw materials-> little evidence to back that up-> more likely explanation could be based on the role of special interests anxious to collect debts or protect particular interests Non economic rationale-> the US had to play a role in the great game of international power politics and to do so, the US needed overseas bases and colonies, especially coaling stations for its fleets Critics of imperialism contended that investors seeking profits in the countries of Central America and the Caribbean should be willing to take the risks of venturing under unstable govs Economic consequences relatively small, but diplomatic consequences were very important

Foreign trade

Manufacturing: US #1, Britain #2 (eventually fell to 3), Germany #3 What had happened to Britain was mainly that two large nations, well endowed with natural resources and possessing economic systems conducive to growth, had expanded their output more rapidly The industrial countries exported manufactured and semi-manufactured products-> in exchange, the less-industrial nations sent an ever swelling flow of foodstuffs and raw materials Rapid improvements in methods of communication and transportation was the key to this system-> first successful transatlantic cable in 1866, RR spanned Amrican continent in 1869, Suez canal in 1869, dramatic productivity gains in ocean transportation in last half of 19th C-> extremely important improvement= development of RRs in various parts of the world-> refrigeration on vessels 1870s-1880s Changing composition of exports and imports Changes in balance of trade

Demographic change and the supply of labor

Number of workers as a percentage of the total population was rising Immigrants added substantially to the population and even more to the labor force since immigrants tended to be concentrated in the prime working years Main source of growth was the natural increase of the native and immigrant populations Birth and death rates -Birthrates falling/ fertility decline -Urbanization has been a major source of this decline because of the costs of raising an additional child are much higher in the city -Declining child mortality (number of births needed to reach a desired family size), rising female employment (increased opportunity costs of children), and compulsory schooling (lengthened time children would be economically dependent) -Rising land prices forced families to accumulate greater financial reserves or do with less Key factor in the first phase of mortality reduction was improved sanitation Immigration -Between 1880 and 1920, more than 23 million immigrants came to make their homes in the US -Number of immigrants rose in economic expansions and fell in contractions-> well informed -Greatly declined during WWI

Marketing and selling

On the eve of the Civil War, advertising was largely limited Installment buying uncommon until the turn of the century-> McCormick's reaper and Clark's Singer Sewing Machine were rare exceptions Most manufacturers sold to wholesalers, who in turn hired "drummers" to drum up trade and solicit orders in the towns and countryside Wholesaling and retailing

Building ahead of demand

Schumpter argued that government aid was necessary to open the West Fishlow reasoned that if RRs were built in unsettled regions, the demand for the RR's services must have been low initially-> performed 3 tests-> didn't find that RRs were built ahead of demand 3 tests: 1. Gov aid widespread? 2. Profit rates initially less than alternative investments but growing? 3. # of people living near RR initially low compared to eastern RRs? Fishlow discovered what he called "anticipatory settlement"-> farmers and businessmen were well informed about the new territories being opened up by the RRs

The 2 phases of the concentration movement

The giant firm, often with some monopoly power, was typical of the American manufacturing industry by 1905-> two forces propelled this transformation 1. The rise of mass production as a result of continuous flow production methods and new forms of management 2. The relentless search for monopoly profits that was often made possible by the development of new legal arrangements Chandler's thesis worked to explain how horizontal and vertical integration interacted to produce the concentration movement (?)

The sherman antitrust act

The rise in corporations such as Standard Oil produces pressures from several direction for gov actions to regulate or eliminate these giants Argument that cattlemen's associations provided political muscle leading to this-> quarrel with "Chicago meat packing monopolists" Declared illegal "every contract, combination in the form of trust, or otherwise, or conspiracy in restraint of trade among the several states" Supreme Court did much to discourage enforcement by its decision: 1. in 1895 in US vs EC Knight Company-> showed that Congress only intended that prohibitions to apply only to interstate commerce-> Court further implied that the Sherman Antitrust Act didn't preclude the growth of large firms by merger or consolidation 2. US vs Addyston Pipe and Steel Company in 1898-> Court made it clear that the act did apply to collusive agreements among firms supposed to be in competition with one another-> but mergers were still apparently legal Ironically, the evidence strongly suggests that the first phase of the concentration movement which led to the act was less spurred by monopoly power seeking than was the second phase-> the second phase of concentration was propelled mainly by the desire to suppress price competition

Changes in balance of trade

Unilateral transfers-> foreign currencies brought or sent to the US and change into dollars by immigrants US had become a lender rather than a borrower, a sign in those days of economic maturity