Download Economic History of the US

Economic History of the US
Revolution to Civil War, 1776-1860
Lecture #3
Peter Allen
Econ 120
US in 1819
Transportation Revolution
 Migration to farmland in northwest
territory
 Demand for cheaper ways to transport
products to Eastern markets
 Time sequence…
1. Natural waterways, 1790-1816
2. Canals, 1815-43
3. Railroads, 1850-
 Formation of national market
Western Commercial Routes, 1793-1860
 Northern-most
 Great Lakes, St. Lawrence R., Hudson or Mohawk
Rivers to New York
 Natural waterways, canals, railroad
 Northeastern
 Roads, canals, railroad
 Pittsburg, Philadelphia/Wheeling, Baltimore
 National Road, Pennsylvania Turnpike
 Southern
 River
 Mississippi to New Orleans
Technology
 Steamboat, Fulton/Livingstone, 1807-11
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Flatboat, 1,000 mi. = 0.75-1 month
Steamboat, 8.5 days
67% reduction in time
Shipbuilding
Esp. Southern gateway
 Canal Era, 1815-43
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Marginal, augmentation of natural waterways
Erie Canal, 364 mi. Albany to Buffalo, $7mm/9 years
1817-32
Canals mostly state-gov. financed, $32 mm. total
Financially unsuccessful
Used for grain, lumber, meat; with flatboat
Erie Canal
Map 9.1 Canals of the
Antebellum Period, 1800–1860
Railroads
Track mileage, total
1830
1835
1840
1845
1850
1855
1860
23
1,098
2,818
4,633
9,021
18,374
30,626
 First, early 1830s
 Resisted by vested
interests…
 …until 1850s
 “Take-off” mid
1850s
Transcontinental Railroad, 1869
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Pacific Railway Act of 1862
Signed by A. Lincoln
Contracted two private companies:
Union Pacific, westward
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From Omaha, Nebraska
1,087 miles
Begun, July 1865
 Central Pacific, eastward
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From Sacramento
690 miles
Started, January 1863
 Promontory Summit, Utah May 10, 1869, Golden Spike
 Integrate California to the Union
Inland Freight Rates, 1784–1900
Transformation of Economic Structure,
1776-1860
 In 1860, Civil War
 US #2 manufacturing country behind England (17%
of GDP or $2 billion out of $12 billion)
 Ag. (83% of GDP, or $10 billion out of $12 billion)
 (2008: ag., 0.9%, manuf., 20.6%, services, 78.5%)
 Formula
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Rapid productivity gains, esp. cheaper transportation
New ways to combine factors (Y=Af(L,K,H,N))
Specialization and trade
New forms of business organization
 Macro drivers…
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Cotton, esp. demand in Britain
Bop surpluses, money supply growth, income, savings, capital
Internal market for manufactures, 1843-60
Table 10.1: Top Ten Manufactures,
1860
Table 10.3 Productivity Growth in
the Northeast, 1820–60
First Industrial Revolution, 1830-60
 Cotton textiles
 Decline of household manufacturing after 1830
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Internal, West/South demand for manufacturing products
1791, 2/3-3/4 of clothing homemade and 90% of food processing
 Emergence of factory style production in NE/MidAtlantic
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Cotton products, after 1794
1860, cotton = 80% of manufacturing
Capital primarily from overseas
Specialization/organization of workers, tasks
Investors brought English model of industrial organization
 Corporate Organization
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Until 1830, required an act of state legislature
Concentration of capital
Permanent
Limited liability
Household manufacture of Woolen Cloth
in NY, 1820 and 1845
Map 9.2 Westward Travel
Demand for New Technology
 High labor cost (esp. vs./Britain)
 Incentive to…
 Economize on labor…(Y/L = productivity)
 …substitute capital for labor
 …sacrifice raw materials efficiency
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Machinery
Standardized, interchangeable parts
Continuous process, assembly lines
Power
Mobile labor force, migration
Reliance on women and children
Early Power Generation,
Water Wheel Designs
Samuel FB Morse
 Electromagnetic
telegraph
 Patented, 1847
 Wires strung
alongside canals
and railroads
 First instant,
long-distant
communications
Protection of Manufacturing
 1791, 99.9% of federal gov. revenue from import tariffs
 1790-1815, rate set to raise revenue
 1860, 94%
 2008, 1%
 Tariff Act of 1816
 After War of 1812, British again flooded the US with
manufactured products…
 Now (1815) vested US interests demanded protection
 Set tariff of 20-25% on most manufactures
 15-20% on raw materials
 More, higher tariffs in 1816-32
 Protected northern manufacturing
 Staunchly opposed in South
 E.g. Tariff of Abominations, 1828; S. Carolina nullification
crisis, 1832
Figure 10.2: Tariff Rates in the
US since 1820
Significance of Tariffs to US Industrial Development
 Tariff protection helped to establish the first
manufacturing industries
 “import substitution, or infant industries”
 Nowadays, most politicians and economists think
protectionist tariffs are bad policy
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Predominantly political
Politically-motivated transfer of money/profits,
…away from consumers, foreign producers…
…in favor of owners of protected industries and workers.