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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 Flatboat, 1,000 mi. = 0.75-1 month Steamboat, 8.5 days 67% reduction in time Shipbuilding Esp. Southern gateway Canal Era, 1815-43 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 Pacific Railway Act of 1862 Signed by A. Lincoln Contracted two private companies: Union Pacific, westward From Omaha, Nebraska 1,087 miles Begun, July 1865 Central Pacific, eastward 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 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… 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 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 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 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 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 Predominantly political Politically-motivated transfer of money/profits, …away from consumers, foreign producers… …in favor of owners of protected industries and workers.