Download Chapter 11: The Early Industrial Sector

Chapter 11: The Early Industrial Sector
Summary
This chapter lays out the story of U.S. industrialization during its early stages. Under British rule, colonial
manufacturing moved along with few notable accomplishments. In 1790, manufacturing moved
forward but was primitive. As late as 1820, manufacturing in the U.S. was still not notable and
characterized primarily by small-scale enterprises and located in the Northeastern region. Mass
production of goods in factories, the production of standardized goods and use of machinery and
equipment were its three main attributes. In less than one century, all that changed. U.S.
industrialization exploded, spread across a number of sectors and eventually surpassed levels achieved
in Europe. Industrialization in the U.S. comprised: a significant increase in industrial output’s total
contribution to GDP, an expansion in the structure of industry, an increase in competition, an increase in
average firm size, a reduction in start-up costs and entry barriers, and a major contribution to growth in
the distribution of firms by size. This chapter presents some of groundwork leading to this success.
Key Terms and Concepts
Capital equipment
Energy
Increasing returns to scale
Industrial location
Industrial revolution
Industrial sector
Innovation
Inputs
Interchangeability
Labor pirating
Labor productivity
Manufacturing
Standardization
Tariff
War of 1812
Teaching Tips
1. Discuss how skilled and unskilled labor contributed to nineteenth century industrial growth.
Mention the role of human capital accumulation and highlight the importance of the transfer of
human and technological knowledge and skills from England to the U.S.
2. Entrepreneurship is in the D.N.A. of its citizens. Highlight how various inputs from labor to
capital equipment to raw materials to technology were combined strategically to boost
manufacturing productivity in the U.S. using new and borrowed ideas from 1860 throughout the
early twentieth century.
3. Rising income per capita fueled increased consumption. And Americans had peculiar tastes
during this period of historical review. Discuss them and relate them to the students’ needs for
immediate gratification and high quality clothing. Use this opportunity to discuss the origins of
the “throw away economy” of the present day.
4. Explain how standardization and interchangeability of parts boosted productivity and aided in
mass production.
5. Discuss how energy and power sources, access to transportation alternatives and locational
needs and advantages influenced decisions on where to establish manufacturing sites.
6. Manufacturing groups are one of many special interest groups to lobby Congress in order to
impose tariffs with the goal of protecting U.S. manufacturers from foreign competition. Tariffs
distort prices and create rents from which targeted manufacturers can benefit at the expense of
consumers. Discuss how tariffs take income from the domestic consumers who actually pay the
tariffs on imported goods and/or face the higher U.S. prices. This income is simply transferred
to the federal government to cover its expenditures, provide national defense, support welfare
programs, etc. Ask students to explain why tariffs are supported by the government, politicians
and some producers. (Tariffs exist to help: government generate revenue by imposing them,
politicians get votes by supporting them, and producers secure rents by backing the politicians.)
Ask students to explain the rationale used by manufacturers to successfully lobby for tariffs.