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The Industrial Revolution
A cotton mill in Lancashire, England, ca. 1834
The Industrial Revolution
What was the Industrial
Revolution?
• Some definitions:
– The change from an agrarian to an industrial
economy
– The change from a largely rural, handicraft economy
to one dominated by urban, machine-driven
manufacturing
– Changes that mark the transition from a primarily rural
civilization characterized by agriculture and a
handicraft economy, to a primarily urban civilization
characterized by machine-powered industry, featuring
a more complex society
The Industrial Revolution:
Other Characteristics
• New energy sources
– Steam
– Electricity
– Oil
• New forms of organization
– The factory system
– The joint stock investment
bank
• New means of transportation
– Steamships
– Railroads
– Automobiles
• New industries
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–
–
–
Coal
Iron
Steel
Chemicals
“The Triumph of Steam and Electricity”
Why did the Industrial Revolution
begin in Great Britain?
•
•
•
•
Rise of science
Increasing productivity in agriculture
Expanding population
Merchant tradition; entrepreneurial spirit; capitalist
philosophy
• Geography
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–
–
–
Coal deposits
Navigable rivers
Natural harbors
Island location
• Global trading, slave labor, gold & silver of the New
World
• State-supported economic development
• Constitutionalism; Locke’s philosophy (property!)
The Industrial Revolution:
Some important milestones
• The textile industry
– Flying shuttle (John Kay,
1733)
– Water frame (Richard
Arkwright, 1769)
– Spinning Jenny (Richard
Hargreaves, 1770)
– Spinning Mule (Samuel
Crompton, 1779)
– Cotton Gin (Eli Whitney,
1793)
– These innovations began
the mechanization of an
existing industry: textiles
Whitney’s Cotton Gin
The Industrial Revolution:
Some important milestones
• Steam engine (James Watt, 1769)
• Steamships (Robert Fulton, The Clermont,
1807)
• Railroads (George Stephenson’s Rocket, 1829)
• These developments characterize some of the
important developments of the “1st” Industrial
Revolution; after 1850, steel, electricity, and
chemicals marked a “2nd” Industrial Revolution
that lasted through the mid-20th century.
Consequences of the Industrial
Revolution
• Urbanization
– Overcrowding
– Crime
– Sanitation
• Population growth
• Social change: new social
classes
– Middle class (bourgeoisie)
– Urban working class
(proletariat)
• Rise in overall standard of
living
• Split between producer and
consumer
• Era saw rise of classical liberal
political and economic thought,
as well as the appearance of
communism
Tenements in Manchester, England, ca.1850
Karl Marx (1818-1883)
• “Father of
Communism”
• Two major works
(with Friedrich
Engels):
– The Communist
Manifesto (1848)
– Das Kapital (1867)
Karl Marx
Das Kapital
• Marx’s account of the
nature, development, and
future of the capitalist
system
• Commodities have a usevalue (measure of
usefulness) and an
exchange-value (measure
of monetary value)
• Exchange-value is rooted in
how much labor-power
went into them
Das Kapital
• Capitalists extract profit by
paying workers less than the
value of their labor, thus
exploiting them
• They are able to do this
because they control the
means of production
• Workers are wage-laborers;
i.e., they do not own the
product of their labor
• The workers’ character is
adversely affected by this
system
The Great Depression
1929 - 1941
Why a “Great” Depression
• A worldwide economic slump in output and
prices
• Affected nearly all industrialized nations of the
world
• Caused unemployment to reach previously
unknown levels.
• Caused some to question classical economic
theories and favor new, innovative approaches
The Agricultural Crisis
•
•
•
•
Farmers began to feel an
economic crisis in the early 1920s
Increased food production during
World War I caused many farmers
to go heavily into debt
It became difficult for many
farmers to pay their debts when
commodity prices declined once
the World War I ended
The Dust Bowl – unprecedented
drought
International Trade Declines
• Most industrialized nations relied heavily on
tariffs (taxes on imported goods) for revenue
• Tariff rates continued to rise, and “tariff walls”
began to reduce the volume of international
trade
• The Hawley-Smoot Tariff (1930) raised rates on
some commodities to 72%
• Reciprocal trade agreements in the mid-1930s
would later begin to dismantle the “tariff walls”
that had been established
The Perils of a “Paper
Economy”
• In the U.S. businesses
appeared to be doing well
in the 1920s
• The Stock Market was an
indicator of national
prosperity
• Three pro-business
presidents occupied the
White House during the
1920s
• But in reality . . .
• Underconsumption was a
problem. Many products
went unsold.
• Much purchasing was
being done on credit.
• Many stock purchases
were made “on margin”
(10% down to purchase)
• Bank foreclosures were
rising
The Crash
• “Black Tuesday” – Oct.
29, 1929 the U.S. Stock
Market crashed.
• Over 16 million shares
sold in massive selling
frenzy
• Average price dropped
40 points
• Paper loss exceeded $26
billion
“Brother Can You Spare a Dime?”
Once I built a railroad, I made it run
I made it race against time
Once I built a railroad, now it's done
Brother, can you spare a dime?
Once I built a tower, up to the sun
Bricks and mortar and lime
Once I built a tower, now it's done
Brother, can you spare a dime?
Once in khaki suits, gee we looked swell
Full of that Yankee-Doodly-dum
Half a million boots went slogging through Hell
And I was the kid with the drum
Say, don't you remember, you called me "Al"
It was "Al" all the time
Say don't you remember, I was your pal
Brother, can you spare a dime?
Hoover is my shepherd, I am in want,
He maketh me to lie down on park benches,
He leadeth me by still factories,
He restoreth my doubt in the
Republican Party.
He guided me in the path of the
Unemployed for his party's sake,
Yea, though I walk through the alley
of soup kitchens,
I am hungry.
I do not fear evil, for thou art against me;
Thy Cabinet and they Senate, they do discomfort
me;
Thou didst prepare a reduction in my wages;
In the presence of my creditors thou anointed
my income with taxes,
So my expense overruneth my income.
Surely poverty and hard times will follow me
All the days of the Republican administration.
And I shall dwell in a rented house forever.
Theory vs. Reality
• “The sole function of the
government is to bring
about a condition of
affairs favorable to the
beneficial development of
private enterprise.”
Herbert Hoover (1930)
John Maynard Keynes
• Father of the “New
Economics”
• Advocated government
spending to “prime the
pump” during periods of
economic distress
• Noted that even deficit
spending might be
appropriate in certain
circumstances
Franklin Delano Roosevelt & the
New Deal
• Ideas based upon Keynesian theory
• Programs targeted at the “3Rs” – Relief,
Recovery, & Reform
• Expensive and controversial programs that
“made jobs,” raised commodity prices by
providing farm subsidies, and reformed
American economic institutions (i.e., banks,
stock market, etc.)
John Steinbeck
• American novelist
• Won the Nobel Prize for
Literature in 1962
• The Grapes of Wrath won
the Pulitzer Prize in 1940
• Described the economic
realities of the Okies –
migrant farmers (many
from Oklahoma) who
sought a new future in
California’s fields
Steinbeck in a Letter to a Friend
“I must go over to the interior valleys. There are about
five thousand families starving to death over there, not
just hungry but starving. The government is trying to
feed them and get medical attention to them with the
fascist groups of utilities and banks and huge growers
sabotaging the thing all along the line and yelling for a
balanced budget . . . I've tied into the thing from the first
and I must get down there and see it and see if I can't do
something to help knock these murderers on the heads . .
. I'm pretty mad about it.”
John Kenneth Galbraith
• Canadian-born, American
economist
• Wrote The Affluent
Society (1958)
• Attacked the myth of
“consumer sovereignty”
• Ideas contributed to the
“War on Poverty” of the
1960s.
Did the Great Depression Forever
Change the American Economy?
• What is the role of the government in
preventing (or solving) economic downturns
that might appear?
• What was the impact of New Deal liberalism
upon the U.S. in the twentieth century?
• How was the Reagan Revolution of the
1980s a reaction to New Deal liberalism?