American Industrial Economy in the 19th Century
During the first half of the 19th century, the U.S. economy was growing at an unprecedentedly rapid rate. By 1870s, the United States became one of the leading industrial nations of the world. The explosion of new inventions and discoveries led to such profound changes that their results were sometimes called the second industrial revolution. Freezer wagons, the phone, phonograph, and the electric light were invented. In parallel with these achievements, industrial infrastructure of the country was developed. The great breakthrough of the American economy can be explained by certain objective factors: the construction of railroads, innovations, and monopolization.
Precursors of Economical Growth
The fifth U.S. President James Monroe emphasized that any attempt of the European states to interfere with the internal affairs of America would be considered as a direct threat. In addition, the doctrine contained a provision that the economic power of a country depended on the access to new areas, particularly in the West and South of the North American continent. On the basis of this doctrine, American planters, who settled in Texas, unleashed the so-called Texas war with the purpose of excluding the State of Mexico. Then, the Americans provoked the war with Mexico, which resulted in the capture of more than half of its territory, which is almost a third of the contemporary territory of the United States.
The capture of new territories was accompanied by significant demographic changes. In the country, there was a rapid increase in the population and urbanization as well as an active migration of people to the West. The U.S. population was growing dramatically. This process was closely linked to the immigration from Western Europe. Immigrants settled in industrial and commercial centers.
A crucial role in the economical development was played by the cancelation of slavery. Slaves received freedom without any ransom, but also without land, civil and political rights. This meant that the largest ethnic group of the United States became free, and it allowed former slaves to be actively involved in socio-political and economic life of the country. The problem of rebuilding the southern states remained the most difficult for the federal government. There was a need to identify ways and conditions of returning states that were part of the Confederacy. It was necessary to reinstall the system of the federal government. Equally complicated was the problem of providing land for freed black slaves and landless white population of the South. Despite the fact that former slaves had the right to acquire land, most of them were forced to leave cities to become industrial workers. Many of them hardly adapted to the urban environment. As a result, blacks were the lowest paid and humiliated part of the American society.
The demographic factors were not less crucial. Relatively sparsely populated new territories gave rise to an acute shortage of labor, which stimulated the introduction of machinery. However, labor shortage caused constant influx of immigrants from Western countries, who were attracted by higher wages, huge areas of land, and the ability to start their own business. Immigrants from Europe were usually energetic, assertive people, who were not afraid of difficulties in the new land.
Construction of Railroads
The railways played an important role in the industrial revolution in the United States. The railway construction was carried out in all areas, transforming them into a single economic complex. The state provided great support to companies that built railways. They were given free land, timber, building materials, and interest-free loans. This strategy caused an increased interest in this type of activity on the part of the planters who sought to acquire new land in those regions. The world's first paddle steamer appeared in the Hudson River. Numerous channels, especially in the Great Lakes region, were built.
The development of the U.S. economy in the last third of the 19th century was characterized by an increased production volumes and changes in the structure of the country. Land development in the West made the problem of transportation urgent. Farmers worked on the market and needed modern means of communication to send their products to consumers. The most effective mode of transport in the second half of the 19th century was railways that linked all regions of the country into a single economic organism. Major private companies were involved in the construction of the railways. They had multilateral state support.
The railway construction contributed to the formation of huge means, which subsequently served as the basis for the emergence of powerful financial and industrial groups. The railways largely influenced the development of expertise in the industry and agriculture, improving the mobility of labor and capital, reducing production costs, and increasing urbanization of the population.
The specific characteristics of the industrial revolution included the fact that there were almost no guilds in the United States. Therefore, the U.S. industry did not have to face strict regulations that were inherent in the guild system, especially after the introduction of the new technology. Manufactory production did not take such a long evolutionary path there as in the Old World. In the United States, centralized manufactories were created, which was a step forward compared to Europe where factories (especially weaving) remained mostly scattered. In addition, there were no remnants of serfdom, which significantly slowed down the formation of the labor market in Europe.
Undoubtedly, a late entry into the stage of the industrial revolution allowed the United States to use the European, and especially English, technical expertise. All these contributed to the fact that the transition to industrial methods in the country took a relatively short period and was essentially completed by the middle of the 19th century, almost simultaneously with many European countries.
The rapid development of engineering could be related to the factors that contributed to the industrial revolution in the United States in the late 19th century. At that time, there were large machine-building plants in New York, in the cities of Pennsylvania, Ohio, and other states of the Northeast, particularly locomotive plants in Pittsburgh, Baltimore, and Philadelphia. Agricultural machinery (drills, cultivators, threshers, etc.), which was required for the farm, was especially rapidly developing. The industrial revolution in the United States was accompanied by a persistent shortage of skilled labor, which required the development and rapid introduction of the original production of various tools and machinery.
An important source of funding of the industrial revolution was revenues from foreign trade, which was based on protectionism. Protectionism as a trade policy had a beneficial impact on the U.S. economy. Business people in the country began to invest their capital in the domestic industry. It should be noted that the southern and northern states advocated different positions in the foreign policy: the northern industrialists needed state protection, and the southern planters preferred free trade because they required cheap imported manufactured goods.
The railway construction significantly stimulated the growth of production in metallurgy, coal mining, and mechanical engineering. This was particularly evident in the period when iron rails were replaced by steel. During this period, new industries became active: oil production and refining, aluminum, rubber, electrical, and other production. In many cities, there were the telephone and telegraph lines. The streets began to be lightened by electric lights. Such innovations have been primarily associated with the growth of electricity production. Sabillon has emphasized that the second half of the 19th century coincided with the emergence of technologists and inventors. The period of recovery was experienced by old industries (metallurgy, metalworking, coal mining), because their growth was closely linked to the unprecedented scale of the railway construction.
The U.S. factory production started mainly in the northeast of the country. As in England, the foundation was laid by the cotton industry, in which many technological advances of the time proliferated. This process developed rapidly, despite the fact that English laws prohibited the export of drawings and descriptions of machines to America in order to avoid competition in the engineering industry. The invention of the cotton gin had the great importance for the development of the industry. It made a real revolution in cotton processing and laid the foundation for a continuous supply of yarn in weaving production.
New inventions included a cylindrical machine for mechanical printed cloth, machines for producing patterned fabrics, etc. There was a marked growth in the industry, which was promoted by the widespread replacement of wood coal by the stone one. As a result, most of the blast furnaces were transferred to coal, which increased iron and coal production.
The industrial boom at the turn of the century was based mainly on domestic developments in science and technology. The first industrial laboratory of Thomas Edison played a huge role in the development of technical inventions in the United States . This laboratory not only produced gadgets (an electric incandescent lamp, phonographs, an improved model of the phone, the telegraph, etc.) but also sought to patent them and introduce into production.
Domestic engineering experienced the golden age. In 1870-1880s, huge machine-building factories, which were equipped with the latest technology, began to emerge. These plants were equipped with the machines that had no analogues in Europe.
During the 1890s, the value of machine tool production increased significantly. During these years, excavators, forklifts ore, engines, agricultural machinery began to be produced. The division of labor and specialization required an ordering technology and standardization of production processes.
In the second half of the 19th century, old industrial areas (New York State, New Jersey, Pennsylvania) gradually began to lose their leading position in the economy. The center of the industry began to shift to the Middle West (Ohio, Illinois), where new sources of raw materials were developed. Powerful textile enterprises were established in the southern states on the basis of local raw cotton. Their products were very cheap because the presence of a large reserve army of labor allowed to pay lower wages to workers. Radical changes took place in traditional industries. For the first time in the world, clothing, food, shoes, and other industries began to move to the mass production of standardized products, semi-finished food, etc.
The development of industrial production at the turn of the century was accompanied by monopolization of the economy. The first American monopoly emerged in 1870-1880s among railway companies as an enormous share capital concentrated in this industry. In addition, rail giants initially occupied a privileged position that enabled them to extract monopoly profits. In 1880-1890s, when the network of railways braided the entire U.S. territory, stiff competition between the railway companies began. It was not limited to any legal framework. They enticed major shippers, reducing their tariffs for the transportation of products. Often, the rates for the transportation of farm products were from two to three times higher than of goods of major industrial shippers. Moreover, criminal tricks such as sabotage, armed attacks on convoys, and so on were used in the course of competition. The process of monopolization took place in the industry. One of the first largest monopolies was Standard Oil Company, created by John Davidson Rockefeller Sr.. This company was a typical single industry monopoly that acted only in oil refining. The power of the Rockefellers was based on agreements about the reductions in the transport of oil. In 1880-1890s, the process of monopolization covered textile, electrical, lead, rubber, sugar, alcohol, tobacco, and other industries. Monopoly also brought transport and communication under control. The economic recovery in the last third of the 19th century led to rapid social stratification of the U.S. population. Millionaires appeared among the rich. The term Robber Barons appeared in this period. It was applied to the founders of the largest industrial corporations whose policy was characterized by ruthlessness and aggression. Robber Barons were railroad schemers. The representatives of the first generation were financiers who profited during American Civil War and prospered after it with the help of deception and brute force.
As a result, there was negative attitude towards big corporations and their wealthy owners. During this period, the workers' movement played a significant role, which developed in the framework of trade unionism.
Historically, the U.S. economy evolved in competitive conditions. Entrepreneurial monopoly always aroused suspicion and distrust in the society. This was particularly acute in the heyday of trusts that used questionable practices to seize power in the market. In the wake of growing dissatisfaction, various forms of public control over the development of the most monopolized (especially mining) industries were formed. At the end of the 19th century, the principles of public oversight were issued in the form of anti-monopoly or anti-trust legislation that was introduced to deter or prevent the process of monopolization. In 1887, the law on the establishment of Trade Commission to oversee the actions of the railway companies was passed. In 1890, Sherman Act, which prohibited monopolization of a trade secret, sole control over any industry as well as conspiracy on prices, was issued (The Antitrust Laws). Sherman Act prohibited any association or agreement that was aimed at restricting trade or freedom of competition.
Agriculture experienced great support from the state. Colleges that trained specialists for agriculture began to receive government subsidies. The funds for the establishment of various research stations on breeding new varieties of crops and livestock began to be allocated. The state began to encourage the expansion of farm credits. The development of agriculture went within a clear regional specialization on a national scale. Various public organizations were created to protect the interest of farmers in the country.
The rapid economic development after the Civil War laid the foundation of the modern industrial economy of the United States. The Gilded Age of the second half of the 19th century was the epoch of magnates. Some of them were honest people. However, others used violence, bribery, and fraud to achieve wealth. Anyway, business interests largely influenced the government. Initially, political leaders were against the excessive interference of the federal government in the private sector with the exception of transport. In general, they accepted the idea of unlimited freedom of business, which was opposed to government intervention in the economy except for the need to maintain law and order. This attitude underwent a change at the end of 19th century, when small businesses, farmers, and the workers' movement began to turn to the government to protect them. Thus, intervention of the government along with the construction of railroads, innovations, monopolization contributed to the transformation of the young country into a world power.