History of the American Economy
History of the American Economy
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History of the American Economy ELEVENTH EDITION
G A R Y M . W A L T O N University of California, Davis
H U G H R O C K O F F Rutgers University
History of the American Economy: Eleventh Edition Gary M. Walton and Hugh Rockoff
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Package ISBN-13: 978-0-324-78662-0 Package ISBN-10: 0-324-78662-X Book only ISBN 13: 978-0324-78661-3 Book only ISBN 10: 0-324-78661-1
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In honor of our dissertation advisors, Douglass C. North and Robert W. Fogel, Nobel Laureates in Economics, 1993
L E F T P H O T O : C O U R T E S Y
O F D O U G L A S S
C . N O R T H , W A S H IN
G T O N
U N IV E R S IT Y
IN S T . L O U IS , R IG
H T P H O T O : P E T E R K IA R /C H IC A G O
Douglass C. North Robert W. Fogel
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Brief Contents P R E F A C E
CHAPTER 1 Growth, Welfare, and the American Economy
PART 1 The Colonial Era: 1607–1776
CHAPTER 2 Founding the Colonies
CHAPTER 3 Colonial Economic Activities
CHAPTER 4 The Economic Relations of the Colonies
CHAPTER 5 Economic Progress and Wealth
CHAPTER 6 Three Crises and Revolt
PART 2 The Revolutionary, Early National, and Antebellum Eras: 1776–1860
CHAPTER 7 Hard Realities for a New Nation
CHAPTER 8 Land and the Early Westward Movements
CHAPTER 9 Transportation and Market Growth
CHAPTER 10 Market Expansion and Industry in First Transition
CHAPTER 11 Labor during the Early Industrial Period
CHAPTER 12 Money and Banking in the Developing Economy
CHAPTER 13 The Entrenchment of Slavery and Regional Conflict
PART 3 The Reunification Era: 1860–1920
CHAPTER 14 War, Recovery, and Regional Divergence
CHAPTER 15 Agriculture’s Western Advance
CHAPTER 16 Railroads and Economic Change
CHAPTER 17 Industrial Expansion and Concentration
CHAPTER 18 The Emergence of America’s Labor Consciousness
CHAPTER 19 Money, Prices, and Finance in the Postbellum Era
CHAPTER 20 Commerce at Home and Abroad
PART 4 War, Depression, and War Again: 1914–1946
CHAPTER 21 World War I, 1914–1918
CHAPTER 22 The Roaring Twenties
CHAPTER 23 The Great Depression
CHAPTER 24 The New Deal
CHAPTER 25 World War II
vii
PART 5 The Postwar Era: 1946 to the Present
CHAPTER 26 The Changing Role of the Federal Government
CHAPTER 27 Monetary Policy, Fiscal Policy, and the Business Cycle after World War II
CHAPTER 28 Manufacturing, Productivity, and Labor
CHAPTER 29 Achievements of the Past, Challenges for the Future
Subject Index
Name Index
viii Brief Contents
Contents
P R E F A C E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x i x
C H A P T E R 1
Growth, Welfare, and the American Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Americans 1900–2009 1
A Study with a Purpose 6 Nation Building 6 Policy Analysis for Better Choices 9
Critical Skills for Personal Development 10 The Long Road out of Poverty 11 An Institutional Road Map to Plenty 15
PART 1 The Colonial Era: 1607–1776
C H A P T E R 2
Founding the Colonies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
European Background to the Voyages of Discovery 22 European Roots and Expanding Empires 22
Portugal and the First Discoveries 23
Portugal and Spain: Expanding Empires 24
The Latecomers: Holland, France, and England 26
First British Settlements in North America 27 Perilous Beginnings 27
Early Reforms 29 Bringing in Settlers 30
Demographic Change 34 Underpopulation Despite High Rates of Population Growth 34 Population Growth in British North America 34 The Racial Profile 36 Imperial European Rivalries in North America 39
C H A P T E R 3
Colonial Economic Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Land and Natural Resource Abundance, Labor Scarcity 42
Agriculture and Regional Specializations 44 The Southern Colonies 45 The Middle Colonies 47 New England 48
The Extractive Industries 49 Furs, Forests, and Ores 49 Sea Products 52
ix
The Manufacturing Industries 52 Household Manufacture and Craftshops 52 Mills and Yards 53 Shipbuilding 54
Occupational Groups 56
C H A P T E R 4
The Economic Relations of the Colonies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
English Mercantilism and the Colonies 58 The Early Navigation Acts 59
Exports, Imports, and Markets 60
Overseas Shipping and Trade 61
Intercolonial Commerce 65
Money and Trade 66 Commodity Money 66 Coins, Specie, and Paper Money 67
Trade Deficits with England 69 Interpretations: Money, Debt, and Capital 72
C H A P T E R 5
Economic Progress and Wealth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Growth and Change in the Colonial Economy 75 Productivity Change in Agriculture 76 Productivity Gains in Transportation and Distribution 80
Technological Change and Productivity 83
Speculations on Early Growth Rates 86 Wealth Holdings 86
Per Capita Wealth and Income, 1774 88
The Distribution of Income and Wealth 88
C H A P T E R 6
Three Crises and Revolt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
The Old Colonial Policy 93
The New Colonial Policy and the First Crisis 96
More Changes and the Second Crisis 98
The Third Crisis and Rebellion 99 Support in the Countryside 101 Economic Exploitation Reconsidered 104
PART 2 The Revolutionary, Early National, and Antebellum Eras: 1776–1860
C H A P T E R 7
Hard Realities for a New Nation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
The War and the Economy 110
The Constitution 113
American Independence and Economic Change 115
x Contents
A Quantitative Analysis of Economic Change 117
War, Neutrality, and Economic Resurgence 119
C H A P T E R 8
Land and the Early Westward Movements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
The Acquisition of the Public Domain 125 Disposing of the Public Domain 127 The Northwest Land Ordinance of 1785 128 The Northwest Ordinance of 1787 129 The Later Land Acts, 1796–1862 130
The Migrations to the West 132 The Northwestern Migration and Hogs, Corn, and Wheat 133 Agricultural Specialization and Regional Dislocation 136
The Southwestern Migration and Cotton 138
The Far Western Migration 141
C H A P T E R 9
Transportation and Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
The Antebellum Transportation Revolution 145
The Routes of Western Commerce 147
Steamboats and the Natural Waterways 148 Competition, Productivity, and Endangered Species 150
Public Versus Private Initiative on the Natural Waterways 152
The Canal Era 153
The Iron Horse 156
Roads 158 Turnpikes 159
The Antebellum Interregional Growth Hypothesis 160
Ocean Transport 161
C H A P T E R 1 0
Market Expansion and Industry in First Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Early Changes in U.S. Manufacturing 166 The Decline of Household Production 166 Craftshops and Mills 167 The Emergence of U.S. Factories 168 The Lowell Shops and the Waltham System 168 Iron and Other Factories 170 The Rise of Corporate Organization 171 Leading Industries, 1860 172
Prerequisites to Factory Production 173 Machines and Technology 173 Standardized Interchangeable Parts 174 Continuous Process and Assembly Lines 174 Power and Energy 175 Factor Proportions and Borrowing and Adapting Technology 177
Productivity Advances in Manufactures 178
Protection from Foreign Competition 179
Contents xi
C H A P T E R 1 1
Labor during the Early Industrial Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
The Growth of the Population and the Labor Force 183
The Changing Labor Force Distribution and Composition 184 Factories and Workers 185 The Rhode Island and Waltham Systems 186
The Impact of Immigration 188
The Wages of Male Labor in Manufacturing 189 English–American Wage Gaps 191 Skilled–Unskilled Wage Ratios 192
Growing Inequality of Income 192
The Early Union Movement 195 Legal Setbacks and Gains 195 Organizational Gains 196
Political Gains for Common Working People 197 Suffrage 197 Public Education 198 Debts, Military Service, and Jail 198 The 10-Hour Day 198
C H A P T E R 1 2
Money and Banking in the Developing Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
The American Monetary Unit 201
The Bimetallic Standard 202
Bank Notes as Paper Money 204
The First Bank of the United States 205
The Second Bank of the United States 208
Economic Fluctuations and the Second Bank 212
Experiments in State Banking Controls 215 The Suffolk System and the Safety Fund 215 Free Banking 216 The Forstall System 216
The Economic Consequences of the Gold Rush 217
C H A P T E R 1 3
The Entrenchment of Slavery and Regional Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 219
African Slavery in the Western Hemisphere 219
First U.S. Constraints on Slavery 220 Northern Emancipation at Bargain Prices 222 The Persistence of Southern Slavery 223
Plantation Efficiency 224
Economic Exploitation 231
Economic Entrenchment and Regional Incomes 232
Political Compromises and Regional Conflict 234
xii Contents
PART 3 The Reunification Era: 1860–1920
C H A P T E R 1 4
War, Recovery, and Regional Divergence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
The Economics of War 242 Trade and Finance Policies South and North 244
The Civil War and Northern Industrialization 246
Economic Retardation in the South 247 Decline in the Deep South 250 The Inequities of War 251
The Legacy of Slavery 252
C H A P T E R 1 5
Agriculture’s Western Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
The Expansion of Land under Cultivation 261
Federal Land Policy 262
The Impact of Federal Land Policy 264
Growth and Change in Agriculture 266 New Areas and Methods of Cultivation 266
Hard Times on the Farm, 1864–1896 268
Agrarian Political Organizations 272 The Grangers 273 The Greenback Movement 274 The Alliances 274 The Populists 274
The Beginnings of Federal Assistance to Agriculture 275 The Department of Agriculture 275 Agricultural Education 275
Natural Resource Conservation: The First Stages 276 Land, Water, and Timber Conservation 277
C H A P T E R 1 6
Railroads and Economic Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
The Transcontinentals 280
Total Construction: Pace and Patterns 282 Productivity Advance and Slowdown 284
Building Ahead of Demand? 285
Land Grants, Financial Assistance, and Private Capital 286
Unscrupulous Financial Practices 287
Government Regulation of the Railroads 288 State Regulation 290 Federal Regulation 291 Capturing the Regulators? 293
Railroads and Economic Growth 293
Contents xiii
C H A P T E R 1 7
Industrial Expansion and Concentration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
Structural Change and Industry Composition 298 New Technologies 300 New Forms and Sources of Energy 304
Mass Production 306
Economies of Scale and Industry Concentration 307 Early Business Combinations 307 Trusts and Holding Companies 308
The Two Phases of the Concentration Movement 309 Phase 1: Horizontal Mergers (1879–1893) 309 Phase 2: The Vertical Mergers (1898–1904) 312
The Sherman Antitrust Act 314 The Supreme Court as Trustbuster 316 The Federal Trade Commission 317
C H A P T E R 1 8
The Emergence of America’s Labor Consciousness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
Demographic Change and the Supply of Labor 319 Birth and Death Rates 319 Immigration 321
Immigration: Politics and Economics 322 Foreign Workers and American Labor 323
Gains for Workers in the Postbellum Period 324 Hours and Wages 324 Women 328 Children 329
Unions, Employers, and Conflict, 1860–1914 330 The Unions and the Courts 334
Labor’s Gains and the Unions 335
C H A P T E R 1 9
Money, Prices, and Finance in the Postbellum Era . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338
New Forms of Currency 339 A Dual Banking System 340
Gold, Greenbacks, or Bimetallism? 343 Returning to the Gold Standard after the Civil War 343 The Crime of ’73 347 The Commitment to the Gold Standard 349 The International Gold Standard 351
The Rise of Investment Banking 352
