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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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