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Possible essay topicsStrengths and weaknesses of the American economyThe future of USD as a global currencyIs the double deficit of the American economy
sustainable?Future of American economy – prosperity or collapse?Lessons from the Great Depression (1929-33)The role of entrepreneurship in the economic success
of the USAAmerican health care reform – is Obamacare
successful?The role of innovation in the American economy
Ing. Tomáš Dudáš, PhD.
Famous US industrialists in the 19th century
Cornelius VanderbiltJ. P. MorganJohn D. RockefellerLeland StanfordHenry Clay FrickJohn Jacob AstorAndrew CarnegieJames Buchanan Duke
Famous US industrialists in the 19th centuryCornelius Vanderbilt - railroadsJ. P. Morgan – banking, finance, steel
industryJohn D. Rockefeller – Standard OilLeland Stanford - railroadsHenry Clay Frick – steel industryJohn Jacob Astor – fur trade, real estateAndrew Carnegie – railroads, steel industryJames Buchanan Duke - tobacco
Cornelius Vanderbilt John D. Rockefeller
J.P. Morgan Andrew Carnegie
The Economic Effects of the Civil WarApproximately 600 000 people died on both sides
– 9 % of the male population in the age group 15-39
Another 500 000 were woundedEstimated loss of human capital – 1,8 billion USD
on both sidesDirect government expenditures – 2,3 billion in
the North, 1 billion in the SouthDestruction of property – 1,5 billion USD (mainly
in the South)On the other hand – the war was a great source
of income for someone
Railroads and Economic DevelopmentThe construction of railroads continued after
the civil warBy 1910 the USA had 351 767 miles of track,
of which 266 000 were main trackConstructing the American railroads was one
of the biggest efforts in the American historyThree major waves – 1868/73, 1879/83 and
1886/92The majority of the construction was financed
by borrowed moneyGovernment help – subsidies and land grants
Pacific Railroad (1863-1869)
Agriculture between 1860 and 1910Huge expansion of farm output – extensive
growthNo chemical and biological improvements availableSlow mechanization
Population growth and the Atlantic migration
Strong migration – 37 million people came from Europe between 1840 and 1920Sources - 6 million from Germany; 4.5 million from
Ireland; 4.75 million from Italy; 4.2 million people from England, Scotland and Wales; 4.2 million from the Austro-Hungarian Empire; 2.3 million from Scandinavia; and 3.3 million people from Russia (mostly Jews, and Poles and Lithuanian Catholics)
On the other hand, domestic fertility was decreasing (41,1 births/1000 people in 1860 compared to 29,2 births/1000 people in 1910)
Population growth and the Atlantic migration
Other demographic trendsContinuing rise in the population living in
urban areasThe country continued to spread out
geographicallyThe percentage of foreign born rose, especially
from EuropeThe nonwhite portion of the population
continued to fall
The rise of the heavy industry
Industry growth rates between 1860-1910Machinery – 690 %Lumber – 650 %Printing and publishing – 520 %Iron and Steel – 310 %Men’s clothing – 260 %Railroad Cars – 205 %
The rise of the heavy industryAmerican manufacturing production surpassed the
combined total of Great Britain, Germany, and FranceRailroads opened new areas to commercial farming,
creating a truly national marketplace and inspiring a boom in coal mining and steel production
By 1900, the process of economic concentration had extended into most branches of industry—a few large corporations, called "trusts", dominated in steel, oil, sugar, meatpacking, and the manufacture of agriculture machinery
Increased mechanization of industry is a major mark of the this era’s search for cheaper ways to create more product
InnovationThe United States became a world leader in applied
technology. From 1860 to 1890, 500,000 patents were issued for new inventions—over ten times the number issued in the previous seventy years
George Westinghouse invented air brakes for trains (making them both safer and faster). Theodore Vail established the American Telephone & Telegraph Company. Thomas A. Edison invented a remarkable number of electrical devices, as well as the integrated power plant capable of lighting multiple buildings simultaneously
Oil became an important resource, beginning with the Pennsylvania oil fields. Kerosene replaced whale oil and candles for lighting
Frederick Taylor – innovation in management science
Examples of key inventions in the late 19th century in the USA
Alexander Graham Bell Telephone
Thomas Alva Edison Light bulb Phonograph
Levi Strauss Blue jeans
Nikola Tesla Radio
Christopher Latham Sholes Typewriter
John Pemberton Coca-cola
Economic crisesPanic of 1873
Start of the long (or great) depression (until 1879 – 65 months)
It began with a crash on the Vienna Stock exchange
Panic of 1893It was caused by railroad overbuilding and shaky
railroad financing which set off a series of bank failures – similar to the tech bubble
In total over 15,000 companies and 500 banks failed
International economic relations of the USA
International tradeThe share of USA was growing – 9,1 % in 1890Shift from agricultural products to industrialTrade with Europe dominated From the start of the 20th century the current
account of the BoP recorded surplusesHeavy protectionism in the USA
International capital flowDuring the turn of the centuries USA changed
from international debtor to creditor
Big business and government intervention
Rise of big business – huge wave of mergers during the last years of 19th century1892 – merger of Edison General Electric and
Thomson-Houston Electric Company to form General Electric
1901 – merger of Carnegie Steel Company and several other steel and iron businesses to form the United States Steel Corporation
Rise of Standard Oil – one of the first multinational enterprises
Why did corporations grow?Innovation produced economy of scale in the industryDeclining transportation costs encouraged growth of
optimal plant sizesDeveloping financial services in the capital markets
made it easier for individual firms to achieve economies of scale
Expansion of domestic and international markets made enlarged plat size profitable
Mergers are used to control markets (instead of cartels)
Other…
Government responseGrowing regulation of big business
Railways – Interstate Commerce Commission
Antitrust actsThe Sherman Act (1890)
It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by the United States federal government
Standard Oil – “unreasonable monopoly” - 1911
Most important Standard Oil successors Standard Oil of New Jersey (SONJ) - or Esso (S.O.) – renamed Exxon, now part
of ExxonMobil. Standard Trust companies Carter Oil, Imperial Oil (Canada), and Standard of Louisiana were kept as part of Standard Oil of New Jersey after the breakup.
Standard Oil of New York – or Socony, merged with Vacuum – renamed Mobil, now part of ExxonMobil.
Standard Oil of California – or Socal – renamed Chevron, became ChevronTexaco, but returned to Chevron.
Standard Oil of Indiana - or Stanolind, renamed Amoco (American Oil Co.) – now part of BP.
Standard's Atlantic and the independent company Richfield merged to form Atlantic Richfield or ARCO, now part of BP. Atlantic operations were spun off and bought by Sunoco.
Standard Oil of Kentucky – or Kyso was acquired by Standard Oil of California - currently Chevron.
Continental Oil Company – or Conoco now part of ConocoPhillips. Standard Oil of Ohio – or Sohio now part of BP. The Ohio Oil Company – more commonly referred to as "The Ohio", and
marketed gasoline under the Marathon name. The company is now known as Marathon Oil Company, and was often a rival with the in-state Standard spinoff, Sohio.
Henry Ford – man of a new eraHe was born in 1863 in Michigan in a farming familyHe never liked farm life, so he left to Detroit in 1879
to work as an apprentice machinistHe worked for Westinghouse and later for Edison1896 – experiments with Ford Quadricycle1899 – Ford founded Detroit Automobile Company 1901 - Henry Ford Company1902 - Ford & Malcomson, Ltd. later renamed as
Ford Motor Company 1908 – Ford Model T (15 million sold)1913 – Moving assembly belts