Economic History of the US

Reunification Era, 1860-1920Lecture #5

Peter AllenEcon 120

Gross National Product

(1860 prices)

Average Total Per

($bn.) % growth real Capita

1849-60 $ 3.3 $120

1899-1908 21.8 4.3% pa. 300

Investment Spending rose from 14-15% of GNP prior to

the Civil War to 24-28% of GNP afterward.

Industrialization

million % of labor force

Labor

Pop. Force Ag. Manuf.

1870 39.9 12.9 52.5% 47.5%

1880 50.3 17.4 51.3 48.7

1890 63.1` 23.3 42.7 57.3

1900 76.1 29.1 40.2 59.8

1910 92.4 37.5 31.4 68.6

% change 130% 190%

10 Largest Industries

1860 1910Cotton Goods 6.7%

Lumber 6.6%

Boots and shoes 6.0%

Flour and meal 4.9%

Men's clothing 4.5%

Iron 4.4%

Machinery 4.0%

Woolen Goods 3.1%

Carriages and wagons 2.9%

Leather 2.8%

All manufacturing 100.0%

$816 mm

Machinery 8.1%

Lumber 7.6%

Printing and Publishing 6.3%

Iron and steel 3.9%

Malt liquors 3.3%

Men's clothing 3.2%

Cotton goods 3.0%

Tobacco manufactures 2.8%

Railroad cars 2.5%

Boots and shoes 2.1%

All manufacturing 100.0%

$8,529 mm

11.7% of GDP 35% of GDP

Urbanization

Percent of the population in Towns…

over 2,500 over 100,000

1800 6% 0%

1840 11 3

1860 20 8

1880 28 12

1900 40 19

1910 46 22

1920 >50

Transition to World Power

Protectionism 1865-1913, high protective-tariff

40-50% on many imports

Democrats, Wilson Admin. 1913- “free-traders”…brought

avg. tariff down to 25%

US companies begin to think about export markets

Permanent income tax Act of Congress overturned by Supreme Court, 1894

16th Amendment ratified, 1913

Basis for further reduction of tariffs

Composition of Foreign Trade

US Imperialism

1880s, height of European imperialism

US focuses on continental expansion

US imperialism, 1898-1917 Republican party

1898, Spanish-American War Philippines, Cuba, Puerto Rico, Guam

“Open Door policy,” China

Perpetual lease,

Panama Canal, 1903

“Roosevelt Corollary,” 1904

Theo. Roosevelt

26th President

1901-09

Immigration and the Labor Market

3 waves of immigration bet. 1860 and 1920

Caused labor market to grow faster than population

Industrial Revolution - huge demand for labor in cities

Immigration kept wages lower

Unionization

Population and the Labor Force (in mm), 1870–1920

Immigration Waves and Business Cycles, 1865–1914

Immigration…surge and first-time shift of origin, 1890

1880-1920…23 million immigrants

1880-90: 82% from northern and western Europe,

“old” Britain, Ireland, Germany, Scandinavia Mostly Protestant

1890-1920: 65%+ from southern and eastern Europe,

“new” Italy, Hungary, Poland, Russia, Greece Mostly Catholic, orthodox

First experience with such different cultures

made assimilation difficult, tremendous hostility

NYT, 1854

Irish Immigration

1849-59

Thos. Nast,

1867

Origin of Immigrants, 1820–1920 (%)

Immigration…surge and shift of origin

Ea. Immigrant group perceived as “inferior” in its

period of peak arrivals

Economic effect of each wave of immigration was

similar Increase of supply…

…but held wages down mostly for unskilled workers

Benefit to businesses industrializing

Permitted rapid change, new industries

…b/c workers did not have to move from one industry to another

Impeded unionization

Immigration, Supply and Demand for Labor

Immigration Restrictions

Growing assertiveness of labor unions after Civil War

First restrictions on immigration…

1882, Chinese Exclusion Act

1885, Indenture contracts prohibited

1917, financial test for in migration

1917, literacy test for in migration

Emergency Immigration Act, 1921

3% limit on entry by nationality

1924, limit cut to 2% of 1890 population by nationality

Real Earnings of Nonfarm Workers

Union Movement in the US

Local union membership began to grow with urbanization and industrialization, 1872

Famous incidents, Chicago Haymarket riot, 1886 and Pullman Strike, 1894

Labor unions failed to organize more than a small fraction of the labor force

Unlike Europe

Rising real wages + immigration

Triangle Shirtwaist Fire, 1911

Union Membership Peaked in 1920