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