Other factors that contributed to post-war economic growth
Capital
- The availability of capital for investment had already improved before the Civil War with the growth of corporations chartered under state law.
- These allowed businesses to attract individual investors who would purchase shares in the companies, providing them with start-up and capital.
- The War created an accumulation of capital as many people tended to save their earnings until the fighting was over, while banking reforms encouraged investment of this saved money.
- Entrepreneurs that had made significant profits out of the Civil War were now also looking to channel those profits into new economic enterprise.
Raw Materials
The USA was almost self-sufficient in natural resources, especially following Westward expansion.
Huge deposits of coal and iron were later supplemented by oil.
- Although natural resources themselves were not sufficient to guarantee economic expansion, (needing trade and development of these resources), the abundance of these resources provided America with the ability to expand easily.
It is also significant that America possessed these resources within their own borders, so they wouldn’t have to import them and could instead raise tariffs on other countries that were importing raw materials into America- protecting US industry.
Workforce
- A major increase in production could not occur without a similar increase in population.
- This would provide a major source of labour, as well as a growing market to buy the new goods.
- The increase in population was linked with immigration, immigrants tending to concentrate in the growing industrial centres of America such as Chicago and NY.
Immigrants provided a constant stream of cheap and eager labour, as well as well-educated people that brought experience from the Old World.
Industrial Organisation
It is significant that the dominant economic organisation of the major industries was in large-scale enterprises, often in trusts or holding companies (companies that own other companies that manufacture goods.)
Although this created some tensions politically, in economic terms it allowed for coordination, and greater development in heavy industry that encouraged speedy growth.
Positive Culture
Essentially creation of the American way, favouring economic enterprise and material achievement.
This belief was exacerbated by the victory of the North and admiration of ‘Yankee ingenuity.’
- This belief was taken up by immigrants who bought into the American dream of hard-work, thrift and individualism who took on difficult jobs at the bottom of society, hoping to rise one day as Dollar Millionaires- such as Carnegie and Rockefeller.
- Positive culture for entrepreneurship was also seen in government, not only through specific acts such as tariffs and banking, but also through the propensity to favour management in labour disputes.
Transport and Communication
The development of the transport system and railroads provided the links to create a national market.
- By 1890, the revenue from railroads was more than $1000 million, double that of the federal government.
- Mileage of track had increased from 30,000 miles in 1860 to over 190,000 miles by 1900.
- By 1880, 90% of all rolled steel manufactured in American was going towards the railroads.
Railroads made it possible to transport raw materials, as well as food and perishable goods to urban areas, with ease.
There were also important developments in communications:
- The telegraph in 1844, and the telephone in 1876.
This established better coordination between companies as well as wide-scale marketing and advertising through the phone.
The ‘Robber Barons’
Robber barons is the name to describe industrialists whose business practices were unethical or ruthless. Carnegie, Vanderbilt, Rockefeller and later Henry Ford were known collectively as the 4 greatest robber barons.
- It is debatable whether they deserve this reputation, as while they exploited workers and destroyed competition from small businesses by holding monopolies of all industries…
- They were also great philanthropists who also gave back some of their wealth to the public (in particular Carnegie.) They also created jobs and were arguably the key to American industrialisation and prosperity in the Gilded Age.
This coincides with the theory of ‘Social Darwinism’ and the start of the laissez-faire in the federal government, the strongest will survive and do it by themselves.
Most of these robber barons started from nothing as well.
Carnegie 1835-1919
- Industrialist and philanthropist born in Scotland.
- He initially invested successfully in railroads, land and oil. Then later the iron and steel industry– making America the world’s leading producer.
- After creating a massive empire he sold it off to the US Steel Trust in 1901.
Carnegie in particular was keen to invest his money to promote the welfare of others
He didn’t do this through handouts to the poor, which would encourage dependancy and discourage a healthy work ethic, but by providing the means to self-improvement:
Investing in libraries (3000 of them), hospitals, public parks and even schools such as the Tuskegee Institute (under Booker T.)
‘The man who dies rich, dies disgraced’
Rockefeller 1839-1937
- Founder of Standard Oil, a company that had control over 90% of US refineries by 1882.
- The activities of the Standard Oil Trust led to an outcry against monopolies and the passing of the Sherman Anti-Trust Act in 1890.
Vanderbilt 1821-1885
- Financier and railroad promoter.
- Also son of financier, Cornelius Vanderbilt, he became the head of a railroad trust.
- Strongly opposed to government regulation of the industry.
- In 1857 Vanderbilt was given control of the Staten Island Railroad, named Vice-President of the New York and Harlem railroads in 1864.
- By 1877 he took over as president of the New York Central Railroad, essentially controlling all means of importation and exportation in the North, the hub of prosperity in the Gilded Age.
He is famous for his phrase ‘The public be damned.’