Economic History of the US

Transcription

1 Economic History of the US Reunification Era, Lecture #3 Peter Allen Econ 120

2 , Hard Times in Agriculture Deflation of Farm prices Rapid rise in output of ag. products Commercialization and globalization Success required more Scale Productivity Mechanization, industrialization Borrowing and Debt Farmers blamed post-civil War Gold standard, Coinage Act of 1873, Crime of 73 Eastern bankers, greediness, inadequate credit Deflation (real cause, ) everything but supply and demand

3 Prices Fell From the End of the Civil War until the 1890s and then rose until WWI Wholesale Price = crop prices Schism in Politics Agriculture West Industry - East

4 Pinnacle of Agrarianism, 1896 William Jennings Bryan Populist, Democrat Candidate for president, 1896, 1900, 1908 Nebraska/Agrarian Return to bi-metallic standard, Coinage of silver Secretary of State, Pacifist, Spanish-American War, 1898 and WWI, 1917 The Wonderful Wizard of Oz allegory of 1896 campaign

5 William Jennings Bryan, 1896 Democratic Party Convention, Chicago 1896 Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold

6 William Jennings Bryan, 1896 Unsuccessful at Turning agrarian-based populism into a movement Overturning the gold standard Killed populism in US Argument in favor of government inflation..esp. silver at 16/1 Frightened most Republicans better for the economy, until FDR

7 Wizard of Oz, 1900 Allegory of Populism Oz ounce Yellow Brick Road gold = standard Emerald City = DC Wizard power based on gold standard, false Dorothy = innocent westerner Scarecrow farmer Tinman urban worker Lion Bryan WW East East Coast bankers WW West drought Ruby/Silver Slippers Silver

8 Transcontinental Railroad, 1869 Post-war railroad building Created our first technology-based financial bubble, in 1873 Pacific Railway Act of 1862 chartered two private companies: Union Pacific, westward From Omaha, Nebraska 1087 miles Began, July 1865 Central Pacific, eastward From Sacramento 690 miles Started, January 1863 Promontory Summit, Utah May 10, 1869, Golden Spike

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12 Transcontinental Railway Financing Example of gov. advance planning Central and Union Pacific needed capital = 40x largest private company at the time, first conglomerates 1. Federal Land Grants Grants: 5 sections (sq. mi.) of land for adjoining each mi. of track Raised to 10 sections in 1864 Checkerboard Total = 79 grants, 20 million acres Stopped in 1871, public outcry Companies sold land after railroad boosted value Covered 1/3 to 1/2 of construction cost, only Right-of-way

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14 Map 16.1 Today s Basic Railroad Network

15 Transcontinental Railway Financing 2. Subsidies Most financing raised from bonds issued to private investors Subsidized by the federal gov. Companies allowed to issue gov. guaranteed bonds: $16,000/ mi. plains, $32,000/ mi. foothills, $48,000/mi. mountains Equal amount of first mortgage bonds First US investment banks, JPMorgan, Kidder Peabody Bought by investors in Eastern cities and Europe 20% to 25% of financing came from British investors Companies repaid gov. guarantees in full 3. Free timber, states: terminal facilities, RR bond investments

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17 Railway Financing was a Bubble CPRR Raised $53mm in bonds Land grants worth $7mm $87,000 per mile UPRR Raised $65mm in bonds Land grants worth $29mm $86,000 per mile Railroad Bonds Fell in value to 75%/CPRR and 30%/UPRR Brits and US banks were main investors

18 Subsequent waves of RR construction Big waves % of all investment spending 1870s, 20% 1880s, 15% 1890s, 7.5% 1900s, 7.5%

19 Main Line RR Track Thousand Productivity Miles % change (1870=100) % % % % % % 213

20 One Byproduct of Surge of Railroad Construction Infrastructure for future Not all successful Wave of bond, stock and land speculation Financial problems in 1873, 1893