Figure 1.-- The United States at the turn of the 20th century had the largest industrial sector in the world, but it was not greatly larger than that of the other two leaders, Germany and Britain. This changed with the adventbof Henry Ford's Model T- Tin Lizzy. It was priced so that workers and framrrs could afford it. Not only were Europeann cars more expensive, but Eurooean workers and farmers did not have the same level of earnings as as Americans. Here we see a farner in Colorado with his Tin Lizzy. That mean it sold in vast quantities. The Eurooeans also manufactured cars, but they were expensive far beyond the buying power of the average person. The result was that the American industrial power lept far above that of all other indusdtrial countries -- more than double that of Germany or the Soviet Union. The result was that when Hitler and Stalin launched World War II, no other country even appriached the American Arsenal of Democracy. .

European countries began creating colonies as partbof their maritime outreach (16th century). The purpose of the colonies was to benefit the mother country. England was a late comer to this proces, but began implanting colonoies along the Atalantic coast of North America (17th century). The idea was that the colonies would provide raw matertials and agricultural products to support the economy of the mother country, including the manufacruring sector. And also to provide a market for manufcuting in the mother country. This became an increasingly important issue as the Industrial Revolution began in England. Parliament passed laws restricting induistry and manufacturing in the Colonies to support British manufacturing. Parliament also restricted settlement beyond the aplaalcjins. These restrictions were some oif the vissues leading to the Revolution. British limits on American industry was one of the causes of the Revolution. The Revolution removed these and other impediment (1776-83). America at the time was still alargely agrcicultural country. During the late-18th and early-19th century, the foundation. The most important step was the extensive implementation of free market capitalism and the rights of property as explaimed by Adam Smith in the Wealth of Nations. This was confirmed by subsequent law and Supreme Court decisions which enabled Americans with few Governent restrictions to develop the country's ample resources and take advantage of the growing domestic market. No other country offered such advanatages. Over the space of the 19th century, America shifted from an agricultural country to an industrial giant. The handicrafts of the northeast developed into industrial manufacturing beginning in the early-19th century. Household manufacturing out of necesity was was virtually universal in colonial America. Local craftsmen on a small scale supplied necesities for their communities. After the Revolution actual factories began to appear. This mean machines and predetermined tasks which producing products on a larger scale that were not only sold locally, but shipped to markets beyond local communities. America's Industrial Revolution began with the textile industry just as it did in Britain. This process occurred mostly in the North. Samuel Slater in Rhode Island built America's the first factory (1790). He brought the technology of the developoing British industry to America. As in in Britain, the first industrial factories were textile mills. He built a cotton-spinning mill in Pawtucket. The machinery was driven by water-power. Up until this point, America imported textiles. Soon other entrpreneurs in the northeast were opening mills. Textile manufacturing became the country's primary industry. And with El Whitney's cotton gin (1793) cottin became an immenbsly valuable crop maeaning that the txtile mills had a domestic source of raw material. Over the next decade textiles was the dominant industry in the country, with hundreds of companies created. Textiles were the first industry, but the impirtant iron a steel industry was launched shortly after. Pennsylvania's furnaces and rolling mills began to replave small local forges. Oliver Evans of Philadelphia took the first major step in using iron for industrial purposes (1804). He developed a high-pressure steam engine that could be adapted for a wide variety of industrial purposes. It was soon powering ships, sawmills, flour mills, printing presses as well as textile factories. Eli Whitney made another major contribution began making guns using interchangeable parts. This idea was not unknown in Europe and actually was first devised in anciet China. It was Whitneyt and Amnerica commercialized . From these beginnings, America by mid-century was becoming a major indistrial power, challenging European industry. It would be capitalism and free labor that powered Northern industry that would defeat the southern Confederacy and destroy the slave systrem (1861-65). By the end of the Century, America was the world leading indiustrial power. And had the best paid workers in the world which is why European workers immigrated to America in their millions. Part of the reason for this development was the availability of raw material. Many countries, however have raw materials and did not become industrial powerhouses. And the Europoean powres important industrial nations with only limited natural resources. What made America different was a legal and societal framework which supported free market capitalism and entrepreneurship. And this is why America made the huge leap over Europe. It was not the work of a brilliant scientist, but a entrepeneur who grew up on a farm and loveed to tunker--Henry Ford. Within a few years he turned America fron one of several important industrial powers into the world's preeminent industrail power. His Model-T Ford was priced so that American workers could afford a car. The industrial expansiin that followed created an industrial jugernought that woould save save Wesrern civiization and defeat the great totalitarin pors of the 20th century. Although winning the Cold War, the United States allowed its heavy industrial base to decline creating the Rust Belt. Another irony is that labor unions, major corporations and the political estblishment, including the labor friendly Democratic Party, cooperated in this process. After World War II, America would lead the way into the high-tech era.

Colonial Era (1609-1783)

European countries began creating colonies as partbof their maritime outreach (16th century). The purpose of the colonies was to benefit the mother country. England was a late comer to this proces, but began implanting colonoies along the Atalantic coast of North America (17th century). The idea was that the colonies would provide raw matertials and agricultural products to support the economy of the mother country, including the manufacruring sector. And also to provide a market for manufcuting in the mother country. This became an increasingly important issue as the Industrial Revolution began in England. Parliament passed laws restricting induistry and manufacturing in the Colonies to support British manufacturing. Parliament also restricted settlement beyond the aplaalcjins. These restrictions were some oif the vissues leading to the Revolution. British limits on American industry was one of the causes of the Revolution. The Revolution removed these and other impediment (1776-83). America at the time was still alargely agrcicultural country.

Early Republic (1783-1820)

During the late-18th and early-19th century, the foundation. The most important step was the extensive implementation of free market capitalism and the rights of property as explaimed by Adam Smith in the Wealth of Nations. This was confirmed by subsequent law and Supreme Court decisions which enabled Americans with few Governent restrictions to develop the country's ample resources and take advantage of the growing domestic market. No other country offered such advanatages. The handicrafts of the northeast developed into industrial manufacturing beginning in the early-19th century. Household manufacturing out of necesity was was virtually universal in colonial America. Local craftsmen on a small scale supplied necesities for their communities. After the Revolution actual factories began to appear. This mean machines and predetermined tasks which producing products on a larger scale that were not only sold locally, but shipped to markets beyond local communities. America's Industrial Revolution began with the textile industry just as it did in Britain. This process occurred mostly in the North. Samuel Slater in Rhode Island built America's first factory (1790). He brought the technology of the developoing British industry to America. The Slater system still had the actual weaving done out side the factory at local farms. As in in Britain, the first industrial factories were textile mills. He built a cotton-spinning mill in Pawtucket. The machinery was driven by water-power. Up until this point, America imported textiles. Soon other entrpreneurs in the northeast were opening mills. Textile manufacturing became the country's primary industry. And with El Whitney's cotton gin (1793) cottin became an immenbsly valuable crop maeaning that the txtile mills had a domestic source of raw material. Over the next decade textiles was the dominant industry in the country, with hundreds of companies created. Textiles were the first industry, but the impirtant iron a steel industry was launched shortly after. Pennsylvania's furnaces and rolling mills began to replave small local forges. Oliver Evans of Philadelphia took the first major step in using iron for industrial purposes (1804). He developed a high-pressure steam engine that could be adapted for a wide variety of industrial purposes. It was soon powering ships, sawmills, flour mills, printing presses as well as textile factories. Eli Whitney made another major contribution began making guns using interchangeable parts. This idea was not unknown in Europe and actually was first devised in anciet China. It was Whitneyt and Amnerica commercialized .

Ante-Bellum Era (1820-1860)

Discussions of the ante-bellum period invariably foccus on the inctrasing section divide and the spread of planation agriculure- into the new states of the South. Thr result was an incrasing divregence of the southern economy from that of the North. Until the antebellum era, there was considerable similarities between norther and southern ecomomies. There were comparable levels of manufacturing in the North and South. This only change as maufacturing began to move away from handicraft and toward factories. Rather than making this shift, the southern economies began to specialize on cotton agriculture produced wirh slave labor. An unansered question in American economic history is why the South did not industrailize. There are two competing theories involving ecobomic and phiodophical issues. [Preyer] As with most major issues there is often not a single cauasative factor. But slavery is also certainly at the heart of the matter. The whole purpose of industrailization was to improve productivity at lower cost. And a majpr cost in manufactueing is labor. Indistrialization reduced labor cists per unit at production. Yet this was not a the same powerful driver inthe South as in the North. Souther planters through slvery had already reduced labor costs to the bare minimum. Commonly less well covered are the economic developmrnts in the North, especially the development of industry. Slater’s early system was supplanted by the more-efficient Waltham or Lowell system. This extended the weacing to the factories with power looms. The Waltham system also included specialized, trained employees need to run the power looms. This advanced the concept of wage labor. This would gradually in the North suplant other forms of labor, such as apprenticeship and indentured servitude, family labor, and slavery. Cities had already begun to grow in the North, bu the availability of better income fron factory jobs accelerate this movement. While the textyile induistry led the way, indistrialization was not limited to textytiles. We notice expanding production of iroin and steel. And important advances were being made in other industries, such as the manufacture of equipment, machinery, furniture, paints, paper, glass, and other areas.

Civil War (1861-65)

It would be capitalism and free labor that powered Northern industry that would defeat the southern Confederacy and destroy the slave systrem (1861-65). There is not doubt that the intensity of feeling in the South about slavery and its imprtance to southern society caused the Civil War. It was the reason for Southern secession and the Northern war to preserve the Unioin and ultimatekt to end slavery. There is also no doubt that the industrialization of the nothern states played a major role in the Federal victory. The North could produce all the weapons of war and military supplies needed. The South could not even produce equioment and food needed for its armies, let alone provide the needed weapons. They had to imprt war supplies, but bas the Federal naval blockade tightened and the meams of purcahsing material declined, this became more amnd more difficult. The cost of the War was enormous. The Federal Government developed effective ways of financing it. Confederate financing effirts were chaotic. When I was college (1960s) the economic debate over the impact of the War was largely ettled. It was seen as a major turning point in American history, including economic development. Important historians labeled it as the 'Second American Revolution'. They claimed that "... at bottom the so-called Civil War – was a social war, ending in the unquestioned establishment of a new power in the government, making vast changes – in the course of industrial development, and in the constitution inherited from the Fathers." [Beard and Beard, p. 53.] Another important historian subsequently endorsed the Beard's' thesis by sucuntly stating that the War’s 'striking achievement was the triumph of industrial capitalism'. [Hacker, p. 373.] Historians became to call theeir views the Beard-Hacker Thesis and became the the most widely accepted interpretation of the economic impact of the Civil War. And there is much to commend the thesis. Modern historians have take issue with the thesis. The most cogent point they make is that milurary production ncan not be counted in making the case for expanded American industrial production. Viewed in this way, The Civil War was a not a major cause of expanding American industtrial production {cichran]. Bur Reoublican policies inmpoleted during and after the Civil War werev important such as the Homestead ct and the Tranconinental Railway Act (1862), National Bamking System (1862), and the Reoublican policies of political economy were imprtant. [Enherman] Another important economic matter was industrial innovations such as Ericson's screw propeller.

Late 19th Century (1865-1900)

Over the space of the 19th century, America shifted from an agricultural country to an industrial giant. From these beginnings, America by mid-century was becoming a major indistrial power, challenging European industry By the end of the Century, America was the world leading indiustrial power. And had the best paid workers in the world which is why European workers immigrated to America in their millions. Part of the reason for this development was the availability of raw material. Many countries, however have raw materials and did not become industrial powerhouses. And the Europoean powres important industrial nations with only limited natural resources.

Early 20th Century (1900-1920)

What made America different was a legal and societal framework which supported free market capitalism and entrepreneurship. And this is why America made the huge leap over Europe. It was not the work of a brilliant scientist, but a entrepeneur who grew up on a farm and loveed to tunker--Henry Ford. Within a few years he turned America fron one of several important industrial powers into the world's preeminent industrail power. His Model-T Ford was priced so that American workers could afford a car. The industrial expansiin that followed created an industrial jugernought that woould save save Wesrern civiization and defeat the great totalitarin powers of the 20th century.

World War I (1914-18)

Some World War I belgertants entered the War because they were invaded by the Germans, Belgium, France, and Russia (August 1914). Others declared ar believing that the War would be short and they would benefit economically (Italy, Greece, and Ottoman Emppire). All of the major cobatants believed it would be a short bringing bebnefits. As a result, they did not initially take major economic measures. Few had Chuurchill's insughts. “I have frequently been astonished to hear with what composure and how glibly Members, and even Ministers, talk of a European War.” The young MP in 1901 went on to point out that in the past European wars had been fought by small professional armies, but in the future huge populations would be involved, and he predicted that a European war would end 'in the ruin of the vanquished and the scarcely less fatal commercial dislocation and exhaustion of the conquerors.' [Churchill] The United States for narly 3 years benefitted from Allied war orders. The United States would be atively involved in the War for only 19 months (April 1917 - November 1918). The United States had made no preparation for war. It laubched an extrodinary economic mobilization, far beyomd that of any other war up to that time, including the Civil War. Some 4 four million Americans would serve in the military. The poweful U.S. economy churned out a vast supply of raw materials and munitions fot its war effort as well as to supply its Allies. But it was men the Allies wanted most. They were suprosed to learn that America did not have a sizeable army.

Inter-War Era (1920s-30s)

The inter-War Era was sparated by two decades that could not be more different. The Roaring 20s of the 1920s and the Great Depression of the 1930s. Much more has bee written about the Great Depression than the Roaring 20s. This means in aan era where there is concern about slow growth, a decade with one of the impressive ans vigoros record of growth and expansion is largely ignored, if not vilified. One economis identifies it as 'the first truly modern decade'. Dramatic economic developments occurred during the decade. An important new industry appeared almost instanenously after the War. Work by the World War I beligerants on wireless opened the way for a whole new modern industry--radio. This was part of two widespread and very important developoments. First, rapidly expanding electric generating and utility networks led to new development consumer appliances and of lighting as well as heating appraoches for bith homes and undustry. This was a trend dengun un thev1910s, but explodedvin the Roraing 20s. Second, commercial radio and to a lesser extent the movies began to end rural isolation. Here another factor wa both local and long-distance telephoning, although here it was more of a New Deal achievement in the 1930s. One of the most important development was the adoption of the automobile ass part of the American life style. And Americans did not just want basic black Tin Lizzies. They wanted style and peformance and the Big Three in Detrout gave them just that. And Amerucan cities began to change Suburbs had been growing even in the late-19th century. But they were tied to rail or trolley lines. The aitomobile opened vast new areas to suburban develooment. And American began to build highways with improved surfaces to meet the needs of both car and increasingly truck owners. Recreatiin also began to changevand becoming an imoorantbpart of the economy. Traveling during summer vacations, Hollywood movies, and professional sports became to shiftbtomimportant industries. Other important changes were innovations in business organization and manufacturing technology. The Federal Reserve System created in 1913 began tomplay an increasingly imprtant role. The United States was an important economic force before Wirld War I, but in the 20s powered to a dominant position in international trade and global industry. All of this came to a srraching halt with the Wall Street Crasg (October 1929). business. These things make the 1920s a period of considerable importance independent of what happened in the 1930s. The Great Depression of the 1930s was the worst economic slump ever to affect the United States. It was not just a national economic crisis, but one which spread to virtually every country. The greatest calamity to befall Americans in the 20th century was the Great Depression--a worse calamity than even two world wars. The Depression began with the Wall Street stock market crash in October 1929. Soon business were going under and Americans were losing their jobs. All Americans were affected. Eventually about one-third of all wage earners were unemployed and many who kept their jobs saw their earnings fall. President Hoover who had engineered a humanitarian miracle in Europe during World War was unable to break away from the mindset that the Government should not intervene in the economy. President Roosevelt was elected by a landslide in 1932. He brought energy and new ideas to Washington and the Federal Government initiated programs that would have been rejected out of hand only a few years ago. Roosevelt was willing to use the Government to solve economic and social problems besetting Americans. The people loved him, electing him to an unprecedented third and fourth term. The propertied class or "economic royalists" as he called them, hated him. Roosevelt's program was called the New Deal and the many programs initiated help change the face of the United States: Social Security, the Tennessee Valley Authority, rural electrification, the Works Progress Administration (WPA), protection for union organizers, and many others. The conservative-dominated Federal Courts struck down WPA, but many New Deal programs endure to this day. The great novel to emerge from the Depression was John Steinbeck's The Grapes of Wrath which addressed to problems of rural Americans and the dust bowl. Urban Americans of course also suffered. While the New Deal brought relief to many desperate Americans, the Depression lingered until orders for war material from Europe began to flood into America in the late 1930s. The rest of the world was also affected by the Depression. Britain and France also struggled with the economic down turn. The response in Germany and Japan was totalitarian, militarism, and finally war.

World War II Arsenal of Democracy (1939-45)

President Roosevelt first used the term "Arsenal of Denocracy" on December 29, 1940 in one of his Fireside Chats, radio boradcasts, to the American people. He expalined the importance of supplying the people of Europe, at the time primarily Britain with the "implements of war". He said that the United States "must be the great arsenal of democracy". The very day he spoke, a Luftwaffe raid on London severly damaged famous buildings and churches in the city center and engulfed St. Paul's Cathedral in flames. [Gilbert, p. 356.] Hitler feared America more than any other country, but was convinced that Britain could be defeated before America could be mobilized or American industry could be effevtiverly harnassed for the war effort. Neither the NAZIs or the Japanese had any idea just how effectibely American production could be converted to war production. Air Marshall Goering sneared. "The Americans only know how to make razor blades." Four years later with the Luftwaffe in tatters, Goering said he knew that the War was lost when American P-51 Mustangs appeared over Berlin escoring waves of bombers. The record of American war production is staggering and in large measure determined the outcome of the War.

Late 20th Century Era (1945-2000

The late-20th century was dominated by the Cold War. It was basicall a test case of the realtive effectuveness of capitalism and socialism. The Soviets believed as Chairman Khruschev expessed it--"We will bury you." He like other Soviet leaders believed fervently that sicialism was a superior economic system. Of course they believed that becususe any on wjo questiined it wound up with a NKVD bullet in his head or a slower death in the Gulag. While the NKVD could impose the answer rather tjan permit discusion of economics, yhey could not cgange the iron laws of economics--socialism is an ineeffcent ecomomic syste,.. And in theresulting Cold War competition, it was the capitalist Western economoes that prevailed. Such is the appeal of socialism, howevrr, the Soviets hung on to gtheir Sicialidt economy y=to the very end --the imposion of the Siviet Uniion. And may in the West conunued and still do hang in to the sicialist dream, despite the clear ecidence thatbsicualism does not work. Although winning the Cold War, the United States allowed its heavy industrial base to decline creating the Rust Belt. Another irony is that labor unions, major corporations and the political estblishment, including the labor friendly Democratic Party, cooperated in this process. After World War II, America would lead the way into the high-tech era.

Sources

Churhcill quoted in Martin Gilbert, The First World War: A Complete History (New York: Henry Holt, 1994), p.3.

Beard, Charles and Mary RitterBeard. The Rise of American Civilization. Two volumes.( New York: Macmillan, 1927).

Cochran, Thomas. “Did the Civil War retard industrialization?” Mississippi Valley Historical Review Vol. 48 (September 1961), pp. 197-210.

Engerman, Stanley L. “The Economic Impact of the Civil War.” Explorations in Entrepreneurial History, second series 3 (1966), pp. 176-199 .

Gilbert, Martin.

Hacker, Louis. The Triumph of American Capitalism: The Development of Forces in American History to the End of the Nineteenth Century (New York: Columbia University Press, 1940).

Preyer, Niorriw W. "Why did industrialization lag in the Old South?" The Georgia Historical Quarterly Vol. 55, No. 3 (Fall, 1971), pp. 378-96.

Created: 8:20 PM 8/6/2020
Last updated: 8:20 PM 8/6/2020