American Economic History Test 3

Front 1

What percentage of slaves brought to the New World 1500-1870 were brought to the United States? What percentage of slaves in the New World were in the United States in 1825? Provide two historical reasons to explain this discrepancy.

Back 1

- 6% brought to the US
-36% were in US in 1825

Differences in natural rates of population growth, negative in Brazil/Caribbean, positive in the US

Front 2

Explain what Walton and Rockoff mean when they describe “Northern Emancipation at Bargain Prices?” Provide 3 specific historical details to support your answer.

Back 2

Current slaves not freed, but kids were after they repaid their "debt" (about 25). This was a gradual compensation scheme, paid for by the soon to be free slaves.

Output equaled cost around 10, positive until about 25 when owner fully compensated.

In North, only 3% of slave wealth lost, likely closer to 0 because they could be sold to the South or worked harder.

Front 3

List two economic factors that drove slavery to become entrenched in the American South.

Back 3

1) C otton Gin - technology increased productivity.
2) F ertile soil out West
3) P lantation agriculture very productive (86% of cotton on these farms)

Front 4

Describe three factors which cause large plantations to be more economically efficient than small farms. How did this promote the development of slavery in the South?

Back 4

1) E conomies of scale
2) G angs (organized and later specialized)
3) B etter land and seeds

This promoted wide scale slavery on these large plantations that resembled factories and were dependent on large groups of slave labor.

Front 5

Describe two ways we can calculate the value in today’s money of a slave in the American South. What present values do these two methods yield?

Back 5

1) Use the CPI Ratio → $46,000
2) Compare wage rates and multiply 1855 price by this ratio → $135,000
3) Use living standards ratio → $600,000

Front 6

How did each of the following political events affect slavery in the United States? The Missouri Compromise of 1820. The Compromise of 1850. The Kansas-Nebraska Act of 1854.

Back 6

→ 1820 – Missouri in as a slave state to balance with Maine. Slavery prohibited north of 36/30
→ 1850 – California free / Southwest with popular sovereignty. NEW fugitive slave law. Senate northern controlled now
→ KS/NEB 1854 effectively repeals MO compromise, allowing popular sovereignty everywhere.

Front 7

Explain what Walton and Rockoff mean when they write “. . .the people of the Northwest found their economic interests more closely tied to the eastern industrialists than to the southern planters.”

Back 7

Northwest farmers didn’t want slavery to expand and hurt their smaller farms at expense of plantations. And with better transportation to the east, the products of the Northwest were increasingly going to the mid Atlantic and Europe. “Altruistic motives were motivated by economic interests”

Front 8

List two ways in which slavery causes the South to develop differently from the North.

Back 8

1) U rban centers develop in the North
2) R ailroads more widespread in the North
3) I mmigration in the North (foreigners don't like slavery, don't want to be "poor whites"

Front 9

What is the Beard and Hacker thesis regarding the Civil War and Industrialization? List 3 pieces of evidence provided by Walton and Rockoff which either support or reject this thesis. Does this evidence generally support or reject the thesis?

Back 9

It states that the Civil War spurred northern industrial development.
1) They reject that war stimulated the economy, we lost tons of potential labor and human capital
2) Evidence shows Northern industry stagnated during the war. (Lost southern market)
3) We spent twice the national income on the war
4) Commodity output was stronger in the 20 years before the war than the 40 years during and after the war.

Front 10

Why did Southern industry and railroads recover so much more rapidly than southern agriculture after the civil war?

Back 10

There was already the existing infrastructure and institutions. Solow predicted that people still have their human capital and they value education. (Germany/Japan)

Front 11

List 3 explanations for why Southern cotton agriculture declines after the Civil war.

Back 11

1) Highly efficient plantations are gone
2) Demand for Southern cotton replaced by foreigners
3) Women and children leave the farm labor force

Front 12

What was sharecropping? Give one reason why it might have harmed the economic progress of ex-Slaves. Give one reason why it might have been beneficial. Finally, give one historical event that helped ex-Slaves escape sharecropping.

Back 12

Farmers not owners of land, are tenants. They pay rent as portion of the crop.

Can lead to subtle oppression. They are no owners, and can fall quickly into debt with bad crop.

One good, can share risk with the owner, encouraging tenants to be prosperous. And definitely preferable to slavery!

Urbanization and industrialization drew migration to the North.

Front 13

What do Walton and Rockoff say was “. . .the outstanding feature of American land policy. . .” Provide one piece of evidence to support this claim.

Back 13

It was how quickly farming, mineral and timber lands were transferred into private hands.

Consumers of foodstuffs and raw materials had falling prices for 30 years.

Front 14

Draw and explain the graph we drew in class that makes the economic argument that the optimal price for federal land was zero. (267)

Back 14

This is the market for land. P on Y axis and Q on X axis with a basic supply and demand graph. Govt revenue is the square within this equilibrium.

However, to maximize GNP, we want to maximize the area under the demand curve. This is the consumer surplus. At P1, the welfare loss triangle is equilibrium A down to Q1 and Q2. P2, (zero price) society’s welfare is maximized. If this land isn’t brought into production future GNP will be less. Zero price brings more land into production and maximize future GDP.

Front 15

Describe two characteristics of the Homestead Act of 1862. Why did it pass in that year when earlier Homestead Acts had failed in Congress? What was the Morrill Act of 1862 and how was it realized in Kansas☺? Finally, chose one of the other land acts on pages 264-265 and tell me one detail about that act.

Back 15

1) 160 acres (320 for married)
2) At the time prime fertile land was unclaimed in Iowa, MN, and KS.
Was passed because there were no southern Democrats because of the war. The Morrill Act authorized “land grant colleges” and especially helped form agricultural training at K-State.

The Timber Culture Act of 1873 gave 160 acres of free land to whoever would plant trees of 40 acres.

Front 16

Provide two arguments in favor of the thesis that the Federal redistribution of land was inefficient. Then provide two arguments in favor of the thesis that it was efficient.

Back 16

Inefficient:
1) High rate of failure among least competent
2) So much land settled that it laid future problems for modern agriculture


Efficient:
1) 30 years of falling prices
2) Investment in land and machinery equaled or exceeded returns on other investments

Front 17

List three developments which helped drive the incredible increase in American agriculture production after the civil war. What kind of productivity was relatively flat in this industry, and what kind of productivity increased rapidly?

Back 17

S eeds (wheatbelt expanded, new varieties aided this)
M echanization
F ertilization

Crop output per acre was flat, but output per worker rises dramatically.

Front 18

Explain the economic argument behind the idea that Good Times for Farming can be Bad Times for Farmers? You may use symbolic reasoning rather than a verbal argument.

Back 18

Increase in agricultural technology leads to increase in output and then a decline in prices and leads to less revenue for farmers because the demand for basic foodstuffs is inelastic. (Use arrows)

Front 19

What is the economic reason why the “. . .waste of natural resources in North America, as perceived by Europeans, contemporaries, and others. ..” has existed since colonial times.

Back 19

→ Europeans thought we ignored their “advanced” farming methods that preserved soil
→ We moved on if land became bad, it was abundant and we were more concerned with shortages in labor and capital.

Front 20

What was the first national park established in the world, and when was it established?

Back 20

Yellowstone National Park. It was established in 1872 by Ulysses S. Grant.

Front 21

List three achievements Theodore Roosevelt and Congress achieved in the area of conservation between 1901 and 1907. What is most significant about these achievements? (List at end of Ch. 15)

Back 21

1) Designated 150 million acres of national forests
2) 75 million acres of mineral wealth land kept from sale
3) Recognized future importance of waterpower sites

Cements the principle that federal government can be in business of conserving and managing resources.

Front 22

List 3 statistics that support the idea that 1865-1910 was a time of dramatic change in the size and composition of the American economy.

Back 22

- In 1869 we were 53% agriculture and 33% manufacturing, but by 1900 that had swapped (14% mining/construction)
- In mid 1890s US becomes the largest industrial power
- From 1860-1910 the machinery industry expanded from $33 million to $690 million

Front 23

List and explain what Walton and Rockoff say are the two dual components of technological change.

Back 23

1) Invention
2) Innovation
Invention is the discovery of something new like electricity. Innovation is when we found ways to use these new ideas in products and services

Front 24

What three changes did we list in class which drive the formation of a truly national market?

Back 24

1) Mass production (Sears catalogs)
2) Telegraph
3) Railroads

Front 25

What, according to Nathan Rosenberg, are the two key roles the machine tool industry played in the development of the American manufacturing industry.

Back 25

1) New skills and techniques were developed here in response to the demands of specific customers
2) The machine tool industry served as the main transmission center for the transfer of new skills to the rest of the machinery based sector of the economy

Front 26

What are the two cornerstones of Mass Production described in the text.

Back 26

1) Continuous flow production (assembly lines)
2) Scientific management (managerial/organizational innovations)

Front 27

Name one company your textbook authors describe as the paradigm of horizontal integration. Name one that is the paradigm of vertical integration.

Back 27

Standard Oil was horizontal and Carnegie Steel is vertically integrated.

Front 28

Which generally occurred first, vertical or horizontal mergers. Explain why with at least one sentence for each type of merger.

Back 28

Horizontal was first because this is where a company is acquiring those that are like it to expand their market share (Standard Oil’s 90% of the market) Vertical then occurs because this is where the horizontally integrated firm acquires the entire supply chain in its industry (Carnegie)

Front 29

What was the first legislation that attempted to limit monopolies. Why was it not very effective during this period?

Back 29

Sherman antitrust act. Mergers were not illegal at this time. The behavior had to be deliberately monopolistic and anti competitive.

Front 30

Describe two ways the Dread Scott case transformed the debate about slavery in the United States.

Dred Scott denied this slave freedom while living in free state.

Back 30

1) Old party system was killed. Whigs , abolotiionists, and antislavery Jacksonian democrats united to become the Republican party at least partly
due to the fear that slavery would expand and hurt Northern and western farmers.
2) It seemed to prepare the two sides for inevitable conflict, intensifying the slavery debate. It empowered both the anti abolitionists, those who were anti slavery because of economics, and Southerners were deeply concerned and/or empowered that their influence and way of life was being threatened.

Front 31

List ways in which the Confederate Constitution reflected anti-state-ism and anti-industrialism.

Back 31

- It banned any internal improvements to help “facilitate commerce”. This was in stark contrast to Hamiltonian and Clay’s ideology.

- It banned government promotion of manufacturing.
- Because of this it was anti statism because it feared government intervention and centralized power.

Front 32

What were the 3 key characteristics of the Clay System?

Back 32

1) H igh tariffs
2) U se tariffs for internal improvement
3) N ational bank

Front 33

List three principles each for what Lind calls the Jeffersonian worldview and the Hamiltonian worldview. Which of these worldviews was advanced by Union victory in the Civil War?

Back 33

Jefferson
1) More local, state control
2) Strict constructionism
3) Against central bank
4) Against tariff
5) For industrialization and urbanization

Hamilton
1) Strong central government
2) Sponsor internal improvements
3) For a central bank
4) For high tariffs
5) Agrarian and rural

Front 34

List three technological innovations from the period 1865-1900 that continue to be important sectors of our economy today.

Back 34

1. S teel
2. O il
3. C hemicals
4. R adio

Front 35

Explain what Zinn means when he says “. . .the Horatio Alger stories of ‘rags to riches were. . .mostly a myth, and a useful myth for control.”

Back 35

Of the major executives in the US in the 1870s, 90% came from middle to upper class families. It may have been true for a small minority. This kept the system “chugging” so to speak for the uber wealthy because they thought they had the ability to become successful and perhaps rich. The rich needed the dreams of the poor to become their labor supply for the ingenious inventions and new machines. (254) Zinn even says that the rich who funded universities were educating the middle class, as a buffer between the rich and the poor.

Front 36

Provide 3 details describing how, according to Zinn, “. . .the government of the United States was behaving almost exactly as karl Marx described a capitalist state”

Back 36

1. Pretend neutrality, but really protect wealthy interests
2. Promote the interests of capitalism
3. Settle upper class disputes, prevent lower class rebellion, promoting long term stability for upper class.

Front 37

What does Zinn mean when he writes “. . .the immigration of different ethnic groups contributed to the Fragmentation of the working class.” Provide two historical details Zinn cites to support this thesis. (265)

Back 37

He is saying that the working class became “fractured” because they were not a homogenous labor force. They came from many different places with different cultures and languages, and so many came so fast that there was a labor surplus, keeping wages down. These differences helped to prevent a united working class.

1) Intense economic competition amongst the new immigrants, led to rivalry and sometimes violence
2) Immigrants more controllable, helpless than natives, they were culturally displaced.

Front 38

What does Zinn mean when he writes that “the serious failure to unite blacks and whites, city workers and country farmers, . . .[and] the lure of electoral politics. . .combined to destroy the Populist movement?”

Back 38

He is saying that not bringing the needed racial and geographical unity destroyed the Populist movement. This as well as their support of the Democratic party and William Jennnings Bryan led them to “sell out” to the politics and the “political brokers instead of the agrarian radicals”. (294) Zinn says that what they really needed was a truly independent political movement.

Front 39

Explain the distinction Lamoreaux makes between “center” and “periphery” firms, by providing two characteristics about each.

Back 39

Center are large and managerially directed by firms. They are in “tight oligopolistic markets” with little price competition. They wouldn’t to preserve their share of the market.

Periphery are firms of “smaller concerns”, often run by their owner. Here the market is competitive, they didn’t have the resources to vertically integrate and needed to keep production costs low.

Front 40

Why, according to Lamoreaux, was collusion among firms so difficult to maintain? Give one example cited by Lamoreaux of collusion breaking down. How could mergers solve the problems associated with collusion?

Back 40

This is because the incentive to cheat was so high, and these agreements were not enforceable in court. Wire
producers would violate a price agreement even minutes after the meeting.

Mergers were formed to “relieve the competitive pressure on rates” Price competition became easier to control with the dominant firm, and new firms could break price dominance.

Front 41

What is the first industry to break with the small-firm culture that dominated American industry before the Civil War? Provide 3 details of this break.

Back 41

The railroad. They became the nations first big businesses. 3) First to raise money from capital markets in NY. 1) They caused the development of “new financial intermediaries and instruments” that afterwards helped the economy grow. 2) They were the first to “articulate a managerial hierarchy” which became a model for future large businesses.

Front 42

What is the first business Lamoreaux credits with successfully mass-marketing its product? Provide 3 details about how this business vertically integrated.

Back 42

The meatpacking business led by Swift.
1) Refrigerated Train cars,
2) Icehouses
3) Slaughterhouses.
4) Has his own sales force.

Front 43

List 2 reasons why the merger of smaller firms into larger firms could solve the cheating problems associated with collusion.

Back 43

1) They made price competition easier to control. The “dominant firm” could turn their competition into “price takers”.
2) New firms could enter the market if price is too high and “break the price collusion” until its market share eroded enough it couldn’t set prices for its industry anymore.

Front 44

What are the two characteristics of industries which consolidated in the late 19th Century?

Back 44

1) S ought to get patent like control over their technology (ATT and GE)
2) P rotect product brand and trademark
3) P romote product through marketing

Front 45

Why did Kansas farmers, and other mid-western farmers, support the coinage of silver alongside the gold standard in the late 19th Century?

Back 45

The farmers (debtors) had the real value of their debts go up to pay back their eastern (creditors). This drop in the price level caused the economy to fall by 23%. They wanted silver to increase the money supply which was only a gold standard at the time. This would have caused the money supply to go up, push up the price level, and “reduce the real burden of farmers debts.