Urbanization People moved from rural life to city life, and that was a phenomenon which happened in the late 19th century.

1800s

In the table down here we can observe: The long march to city dominance of where most Americans live is revealed in Table 20.1 on page 359, which shows that the percentage of the population living in urban centers nearly doubled between 1800 and 1840, doubled again between 1840 and 1860, and then again from 1860 to 1900.

TABLE 20.1

URBAN PERCENTAGES OF THE POPULATION, 1800

–

1910

YEAR

POPULATION IN

TOWNS OVER 2,500

POPULATION IN

TOWNS OVER 100,000

1800

6

%

0

%

1840

11

3

1860

20

8

1880

28

12

40

1900

19

1910

46

22

Source:

Historical Statistics,

1975

, Series A2 and A

57-72.

By 1910, nearly 10 percent of the total population lived in three cities—New York, Chicago, and Philadelphia—each having a million-plus residents.

Between 1860 and 1910, more than half of new city residents came from overseas. The urban growth resulted from natural increase (about 10 percent), and a little over one-third came from domestic rural areas.

We can see that some cities established centers for the manufactures and also they developed some industry by their own.

Marketing and Selling During the Civil War, the typical store was processing sales. In a few large cities attracting customers was not the main purpose of advertisement. Edward Clark of the Singer Sewing Machine Company had innovated consumer credit in 1856, selling $125 sewing machines for $5 down and $3 per month. McCormick and Singer, pioneers for direct sales to consumers before the Civil War, were rare exceptions.

1861

The government and banks suspend gold payments The government and banks suspended gold payments in late 1861-1862 due to lack of funds for the war effort in an attempt to try and maintain the federal gold reserve.

Silver nearly exits the market at this time due to undervaluing and overproducing. This will cause real problems later.

At this time, gold export far exceeds the gold import.

1862

Government issues new currency: Greenbacks In 1862, Congress passed the “Legal Tender Act of 1862.” This order helped to keep the government running during the Civil War by inventing a new fiat currency, nicknamed “greenbacks.” These were paper forms of currency issued throughout the course of the Civil War that were not backed by gold or silver. That is to say, that if everyone in 1863 wanted to cash in their greenbacks for real gold or silver, there would not be enough in the United States Federal Gold reserve to do so. The limit on the amount able to be issued was $150 million. This will later rise based on votes passed by Congress.

Greenbacks solved 2 problems immediately. They provided money to fund the war, and provided a first form of uniform currency for the United States.

1863

National Bank Act In 1863, Congress passed the National Bank Act. This created new national banking institutions and created National Bank notes. These notes were backed by bonds the bank issuing the note had purchased through the treasury of the United States and were issued out through the bank themselves.

1864

Overview of the monetary system In 1864, a 2% tax was levied against State Bank Notes, promoting National Bank use. At this time, money in America consisted of National Bank notes, gold or silver forms of specie, and greenbacks. This created some problems in regulation of currency and how our monetary system works in general.

1865

End of the Civil War The Civil War ended with the surrender of General Robert E. Lee at the Appomattox Court House on April 9, 1865. This marks the end of one of the longest and bloodiest wars in American history, and the beginning of the next stage in American future.

1865

The 2% tax levied against State Bank Notes is raised to 10%, further decreasing the interest in state banks This also marks the point at which the United States starts to try to return to the gold-backed standard we had before the war.

Product differentiation and advertising Merchants had advertised long before the Civil War, but as long as durable and semidurable goods were either made to order for the wealthy or turned out carelessly for the undiscriminating poor, and as long as food staples were sold out of bulk containers, the field of the advertiser was limited. In fact, the first attempts at advertising on more than a local level were directed largely toward retailers rather than consumers. After the Civil War, advertising on a national scale finally became a widely accepted practice. With the trusts, came truly national firms whose brand names and trademarks became impressed on the minds of consumers.

1865

Contraction Act This act, put into place by Secretary of the Treasury Hugh McCulloch, started the withdrawal of interest free “greenbacks” from the monetary system, in order to move closer to a solid gold standard nation-wide. This act was hated so badly that Congress voted it down just three years later, in1868.

Low point for state banks By the fall of 1866, fewer than 300 state banks remained in the nation.

1866

1866

Contraction Act voted down The contraction act is voted down by Congress.

1869

Public Credit Act In 1869, the Public Credit Act was passed by Congress. This bill made sure that U.S. bondholder would be guaranteed gold payment for their bonds. This was important because during this year, gold was fluctuating wildly in price and availability.

1870

State Bank Revival In 1870, the desperately struggling state banks made an unusual and surprising revival to the forefront of the American economy. This comeback came about when people realized that banks during this time could survive on deposits alone, and didn’t need to issue insane amounts of bonds to succeed. During this year we see many state banks begin to open up and the ones already open received a bolster to their business.

1873

Crime of ’73 In 1873, silver reached an all-time low in value going for 16 to 1 at the mint at its lowest rate. This caused Congress to omit the silver specie from their official minting list. This had several effects.”

1. Silver mines, silver producers, and silver refineries were outraged. They were virtually all losing their jobs and their way of life. These are the people that deemed this act, The Crime of ’73. This is otherwise known as the act that demonized silver.

2. Silver was flooding the markets, creating a huge inflation of silver, driving down the already low price.

3. Since silver was such a large industry in America at the time, this would be a problem that would plague the U.S. until we jump back onto the bi-metallic standard early in the 20th century.

1874

De-facto gold standard In 1874, Democrats won control of Congress and moved the U.S. onto a de facto gold standard. This means that instead of each and every dollar being backed by its equivalent weight in gold, Congress made a number up that would suit the needs of the economy.

1878

Bland-Allison Act In 1878, the Bland-Allison act was passed. This act provided the coinage of silver in small, monitored amounts The Secretary of the Treasury was ordered to purchase and mint $3 million in silver each month. Although this was done to help bolster silver, the price of silver continued to decline for the next twelve years.

The United States in an imperialist world In the early 1880s, western Europeans, although never shy about extending their control over other peoples, became obsessed with a desire to own more of the earth’s surface (Lebergott 1980). Africa’s interior, which before 1875 had been almost entirely unexplored and unmapped by Europeans, was partitioned among the major European powers, with only Liberia and Ethiopia remaining independent.

Through most of the nineteenth century, the United States remained somewhat apart from the race to acquire colonies in other parts of the world. Before the Civil War, southern politicians had looked to Central and South America for colonies that might be incorporated as slaveholding areas within the United States, but these efforts came to naught.

American sympathy for the Cuban revolutionaries trying to win independence from Spain rose in the late 1890s, fueled in part by dramatic accounts of brutal Spanish attempts to suppress the revolution in the Hearst and Pulitzer newspapers.

©WILLIAMDINWIDDIE/HUITON

ARCHIVE/GETTYIMAGES

The impact of the Spanish-American War, the Philippine-American war, and the Roosevelt Corollary are clearly visible. Spending ratchets upward with the Spanish-American War, but never falls back to what it was before.

It would take a new generation of Americans and a second world war to remove part of this emotional conflict. Even so, the harm of two decades of harsh diplomacy could not be easily undone.

1890

The Sherman Silver Act In 1890, the Sherman Silver Law was passed. This was in response to the growing anger over the inflation of silver all throughout the community and under this law the Secretary of the Treasury was required to purchase and mint $4.5 million worth of silver each month. Because of this, over $150 million in Treasury Notes are issued.

Silver prices continue in steep decline despite this law.

1893

Cleveland repeals Sherman Act

Grover Cleveland repealed the Sherman act in 1893. This repeal reduced the number of redeemable treasury notes and greenbacks available in circulation.

Gold demand skyrockets during this time. During this year, the federal gold reserve dips below $100 million, causing outrage and panic.

1900

Gold is Back! During this year, we see a major increase in gold coming into America from abroad, saving the gold standard. We also see a rapid increase in the monetary gold in circulation coming out of this year.

William Bryan of the Democratic Party gives his famous, “Cross of Gold” speech at the Democratic National Convention. The West and the South support Bryan.

William McKinley represents the Republican party at this time and he ends up winning the election. The East and the North back McKinley.

Foreign Trade By 1900, the United States had become the leading manufacturing country in the world in terms of total production. Great Britain (the world’s first industrial nation) was second, and Germany was third. By 1913, the U.S. lead had increased, and Britain had fallen to third.

Although many people in Britain were concerned about a failure of British entrepreneurship, what had happened to Britain was mainly that two large nations, well endowed with natural resources and possessing economic systems conducive to growth, had expanded their output more rapidly.

In exchange, the less-industrial nations sent an ever-swelling flow of foodstuffs and raw materials to support the growing industrial populations and feed the furnaces and fabricating plants of industry.

In the late 1870s and early 1880s, 368 Part 3: The Reunification Era: 1860–1920 refrigeration on vessels made possible the shipments of meats, then dairy products, and finally fruits. To these were added the products of the tropics: rice, coffee, cocoa, vegetable oils, and tapioca.

The Income Tax Opposition to the tariff was strong, particularly in the South and West. But if tariffs were cut, where would federal revenues come from? The answer, according to the Populists and Progressives, was from an income tax. The income tax was not a new idea. Income taxes had been used sporadically before the Civil War at the state level and sometimes proposed for the federal level.

Two categories of spending proved extremely popular and increased support for a tax to fund them: more generous army pensions and increased military spending, particularly on the navy. Support for the naval buildup in turn is explained by the growing role of the United States in the world competition for colonies and for naval supremacy. By 1907, when President Theodore Roosevelt sent the Great White Fleet of the United States around the world, the U.S. fleet, measured in battleship strength, was already second only to Britain’s.

In 1909, Congress passed an amendment to the Constitution providing for an income tax; it was ratified in 1913

1906

The first steps towards consumer protection The Pure Food and Drug Act and Meat Inspection Act, both passed on June 30, 1906, were dramatic interventions by the federal government into the economy to ensure quality standards of products for unwary customers. In 1906, Upton Sinclair’s novel The Jungle was published and received the personal attention of President Theodore Roosevelt.

The 1906 Meat Inspection Act was not new. It was an amendment to the Meat Inspection Act of 1891, which had been passed in response to allegations by small local butchers and their organizations that dressed meat sent to distant markets by refrigerated railroad cars was unwholesome (Libecap 1992). The 1891 Meat Inspection Act for interstate trade was similar to an 1890 act on meat for export. Both acts largely benefited the producers by reinforcing each firm’s quality control standards for shipment to markets at home and abroad. Whether or not consumers benefited from the acts is unsubstantiated, but the grounds and precedents for consumer protection were established by these first inspection acts, ostensibly on the consumers’ behalf.

©LIBRARYOFCONGRESSPRINTSANDPHOTOGRAPHSDIVISION/LC-USZ62-67847

©COURTESYOFSEARS,ROEBUCKANDCO.

1907

The Panic of 1907 In 1907 there was a small but severe recession causing a huge financial panic. This was following the depression of the 1890’s but didn’t last very long.

1913

Federal Reserve Act President Wilson signs the bill to enact the Federal Reserve Act two days before Christmas in 1913. This came after waves of voiced support for a basic reform to the American financial system. The system is headed by a board of 7 members, including the Secretary of the Treasury.

Wholesaling The full-service wholesale houses bought goods on their own and sold to retailers frequently on their credit. In the cities of the Midwest, successful retailers began to perform wholesale functions. The reason for the relative decline in wholesaling lay in the structure of emerging large-scale producers. Firms in many industries were adopting “continuous process” technologies, in which raw materials moved in a steady flow through the factory rather than being processed in separate batches. The marketing departments of firms like Duke’s helped to establish and maintain the brand name of the product, particularly by stressing better quality or unique services.

Origins of WWI included nationalistic and imperialistic rivalries

1914

France: Revenge for lost territory and reparations to Germany from the Franco-Prussian War of 1870-1871.

Austria-Hungary: Feared the restive Slavic minorities that were increasing.

Germany: Feared being surrounded by hostile military alliances.

Alliances

June 1914

Assassination of the Archduke of Austria, Franz Ferdinand

Archduke Franz Ferdinand, nephew of Emperor Franz Josef and heir to the Austro-Hungarian Empire, was shot along with his wife by a Serbian nationalist in Sarajevo, Bosnia.

July 1914

U.S. Stock market closed The exchange was closed shortly after the beginning of World War I but it partially re-opened on November 28 of that year in order to help the war effort by trading bonds, and completely reopened for stock trading in mid-December. The stock market had never been closed for 4 months, nor has it since.

1914-1917

During U.S. neutrality, we had a very favorable balance of trade German imports from the United States fell to nearly nothing because of the British naval blockade; but Britain, France, and other European countries purchased large amounts of food and munitions at ever-rising prices from the United States. A wide gap opened between America’s soaring exports to Europe and America’s declining imports. By the end of the war the world’s financial center had moved from London to New York and the U.S. had become a major creditor, holding much of the world’s stock of monetary gold. The war was immensely profitable for many U.S. corporations.

1914-1920

The U.S. price level nearly doubled. The US economy grew by 21%. The US produced large amounts of arms, weapons, airplanes (the first time used in war), and a large shipbuilding program. Both nominal and real earnings increased substantially.

May 1915

British ship Lusitania sunk by German U-boats with the loss of 1,198 lives, including 124 Americans. President Woodrow Wilson sent a series of strongly worded warnings to Germany. For a while, Germany moderated its use of submarines.

April 1917

United States entered WW I

The U.S. was a formal participant in the war for only 19 months. Woodrow Wilson was president. The Allies included Britain, France and Russia, Arabs and Italy. The Central Powers (the other side) included Germany and Austria-Hungary, Turkey.

April 1917

U.S. draft began The armed forces of the United States increased from 179,000 in 1916 to nearly 3 million in 1918. About 2 million served overseas in the American Expeditionary Force, and about three-quarters of them saw combat. Almost 117,000 Americans died in military service, more than half from disease.

.

To pay for WW I, the national debt was expanded from 3% of GDP at the beginning of the war to 32% of GDP by the end of the war. The debt at the end of the war was about $31 billion, which is equivalent to $6 trillion in today’s dollars.

Wages increased in the U.S. during the war due to:

1) a sharp decrease in immigration during the war,

2) a large increase of drafting men into the armed forces,

3) a large increase in the number of government contracts.

1917

Record year for the number of strikes. There were 4,450 strikes across the nation, though it was particularly bad west of the Mississippi.

1917

Real wages fell. Personal income increased by 14.5% from 1916 but consumer prices increased by 16.1%, therefore real wages fell. Personal income increased by 14.5% from 1916 but consumer prices increased by 16.1%, therefore real wages fell.

April 1917

Liberty Bonds, a.k.a federal borrowing from the public Secretary of the Treasury William Gibbs McAdoo launched an aggressive program to market bonds to “capitalize patriotism.” Huge rallies were held, and the crowds were exhorted by celebrities such as Mary Pickford and Douglas Fairbanks to buy war bonds. In spite of the aggressive marketing, sales were slow. Eventually $17 billion was raised by way of government bonds to finance the war effort. Borrowing from the public was the primary way the war was financed.

Charlie Chaplin addressing crowds via megaphone Charlie Chaplin in The Bond (1918)

in New York during a Liberty Loan Rally.

Printing Money to finance the war The Federal Reserve doubled the money supply from 1914 to 1920 resulting in 200% inflation. Inflation due to printing money is preferred by many because it is a hidden tax.

\

Sept. 1916

Estate tax (“death tax”) became permanent Populist reformers who wanted to redistribute the wealth of the “Robber Barons” had long advocated this tax. But at the federal level it had been successfully resisted on the grounds that it was needed only in wartime. World War I was the first time it was imposed since the Spanish American War. After its passage in 1916, however, the estate tax became a permanent part of the federal revenue system.

Aug. 1917

The Food and Fuel Administrations Congress passed the Lever Food and Fuel Control Act, establishing a

wartime Food Administration and a Fuel Administration. Herbert Hoover was appointed as the food administrator. His job was to maintain an adequate supply of food to the domestic market and to our allies while preventing excessive increases in prices. He preferred voluntary rationing and behind-the-scenes control of foodstuffs. To encourage voluntary rationing he promoted “Meatless Mondays” and “Wheatless Wednesdays,” among other things. Only sugar was directly rationed.

U.S. Food Administration. Herbert Hoover

Educational Division

Advertising Section

War Revenue Act increased a variety of taxes This act increased corporate and personal income taxes (the rate in the top bracket was raised to 70 percent) and established excise, excess profits (for business), and luxury taxes.

Oct. 1917

Dec. 1917

Railroads nationalized under the United States Railroad Administration (USRA)

after the railroad workers threatened to strike. Over 100,000 railroad cars and 1,930 steam locomotives were ordered at a cost of $380 million, all of new USRA standard designs.

The Light Mikado was the standard light freight locomotive

and the most widely built of the USRA standard designs.

March 1918

War Industries Board President Wilson reorganized the most ambitious of the war agencies, the War Industries Board, and appointed Bernard Baruch to lead it. Baruch personally negotiated prices of key industrial raw materials. Other industrial prices were set by a separate Price-Fixing Committee within the War Industries Board. The Committee often used a system called "bulkline pricing." Under this system, firms reported their costs of production, and the committee then set a price that would bring forth the “bulk” (say, 80 percent) of the maximum possible output. This system was designed to balance the need for raw materials against the need for overall price stability while limiting the profits of low-cost producers. Baruch also set up a system of priorities to guide business in filling the mounting volume of war contracts.

Bernard Baruch

Nov. 1918

The Treaty of Versailles ended WW I

A treaty was hammered out by the Big Four: Britain, France, Italy, and the United States. The United States, however, never actually ratified the treaty. Under the treaty, Germany was forced to admit responsibility for the war, to transfer land and other resources to the allies, and to pay reparations that were later set at $56 billion in gold dollars. John Maynard Keynes, who attended the conference as part of the British delegation, wrote a critique of the Treaty: The Economic Consequences of the Peace (1919). Keynes argued that the treaty was punitive and imposed excessive penalties on Germany and Austria. We now understand that the German belief that the peace was unjust contributed to what then seemed unthinkable—a second world war.

Signing the treaty at Versailles

1918-1919

An economic slowdown occurred immediately following the Armistice

Psychological costs

Jan. 1920

Prohibition The 18th amendment was the prohibition of alcohol. Nationwide, the consumption of alcohol was now illegal. This was said to be a wartime effort to cut back on the personal spending on alcohol and to cleanse the population of it. The result of making the alcohol illegal was the increased cost that had to be spent by the government on the new problems regarding an alcohol black market. The amount spent on enforcement went from $6.3 million in 1921 to $13.4 million in 1930.

Feb. 1920

The Ponzi Scheme In a time of a thriving stock market, Charles Ponzi was running and investment scam to collect money from innocent investors for his own profit. He told his clientele they would be investing in stamps that could be sold in America for a 50 percent mark -p. What Ponzi was really doing was pocketing all of the money and paying his investors their returns gradually with the money he was making from other investors. In August of 1920, Ponzi was arrested on multiple accounts for fraud.

.

for the returning soldiers included shell shock and disillusionment with American life and culture. They became known as “The Lost Generation.”

March 1920

Railroads were returned to private ownership.

Aug, 1920

Women’s suffrage The 19th Amendment to the United States Constitution prohibited any United States citizen from being denied the right to vote on the basis of sex.

Women in society The early twenties were a very progressive time for women. Not only did they gain the right to vote but it was becoming more of a social norm for the woman of the household to have a job and make money of her own. Increased education, a reduced birth rate, smaller families, the emergence of the clerical sector, and the demonstration effect of World War I all were factors that pushed more women into the labor force.

Urbanization Following World War I, many returning soldier did not want to go back to the rural towns they once resided in after seeing the beauty of Europe. This wave of returning soldiers found themselves flocking to more urban places around the country like the big cities of New York or Los Angeles. Sometime near the end of World War I, the number of Americans living in urban centers of 2,500 people or more passed the 50 million mark. As the census of 1920 was to report, for the first time, more than 50 percent of the population, over 54 million people, were urban dwellers.

1920

Economic Slump Initial depression hit in 1920 and 1921, with a decline in durable goods output by 43%.

May 1921

Emergency Immigration Act of 1921

With a growing amount of immigrants pouring into the country, the government thought that an abundance of foreign unskilled workers would be a threat to the thriving economy of the time. The Emergency Immigration Act of 1921 restricted the number of people to be admitted each year from any country to 3 percent of the number of people of that nationality residing in the United States in 1910. This prohibited the amount of people coming from Europe and almost stopped any immigration from Asia at all.

The Highway Act of 1921 Automobiles in the United States up until the twenties were looked at more as a luxury toy for those who could afford it. But as the twenties came along, more and more people were using automobiles for day to day use. A lot of farmers started to purchase vehicles. With the new wave of automobile usage there was an increased need for roads for the vehicles to travel on instead of roads. The Highway Act of 1921 was passed to promise construction of a new highway system to more easily commute. The annual production of automobiles rose from 1.5 million cars in 1921 to 4.8 million in 1929. By 1930, 60 percent of America’s families owned an automobile.

Nov. 1921

.

1923

Agricultural debt reaches new high During the Roaring Twenties industry thrived leaving the farms and agriculture to fall behind. A lot of farmers were buying land at high prices to expand their farms. to do so they were taking out loans. In 1923 the American agricultural debt was at an astounding $11 billion. This left a lot of farmers owing more money than they were making, leaving the agricultural sector in a decline throughout the twenties.

.

1926

Birth of Radio In a time where more and more people had money to be spending, the radio became a popular device to be found in any average family home. The radio became the main source for news and home entertainment. Both broadcasting companies NBC and CBS were established during this time and were the main sources for news around the nation and the world. With the radio being so popular it became a perfect marketplace for advertisements of the time.

.

1929

Stock Market Boom By the end of the 20s the bull market was in full force. The stock market was seeing higher returns than ever and the confidence was in the people. This is said to be what inevitably led to the Great Depression that followed soon after in the 30s. The prices of stocks tripled in price between 1922 and 1927 and was said that between 1928 and 1929, the average stock rose 26.5 percent in value.

1929

United States Economy Crashes Between 1929 and 1933 the United States Economy completely collapsed. The real GDP fell by 30 percent and the rate of unemployment rose from 3.2 percent to 24. percent within a 4 year span of time.

1929

Break in the Stock Market On September 5th, 1929 the American public was warned about an impending crash in the stock market by Robert Babsen.

1930

· On October 24th, 13 million shares were traded, resulting in Black Thursday.

· October 28th would be Black Monday.

· October 29th would become Black Tuesday.

Share prices on the rise By 1930, the share prices had risen above the levels reached in 1926.

1930

Bank failures begin to occur The economy of the 1930’s was repeatedly buffeted by waves of bank failures.

The first bank failure occured in October of 1930 with the failure of banks in the South and in the Midwest.

1930

1930

Smoot-Hawley Tariff Passed This raised taxes on a wide variety of items, including agricultural products.

The tariff caused the general public to feel pessimistic about the future and made them less likely to invest.

This was one of the last high “protective” tariffs of the United States.

1930

The Bank of the United States Fails December 11th brought quite a bit of devastation when the Bank of the United States failed in New York City. It was the largest bank failure, as measured by deposits in the history of the United States at the time

.

1931

The Second Banking Crisis In March 1931, the onset of the second U.S. banking crisis began. Bank failures begin to reach all new highs and deposits continue to fall.

1931

The Kreditansalt fails In May of 1931, Austria’s largest private bank, Kreditansalt, fails. The economic crisis is officially an international dilemma.

July 1931

Closing of German banks In July 1931, German banks are closed. Capital finally begins to flow to the United States, but the short term obligations of U.S banks are frozen.

1932

Federal Reserve Annual Report stated that its power to purchase bonds was limited by the requirement that Fed notes be backed by at least 40%.

1932

Presidential campaign Roosevelt promises to cut government spending by at least 25% and to also balance the budget.

1933

Nation’s Capital Stock Declines Wholesale prices drop by one-third. Consumer prices drop by ¼. By March of 1933 the output of durables had fallen by 80%, and the output of nondurables had fallen by 30%.

1933

Civilian unemployment rates skyrocket In 1933, one quarter of the civilian workforce was unemployed or was forced to get by on “make work” jobs created by the federal government to cope with the severity of the Great Depression. Half of the nations breadwinners were living in seriously reduced circumstances.

1933

Banking Panic of 1933 State bank holidays occur. President Roosevelt declared a national banking holiday on March 6th.

April, 1933

Federal Government seizes gold The government took the extraordinary step of ordering all citizens that held monetary gold to turn it over to the federal government. This took the United States off of the gold standard.

Jan. 1934

United States recommits to a gold standard by fixing gold at 35 dollars per ounce. Gold production began to soar in the 1930s on a global level.

1933

National Industrial Recovery Act Then in 1935 the details of the NIRA were established. With these policies, the United States began to pull itself out of The Great Depression.