1K - Economic change and developments: the rise of US dominance as an economic and industrial power and the consequences of this
Between 1890 and 1920, the USA's industrial strength increasingly became international economic power. This lesson explains how resources, markets, corporations and technology combined, why growth created insecurity as well as prosperity, and how the First World War changed America's financial position.
Foundations of industrial dominance
American industry could expand because the country possessed several advantages together. Coal, iron ore and oil supplied energy and raw materials. A large population provided workers and consumers, while immigration and movement from farms to cities increased the industrial labour force. Railways linked mines, farms, factories and ports into a national market. A manufacturer could sell far beyond its own town, making investment in a large factory more worthwhile.
Government also helped construct this environment. Land grants had supported railway expansion, tariffs protected many American producers from foreign competition, and courts defended property and contracts. Laissez-faire therefore did not mean that government had no economic influence. Much intervention protected the conditions for private business rather than providing extensive protection for employees.
These advantages reinforced one another. Railway construction increased demand for steel; cheaper steel made further railway construction possible; railways opened markets for farm produce and manufactured goods. Industrial growth also drew on capital raised through banks and financial markets, including earlier European investment. It was a cumulative process, not the achievement of one inventor or president.
By 1913 the United States had the world's largest economy. Yet industrial scale and international financial leadership were different measures. European financial centres still played an important part in financing world trade. American predominance in production preceded its stronger position as a global lender.
Economic dominance
A leading position in production, trade or finance. A country may lead in one of these measures before it leads in all of them.
Corporations and mass production
Large corporations could coordinate investment and production on a scale that a small owner-managed business could rarely match. Vertical integration brought different stages of production under one business: a steel producer could control ore supplies, transport and mills. Horizontal integration combined businesses operating at the same stage, reducing competition. The formation of US Steel in 1901 showed the enormous scale that American corporate organisation had reached.
Size could lower costs. A large business could purchase inputs cheaply, distribute goods widely and spread expensive machinery costs across a high output. However, concentration could also give employers and producers greater power over wages, suppliers and prices. Higher efficiency and greater inequality were compatible consequences of the same development.
Electric power, telephones and improved production methods helped firms organise more reliably. Ford's introduction of the moving assembly line at Highland Park in 1913 illustrates a further change. Workers performed specialised tasks as the product moved between them. Standardised parts and a regular sequence reduced the time needed to manufacture a car. Greater output allowed lower unit costs and helped make the Model T accessible to a wider market.
The assembly line also changed work. Employees had less control over pace and performed repetitive tasks. Ford's five-dollar day, introduced in 1914 for qualifying workers, helped attract and retain labour; it was not an unconditional wage for everyone. This example supports two arguments at once: industrial growth could increase purchasing power, while employers retained substantial control over working life.
Uneven prosperity and labour conflict
Economic expansion enlarged a prosperous middle class of managers, professionals and clerical workers. It also created a much larger wage-earning industrial population. These groups did not share the same security. Low wages, accidents, long hours and periodic unemployment could leave a household vulnerable even while national output rose.
Workers organised to improve conditions. The American Federation of Labor, associated with Samuel Gompers, concentrated on bargaining over wages and hours, especially for skilled workers. Other movements sought wider industrial organisation or challenged capitalism itself. Differences of skill, ethnicity and race made collective action difficult; many unions excluded African Americans or offered them inadequate protection.
The Pullman conflict of 1894 reveals the imbalance of power. During a depression, the company reduced wages without matching reductions in company-town rents. A factory strike expanded into a railway boycott led by the American Railway Union under Eugene Debs. Federal intervention, justified by disruption to the mails and interstate commerce, helped break the strike. A dispute between employees and a corporation became a question about national authority.
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