Chapter 20 Commerce at Home & Abroad Chapter Overview · Dependable name–brand products were born and succeeded after successful advertising · Material well-being of U.S. increased due to the new styles and number of products Urbanization · City life was more favorable than rural life at the turn of the 20th century · Percent of Americans living in cities doubled between 1800 & 1840 · Doubled again between 1840 & 1860 · Doubled again between 1860 & 1900 · By 1910, nearly 10% of all Americans lived in Chicago, New York and Philadelphia · All three cities had a population of mora than 1 million. · Before 1860, urbanization resulted from the growth od interregional trade via the transportation revolution. · Cities grew due to being primary transport, commercial and banking services foe expanding long-distance trades · By the late 1800s, factories were largely in cities. · People from abroad poured into cities – between 1860 & 1910 half of new city residents came from overseas. · Industrial workers flocked to cities in the Midwest & south · Bu 1910, the west and south produced half the railroad tonnage as the manufactures in the East produced. · Once automobiles became common in 1910, large town & cities gained at the expense of small towns · In 1920, cars delivered people to urban centers from distances that were hardly conceivable a few years prior. Marketing & Selling · Before the Civil War, stores were focused on processing sales rather than promoting sales. · Advertising was limited to newspapers, a few national magazines & some outdoor signs · Main purpose of ads was not to attract customers, but what was for sale and the location · Cyrus McCormick sold his reaper “on time” – 20% down, and four months to pay · Ed Clark of Singer Sewing Machines innovated consumer credit · Most manufacturers sold directly to wholesalers who hired ‘drummers’ or travelling salespeople. · Wholesalers bought goods from manufacturers – especially those in distribution based cities – offered seral lines of merchandise (think Target) while most focused on a single ‘ full line’ -full line example: hardware store; dress shop Wholesaling · From 1860 to 1900, full-line, dull-service wholesalers – who bought from the manufacturers and sold to retailers had little competition · After 1900, these wholesalers started to have competition from marketing departments of large manufacturers · Wholesalers sales increased between 1900 & 1920.. · But the proportion of goods they handled dwindled. · Why did wholesalers decline? · Emerging large-scale producers began adopting continuous process technologies · Any interruption in the distribution of these products would cause an increase in production costs Retailing · The appeal of being able to buy all personal necessities in one stop grew · The response was the department store -First stop retailers included: · Macy’s in New York · Marshall Field’s in Chicago · John Wanamaker’s in Philadelphia · To accomplish a successfu.

1. Chapter 20 Commerce at Home & Abroad
Chapter Overview
· Dependable name–brand products were born and succeeded
after successful advertising
· Material well-being of U.S. increased due to the new styles
and number of products
Urbanization
· City life was more favorable than rural life at the turn of the
20th century
· Percent of Americans living in cities doubled between 1800 &
1840
· Doubled again between 1840 & 1860
· Doubled again between 1860 & 1900
· By 1910, nearly 10% of all Americans lived in Chicago, New
York and Philadelphia
· All three cities had a population of mora than 1 million.
· Before 1860, urbanization resulted from the growth od
interregional trade via the transportation revolution.
· Cities grew due to being primary transport, commercial and
banking services foe expanding long-distance trades
· By the late 1800s, factories were largely in cities.
· People from abroad poured into cities – between 1860 & 1910
half of new city residents came from overseas.
· Industrial workers flocked to cities in the Midwest & south
· Bu 1910, the west and south produced half the railroad
tonnage as the manufactures in the East produced.
· Once automobiles became common in 1910, large town &
cities gained at the expense of small towns
· In 1920, cars delivered people to urban centers from distances
that were hardly conceivable a few years prior.
Marketing & Selling
· Before the Civil War, stores were focused on processing sales
rather than promoting sales.

2. · Advertising was limited to newspapers, a few national
magazines & some outdoor signs
· Main purpose of ads was not to attract customers, but what
was for sale and the location
· Cyrus McCormick sold his reaper “on time” – 20% down, and
four months to pay
· Ed Clark of Singer Sewing Machines innovated consumer
credit
· Most manufacturers sold directly to wholesalers who hired
‘drummers’ or travelling salespeople.
· Wholesalers bought goods from manufacturers – especially
those in distribution based cities – offered seral lines of
merchandise (think Target) while most focused on a single ‘ full
line’
-full line example: hardware store; dress shop
Wholesaling
· From 1860 to 1900, full-line, dull-service wholesalers – who
bought from the manufacturers and sold to retailers had little
competition
· After 1900, these wholesalers started to have competition from
marketing departments of large manufacturers
· Wholesalers sales increased between 1900 & 1920..
· But the proportion of goods they handled dwindled.
· Why did wholesalers decline?
· Emerging large-scale producers began adopting continuous
process technologies
· Any interruption in the distribution of these products would
cause an increase in production costs
Retailing
· The appeal of being able to buy all personal necessities in one
stop grew
· The response was the department store
-First stop retailers included:

3. · Macy’s in New York
· Marshall Field’s in Chicago
· John Wanamaker’s in Philadelphia
· To accomplish a successful department store model:
· Retailers had to fill the store with clerks
· Retailers had to assign prices to each item and eliminate the
haggling over prices
· Achieve high sales volume and leverage that volume for better
manufacturer pricing
· In 1879, F.W. Woolworth opened a variety store that sold
things for no more than a dime
· “Chains” with massive buying and marketing power became
more prevalent
· Ordering by mail once gave a real thrill to Americans – parcel
post started in 1913
· Montgomery Ward & Sears did best once they moved to
Chicago – a spot to sell coast to coast
Product Differentiation & Advertising
· First attempts at advertising were directed at retailers, not
consumers
· What industry was the first to advertise nationally?
· Patent medicine manufactories
· Monopolistic competition was brought upon by brand names,
advertising & product differentiation
· With improving goods, Americans were sold on brand name
advertising
· By 1920, advertising was a billion-dollar industry
· Firms had to advertise to maintain their market share
· Awareness around products grew when competitors marketed a
product for long periods of time
· Two changes loomed large for American advertising:
1. Radio wad supposed to be a more effective way to advertise
2. Consumers’ began to change their durable(耐用的 goods
purchasing habits – shifting from furniture to cars & appliances

4. First Steps Towards Consumer Protection
· Pure Food & Drug Act & Meat Inspection Act – both
established in 1906 – ensured quality standards of products for
unwary customers.
· Upton Sinclair wrote The Jungle in 1906
· The Meat Inspection act was not new and was an amendment
to the same act in 1891.
· Local butchers could not compete with larger urban
butchers…why?
· New technology in transportation allowed for beef to be
transported while staying cool
Foreign Trade
· By 1900, the U.S. was the leading manufacturer in terms of
total production.
· Great Britain was second
· Germany was third
· Improving communication & transportation was a key for
growth.
· First successful transatlantic cable began in 1866, a railroad
that spanned America
· In1869, the Suez Canal was opened
· Improved railroad in other countries helped transport goods to
ever-improving ocean liners
· In the late 1870s & early 1880s refrigeration was introduced
on vessels allowing for large shipments of meat to be made
· Between 1850 & 1900, the U.S. comparative advantage shifted
away from agriculture, moving toward manufacturing
· Raw materials – such a cotton made up 60% of export in 1850
– by 1900, these materials made up just 25% of export
· On the import side
· In 1850, 9% of imports were raw materials. By 1900, raw
materials made up to 33% of American imports
· Imports of semi-manufactured goods increased but declined in
importance as American productivity capacity grew.
· So why did American manufacturing skyrocket like it did?

5. · The relative abundance of non-reproducible natural resources
· In 1913, the U.S. had:
- 65% of the world’s petroleum; 56%-copper; 39%-coal; 37%-
zinc, 36%-iron ore, 34%-lead
· America’s fortunes were not based on a lucky series of events.
· The large and stable internal market for manufacturers,
combined with flexible property right laws promoted intensive
exploration and exploitation of natural resources
· This is far different than oil-rich countries today that depend
solely on their natural resource.
Tariffs for Revenue & Production
· Two main factors for tariffs to be imposed:
· Federal Government’s need for revenue
· F
· The Civil War did demand the need for money but also had
costs that lasted well beyond the war’s end.
· Much of the war was financed by issuing bonds
· Payments on the interest of these bonds continued many years
after the war
· Veterans’ benefits needed to be paid
· Veterans’ pensions during this time were so high they have
been referred to as the first social security system
· High tariffs protected American manufactures – typically
farmers from foreign competitors
· This cost American consumers who were forced to pay higher
prices
· Republicans favored high tariffs
· Protected American Farmers
· Provided Veterans’ window benefits
· Northern industrial workers viewed the tariff as job protection
· Democrats favored lower tariffs
· Overall lower cost of living without tariffs
· Southern farmers did not want to pay benefits to Union
Soldiers’ families

6. Chapter 21 World War 1
The Origins of the War
1. Assassination of Austrian Archduke
Ferdinand by a Serbian revolutionary on June 28, 1914
1. This set off a chain reaction that soon engulfed Europe in the
bloodiest war yet
1. Allies: Britain, France, Italy & Russia
1. Central: Germany, Australia-Hungary & associates.
1. First U.S. reaction: Financial Panic
1. The stock market closed for four months
1. From 1914 to 1917, it became apparent that the war would be
profitable for U.S. business
1. When the war began, the U.S. was a debtor
1. When the war ended, the U.S. was a creditor holding much of
the world’s monetary gold stock
1. The U.S. involvement in the war began out of cultural &
linguistic ties to Britain
1. The crucial factor to join the allies was the German’s use of
submarine warfare
1. U.S. declared was on April 17, 1917
1. The armistice with Germany was singed on November 11,
1918
The U.S. Goes To War
1. A military draft was instituted in April 19917
1. 117K Americans died in the war
1. More than half of American deaths were from disease
1. U.S. produced vast amounts of weapons
1. Airplane
1. Launching a shipbuilding program
1. Federal Government’s spending increased from 1.5% of GNP
in1916 to 24.2% in 1918
Financing The War
1. Governments can obtain resources needed to fight a war in

7. several way:
1. Commandeering (e.g. soldier drafts)
1. Capturing resources from the enemy
1. Receiving voluntary contributions from citizens
1. Sell existing assets
1. Taxing
1. Borrowing
1. Printing money
1. Last there are noted ways of raising capital during a war
1. In 1916 Congress levied an estate tax to help finance
rearmament
1. The first time this happened since the Spanish American war
1. The War Revenue act was passed on October 3, 1917
1. Act increased corporate & personal taxes and established
excise, excess profits and luxury taxes.
1. Taxation was important, but borrowing was far more
important, accounting for 61%
Of total financing
1. Borrowing helped conceal some war costs
1. Borrowing was used to smooth taxes over time (not all the
burden was on the current generation, but passed along to future
generations due to borrowing).
1. Despite efforts to market & sell bonds, the government found
it could not sell bonds below the going market rate.
1. Government also relied on creating new money.
1. Net result of financing part of the war by creating was a
substantial increase in the stock of money and the price level.
1. The stock of money nearly doubled between 1914 & 1920 as
did the level of prices
Inflation as a Tax
1. R=pai (M/P)
1. R is revenue from inflation
1. Pai = rate of growth of the money supply
1. M = amount of money

8. 1. P = price level
The war industries Board
1. War industries Board:
1. Was established by President Wilson to mobilize war efforts
more quickly
1. Bernard barunch was placed as
1. Bulkline Pricing was established
1. Firms reported their cost of production and the committee set
a price that would bring forth the bulk of the production
1. Each contract was given a government priority rating: AA, A,
B, C, or D.
1. Markets soon became choked with priority contracts
The Food & Fuel Administrations
1. Level Food & Fuel Control Act
1. Purpose was to maintain and adequate supply of food to the
domestic and to our allies while preventing excessive price
increases.
1. Food administrator was empowered to license food dealers.
1. Voluntary conservatism was called for:
1. Meatless Mondays
1. Wheatless Wednesdays
1. Promoting domestic demand reductions and leaving more for
exports.
Labor During The War
1. In 1917:
1. Money incomes were up 14.5% from 1916
1. Consumer prices were up 16.1& from 1916
1. Real wages had fallen
1. There were 4450 strikes – mainly out west where low wages,
harsh working conditions & uncompromising employers
produced bitter labor disputes.
1. In 1920, the railroads were returned to private ownership.
1. Organized Labor was extremely optimistic in the immediate

9. aftermath of the war.
1. Labor membership was up – so to was the conservative wing
of labor led by Samuel Gompers.
1. Women were a potential source of labor leveraged during the
war.
1. Women served with the armed forces in Europe as nurses or
telephone operators
1. One Million women took up war work
1. Willison administration strongly supported the right of
women to vote
1. Nineteenth Amendment to the Constitution gave women the
right to vote and was finally adopted in 1920
1. No group seized the opportunity provided by the work more
than African Americans
1. Massive migration of African Americans from the south to
northern cities
1. Some whites resented this movement and clashed in East St.
Louis in 1917
1. Many encouraged African Americans to ‘get a foot in the
door’ according to Warren Whateley
The Cost of The War
1. The draft can be thought of as a tax
1. When a soldier received a nonmortal wound or died, there
was a further loss: the discounted value of the lost future
income.
1. Veterans wanted a bonus for their time and were paid that
bonus in 1936
1. Maurice Clark found the war cost the U.S. $31B
1. This is about 44% of GDP then.
1. In today’s dollars was $6.8T