This document provides an overview of economic and political issues related to slavery and the Civil War in the United States. It discusses the productivity and profitability of large slave plantations in the South prior to the war. It then covers political compromises around the expansion of slavery, leading to increasing regional tensions. The economics of the Civil War are examined, with the South facing challenges in financing the war effort and maintaining production while the North was able to ramp up industrialization. The document concludes by noting the dramatic economic decline of the Deep South after emancipation as the plantation system was destroyed.

1. Chapter 14
War, Recovery &
Regional Divergence
Dr. Mayes-Denker
The Legacy of Slavery
– 13th Amendment to the ConsEtuEon freedall
slaves.
– 14th Amendment to the ConsEtuEon ensured no
“state shall deprive any person of life, liberty or
property without due process of law.”
• Guaranteeing: “the right of ciEzens to vote
shall not
be abridged.”
The Legacy of Slavery
– Sharecropping became popular – the tenant &
owner
would split the proceeds 50/50
– Sharecropping gave the owner an incenEve to
remain interested in the farm throughout the

2. growing season and to share informaEon such as
changing crop prices with the tenant.
– Improved roads and the automobile also eroded
the
monopoly power of the local storeowners (lenders)
The Legacy of Slavery
– Many believe the South remained a separate
labormarket.
• CoUon became increasingly laborintensive as farm
sizes fell
• MechanizaEon was slowed and wages kept low
• A striking wagegap between the north and south
emerged
• LiUle investment was made in Southern schools
• Spending on educaEon best served the wealthy
while
forsaking modern economic growth due to producing
ill-prepared workers
Chapter 15
Agriculture’s Western Advance
Dr. KelliMayes-Denker

3. Expansion of Land Under CulEvaEon
– Hope persisted of beUer Emes if only new
soil
could be broken further west.
– Total culEvated land doubled between 1870 &
1900.
• PrivaEzing land helped spur this growth
Federal Land Policy
– Timber Culture Act of 1863
– Gave 160 acresto anyone who planted trees on at
least 40
acresof the land
– Desert Land Act of 1877
– People could buy 640 acres(a secEon) for $1.25
per acre if
they agreed to irrigate the land within 3 years
Federal Land Policy
– Timber & Stone Act of 1878

4. – Valuable Ember & stone acrescold be
purchased for $2.50
per acre in Nevada, CA, Oregon, Washington
– Timber-Cugng Act of 1878
– CiEzens could cut Ember on federal lands
if the lumber was
used for agriculture, mining, or building purposes
Impact of Federal Land Policy
– Large tracts of land went to wealthy individuals
and corporaEons
– GranEng land to railroads was considered normal
public policy
– Good land was ohen fraudulently obtained by
mining and lumber companies or speculators
– Fraud served an economic purpose:
– It helped transfer resources to largecompanies
that could
take advantage of economies of scale
Growth & Change In Agriculture

5. – 1900 – Texas was the leading producer of
coUon
& caUle
– The 19th century brought along several
biological
innovaEons to spur growth in agriculture
– Plant varieEes expanded
– IrrigaEon systems modernized
– FerElizers
Growth & Change In Agriculture
• New wheat varieEes allowed for the wheat
belt to be
pushed north and west – expandingproducEon
• Farmersfound new ways to combat bugs & insects
Growth & Change In Agriculture
– 1834 – Cyrus Hall McCormick received a
patent
for his reaper
– 1848 – Cyrus Hall McCormick moved his
implement plantto Chicago, creaEng his own
supply chain to the Midwest

6. – 1857 – John Deere was producing 10,000 steel
plows annually
Hard Times on the Farm: 1864-1896
– All prices fell from 1875-1895
• The farmer’s terms of trade– the priceof
sold
products / priceof bought products – was
worsening
• Why?
– Rapid increase in the supply of agricultural
products
– Increased output through mechanizaEon
– On the demand side, rapidincreases in the
populaEon sent the demand for food soaring.
Hard Times on the Farm: 1864-1896
– Farmers traced their hard Emes down to
monopolies & conspiracies
– Bankers who raised interest rates, manipulated
currency and
then foreclosed on farm mortgages

7. – Grain elevator operators who charged rates farmers
could
not afford
– Industrialists who charged high prices for farm
machinery &
consumer goods
– Railroads that charged monopoly rates on freight
– Finally, interest rates on farms began to fall
Hard Times on the Farm: 1864-1896
– Farmers were subject to globalizaEon that they
could neither control nor understand
– E.g. to keep up with producEon standards, farmers
needed
the latest equipment – which pushed them
further into debt
– With beUer equipment, producEon (supply)
increased
– With a greater supply, prices fell
– When prices fall and farmer’s are heavily
indebted,
foreclosures happen

8. Agrarian PoliEcal OrganizaEons
– The Grangers:
– Fought unfair business pracEces
– 20,000 local branches w/1.5M members
– Founded the co-op, where farmers essenEally
sell what they
make to otherGrange member owners
– Montgomery Ward was the first largemail-order
house and
was established to sell to the Grangers
– The Alliances
– Farmers could store non-perishable goods and
receive loans
up to 80% of the stored goods value
Agrarian PoliEcal OrganizaEons
– The Populists:
– Felt that only through government control of
the monetary
system
– and
– Government ownershipof banks, railroads & means
of
communicaEon could the evils of monopoly be put
down.

9. The Department of Agriculture
– 1839 – Agriculture Division is set up in
the Patent
office
– 1862 – Congress creates Department of
Agriculture to perform threemain funcEons:
– 1. Research & ExperimentaEon
– 2. DistribuEon of agricultural informaEon
– 3. RegulaEon of product quality
– Pressure was to give farmers pracEcal help
– Ohen distributed free seeds
Agricultural EducaEon
– 1862 – Morrill Act gave impetus to agricultural
training at the university level
– Established land-grantcolleges that gradually assumed
statewide leadershipin agricultural research
Natural Resource ConservaEon: The
First Stages

10. – Land was abundant
– Concern was with shortage of labor& capital
– Uncut Ember on public lands value was
zero for
all pracEcal purposes
– With clear legal right to clear Ember, the incenEve
existed to
cut as fast and deep as possible
– Large piles of cut Ember provided fire hazards
» A fire in Wisconsin burned 1.28 Million acres,
killing
more than 1,000 people
Land, Water & Timber ConservaEon
– Theodore Roosevelt’s sought conservaEon
legislaEon:
– 1. NaEonal Forests comprisedof 150M acres
– 2. Land containing 75M acresof mineral wealth
were
reserved from sale or seUlement.
– 3. Explicit recogniEon of the future
importance of
waterpower sites
– 4. Principle was accepted that it was a proper
funcEon of

11. the federal government to implement a wide
public works
for the purpose of controlling stream flows
Economic History of the United States
Assignment: #2 Article Discussion
Learning Objectives
• Read current event news articles published in
the last 6 months
• Choose current events as related to U.S. History
in colonial times
• Identify modern day innovations, changes to
markets, use of money and policy
• Link your modern day finding to a past event
discussed in class or found in Ch 7-17 of
the textbook
• Answer the question – how has the past helped to
shape the future we see today?
• Use an economic lens to explain the progress
and demonstrate with economic graphs, terms
and theories
Due Date
Please submit your assignment by October 18th at
11:59 PM (AZ time).

12. Assignment Overview
Current events are opportunities to see economics
in practice. This assignment provides the chance
to connect
economic theory to the real world and writeabout
your findings. Use economic history discussed in
class and in
the textbook to showthe progress made in today’s
markets. You can choose to work individually, or
work in
groups of two students. You (your group) are
required to find a substantial article from
Wall Street Journal. You
must email Elaine by October 1 with your group
members otherwise you will work individually.
If you need assistance, please consider contacting
the Eller librarians at
http://libguides.library.arizona.edu/EllerOnlineUndergrad
1. Once you find the WSJ appropriate article, you
are to summarize the article in several
paragraphs.
2. Please provide the article’s complete citation and
URL.
3. Then look for the areaswhere you see the
connection between economic history and how
markets have
evolved.
a. For example, you may have an article where
you see a town in the United States taking
actions to barter instead of

13. using U.S. dollars. Explain what you see happening
and then walk through how barter was a main
way of doing
business. Discuss the benefits and problems such as
double coincidence of wants and difficulty
determining each
item’s value.
4. Use graphs or tables to help illustrate the
economic principles
5. Conclude by explaining why you chose this
article.
The review should be 2-3 pages single spaced
and use APA format
(http://www.library.arizona.edu/search/reference/citation-
apa.html) for the citations.
Page 2 of 2 Copyright © Arizona Board
of Regents
Evaluation Criteria and Grading Rubric
This assignment will be graded based on the
criteria provided in the grading rubric below.
Criteria Above Average Average Below Average
Interesting article related to
course
(20%)
Clearly relates to course,

14. good, credible source
Article lacked depth or
source credibility
Article is off topicand
does not relate to course
material or not a credible
source
Summary is complete
(20%)
Two paragraphs devoted
to summarize the article
One paragraph
summary
Less than one paragraph
summary
Strategic tools are correct
analysis
(20%)
Correct application of
tools to assess article
Error in assessing or tool
choice
Errors in two or threeof
the tools used for
analysis

15. Use of graphs/tables to
illustrate
(20%)
Correct graphs used to
illustrate
2+
Error in calculating a
graph/table
Errors in calculating
numerous graphs/tables
Grammar and writing style
(20%)
Grammar and writing are
business appropriate
Several errors in
grammar or casual
writing style
Multiple errors in
grammar, spelling and
casual writing
Assignment Submission Instructions
Save your assignment as a word (.docor .docx) or
.pdf file.
Include your own name in the title of the
electronic file for identification purposes, for
example

16. "MayesDenkerKelliArticleReview1" and do NOT use
any spaces, punctuation, or special characters in
the file
name. If you are working in groups, both of
the members need to upload the same file with
your own name.
When your file is ready, submit it for grading
through the appropriate assignment drop box as
indicated below.
• Navigate to the folder Table of Contents ->
Learning Modules -> Week 9 area of D2L.
• Find the item #2 Article Discussion assignment
drop box.
• Click on the Add a File button.
• Find the file you would like to upload. If
you are using the most current version of
your internet browser,
you can drag and drop the file into the target area of
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• Once you have selected your file(s), click the Add
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• Click on the Submit button to complete the
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• Upon successfulassignment submission, you will
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For further details on submitting assignments,
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17. http://help.d2l.arizona.edu/student/submitting-assignments
web site.
Please note:If you make a mistake (such as
leaving out part of the assignment, send the
wrong files,etc.) and
the Assignment tool won’t let you submit, then
you must contact the instructor and describe what
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Extra credit
If you want to earn extracredit, you need to prepare
a minimum of 10 minute presentation with a
maximum 20
minutes. A PPT is required to present to the
class. Send an email to the TA to
schedule a date to present.
Chapter13
Plantation efficiency
· Large plantations were considerably more productive than
small, slaveless farms…why?
· Exceptionally high levels of productivity levels
· Superior lands large plantations occupied
· Work speed
Economic exploitation
· Though exploitation occurred, owners did not carelessly
mistreat their slaves…
1. Each male filed hand was worth $600,000
2. Standards of living for slaves was low yet self-sustaining
· The entrapment of slaves kept them from advancement by
taking away their incentive for self-improvement

18. Economic Entrenchment & Regional Incomes
· The South was slow to industrialize – due largely to the slave
system
· Plantation slavery was extremely profitable
· Laws were established to punish those assisting slaves to
runaway
Political Compromises & Regional Conflict
· Most significant issue was slavery’s containment, not its
eradication
· In 1819 the Senate was balanced:
· 11 slave states
· 11
· Missouri compromise of 1820
· Missouri was admitted as a slave state
· Maine was admitted as a non-
· From this point forward, states were admitted in pairs – one
free, one slave
·
· In 1854, the Kansas- Nebraska Act replaced the Missouri
compromise and provided “popular sovereignty” in the unsettled
portions of the Louisiana purchase.
· The Dred Scott decision in 1857 declared congress could not
prohibit slavery in the territories .
Enter Abraham Lincoln
· Lincoln was elected President in 1860
· This presented only two options for the south:
1. Submit to becoming nonslave stated
2. Secede
Chapter overview:
· In the mid-1860s, the democratic party split allowing the
republican, Abraham Lincoln to become president with just 40%
of the vote.
· By the Civil War’s end, more than 620,000 soldiers &sailors
had lost their life – more than all other American conflicts
com～

19. The economics of War
· South had to use some of its precious manpower to repress its
slave labor force
· When possible, slaves & free blacks fought for the north –
tipping the war in favor of the North
· Both sides relied on imported weapons, but the north was able
to increase its production quickly
· South’s limited rail network was strained to capacity
· Primary shortage was horses & mules
· South’s hope was that the North would eventually tire of the
enormous human costs and agree to let the South secede
Trade & Finance Polices / South & North
· South also faced financial issues:
· South had a hard time collecting taxes – hurting their war
effort and
· Increasing inflation in the Southern states
· The gap between prices & money increased due to two
reasons:
1. Decline in Southern production
2. Decline in confidence in the southern currency
· Astronomical inflation rates occurred once it was clear the
Union was going to claim victory
· The North’s economic strain was not as bad as the South’s.
· In 1861 a sharp financial panic did start when banks
suspended specie payments
· Government quickly raised taxes and sold bonds.
· The tax changes brought about the first federal taxes on
income
· The north escaped hyperinflation and confounded the south
The Civil War & Northern Industrialization
· The Civil War spurred northern industrial expansion
· With the north in charge, legislators passed laws intending to

20. unify markets & propel industrialization
· New programs included
· National Banking System
· Increase in tariffs
· Land-grant college act
· Land grants to
· The civil war was tragic
· Consider this: the war costs twice as much as the overall valor
of the slaves.
· Manufacturing changed as well:
· Minute stimulus manufacturing arouse (focus on the now
(small arms) v. long term (railroads).
Economics In the South
· In 1860, the South & North had nearly the same commodity
output per capita.
· In 1870, the North’s per capita output exceeded the South’s by
nearly 2/3
· Lincoln’s Emancipation Proclamation:
· Reduced the South’s agricultural output
Decline in the Deep South
· The greatest setbacks occurred in the 5 key cotton states in the
South – 3 reasons
· The highly efficient plantation system was destroyed.
· Economies of scale from driving slave labor were lost
· Significant reductions in field labor
· Decline in per capita ag output of 30%-40%
· Cotton demand slowed due to competition from India, brazil &
Egypt
· U.S. had dominated the cotton market commanding 77% of
English imports
· South became a food-importing region
· South maintained a comparative advantage in cotton
production
· Southern cotton farmers were as responsive to price changes

21. as Northern farmers were to wheat price changes
Chapter 16 Railroads & Economic Change
The Transcontinentals
· Gold rush of 1849 sparked a frenzy to move west, where land
was vast.
· Three ways existed to get to the west:
1. Wagon trains
2. Sea route through Panama
3. A clipper ship around Cape Horn
· Government participation was viewed as essential.
· By 1853, Congress was convinced of a railroad’s feasibility
· The civil war alienated the southern state’s river towns.
· In 1862, Council Bluffs, IA, was selected and congress
ordered a railway be constructed from Council Bluffs to the
western boundary of Nevada.
· To build the railroad, the government assisted in 2 ways:
1. Public land grants
2. Loans for each mile of the track completed
· Loans were to be 1st mortgage bonds
· Without sufficient capital, government doubled the land grant
and the railroads sold first-mortgage bonds
· Given the loans per mile:
· Construction of the railroad was quick
· The quality of the track was not that great
· Union Pacific & Central Pacific fought the final 2 years to
garner as much subsidy as possible ( remember the loans per
miles).
· Union Pacific relied on ex0solders & Irish immigrants laid
1086 miles of track
· Central Pacific, relying on Chinese immigrants laid 689 miles
– some of which was through the mountains .
· May 10, 1869: the Union Pacific & Central Pacific joined at
Promontory Summit a few miles west of Ogden Utah.
Total Construction: Pace & Patterns
· From 1864-1900, the greatest percentage of track was laid in
the plains states

22. · Chicago was the thief terminal
· Railroad construction had a strong influence on aggregate
demand and business cycles
· Railroad construction accounted for 20% U.S. gross capital
formation in the 1870s
· In 1920, 5% of all Americans were employed on the railroad
Productivity Advance & Slowdown
· Total factor productivity of the railroad more than doubled
between 1870 & 1910
· Sustained rapid growth of output per inputs were due to 2
productivity advancements:
1. Economics of scale in operation
2. More powerful locomotives, stronger steel rails, automatic
couplers, air brakes.
· Railroads were not the sole cause of American’s rapid
economic progress – railroads did symbolize a ceaseless wave
of entrepreneurial energy and technological progress.
Building Ahead of Demand?
· Joseph Schumpeter argued:
· Railroad projects “meant building ahead of demand in the
boldest sense of the phrase… middle western and western
projects could not be expected to pay for themselves in such as
most investors care to envisage”
· In other words, government aid to the railroads
· Albert Fishflow supported Joseph Schumpeter arguments:
· If railroads were built in unsettled regions, the demand for the
railroad’s services must have been low initially…
· Three test:
1. Government aid should be widespread
2. Profit rates initially should be less than profit rates in
alternative investments and should grow after the railroad aged
3. The number of people living near the railroad should be low
compared to the number living near Eastern railroads.
· All 3 test failed to support Schumpeter’s assertion that the
railroad were

23. · Fishlow discovered what he called “anticipatory settlement.”
· Fogal & Mercer followed up on Fishlow and determined
railroads were built ahead of demand
· They had relatively low initial profit rates
· Profit rates grew over time
Railroads & Standard Time
Land Grants, Financial Assistance, & Private Capital
· Subsides for canals were common
· States & municipalities helped the railroad by buying railroad
bonds.
· Financial aid came more from the federal government rather
sate or municipalities – a change from the antebellum period.
· (congress did receive reduced rates for transporting troops,
mail & government property)
· Land grant subsidies were discontinued after 1870 due to
public opposition
Unscrupulous Financial Practices
· Fraudulent practices often involving construction companies
emerged.
· Insiders were rewarded with stock below ‘par-value’
essentially taking money in a way that shareholders could not
benefit from
· Certain members of Congress bought stock or were given
shares – a conflict of interest
Government regulations on the Railroad
· Railroads engaged in discriminatory pricing policies.
Discrimination practices included:
· Long-haul v. short-haul rates
· Separate markets had different rates on per ton loads (e.g. coal
v. manufactured goods)
· Often the railroad had competition for some clients and no
competition for other clients based on location

24. · Albert Fink took the lead in forming regional ferdations to
pool either traffics or profits.
· State regulations:
· First wave of regulations came from the state level in the
1870s.
· Farmers demanded legislation to regulate rates
· In 1871 & 1874, Illinois, Iowa, Wisconsin & Minnesota passed
regulatory laws.
· 1886 – Wabash, St. Louis, and Pacific Railway v Illinois:
· State found the Wabash was charging more per ton for a
shorter haul from Gilman, IL to NYC than from Peoria, IL to
NYC and ordered the rate adjusted
· U.S. Supreme held that IL could not regulate rates on
interstate shipments.
· Federal Regulations:
· Interstate Commerce Commission (ICC)
· Commission was to examine the business of the railroad
· Commission heard complaints that arose from violations of the
Act to Regulate Congress
· Commission required all railroads to submit annual reports
based on a uniform system of accounts
· Commission provided Congress an account of its activities.
· ICC was the first independent regulatory agency
· Railroad manager used the ICC to stabilize profit rates and
secure other advantages of cartel management
Railroads & Economic Growth
· By World War 1, railroads were decaying and had little
capital.
· The U.S. nationalized the railroads in the interest of the war
effort.
· After the war, railroads were returned to private ownership.
· Schumpeter argued:
· Railroads led the transition to modern economic growth
· Growth came from applying major technological advances

25. Chapter 17 Industrial Expansion & Concentration
Structural Change & Concentration
· Exact flip-flop of commodity distribution between agriculture
& manufacturing.
· In 1869, agriculture was 53%, manufacturing was 33%
· In 1899, agriculture was 33%, manufacturing was 53%
· American gains in manufacturing were also phenomenal
relative to the rest of the world.
· In the 1890s, America was the leading industrial power and
in 1910, America produced twice as much as the next nearest
country, Germany
New Technologies
· Technological changes,
· Investments in human capital, and
· New energy sources brought economies of scale.
· Also, shifts in resources from lower to higher productivity
rates led to exceptional long-term trends.
· Advances based on invention & innovation
· Invention signifies the discovery of something new (e.g. steam
power or electricity)
· Innovation denotes the many ways found to use and adapt new
ideas to existing products and services.
· Most growth in value added in textiles was the result of
innovation and greater automaticity.
New Forms & Resource of Energy
· Before WWI, power reliance moved from wind & water
generation to other sources
· Electricity appeared on the stream add was made either with
the burning of fuel or water flow
· By WWI, one-third of the nation’s industrial power was
provided by electricity

26. Mass Production
· Faced with unmanageable size & complexity, the railroads
developed a host of new management practices and concepts
· Managers authority to make decisions should match their
responsibility
· Worker efficiency could be improved by:
· 1. Analyzing the movements to perform a job
· 2. Carrying out experiments
3. Offering incentives for superior performance