Economic History of the US

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1 Economic History of the US Revolution to Civil War, Lecture #2 Peter Allen Econ 120

2 Map 8.1 US Land Expansion

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4 Early Western Migrations Population at independence (in thousands) Total White African (92%) (8%) ,728 2, (79%) (21%)

5 Early Western Migrations Population in the west (thousands) Total West , (6%) ,200 1,000 (14%) ,400 13,000 (41%)

6 Early Western Land Settlement Gov. Land Policy, At independence, 13 state plus large unorganized territory How to administer and privatize? Settlers wanted to buy how to establish market and sell? At first, government set prices too high vast surplus (S>D) caused it to drop until 1862: gov. set price at zero

7 Northwest Ordinances First land policies of Confederation Northwest Territory, unsettled land north of Ohio River Ordinance of 1785 (OH, IL, ID, WN, MI, Min part) 1. Inventory: Land survey, base lines and principal meridians Lot/section = one square mile (640 acres) Township = 36 square miles, or 23,040 acres 2. Land to be sold at auction in large tracts Minimum price (p), set at $1 per acre Minimum quantity, set at 1 lot ($640) Fast and easy, Cash cow Effect Little land sold What was the market price? Avg. worker s income, $300 per year, 2.13 years income Beyond the means of most who wanted to settle, New Englanders

8 The Problem price control well above market equilibrium Price of Land $1.00 Surplus Supply 0.25 Demand Quantity of Land

9 NW Ordinance of 1787 Process for bringing NW territory into the confederation 1. Federal Territory once 5,000 male inhabitants, territorial legislature elected administered by a fed. governor appointed by Congress One representative (nonvoting) sent to Congress 2. New State when pop. reached 60,000 equality with existing states NW territory to be divided into 3-5 states

10 Land policy evolves to vast Surplus Land Acts, 1800, 1804, 1820, 1832 min. parcel lowered to 320, 160, 80, and finally 40 acres Min. price lowered to $1.25 per acre 1832, migrant could get a 40 acre parcel for $50, equiv. 2 months wages Still a vast excess supply, gov. controlled price still too high, squatting Homestead Act, acres for processing fees, i.e. P = Ø Opposed by southern states, vetoed by P. Buchanan Signed by A. Lincoln in 1862

11 Migration to NW Territory Migrants from NE and Mid-Atlantic states Favored northern parts of Ohio, Indiana, Illinois Another try at agriculture copy the South? Productivity, economies of scale Midwest specialized in hogs, corn, wheat Profit first hampered by high transportation cost Econ. incentive to find a way to get products to Eastern markets

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13 Migration to NW Territory Later route: Cumberland Gap into Kentucky, southern Ohio, Indiana, Illinois and Tennessee People from Mid-Atlantic and southern states Same motives Profit, productivity, better ag. land Mid-west and upper south

14 Table 8.1 Population in the Trans-Appalachian States a

15 Figure 8.1: Pop. Distribution by Region,

16 Southern Migration Economy of 5 southern states hurt most by: Independence, loss of export market in England Esp. tobacco, indigo, rice Little chance to recover Jefferson s effort to stay out of Napoleonic Wars Plantation system revived by 1. Cotton after Better land and climate conditions as wealthy planters moved westward into Alabama, Mississippi, Louisiana, W. Texas 3. Entrenchment of Slavery

17 Cotton gin, patented March 1794 Eli Whitney Huge increase in productivity One worker 55 lbs./day Instead of 1 lb. 5,400%

18 Southern Migration Western plantations Cotton became central to southern agriculture As export and also NE textile manufacturing By 1860 Cotton was ½ of all merchandise exports 10X larger than second largest export, wheat cotton goods/fabric was #1 manufactured export

19 Map 8.4 Shifts in Cotton Cultivation

20 Missouri Compromise, 1820

21 New England, first move to specialize in manufacturing Being forced out of the ag. Competition from west, poor conditions for ag. Capital and labor force into manufacturing Temp. opening of overseas markets Napoleonic wars Concentration of initial investments. scale in textiles, like England England no longer trying to suppress Dairy farming

22 Far Western Migration California Mexican Territory until Gold discovered, Jan in Sacramento Sutter s fort Technically Mexican territory Gold Rush population (non-native) , ,000 Easterners in SF ,000 Bear Flag revolt, 1846 US Territory, Feb Sep Admitted as a free state, Sept. 1850

23 Mexican-American War, Over US annexation of Texas, March 1845 (Pres. Tyler) Border, Nueces or Rio Grande Treaty of Guadalupe Hidalgo, Feb Cession of Alta California, and part of Nuevo México to US Terms dictated by US Paid Mexico $15 mm $313 mm, 2008$)

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27 Organization of Western Settlement Three ways for a country to expand territory 1. Treaty 2. Purchase 3. Conquest First territory of US acquired by Treaty or Purchase 1. Territories ceded by Britain (1783) - Atlantic to the Mississippi 2. Louisiana (1803) - purchased from France Ffr 60mm. + Ffr18mm of debt = $ mm. = $15 million, nom. 3 /acre $213 million in 2008 $, 43 /acre 3. Florida (1819) purchased from Spain (no cost, $5 million of claims against Spanish Gov.)

28 Organization of Western Settlement Later acquisitions made by conquest US gov assumed European right of conquest from England and other colonial powers based on, superior force, Christianity, verdict of advancement Right of subjugation of indigenous Americans Texas annexation, 1845 Oregon Country, 1846 Mexico Cession, 1848 ($15mm., $369mm today) Gadsen Purchase, 1853 ($10mm, $255mm today) Alaska Purchase, 1867, ($7.2mm, $110mm today) Hawaii Annexation, 1898 Pre-Civil War, southern leaders had designs on Mexico and Cuba

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32 US in 1819

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