ii.2i7L 5 Class Book, TS^^iIg^, (]opyiightN"_J3l2L_ CQEOucMT usposrr. INTRODUCTION TO THE Study of Economics BY CHARLES J. BULLOCK, Ph.D. PROFESSOR OF ECONOMICS IN HARVARD UNIVERSITY FOURTH EDITION, REVISED AND ENLARGED SILVER, BURDETT AND COMPANY Boston .... New York .... Chicago ^^ \\ ^.v^ (A Copyright, 1SD7, WOO, 190S, 1913, By Silver, Burdett and Company ©CI, a:} 5 175G PREFACE. This work is designed for an introductory text-book of economic science. The first three chapters aim to familiarize the student with an orderly treatment of Bome leading facts in the economic history of the United States before the study of economic theory is commenced. Throughout the book economic principles are discussed with special reference to American con- ditions, and their workings are illustrated by frequent allusions to American experience. Some of the chapters treat of topics that are ex- tremely difficult. In such cases no attempt has been made to secure a false appearance of simplicity. The subject of public finance has been only incidentally touched upon. The author considers it impossible to discuss taxation satisfactorily without studying public expenditures also. To do this would have required more space than could be allotted to that subject. When many important points of economic theory are unsettled, as is certainly the case at the present time, the preparation of a text-book is not an easy task. The author believes that it is neither desirable nor pos- sible to introduce the beginner to many controversiets 4 PREFACE. on fundamental points of theory. For this reason he has been obliged oftentimes to present his own views much more dogmatically than he would desire to do under other circumstances. On practical problems, however, such as bimetallism and monopolies, where weight of opinion is nearly evenly balanced, every effort has been made to present both sides of the controversies. The author has received invaluable assistance in the preparation of this work. Special acknowledgment should be made to Professor Charles H. Hull, of Cornell University, to whose suggestions and criticisms this book owes much of whatever value it may have. The thanks of the author are due especially to his wife, who prepared nearly all the manuscript for the printer, lightening by one half the labor of writing this work. CHARLES J. BULLOCK. Ithaca, N. Y., April, 1897. PREFACE TO THE FOURTH EDITION. In the second edition of this work the chapter upon value was revised and a new chapter upon public expen- diture and revenue was added. The third edition gave opportunity for inserting a discussion of the localization of industry and adding a new chapter upon railroad transportation. In the present edition all statistics have been brought up to date, and such changes made as events of the last five years have rendered necessary. C. J. B. Cambridge, May, 1913. CONTENTS. CHAPTER I. PAGH /^^troduction to the economic history of the United States 11 I. Westward Expansion 11 II. Land Tenures in the United States 14 III. Growth of Population in the United States ... 18 IV. Systems of Labor in the United States 22 Literature on Chapter I .... 30 CHAPTER IL The Growth of Foundational Industries .... 32 L The Fur Trade and Cattle Raising 32 II. Agriculture 35 III. Fisheries and Mining 43 Literature on Chapter II 47 CHAPTER m. Manufactures and Transportation 48 I. Colonial Manufactures 48 II. The Industrial Revolution and the Factory System . 53 m. Transportation . , 58 CONTENTS. PAOB IV. Ship Building 65 V. The Textile Industries 69 VI. Iron and Steel Industries 74 Literature on Chapter III 77 CHAPTER IV. The Consumption of Wealth 79 I. Human Wants 79 II. Economic Goods 84 III. The Consumption of Wealth 87 IV. Statistics of Consumption 99 V. Economy in Consumption. Saving and Investment . 101 VI. Demand 110 Literature on Chapter IV 114 CHAPTER V. The Production of Wealth 115 I. Production in General 115 n. The Factors of Prochiction 118 III. The Localization of Industry 142 Literature ou Chapter V 148 CHAPTER VI. The Production of Wealth (continued) 149 I. Organization of the Factors of Production .... 149 II. Stages in the Development of Production . ... 1 63 III. Freedom in the Establishment of Productive Under- takings 166 TV. Cost of Production 168 V. The Investment of Labor and Capital upon Land . 170 VI. Large-Scale Production 176 Literature on Chapter VI 185 CONTENTS. CHAPTER Vn. PAOB The Theory of Exchange 186 I. Exchange in General 186 II. Value 189 III. Market Value 102 IV. Normal Value 200 V. Exceptions to the Theory of Normal Value .... 215 Literature on Chapter VII . • 223 CHAPTER VIU. Money o..... 224 I. Development of Metallic Money 224 II. The Value of Metallic Money 233 III. Debased Money. Gresham's Law 248 IV. Inflation and Contraction • 258 V. Government Paper Money • 263 Literature on Chapter VIII 269 CHAPTER IX. Money and Credit 270 I. Credit and Instruments of Credit 270 II. Banks as Institutions of Credit 279 III. Advantages and Disadvantages of Credit .... 284 IV. Territorial Distribution of the Precious Metals . . 285 V. Summary of the Theory of Money 288 Literature on Chapter IX 293 CHAPTER X. Monetary History of the United States. Bimet- allism 294 I. Monetary History of the United States ..... 294 n. Bimetallism 303 Literature on Chapter X. . ^ , . . » . 314 8 CONTENTS. > CHAPTER XL PAOB Monopolies o 31.7 I. The Nature of Monopolies. Monopoly Value . . . "l'\ II. Classes of Monopolies 319 III. General Considerations concerning Modern Monopo- lies 324 IV. The Problem of Natural Monopolies 326 V. Capitalistic Monopolies 331 VI. Final Considerations concerning Monopolies . . . 335 Literature on Chapter XI 342 CHAPTER XIL Railroad Transportation . 343 I. Railroad Competition and Corcbination 343 II. Railroad Rates 353 III. Public Control of Railroads . 361 Literature on Chapter XII 372 CHAPTER XIIL International Trade 373 I. The Foreign Trade of the United States .... 373 II. The Nature of International Commerce 375 III. International Values 380 IV. Restriction of Internationa! Trade 387 Literature on Chapter XIIL 410 CHAPTER XIV. The Distribution of Wealth 411 I. Social Income 411 II. Private Income 414 III. Primary and Secondary Distribution 416 CONTENTS. 9 PAOB IV. General Classification of Private Incomes .... 421 V. Interest 423 VI. Rent • 435 VII. Wages 446 VIII. Profits 460 Literature on Chapter XIV 467 ^ CHAPTER XV. The Wages System 468 I. General Considerations on the Labor Contract . . . 468 II. Labor Laws and the Labor Contract 473 III. Labor Organizations and the Labor Contract . . . 476 IV. The Unfavorable Relation of Laborers to the Product of their Labor 485 V. Conciliation and Arbitration 489 Literature on Chapter XV 493 CHAPTER XVI. Land Nationalization. Socialism 494 I. Land Nationalization 494 II. Socialism 500 Literature on Chapter XVI 513 CHAPTER XVIL The Economic Functions of Government 514 I. Economic Functions Performed by Governments . . 514 II. Examination of Modern Theories of Governmental Functions 518 III. The Several Functions of Government Considered from the Point of View of Individualism . . . 524 Literature on Chapter XVII 528 10 CONTENTS. ' CHAPTER XVIII. FAOE Governmental Expenditures and Revenues .... 529 I. Public Expenditures 529 II. Public Revenues 534 III. Taxation in the United States 650 Literature on Chapter XVIII 587 Bibliography S89 I. English and American Works 589 II. Periodical Literature 604 III. French and German Works 605 (1) French Works on Economics 605 (2) German Works on Economics 606 Index 611 INTRODUCTION TO ECONOMICS CHAPTER I. INTRODUCTION TO THE ECONOMIC HISTORY OF THE UNITED STATES. I. "Westward Expansion. § 1. The English colonies in North America were planted on the mere threshold of a vast territory of con- tinental extent and imperial richness. Re- Westward sistlessly the line of settlement has been movement of pushed westward until, at the present day, ^^ °"* no distinct frontier of unsettled land exists in the United States, This westward expansion of population over a vast area of free land has been the fundamental fact in the economic history of the country, exerting an influence upon almost every phase of its economic life. § 2. The colonists of the seventeenth century, ad- vancing through the valleys of the rivers flowing into the Atlantic, pushed their settlements The first slightly beyond the "fall line," or the point *7*"*!f , ^ J J ' i of westward where the first falls obstructed the naviga- expansion, tion of the rivers. The frontier of the seventeenth century corresponded roughly with the western border of the Atlantic coast reinon. From 1700 to 1760 the 12 ECONOMIC HISTORY OF THE UNITED STATES. frontier was advanced another stage toward the west, Emigrants gradually followed the rivers that penetrate the Appalachian region, and formed settlements in the table-lands of Pennsylvania, Virginia, and the Caro- linas. In New York and New England many settlers pushed toward the interior of those sections. Mean- while, the eastern or tide water regions became an area of more or less continuous settlement. § 3. The third stage in the advance of the frontier occurred between 1760 and 1790. Settlers moved third through the valleys and mountain passes of and fourth the Appalachians, and emerged in Tennes- see, and Kentucky, and around the upper branches of the Ohio River. Thus the frontier passed over the mountains, while the area of continuous settle- ments advanced well into the Appalachian region. With the Appalachian mountains once passed, emi- grants moved rapidly into the Mississippi Valley. In 1820, Ohio, southern Indiana and southern Illinois, Tennessee, Kentucky, and southeastern Missouri were included within the settled area. West of the Missis- sippi and along the Great Lakes, a fourth region of frontier existed. § 4. From 1820 to 1850 the westward movement of population was very rapid. The construction of the Erie Canal, in 1825, and the use of the The fifth ' . „ .,. and sixth steamboat upon the western riveis, facili- ^^* tated communication with the East, and stimulated the settlement of the Mississippi Valley. By 1850 the frontier was advanced to the eastern boundary WESTWARD EXPANSION. 13 of Kansas and Nebraska, while great states had arisen east of the Mississippi. At the same time a new fron- tier of settlement was begun in California, Oregon, and Utah. By 1880 the territory intervening between the Kansas-Nebraska and the Pacific frontiers of 1850 had become populated, although somewhat sparsely. In many places frontier conditions still existed, but areas of thicker settlement had so broken into the old Rocky Mountain frontier that a distinct line of frontier no longer existed. The decade from 1880 to 1890 saw almost the complete disappearance of an " American frontier." § 5. Up to the present time the economic history of the United States has been marked by a continual west- ward movement of population over vacant „, ,„ ^ /^ Significance lands. In the future it will be altogether a of westward story of the more complete development of the territory won for the cause of civilization by the labors and privations of the American pioneer. The significance of this movement for westward expansion has been understood by few. For this reason, says Woodrow Wilson, " the history of the country and the ambitions of its people have been deemed both sordid and mean, inspired by nothing better than a desire for the gross comforts of material abundance ; and it has been pronounced grotesque that mere bigness and wealth should be put forward as the most prominent grounds for the boast of greatness. The obvious fact is that for the creation of the nation the conquest of her proper territory from Nature was first necessary ; and this task, which is hardly yet completed, has been 14 ECONOMIC HISTORY Of HIE UNITED STATES. idealized in the popular mind. A bold race has de- rived inspiration from the size, the difficulty, the dan- ger of the task. Expansion has meant nationalization ; nationalization has meant strength and elevation of view." n. Land Tenures in tlie United States. § 6. Systems of land tenure influence powerfully the economic development of a country. In Europe, the The influence possession of land has often conferred of land economic superiority and social distinc- tenures. tion. In the Middle Ages the large land- owners became the feudal rulers of Europe, while the small owners and the landless men were obliged to place themselves under the protection of some feudal lord, in a position of economic and social dependence. In modern Europe the landed aristocracy has lost most of its exclusive political privileges, but retains something of its former social superiority. Land tenures have in most countries remained aristocratic, — that is, such as to perpetuate large estates and to make difficult the growth of a large number of small holdings. Such land tenures keep the mass of the agricultural popula- tion of Europe in a position of economic dependence upon the land-owning classes. In the United States economic development has taken a different direction. In some colonies efforts Tenures in were made to create large estates whose the United proprietors should enjoy special privileges, SXflX6S* ^ ^ and various conditions sometimes made it difficult for small proprietors to acquire titles to land LAND TENURES IN THE UNITED STATES. 15 • But, in the long run, the tendency was toward a popu» lar system of land tenure and laud transfer. After the Revolution, practically all traces of aristocratic land laws were swept from the statutes of the states. Small holdings had always been the rule in New England, while large estates became more common as one passed toward the South. These differences had an economic explanation. The more fertile lands of the middle and southern colonies made large farms and plantations profitable economically. On the less fertile soils of New England, smaller farms and a more careful cul- tivation were an economic necessity. Similar causes explain differences in agricultural tenures that exist in the country at the present day. § 7. Since vacant lands abounded, the management and settlement of such public lands became an impor- tant problem early in colonial history. Management The usual outcome was that the people ofpubuc finally secured the right to acquire owner- ship of the vacant territory by simple methods of reg- istration, and by making a payment that was often nominal. The growth of democracy in the colonies made such a solution inevitable. The War for Independence placed in the control of the United States nearly all the territory now comprised within its limits east of the Mississippi.^ The pubUc The territory west of the Alleahanies was domain of the •' ^ United states. ceded to the national government by the 1 On the subject of land cessions.'see maps iu MacCodn, Historical Atlas ; Hinsdale, The Old Northwest ; Gannett, The Building of a Nation. 16 ECONOMIC HISTORY OF THE UNITED STATES states, and became a public domain. In 1785 and 1787 Congress passed ordinances that provided for the ad- ministration of the Northwest Territory. These ordi- nances laid down the lines which the policy of the United States has always followed, in many important features. The lands were divided by a governmental survey into townships six miles square.^ Entire townships or sec- tions of townships were sold at public sale for not less than a dollar per acre. This system enabled settlers to locate easily in the states north of the Ohio, and conse- quently the flow of population into the Ohio Valley was very rapid. By several acquisitions the United States extended its territory to the present limits ; and the public domain included, at one time and another, 2,889,175 square miles.^ The thirteen original states, together with Maine, Kentucky, and Texas, were never part of the public domain. Their area is about 699,000 square miles. This vast public domain has been sold at public and at private sale at a common price of $1.25 to $2.50 per acre. Since 1862 a free homestead of not Disposal of the pubUc more than one hundred and sixty acres has been granted practically free of charge to every citizen who is the head of a family, or above the age of twenty-one, on condition that he shall actually cultivate the land for five years. Lands valuable for minerals, for timber or stone, for town sites, etc. have 1 See FiSKE, Civil Government, 81-88 ; Hinsdale, The Old North west, 255-279. 2 For these statistics see Donaldson, The Public Domain, 10-14 ; Sat(^ The Land Question, 21-77. LAND TENURES IN THE UNITED STATES. 17 been sold on special terms. Vast tracts of land have been given away for the purpose of assisting in the construction of railroads and military roads, for the endowment of schools and colleges, and for military bounties to soldiers and sailors. In these ways the larger part of the original domain has passed out of the hands of the United States. In 1894, exclusive of Indian and military reservations, there remained about 850,000 square miles of public domain. To this should be added nearly all of the 577,390 square miles included in the limits of the territory of Alaska. Of the lands that remain, only a small part will be available for agricultural purposes until the arid regions of the West shall be irrigated. There have been great abuses in the administration of the public domain. Vast tracts of land have been secured by fraud, railroads and other cor- •^ Result of the porations have secured land without fulfill- pnbUc land iug the conditions upon which the grants ^ ^' were made, while land and timber thieves have sup- ported lobbies at Washington to prevent the passage of laws designed to protect public interests. Yet, in spite of all abuses, millions of settlers have found homes on lands secured from the United States, the resources of the country have been developed, and twenty-seven states, carved out of the public domain, have been admitted to the Union, On the agricultural lands, holdings of moderate size have been the rule ; and the public-land states have become composed of a large number of proprietors, not of landlords and tenants. 2 18 ECONOMIC HISTORY OF TEE UNITED STATES III. Growth of Population in the United States. § 8. During the seventeenth century the population of the English colonies grew quite slowly, but from 1700 to 1775 numbers increased rapidlv. statistics of '■ increase of Mr. Bancroft estimates the population in population. j^g_j ^^ 1,165,000 whites and 263,000 ne- groes. In 1775 it had increased to 2,500,000 souls. The English element predominated in most of the colo- nies at that time, but the population was quite hetero- geneous. In New York the Dutch stock prevailed, on the Delaware River there were settlements of Swedes, in Pennsylvania there were many Germans, in the moun- tainous districts of the Appalachian frontier Scotch-Irish were most numerous, while the southern colonies con- tained many Huguenots. The First Census of the United States, in 1790, showed the population to be 3,924,214. The subsequent growth of the country is shown in the following table : — Census Year. Population of Continental United States. Land Area in Square Miles. Population per Square Mile. 1910 91,972,266 2,973,890 30.9 1900 75,994,575 2,974,159 25.6 1890 62,947,714 2,973,965 21.2 1880 50,155,783 2,973,065 16.9 1870 38,558,371 2,973,965 13.0 18G0 31,443,321 2,973,965 10.6 1850 23,191,876 2,944,337 7.9 1840 17,069,453 1,753,588 9.7 1830 12,866,020 1,753,588 7.3 1820 9,638,453 1,753,588 5.5 1810 7,239,881 1,686,865 4.3 1800 5,308,483 867,980 6.1 1790 3,929,214 867,980 4.5 THE GROWTH OF POPULATION. 19 § 9. The enormous increase of the population of the United States during the last century is due partly to natural increase by a constant excess of „ births over deaths. From 1700 to 1820 increase of the natural increase was very great, so that population doubled repeatedly in periods of about twenty- five years. This was due to the abundance of fertile land which was usually accessible to every one. Food, clothing, and shelter could be secured very cheaply. An increase of numbers meant not so much an increase of mouths to be fed, as an addition to the productive labor of each family employed upon new land. Under such conditions marriages occurred early, families wei"e large, and the natural increase of numbers was rapid. After 1820 it was noticed that the rate of natural increase began to diminish. This became apparent in the older and more thickly populated regions. In recent times this condition has become very general, as the pop- ulation of more states has become relatively dense.^ § 10. Immigration has been so large that the smaller rate of natural increase has been less apparent than it would have been otherwise. From 1790 ... n 1 Immigration, to 1820 immigration was small, less than 250,000 persons coming to this country during that period. Between 1820 and 1850 over 2,400,000 immi- grants arrived on our shores, and as many more came * See Tucker, "Progress of the Uuitetl States," 89-107, published in 1843, for a discussion of the decreased rate of natural increase. Also read Mayo-Smith's '' Statistics and Sociology," chaps, v., vi., vii., and riii. 20 ECONOMIC HISTORY OF THE UNITED STATES. between 1850 and 1860. In the latter year more than thirteen per cent of the total population was estimated to be of foreign birth. After the close of the Civil War immigration assumed larger proportions than ever. The West welcomed immigrants, bureaus were estab- lished to aid them, the cost of ocean and land trans- portation was cheapened, and transportation companies made efforts to obtain passengers from foreign lands. In 1871, 321,350 immigrants came to this country; and in 1882, 788,992 arrived. Since then the annual aver- age has been about half a million. The whole number of immigrants from 1820 to 1911 has been 28,915,000. The Census of 1910 showed that the population of the United States fell into the following groups : — Native-born whites with native parents . 49,488,575 Native-born whites with foreign parents. 18,897,837 Foreign-born whites 13,345,545 Colored persons 10,240,309 Formerly, most of the immigrants came from Ireland, England, and Germany. More recently, larger num- bers have come from the Scandinavian countries. Dur- ing the last decade immigration from Ireland has fallen off, while Austria-Hungary, Poland, and Italy have sent vast numbers of immigrants. § 11. The general movement of population has always been westward, on account of the unoccupied lands of Motility of the frontier. Not only immigrants, but also TtT^u^?^ many of the native population, have formed states. this stream of westward migration. No other country of the world has shown, at least in THE GROWTH OF POPULATION. 21 modern times, an equal amount of internal migration. This mobility of i)opulatiuii has diminished the force of all economic shocks. In 1910 it appeared that 21.7 per cent of the native-born inhabitants of the United States were living in a different state from that in which they were born. In 1880 it was shown that only one half of the people of native birth were living in the county where they were born. § 12. In progressive countries there has appeared, in modern times, a marked tendency of the population to concentrate in cities. This has been the Growth of result of the development of manufactures *^**^^'- and commerce, and of the improvement of transporta- tion facilities. In 1790 there were in the United States six towns or cities with a population of 8000 pr more, and they comprised 3.35 per cent of the total population of the country ; in 1900 there were 545 such places, and they had 33.10 per cent of the total population. Classifying as urban population all persons living in cities or other incorporated places, the Census of 1910 showed that the movement of the urban population has been as follows : — Census Years. Population of the United States. Urban Population. Percentage of Urban Population. 1880 1890 1900 1910 50,155,783 62,947,714 75.994,575 91,972,266 14,772,438 22,720,223 30,797,185 42,623,383 29.5 36. 1 40.5 46.3 22 ECONOMIC HISTORY OF THE UNITED STATES. A comparison of different sections shows more striking results. In the New England States 83.3 per cent of the population is urban. In Massachusetts and New York the numerical increase of the urban population is larger than the total increase of the population of the states, so that there has been an actual depopulation of the rural districts. This concentration of the popu- lation in cities is greatest in all the states where manu- facturing and commercial interests are most important. rv. Systems of Labor in the United States. § 13. In the original colonies there was a great scarcity of laborers. Small proprietors cultivated their Scarcity of ^^^^ lauds, but on the larger farms and laborers ifl plantations there was great need of addi- the colonies. tional laborers. This lack was intensified as other industries grew up beside agriculture. To supply this need immigration was encouraged, and various systems of obtaining laborers were developed. § 14. Indentured white servants were found in all the colonies at an early date. They were of three indentured classes. The first and principal class con- servants, sisted of free persons who desired to mi- grate to the colonies, but were unable to pay the expense of transportation thither. They voluntarily contracted with some one in America to place their labor at his disposal for a term of years, in return for his assuming the expense of transporting them to the colonies and supporting them during the stipulated terms of service. The second class was made up of LABOR SYSTEMS IN THE UNITED STATES. 23 English political or criminal offenders, whose labor was sold for a term of years or for life. The third and least important class was composed of persons in the colonies who were sold into servitude for a term of years, either for criminal offenses or for non-payment of debts. Sometimes orphans were bound out to service in this manner. Tliis system of indented servitude differed very materially from slavery. The term of service was usually from three to six years. At its character of close the servant was entirely free. The ti»" system, rights of servants under the contracts were usually safeguarded fairly well. On becoming free, servants often rose in the social scale, even into positions of prominence. Many of them became free laborers, but the majority became landholders and swelled the number of small proprietors. Except where slavery assumed greater importance, the larger part of the laboring class of the colonies was composed of servants. In the eight- En^ofthe eenth century the system of indented serv- system, itude declined in the southern colonies, yet it continued everywhere until the Revolution, when further impor- tations of servants from England became impossible. Tims the supply gradually disappeared by expiration of the terms of service ; yet indented servants were found here and there until the present century, when the sys- tem was abolished by law in some states. This class of servants had been an important addition to the labor force of all colonies where slavery had not assumed 24 ECONOMIC HISTORY OF THE UNITED STATES greater importance. But by 1780, even in the northern states, the system was less profitable to employers, since laborers had become more abundant and it was less desirable to hire workmen for so long a period as six years. § 15. Slavery dijffered from indented servitude in that the master had the legal right of ownership of the person of the slave. In the sixteenth cen- Slavery. tury various European nations entered upon the African slave trade, and introduced slaves into the New World. In 1619 a Dutch ship landed twenty African slaves in Virginia, and soon African slavery was introduced into the English colonies. The English slave trade became very large, and the government fos- tered it, forcing negroes upon the colonies even in opposition to protests and restrictive legislation. But the profits of the trade were so large that the colonists finally entered upon it. After the Revolution various states restricted this nefarious traffic ; and, in 1807 and 1808, Congress finally abolished it. English and American traders brought thousands of slaves into the country ; while, in the southern colonies, the negroes multiplied rapidly by natural slavery in the increase. In the eighteenth century the importation of slaves gradually declined in the colonies north of Maryland, this tendency being most marked in New England. After the Revolution slavery was gradually al)(jlishcd in the northern states. In 1790 the distribution of slaves among the states was as follows : -~ LABOR SYSTEMS IN THE UNITED STATES. 25 New England States 3,886 New York, Pennsylvania, and New Jersey .... 36,484 Southern States 657,527 697,897 Up to this time the course of the institution ot slavery had been shaped mainly by economic forces. It is incorrect, however, to say that moral causes that considerations had nothing to do with the iiistory*of * abolition of the institution in the North, slavery, for an opposition to slavery based upon moral and religious grounds commenced early in the eighteenth century. Moreover, this feeling was not confined to the North, but was shared by eminent southern statesmen. Said Jefferson, writing concerning slavery, " I tremble for my country when I reflect that God is just." But back of all such considerations lay the fact that slaveqr-~had never been profitable in the North, and that in the South it had enabled the slave-owners to accumulate much wealth. Abolition, therefore, would cost the northern states little ; while, in the southern states, it would destroy millions of dollars of property. In the South the demand for labor, to be em- ployed in raising tobacco, rice, and indigp, caused a rapid increase of slavery. In the North smaller hold- ings and more careful cultivation were the rule. The careless and indolent slave was wholly unsuited for such work. On small farms, also, overseers could not be employed, and slave labor could not be directed properly. Finally, the expense of feeding and clothing slaves was much larger in the North, while the mor- 26 ECONOMIC HISTORY OF THE UNITED STATES. tality of negroes was far greater ; so that the cost of slave labor was high and its efficiency was low. The result of slavery was to divide the United States Into two groups of states, — one dependent upon slave The end labor, the other upon free. From 1790 to of the in- I860 there arose a bitter sectionalism based upon these differences. Slavery was for- bidden in the Northwest Territory, and the great states formed in that region entered the Union as free states. Into the free states the increasing tide of immigration flowed, population increased rapidly, and manufactures and commerce developed. The southern states received few immigrants, and fell behind the rest of the country in respect to the growth of population and industries. By 1860 the free states had a population of 19,088,927; while the population of the slave states was only 12,315,374, of which number 3,958,696 were slaves. The invention of the cotton gin, in 1792, vastly extended the cultivation of cotton in the South, and this soon became the great staple crop of that section. Other branches of agriculture were neglected in order that the production of cotton might be increased. Slave labor was adequate to the work of producing large crops of cotton by wasteful surface culture extended con- stantly over new lands. But improved agriculture and mechanical or manufacturing industries, which required more efficient labor, could not be undertaken with the labor of slaves. So the South was shut up to agricul tural pursuits that tended toward the gradual impover. isliment of the soil. It could have no part in the LABOR SYSTEMS IN THE UNITED STATES. 27 economic progi'ess of the nation, and remained in 1860, as it had been in 1790, exclusively an agricultural region. Slavery had become, therefore, a distinct impediment to the economic progress of the South. The abolition of the institution freed that section from an absolute barrier to its further progress, and made possible the development, by free labor, of the manifold resources of the New South. § 16. From the first, free laborers existed in all the colonies. They were often people who had been able to pay the expense of their passage from the ^ ■^ ^ 1 o Free laborers. Old World, but lacked the capital or the en- terprise to engage in some industry upon their own account. Their numbers were recruited by indentured servants whose terms of service had expired. The num- ber of free laborers varied greatly in the different colonies, but it was largest where slavery was least general, and free workers were not brought into com- petition with slaves. In the northern colonies free laborers increased rapidly during the last half of the eighteenth century. John Adams, writing in 1780, says that one cause of the opposition to slavery in Massachu- setts was " the multiplication of laboring white people, who would no longer suffer the rich to employ these sable rivals so much to their injury." Alexander Hamilton, writing in 1791, says : " There are large dis- tricts which may be considered as pretty fully peo- pled. ... If these districts have not already reached the point at which the complaint of scarcity of hands ceases, they are not remote from it." 28 ECONOMIC HISTORY OF THE UNITED STATES. One cause of the scarcity of hired laborers was the abundance of free land. Almost any one could become Effect of ^ proprietor, and cultivate the soil on his free land. own account. The land was usually fertile, and the return to the agriculturist was large. These facts made it necessary for an employer of labor to pay wages sufficiently high to induce people to work for hire, rather than to secure land and engage in agriculture. American wages have felt this influence even to the present day. Economists have found one explanation of the high rates of wages in this country in these two facts of free land and the productivity of American agriculture. The elder Winthrop wrote in 1645, " Our children's children will hardly see this great Continent filled with people, soe that our servants will still desire freedom to plant for themselves, and not stay but for verie great wages." In 1723, a leading royal official wrote of the colony of New York : " North America containing a vast tract of land, every one is able to procure a piece of land at an inconsiderable rate, and therefore is fond to set up for himself rather than work for hire. This makes labor continue very dear, a common laborer usually earning 3 shillings by the day ; and consequently any undertaking which requires many hands must be undertaken at a far greater ex- pense than in Europe, and too often this charge only overbalances all the advantages which the country naturally affords, and is hardest to overcome to make any commodity of manufacture profitable which can be raised in Europe." From eai-liest times there is an LABOR SYSTEMS IN THE UNITED STATES. 29 abundance of evidence to show that wages have been higher in the United States than in European countries. Within the last decade the most desirable portions of our public lands have been occupied, and laborers will have more difficulty in the future in finding an outlet in the unsettled regions of the West. In the eighteenth century there were three classes of free laborers. First, there were many fre e laboj ;ers_m the northern colonies engaged in agriculture ^, o a o Classes of or in domestic service. Such laborers, male laborers in and female, were usually hired by the year, and did not receive the highest rates of wages. In the southern colonies, such work was performed by slaves. The second class of laborers comprised those engaged in mechanical or manufacturing pursuits, or in trade and commerce. These were found in all the colonies, since slave labor could not be utilized for such purposes. This class of laborers received the highest wages and was always in demand, since the supply of skilled workmen was always inadequate. The third class was composed of unskilled laborers of the towns and villages. Their wages were sometimes high, but employment was irregular and their yearly income was not so large. The rapid growth of population during the present century has increased the number of laborers who work for hire. With the disappearance of * Latmr in the indented servitude, free laborers formed the present only class of workmen in the North and *^° "^* West. The abolition of slavery gave to the South the advantages of free labor. 30 ECONOMIC HISTORY OF THE UNITED STATES LITERATURE ON CHAPTER I. On "Westward Expansion : Turner, The Significance of the Frontier in American History; Roosevelt, Winning of the West, especially I. 101-133 ; Roosevelt, Thomas H. Benton, 1-46; Sumner, Andrew Jackson, 1-24; Shaler, Kentucky, 53-120; Carr, Missouri, 1-138; Smyth, Tour in the United States, I, 178-183 ; Wilson, Division and Reunion, 2-7 ; The Eleventh Census of the United States, Volume on Population, XVIII.-XXXVI. On Land Tenures : Maine, Early History of Institutions, 98- 118; Leslie, Land System of Ireland, England, and Continental Europe; Pollock, The Land Laws; Mill, Political Economy, Bk. II. Chaps. 6, 7, 8, 9, 10; Jones, Peasant Rents; Probyn, Sj'^steras of Land Tenure ; Cheyney, Early American Land Ten- ures; Cheyney, The Anti-Rent Agitation in New York; Eqles- TON, The Land System of the New England Colonies; Doyle, The English Colonies in America ; Weeden, Social and Economic History of New England; Bruce, Economic History of Virginia; WiLLOUGHBY, Government and Administration in the United States, 107-110 ; Donaldson, The Public Domain ; Sato, His- tory of the Land Question in the United States ; Hinsdale, The Old Northwest ; Gannett, The Building of a Nation ; Johnson's Universal Cyclopasdia, VIII. 359-360. On the Growth of Population: Eleventh Census of the United States, Volume on Population ; Bancroft, History of the United States, I. 602, II. 389, 390, IV. 52; Tucker, Progress ol the United States ; Smith, Statistics and Sociology ; Smith, Emi- gration and Immigration; Whitney, The United States, Supple- ment, 1-25 ; Gannett, The Building of a Nation, 51-129 ; Ket- tell, "Immigration," in] Eighty Years' Progress, I. 228-244; The Statistical Abstract of the United States, 1 894, 4 and 5. On the Labor System: Waltershausen, Die Arbeits- Verfassung der Englisclien Kolonien in Nordamerika ; Lodge, History of the English Colonies in America ; Doyle, The English Colonies in America; Bancroft, History of the United States; LITERATURE. 31 Bruce, Economic History of Virginia; Weeden, Economic and Social History of New England ; Wright, Industrial Evolution of the United States ; Ballagh, Wbite Servitude in the Colony of Virginia; Basset, Slavery and Servitude in North Carolina; Brackett, The Negro in Maryland ; Ingle, The Negro in the District of Columbia; Tremain, Slavery in the District of Co- lumbia; Steiner, History of Slavery in Connecticut; Eighty Years' Progress, I. 103-122 ; Moore, Histoiy of Slavery in Massa- chusetts ; Tucker, Progress of the United States, 108-118; Hins- dale, The Old Northwest, 345-367 ; Ingle, Southern Sidelights ; Lalor's Cyclopaedia of Political Science, " Slavery " ; Kalm, Trav- els into North America, I. 303 ; Oldmixon, British Empire in North America ; Ingram, History of Slavery ; Mill, Political Economy, Bk. II. Chap. V. ; Roscher, Political Economy, L 207- 234. General References : Bogart, Economic History of the United States; Bullock, Selected Readings in Economics, 1-235; Cal- LENDER, Economic History of the United States ; Coman, Indus- trial History of the United States. Note. — Students should consult the maps in the Eleventh United States Census Report on Population, pages XII. -XXVII i., for illustration of the westward movement of the frontier. 32 ECONOMIC HISTORY OF THE UNITED STATES. CHAPTER II. THE GROWTH OP FOUNDATIONAL INDUSTRIES, I. The Fur Trade and Cattle Raising. § 17. The development of the industries of the United States has been described in the following words : ^ " The United States lies like a huge pas-e in The develop- & r & mentof in- the history of society. Line by line as we read from west to east we find the record of social evolution. It begins with the Indian and the hunter ; it goes on to tell of the disintegration of sav- agery by the entrance of the trader, the pathfinder of civilization ; we read the annals of the pastoral stage in ranch life ; the exploitation of the soil by the raising of unrotated crops of corn and wheat in sparsely settled farming communities ; the intensive cultivation of the denser farm settlement ; and finally, the manufacturing organization with city and factory system." § 18. The earliest English colonists began to traffic with the Indians for peltry. In New England the fur The fur trade furnished the earliest basis for the *"*^* foreign commerce of that region. In New Fork the Dutch and the English fur traders pushed up the Hudson River, reaching, through the Mohawk * Turner, Significance of the Frontier in American Historj. THE FUR TRADE. 33 Valley, the Great Lakes and the Illinois conntry. In Virginia the traders crossed the Alleghanies by the close of the seventeenth century, and later explored the moun- tains of Tennessee and the Carolinas. In the Caro- linas the colonists began at an early date to compete with the Virginians for the trade with the Indians of the Southwest. Meanwhile, in the Mississippi Valle3?, the French extended their traffic with the Indians, dot- ting the interior of the continent with their trading posts. For the control of this valuable trade the English and French contended until the French and Indian War wrested this territory from France. In the early history of this country the fur trade was important because it furnished a valuable industry which aided in building up a thriving com- -g^^^^jj^f. merce. But more than this, it prepared the sigrnificanceof / ^ the fur trade. way for the advance of civilization across the Appalachian ranges. The fur traders, following Indian trails,^ planted the first posts in the outlying western wilderness. In their tracli, hunters and trappers fol- lowed. As numbers grew and game became scarce, both traders and hunters moved on into the wilderness. Their places were soon taken by the cattle raiser, and then by the farmer ; and settled communities grew up. The trading post, therefore, located at some convenient place along an Indian trail or a river course, becamethe nucleus of a new area of settlement. 1 See EoosEVELT, Winning of the West, i. 251, 314, ii. 328 ; Speet), The Wilderness Road ; also the speech by Senator Benton, quoted by roRNER in "The Indian Trade." 72, 73. 34 ECONOMIC HISTORY OF THE UNITED STATES. This process has been repeated at each step in the Bsttlement of the West. After the Revolution, the set- tlers in the Mississippi Valley followed the Later history of the fur paths marked by the early French traders. trade. -^^^^ Orleans and Mobile were the centers of the Indian trade in the southern part of the Valley, while the region of the Great Lakes was the seat of perhaps the greatest fur trade of the world. From Ohio to Wisconsin six lines of rivers furnished water routes from the Lakes to the Mississippi.^ At these points old trading posts rapidly developed into important towns. Beyond the Mississippi, fur traders ascended the Missouri, penetrated the Rocky Mountains, and guided the earliest exploring expeditions and first immigrant trains through the mountain passes to the Pacific coast. Of this trans-Mississippi trade St. Louis was long the center, since the Missouri River gave it access to the entire Northwest. Along this route the Pacific Fur Company sought to establish a line of trading posts con- necting its station at Astoria, Oregon, with the Mis- sissippi Valley .2 § 19. Cattle grazing has often been a special industry in the United States, and has an economic significance Cattle distinct from that of agriculture. European raising, cattle were imported into both Spanish and English colonies at an early date. In Virginia and the Carolinas cattle raising soon became distinctly a frontier * See Turner, Character of the Indian Trade, 21; Himsdals, OM Northwest, first map 2 Read Washington iRviNa, Astoria. AGRICULTURE. 35 industry. Cattle were turned loose in the forests, where they multiplied rapidly. Advancing settlements pushed the large herds of cattle westward, where vacant lands abounded. In 1770 Wynne described the large herds, often numbering one thousand cattle, that were common in the Carolinas. A few years later Smyth gave an account of cattle raising on the Carolina frontier, where vast numbers of horses, cattle, sheep, and hogs were turned loose in the forests and savannas. Each owner branded his cattle with a brand which was recorded by the clerk of the county court. West of the Alleghanies the cattle raisers occupied new lands some time in advance of the coming of a settled agricultural population. Across the Mississippi the same process has been repeated ; and, at the present day, cattle raising is carried on as a separate industry on the ranges of most of the Western States. It has gradually declined as the growth of a farming population has diminished the land available for grazing. In 1880 about 3,750,000 cattle and 7,000,000 sheep remained on the western ranges. II. Agriculture. § 20. Agriculture has always been the largest single industry of the United States. The first task of the American settler has been to clear away the production of forests and bring the land under cultivation. ^^ cereals. The earliest English colonists endeavored to raise such croi)s as would furnish an adequate food supply. For this purpose maize, or Indian corn, proved best adapted. The colonists learned from the Indians how to plant 3i6 ECONOMIC HISTORY OF THE UNITED STATES. this hardy cereal, and secured large crops of corn, which became their most important article of food. At every stage of westward migration the same process has been repeated. Before the forests have been wholly cleared, corn has been sown in partial clearings, pumpkins and beans have been planted in the same patches of land, and an abundant food supply has been secured. When the fertile and open prairies of the Mississippi Yalley were reached, the production of corn greatly increased ; and the United States became able to supply large amounts for export. In 1911 the value of the corn and corn meal exported from this country was f 37,418,000. I21 that year the corn crop amounted to 2,531,488,000 bushels, and its value was about $1,565,258,000. The cultivation of wheat has been extended continuously since the early days of colonization, although Indian corn proved a more reli- able crop at first. Wlieat and flour were exported from the middle colonies at an early date, and at the close of the eighteenth century New Jersey, Pennsylvania, and New York were the granary of the United States. Early in the present century the fertile prairies of the Ohio Valley began to yield large amounts of wheat. Between 1830 and 1850 exports of wheat and flour increased from 23,385,000 to 71,000,000 bushels. The culture of wheat has moved steadily westward. Minnesota, Nebraska, Kansas, and the Dakotas now form the gran- ary of the United States. Exports of wheat amounted to 23,729,000 bushels in 1911. For the year last men- tioned tlie wheat crop of this country was estimated at 621,338,000 bushels, valued at $543,063,000. For a long AGRICULTURE. 37 time large crops of oats, barley, rye, and buckwheat have been raised in the United States, but the oat croiJ alone approaches in value the corn and wheat crops. In 1911 this country produced 922,298,000 bushels of oats, valued at $414,663,000. § 21. In the northern portions of the United States, special attention has been given to the grass and hay crop, since it has been necessary during the ' , Production long winters to feed live stock upon hay of grass stored up in the summer months. In New *° * England and some of the middle colonies great difficulty was experienced at first in providing sufficient food for live stock during the winter, and the animals often died of starvation. Near the coast a scanty supply of salt hay was secured from the salt marshes, but in the thickly wooded regions of the interior even this resource was lacking. Hayfields gradually appeared as the for- ests were cleared, but the quality of the grass was usu- ally poor. In 1750 timothy grass was introduced, and half a century later clover began to be generally culti- vated. Since then the quantity and quality of the grass crop has steadily improved. In the prairies of the Mis- sissippi Valley no such difficulties were encountered by the settlers, since a luxuriant growth of grass was found in those regions. At the present day grass and hay form the largest crop raised in the country. In 1911, after our pasture lands had furnished pasturage during the months when grazing was possible, the hay crop was valued at -1694,570,000. § 22. In the first century of settlement many of the 38 ECONOMIC HISTORY OF THE UNITED STATES. fruits and vegetables known in Europe were introduced Vegetables ^^^^^ ^^^^ colonles. Little attention was paid and fruits. ^q ^|^g development of fine varieties of fruit until the present century, during which the fruit crops have increased constantly in importance. The cultiva- tion of nearly all vegetables has been very widely ex- tended, but the white and the sweet potato have formed the most important crops, furnishing a considerable part of the food supply of the country. In 1911 the potato crop -was valued at $233,778,000. § 23. The cultivation of flax and hemp was com- menced in America early in the seventeenth century, and many of the colonies attempted to stim- Production of vegetable ulate it by means of bounties. The entire "' hemp crop has never been large, however, and it has diminished for the last thirty years. Ken- tucky and a few states of the Mississippi Valley produce about all the hemp raised in the country at the present time. Flax has always been raised in larger quantities, and has been much used in the manufacture of home- spun cloth. For nearly forty years the flax crop has steadily decreased in all sections except the states of the Mississippi Valley. The production of cotton was stimulated between 1770 and 1790 by the invention of improved machinery for spinning and weaving that fiber. From New Jersey to Georgia experiments were made in cotton culture ; and in the coast regions of the South Atlantic States a very fine variety, known as " sea island cotton," was developed. On the uplands in the interior there was raised an inferior grade, whose use was limited AGRICULTURE. 39 by the fact that its short fibers could be separated from the seeds only by an expensive and laborious process. In 1792 Eli Whitney invented a cotton gin which per- formed this work very easily. This made the upland cotton available for exportation to the English market, where the demand was rapidly increasing. Between 1792 and 1800 the cotton exports from the United States increased from 130,000 to 13,000,000, and by 1810 the crop was valued at .fl5,000,000. Cotton culture was extended rapidly in the Gulf States, so that in 1859 the crop was valued at more than 1200,000,000. Most of this cotton had been exported to England, and it was to the planters of the cotton states what tobacco had been to the colony of Virginia. Other industries had been neglected for the one business of cotton raising. The extension of cotton culture made slave labor very profit- able to the planters, and fastened the institution of sla- very more firmly onto the economic life of the South. The substitution of free labor for slave, since the Civil War, placed no permanent check upon the cultivation of cotton. In 1910 the crop amounted to 11,608,000 bales, valued at $820,320,000. Texas, Mississippi, Ala- bama, and Georgia led in the production of this great staple product. § 24. About 1750 the sugar cane was introduced into some of the Gulf States. While other states have ex- perimented with this industry, it has shown _ , ^ ^ •' Production of constant growth in Louisiana only, where sugar, rice, most of the crop is now raised. In recent years sorghum has been cultivated in a number of 40 ECONOMIC HISTORY OF THE UNITED STATES. states, while the sugar beet has been introduced in Nebraska and California. But the entire product has furnished only a small part of the sugar consumed in the United States. Rice has been produced in large quanti- ties in the coast districts of the Carolinas, Georgia, and Florida. Tobacco has always been an important crop in certain sections of the country. In Virginia and Maryland it early became the principal product. A superior quality of tobacco could be raised on the rich soils of those colonies, while the London market fur- nished a constant demand. With this crop the planters of those colonies paid easily for large quantities of man- ufactured supplies imported from England. For two centuries the entire economic life of Virginia centered around the production of tobacco for the foreign market. The Middle Atlantic States finally commenced the cul- tivation of tobacco, and it has extended into New Eng- land and the Mississippi Valley. The crop has always tended to exhaust the fertility of the soil, and its con- tinued cultivation has usually made it necessary to resort constantly to new lands. In 1906 the tobacco crop of the United States was valued at about '|<85,210,000. The State of Kentucky produced more than one third of the entire crop. § 25. Stock raising has always been a part of American agriculture, and live stock products form a other impor- J^iost important part of the agricultural prod- tant products, ^qq of the Country. Billions of gallons of milk and more than a billion pounds of butter and cheese are furnished by the dairies each year. Hams, AGRICULTURE. 4T bacon and lard, live cattle, and dressed beef are ex- ported in great quantities after the domestic demand has been satisfied. Wool is raised in large amounts, al- though a considerable part of our entire supply has been imported. Poultry and eggs are other important products, the value of which in 1909 was -1509,195,000. § 26. Agriculture in the United States has been carried on chiefly by proprietors, not by agricultural tenants. The result of popular systems of Land land tenure has been that we "have mil- tenures, lions of farms just large enough to profitably employ the labor of the proprietor and his growing sons ; while we have also multitudes of considerable estates upon which labor and moneyed capital, live stock, and improved machinery are employed under skilled direction ; and we have, lastly, those vast farms, the wonders of the world, in Illinois and California, where 1,000 or 5,000 acres are sown as one field of wheat or corn ; or, as on the Dal- rymple farms in Dakota, where a brigade of six-horse reapers go, twenty abreast, to cut the grain that waves before the eye almost to the horizon." The following statistics from the Census of 1910 show the character of our agricultural tenures : — Tear. Number of Farms cultivated by Owner. Number of Farms rented for Money. Number of Farms rented for Share of Products. 1900 1910 3,653,323 3,948,722 751,055 820,287 1,273,299 1,528,389 42 ECONOMIC HISTORl OF THE UNITED STATES. § 27. The most striking feature of American agricul- ture has been that an abundance of fertile land has Extensive encouraged extensive methods of farming. cultivation. From the fertile soil of new fields, large crops have been raised with little or no attempt to renew or to enrich the land. When in this manner the fertility of one field has been exhausted, another has been brought into cultivation. In older countries, where land is scarce, a more careful, intensive form of cultivation is necessary ; and the farmer is obliged to return to the soil, by means of fertilizers, the various mineral ingredients that are taken from it by each year's crops. European writers have called the American practice " wasteful, wanton earth -butchery," and have criticised Americans for per- sisting " in taking up fresh land instead of the more costly process of manuring a worn-out soil." But it should be remembered that we have been rich in fertile lands, and until recent times poor in most other kinds of wealth. Our extensive agriculture has converted a portion of the natural fertility of our soils into other kinds of wealth that were less abundant. In the older • sections of the country intensive cultivation has long been practiced. After the great staple crops of corn and wheat have been raised for successive years with the smallest expenditure of capital and labor, the soil becomes perceptibly impoverished ; and the production of grain jnoves steadily westward toward unoccupied territory. Then, on the older lands of the Enst begins a more care- ful, intensive cultivation of smaller crops, vegetables, fruits, or grass for the support of the dairy. On the MINING 43 better portion of these lands cereal crops are still raised by higher cultivation, while the poorer soils are often allowed to revert to forest. In the vicinity of towns and cities market-gardening allows a still more intensive application of labor and capital. On the newer lands of the West extensive farming, for some time to come, may suffice for the production of large staple crops ; but in most parts of the United States the agriculturist must, in the future, resort to scientific soil cultivation. In fhis direction much has been done already. During the present century experiments and- innovations have rap- idly increased, while agricultural societies and publica- tions have diffused knowledge of improved methods. In the invention and practical use of agricultural machin er)i the United States has led the world. ni. Fisheries and Mining. § 28. The rivers of most of the colonies abounded in fish, but New England possessed sea fisheries that formed the basis for a profitable commerce with the Fisbeiies. West Indies and with Europe. Thousands of hardy fishermen pushed their voyages as far as the Banks of Newfoundland, where there were the greatest sea fisheries of the world. The cod fishery has been the most important of these, although the whale fishery enrolled vessels of a greater tonnage from 1840 to 1858. During the last thirty years the character of the fishery interests of the United States has changed. The shore and inland fisheries have been developed into greater commercial importance than those of the deep sea. In 44 ECONOMIC HISTORY OF THE UNITED STATES. 1871 the United States Fish Commission was e8tal> lished. This body has been successful in propagatiug artificially more than forty kinds of fish. In the year 1911 the exports of fish and fish products amounted to 17,698,000. § 29. Iron was the first metal to be produced success- fully in the English colonies. By 1650 Massachusetts Mining had established the industry of smelting iron industries. j ^.^^^ ^^^ u ^^g Q^eg " ^hat were found in marshes and at the bottom of ponds. The iron industry gradually spread through the other colonies, and became especially important in the middle colonies. Pig and bar iron were exported to England from 1718 to the time of the Revolution, Copper and lead were mined in small quantities in some of the colonies, but other attempts at mining met with little success. In the upper Mississippi region, lead was mined by the French and Spanish ; but the vast stores of mineral wealth around Lake Superior remained untouched by European colonists. Early in this century gold was discovered in the Caro- linas and Georgia, where about $24,000,000 worth of the Development y^^^ow metal was mined up to 1847. Mean- of mining, while the lead mines of the upper Mississippi 1800— I860. were developed quite rapidly. In 1820 anthracite coal fairly began to be mined in Pennsyl- vania, and the coal fields of that state began to be opened up. This caused a rapid expansion of the iron industry. About 1840 coal was first used in smelting pig iron, and the production of iron greatly increased. It more MINING. 45 than doubled between 1828 and 1842. Smelting hy charcoal still continued, however, in those states where wood was abundant. After 1830 geological surveys were established in many states, and the mineral resources of the country were explored more systematic- ally. Between 1845 and 1850 copper mining was commenced in the Lake Superior district. The copper product of the country increased from almost nothing to more than 8,000 tons in 1860. Meanwhile gold had been discovered in California, and the gold product of the United States increased from $889,000 in 1847 to 165,000,000 in 1853. This last figure was nearly five times the annual product of the world from 1800 to 1845. Fifteen years later, silver was discovered in Nevada. By 1860 the mineral resources of the United States were fairly beginning to be developed. Since 1860 the growth of the mining industries of the country has been constant. The output of coal has increased until it forms the most valuable Mining mineral product of the United States. In industries 1910 the statistics of the production of coal s"cei86a were as follows : — Kind. Tons Produced. Tons Marketed. Value at Mines. Bituminous . . Anthracite . . . 372,339,000 75,514,000 363,788,000 67,539,000 $469,281,600 i^lOO, 275,000 Pennsylvania produced practically all of the anthracite coal, and more of the bituminous than any other state. 46 ECONOMIC HISTORY OF THE UNITED STATES. Iron mining has advanced as steadily as coal mining. The output of iron ore increased from about seven mil- lion tons in 1880 to sixteen million tons in 1890. In 1910 the output was 56,889,000 tons. Michigan and Minnesota produce more than four fifths of the total product, while Alabama occupies third place. Copper mining has developed wonderfully. The Lake Superior mines have now been surpassed by those of Montana and Arizona. Lead and zinc have been mined steadily, Missouri retaining its importance in this industry. In the production of gold and silver the United States has held a position of great importance, although within recent years the mines of Australia and South Africa have yielded larger amounts of gold. In the produc- tion of silver this country has led all others.^ While it is impossible to mention all the mineral products of the country, the growth of the petroleum industry should be noted. In 1910 the product of crude petro- leum was 209,556,000 barrels, valued at $127,800,000. In 1910 the total value of the crude mineral products of the United States was estimated to be more than two billion dollars. 1 In 1910 the world's gold product was $454,703,000, of which the United States produced $96,269,000. In the same yearthe world's silver product was valued at $120,000,000, of which the United States produced $30,454,000. LITERATURE. 47 LITERATURE ON CHAPTER II. On the Fur Trade : Turner, Character and Influence of the Indian Trade in Wisconsin ; Turner, The Significance of the Frontier in American History, 89-92 ; Weeden, Economic and Social History of New England ; Beer, The Commercial Policy of England toward the American Colonies, 57-62 ; Eighty Years' Progress, II. 343-347 ; Thwaites, The Colonies, see Index. On Cattle Raising : Turner, Significance of the Frontier in American History, 92-93; Bruce, Economic History of Virginia; Weeden, Economic and Social History of New England ; Smyth, Tour in the United States, I. 140-146, II. 78-79 ; Wynne, British Empire in America, II. 288; Eighty Years' Progress, I. 37-68; Tenth Census, III. 953-1116; Nimmo, Report on Range and Ranch Cattle Business; Salmon, Report on the History and Condition of the Sheep Industry in the United States. On Agriculture : Weeden, Economic and Social History of New England ; Bruce, Economic History of Virginia ; Ramsay, History of South Carolina, H. 199-231 ; Smyth, Tour in the United States, I. 288-299, II. 56-76, 110-140; Eighty Years' Prog- ress, I. 19-131; Bolles, Industrial History of the United States, 1-181; Ingle, Southern Sidelights, 47-66; Shaler, The United States, I. 375-416, II. 54-57, 525-527, 617-621 ; Whitney, The United States, Part IX. ; Tenth Census, III. p. XXVIII.-XXXIII. ; Eleventh Census, Volume on Agriculture ; Statistical Abstract of the United States, 1895. On Fisheries : Weeden, Economic and Social History of New England ; Eighty Years' Progress, II. 378 et seq. ; Goode, The Fisheries and the Fishery Industry of the United States; Eleventh Census, Report on Fisheries. On Mining: Weeden, Economic and Social History of New England ; Eighty l''ears' Progress, II. 17-170 ; Swank, History of the Manufacture of Iron ; Bolles, Industrial History of the United States, 667-780; Wright, Industrial Evolution of the United States', 80-103 ; Shaler, The United States, I. 417-484 ; Whit- ney, The United States, 259-368 ; Report upon the Production o the Precious Metals; Statistical Abstract, 1895. General References : See Chapter I. 48 ECONOMIC HISTORY OF THE UNITED STATES. CHAPTER III. MANUFACTURES AND TRANSPORTATION. I. Colonial Manufactures. § 30. The poverty of the American colonists and their remoteness from the English market compelled Household them to undertake the work of converting Industries. j.^^^ materials into finished products. Many kinds of manufactures had their beginning within the household. Soap making, candle making, dressing and manufacturing leather, the work of the carpenter and the smith, spinning yarn, weaving homespun cloth, mak- ing clothes and hats, and many other industries were carried on within the family. The larger farms and plantations, equipped with tool houses, forges, grist mills, and saw mills, were almost self-sustaining eco- nomic units. This lasted until the close of the eight- eenth century. § 31. Yet, even in the early days, various manufac- tures were carried on for commercial purposes, not for Production for consumption within the household. Salt tiie market, and iron works were established for the purpose of supplying the domestic market. Brick mak- ing, cordage making, tanning, and other industries became important commercially. Saw mills and grist COLONIAL MANUFACTURES. 49 mills were run for public as well as domestic supply. Thus began a division of occupations, which was carried further when increasing numbers of artisans devoted themselves to the trades of the blacksmith, carpenter, wheelwright, shoemaker, cooper, sawyer, shipwright, bricklayer, etc. Such workmen performed much work that had been done formerly upon the farm. An abundant supply of timber made it possible to establish various manufactures of wood. From pipe- staves and clapboards to wagons and ships, ^ /= \ ' Principal man- many of the colonies supplied the domestic ufacturing demand, and had a surplus for export. The manufacture of iron was firmly established between 1650 and 1750. In some places rolling mills converted the iron into sheets and bars, while slitting mills cut it into rods. Wrought-iron nails, household utensils, and many kinds of tools were produced ; and the manu- facture of arms and cannon was begun. During the Revolution the iron industry stood the country in good stead. The textile industries also became important. The first colonists, with spinning wheel and hand loom, began to spin flax, hemp, cotton, or wool into yarn, and to weave the yarn into cloth. Gradually fulling mills were built, where homespun fabrics were rolled and pressed in hot suds and fuller's earth in order to thicken the goods and increase their weight. In the eighteenth century a number of factories produced cloth for the market. The colonists probably produced three fourths of the cloth consumed by them. The fine/ 50 ECONOMIC HISTORY OF THE UNITED STATES. grades of cloths were always imported from England, but the majority of the people depended upon the coarser domestic fabrics. The manufacture of cordage and sail cloth was an important auxiliary of the ship- building industry. Boots and shoes were important in inter-colonial trade as early as 1700. Lynn, Massa- chusetts, was a center for this branch of manufacture. Of other industries, paper making, printing, and pub- lishing, and the manufacture of glass, pottery, and hats were the most important. § 32. This development of colonial manufactures took place not only in the face of English competition, The attitude '^"^ ^^ Spite of repeated attempts to destroy of England, these industries. The commercial policy of England was to limit the colonies to the production of raw materials useful to English manufacturers, and to reserve the colonial market exclusively for the sale of English manufactured products. As early as 1699 Parliament prohibited wool or manufactured woolen goods from being exported from any of the colonies. In 1731 the exportation of hats was prohibited, and the industry was placed under oppressive restrictions. In 1751 Parliament forbade the erection of new iron fur- naces, forges, rolling mills, or slitting mills, with the purpose of restricting the colonies to the production of pig and bar iron. Although these restrictions were evaded, they were an obstacle to the development of colonial industries. § 33. Manufactures were further developed in the northern colonies than in the southern, where the energy COLONIAL MANUFACTURES. 51 of the people was occupied with the cultivation of tobacco and rice. Even in the northern colonies, fisheries, ship buildino; and commerce with the West In- ^^ ^_ o other obsU- dies absorbed a large portion of the available cieatomanu- labor and capital. Finally, in all sections of the country, scarcity of labor and high wages hin- dered manufacturing enterprises. The high rate of American wages has existed since the earliest times,i and was a matter of record as early as 1645. It was due to the productiveness of labor employed upon new land. Laborers would not enter otlier industries un- less employers could afford to pay as high wages as could be secured in agriculture. An industry could be established only when the superior efficiency of labor, or ' some other advantage, enabled the employer to pay the prevailing high wages. § 34. Although the United States imported from England a large part of its manufactured supplies, yet Alexander Hamilton, in 1791, could give „ ,„ , ' ' ® Hamilton's the following account of American man- Report on ufactures : ^ "To all the arguments which are brought to evince the impracticability of success in manufacturing establishments in the United States, it might have been a sufficient answer to have referred to the experience of what has been already done. It is certain that several important branches have grown up and flourished with a rapidity which surprises, af- 1 See page 28. ^ See " Report on Manufactures," in Taussig, State Papers and Speeches on the Tariff, 48, 49. 52 ECONOMIC HISTORY OF THE UNITED STATES. fording an encouraging assurance of success in further attempts. Of these it may not be improper to enumer- ate the most considerable." These were in substance as follows : — 1. Leather, shoes, harness, trunks, gloves, glue, etc. 2. Iron bars and sheets, steel, nail rods and nails, imple- ments of husbandry, artificers' tools, household utensils, arms, etc. 3. Ships, cabinet and coopers' wares, wool and cotton cards, machinery for manufactures and agriculture. 4. Manufactures of flax and hemp, cables, cordage, sail- cloth, twine, etc. 5. Briclis, coarse tiles, and potters' wares. 6. Ardent spirits and malt liquors. 7. Writing and printing paper, wrapping paper and paste- board, paper hangings. 8. Hats of fur and wool. 9. Refined sugars. 10. Oils, soap, tallow candles. 11. Copper and brass wares. 12. Tin wares. 13. Carriages of all kinds. 14. Snuff, chewing and smoking tobacco. 15. Starch and hair powder. v 16. Lampblack and painters' colors. 17. Gunpowder. " Besides manufactories of these articles, which are carried on as regular trades, and have attained to a con- siderable degree of maturity, there is a vast scene of household manufacturing, which contributes more largely to the supply of the community than could be imagined without having made it an object of particular inquiry." THE INDUSTRIAL REVOLUTION. 53 II. The Industrial Revolution and the Factory System. § 35. While the American colonies were struggling for independence, there began in England a series of economic changes which ultimately trans- , The Indnstrltl formed completely English mdustry and Revolution commerce. These changes constituted the ^ Industrial Revolution. Between 1790 and 1850 the United States was affected by the same influences. For this reason, we must now consider briefly the course of the Industrial Revolution in England. The economic condition of England in 1760 was prim- itive when compared with the present order of things. Manufactures were carried on mainly by •' ■' English hand, and water or horse power was seldom manufacture utilized. The woolen industry was the prin- cipal branch of manufacture, the iron trade coming next in importance, while manufactures of silk, linen, and cot- ton were much smaller. The textile industries were carried on often in country districts in combination with agriculture. The men of a household attended to the farm, while the women and children spun yarn for sale. Weaving usually occupied the men during the winter. In all industries the tools and machinery were sim- ple, so that a person needed but little capital in order to become an independent producer and the employer of a few journeymen and apprentices. After 1740 the iron trade began to decline, because it was no longer possible to secure supplies of wood sufficient to furnish charcoal for smeltinq; iron ores. 54 ECONOMIC HISTORY OF THE UNITED STATES. In 1760 the entire foreign commerce of England amounted to about $120,000,000, a very small figure when compared with the development of the Commerce and transportation next fifty years. Domestic commerce was restricted by the difficulty of inland trans- portation. Roads were very bad, while the construction of canals had only commenced. London was the only national market, where products of all sections were ex- changed ; and the rest of the domestic commerce was carried on through a few local markets, through annual fairs, or through traveling merchants. Labor and capital were hampered by many restrictions. In most towns industries were under the control of ex- Legai position clusive guilds, which supervised prices, qual- ^\*tja^in°* ^*^ ®^ goods, and many details of business. 1760. In such towns no one could engage in any trade without becoming a member of the guild, and serv- ing an apprenticeship of seven years. Laborers could not move from one parish to another, unless they could give guarantees that they would not become dependent upon the poor rates of the parish in which they settled. They were forbidden to form associations for any purpose, while justices of the peace were empowered to regulate wages. Joint-stock corporations hardly existed in any industries except banking, insurance, and foreign trade. Adam Smith, in 1776, could appeal to experience to prove that such companies, whose hired managers con- trolled other people's money, would generally be man- aged wastefully and negligently ; so that they could not compete with the common business partnership. THE INDUSTRIAL TxEVOLUTION. 56 Between 1760 and 1840 English industries were revo lutionized. The cause of this was a remarkable series of inventions which affected the cotton and Changes in woolen industries first. The production of the textile cotton and woolen goods had long been hin- dered by the difficulty of supplying weavers with enough yarn. The rude hand loom could weave cloth faster than the spinners could produce yarn, a single thread at a time, upon the spinning wheel. Between 1764 and 1780 three inventors, Hargreaves, Arkwright, and Crompton, perfected appliances which finally enabled a spinner to spin many thousand threads of yarn at once. These inventions enabled spinners to produce more yarn than the clumsy hand looms could weave into cloth. But, in 1785, Cartwright invented a power loom which, after undergoing improvements for many years, placed appliances for weaving on an equality with the machinery for spinning. Meanwhile, James Watt had invented the steam engine in 1769. Sixteen years later it began slowly to displace water power in running the new spin- ning machinery. These inventions first revolutionized the manufacture of cotton, but during the first quarter of the present century all textile industries were affected by them. The steam engine was first used in coal mines, in sink- ing shafts, in pumping water out of the mines, and in hoisting coal from the pit. In this way '=' * •' Change* la sufficient supplies of coal could be obtained the iron to run the smelting furnaces, and the iron hidustry was stimulated into new life. By the use of the 56 ECONOMIC HISTORY OF THE UNITED STATES. steam engine the blast furnace was greatly improved, so that the production of iron increased rapidly. From 1755 to 1800 many canals were constructed between important places, with the result of cheapening Changes in transportation. Early in the present cen- transpoitation. j;^^py the highways of England were greatly improved. During the second quarter of the century railroad construction was commenced, and the steam engine revolutionized land transportation. By 1850 it had been applied successfully to ocean transportation. One result of the Industrial Revolution was the growth of the factory system. The new machinery was far more expensive than the old hand loom or spin- the factory ning wheel. Consequently the ownership of svstcm capital tended to pass out of the hands of the laborers, who became dependent upon capitalist employers for the supplies of tools and materials with which they worked. Then it appeared that, in order to apply water or steam power advantageously in operating the new machinery, it was necessary to concentrate a number of machines in the same building. Moreover, as the product of an establishment increased, the processes of manufacture could be divided more profitably among different classes of laborers. This fact necessitated more thorough superintendence and organization. Such causes led to the gradual concentration of industry in large factories, and to the disappearance of the small establishments of the domestic producers. In a period of such rapid growth and change, the old restrictions on the c?tablishmci?t of industries and the THE INDUSTRIAL REVOLUTION. 57 regulation of prices and wages could not be maintained. More and more these laws and customs fell changed into disuse, and capitalists and laborers were labor and left free to establish new enterprises, and to **p"*^* arrange their respective interests by a contract which was nominally free. Competition became the ruling economic force, and regulation by law was given up for the time. One of the most important results of the In- dustrial Revolution was the destruction of mediseval restrictions upon competition, and the abandonment of prices and wages to determination by the contracts of the competing parties. § 36. In 1789 agriculture and commerce were the principal industries of the United States, although do- mestic manufactures had been established. The industrial There appeared here and there a desire to f^T"^^"" , ^^ in the United promote the rapid growth of manufactures, states. in order that the country need not depend upon England for manufactured goods. Largely from a desire for what was termed " industrial independence," attempts were made to foster manufactures. In this effort a great obstacle was encountered. England possessed the in- ventions that were revolutionizing industry, while with- out such appliances it would have been hopeless for Americans to attempt to compete with the manufac- turers of the mother country. But England intended to retain the United States as a market for her manu- factured products, and did not intend to allow the new inventions to be used outside of her own borders. Strin- gent laws prohibited the exportation of machines, plans, 68 ECONOMIC HISTORY OF THE UNITED STATES. or models of macliinery ; and the emigration of skilled workmen was forbidden. After unsuccessful attempts to secure a knowledge of English machinery and meth- ods, a cotton mill was finally equipped in 1790, at Pawtucket, R. I. A few years later the cotton gin was invented. Yet the cotton industry grew very slowly until after 1807, when foreign commerce was forbidden by the embargo, and domestic manufactures rapidly developed. Slater's cotton mill at Pawtucket marked the estab- lishment of the factory system in the United States. Yet weaving was still performed by hand, The completed . o i j j factory sys- and weaving and spinning were not united in a single factory. In 1814 Mr. Francis Lowell constructed a power loom at Waltham, Mass., and completed a factory equipped with machinery for spinning and weaving cotton. This marked the com- pletion of the factory system. Before long other indus- tries were developed in a similar manner, and American manufactures commenced a period of steady growth. III. Transportation. § 87. The first roads in the colonies had to be cut through the dense forests that covered the Atlantic Roads. coast regions. Indian trails offered more or less beaten ways that were often widened and straightened into highways. Continuous roads finally connected the principal towns of the tidewater districts, but wagon roads did not exist far from the seacoast until after 1750. Bridges were constructed very slowly, and most rivers had to be forded. The larger streams TRANSPORTATION. 59 were crossed by ferries, which gave very poor, and often dangerous, service. The colonial roads were in the charge of the local political units, the towns and counties. They were constructed only as local needs demanded, without reference to any general plan for colonial highways. The " road tax " levied by the towns or counties was paid in labor, not in money ; and the work of road building was very badly done. Both this custom of " working out the road tax," and the bad roads produced by it, remain in many country districts to this day. About 1790 turnpike roads, or highways constructed and maintained by tolls, began to be built. Early in the present century the turnpike systems were rapidly extended. These roads were built by corpora- tions which were given rights of way, and allowed to charge tolls. They were advantageous in a time when the local governments could not be induced to build ade- quate highways, but grave abuses soon appeared. The tolls were often excessive and the roads were poor. In more recent times the tendency has been to bring all roads under public control, and to provide for highways by general taxation. Still more recently some of tjie state governments have begun to aid in the very neces- sary work of improving our roads, which are the worst to be found in any civilized country. Early in this century, after settlements had been planted west of the Alleghanies, it became _ ^ , ^, ^ ^ ' Road building: very necessary to have some means of com- by the united munication between the seaboard and the Mississippi Valley. There arose a strong movement in 60 ECONOMIC HISTORY OF THE UNITED STATES. favor of the construction of long-distance highways, canals, and other improvements by the national govern- ment. Between 1806 and 1837 the United States built a highway known as the Cumberland Road, which ex- tended from Washington to Cumberland, and thence by way of Wheeling, through Ohio, Indiana, and Illinois, to the Mississippi River near St. Louis. By 1840, a grow- ing opposition to internal improvements by the national government put an end to such expenditures by the United States. § 38. The original colonies were favored with easy means of intercolonial communication by sea, while a Transporta- number of navigable rivers gave access to tionbywater. ^he interior regions of the seaboard. Lines of packet sloops were established along the seacoast and on the Delaware and Hudson rivers. After 1807 steamboats were placed upon many of these routes. A few years later they appeared upon the Great Lakes. On the rivers of the Mississippi Valley, steam navigation was exceedingly important. From 1815 to 1860, steam- ships multiplied on all these waters. They furnished an easy means of access to all parts of this region, and greatly hastened the development of the Valley. After 1860 the railroads began to secure a large part of this carrying trade. On the Great Lakes the steamboat has held its own, and to-day the lake fleet comprises more than one fourth of our entire merchant marine. Washington, when a young man, perceived the possi- bility and desirability of constructing canals connecting the Hudson River and the Great Lakes, and connecting TRANSPORTATION. 61 Chesapeake Bay with the Ohio River. Between 1790 and 1800 many canals were projected, and a few were built. The era of canal construction really commenced after 1820. The Erie Canal was opened from the Hudson River to Lake Erie in 1825, and soon cheapened transportation from the Ohio Valley to the seaboard so that rates fell to one tenth of the former cost. Branches were built, and towns and cities sprang up wherever the canal met a branch or a natural watercourse. Before long other canals were built between the Ohio River and Lake Erie, between the Hudson and Lake Champlain, and between the coal regions of northeastern Pennsylvania and the seacoast. Many states entered upon the construction of elaborate canal systems. Pennsylvania, Virginia, Lidiana, and Illinois were among the number. Generally these canals proved unsuccessful, and were either abandoned or fell into the hands of railroads. Indeed, railroads made their appearance very soon after the canals were opened. In many cases the canals could not compete with the railroads ; but other canals, notably the Erie, proved to be successful competitors, and have tended permanently to lower transportation charges. § 39. By 1830 the era of railway transportation was opened by the completion of the first few miles of the Baltimore and Ohio Railroad. Shortlv after, „ ,, ^ ' Raiiroaa railroads were built from Boston to Albany, transportation, from Richmond to Chesterfield, from Albany to Sara- toga, and from Charleston to Hamburg. By 1840 there were 2,755 miles of railways in the United States. 62 ECONOMIC HISTORY OF THE UNITED STATES. Practically all were in the Atlantic States, and thej were short, independent lines, radiating from Boston, Albany, New York, Philadelphia, Baltimore, Richmond, and Charleston. They were local roads, yet they fur- nished an almost continuous line of transportation from New York to North Carolina.^ Between 1840 and 1850, railroads were extended very rapidly in New England, where 2,600 miles of track ^ . were in operation the latter year. A road Second decaae ^ •' ofrauroad was Completed from Boston to Albany, so that New England was placed in direct com- munication with the West, via the Erie Canal. By 1850, railroads had been pushed well into the western portions of New York, Pennsylvania, and Maryland. Georgia had started a railway system, while roads were being constructed in tlie Mississippi Valley. As yet no lines of railway connected the seaboard with the West, while the roads still remained local companies serving local needs. From 1850 to 1860 the railway mileage of the United States increased from 8,571 to 28,919 miles. The Mid- The third ^le Atlantic States rapidly pushed their rail- decade, ways westward. In the Southern States remarkable progress was made. But in the Mississippi Valley railroad expansion was most noteworthy. Chi- cago and St. Louis were finally connected with the Atlantic coast, while the states north of the Ohio and east of the Mississippi were covered with a network of 1 See Scribner's Statistical Atlas for maps showing railroad construe- tion by decades. CRANSPORTATION. 63 railways. Twenty-seven million acres of public lands had been granted by Congress to aid the construction of railroads in the West and South. The people looked upon the roads in a friendly manner ; and states, coun- ties, and towns granted large sums of money to further their construction. The Civil War checked railroad building only tem- porarily. After 1866 it was continued on a larger scale than ever. For political reasons the United ^^^ fourth States favored the construction of railroads decade, to connect the Pacific coast with the rest of the Union, and granted millions of dollars and millions of acres of land to aid the Union and Central Pacific roads. Then in the Southwest and Northwest land grants and sub- sidies to railways were renewed. In 1873 the country had 68,484 miles of railroads. Since that time many thousand miles of road have been built in the states west of the Mississippi, „ , ^ ^ Railroad con- and other lines have been pushed through to struction from *the Pacific coast. In 1905 there were over 217,000 miles of railroads in the country. During the last thirty-five years, railways have often been con- structed as speculative enterprises far in advance of the needs of the country. Sometimes the construction of such a road leads to the rapid development of the region through which it runs, and so creates a paying business. But such enterprises often lead to the building of un- necessary lines that can have no immediate prospect of becoming paying investments. The character of American railways has changed 64 ECONOMIC HISTORY OF THE UNITED STATES greatly since 1850. The early roads were short, local Railroad con- affairs. Between 1850 and 1860 local roads soUdation. began to be consolidated into through lines. Thus the numerous local roads that together covered the distance from Albany to Buffalo were consolidated by Vanderbilt into the New York Central Railroad. About the same time the Pennsylvania Railroad secured a through line from Philadelphia to Pittsburg, and the Baltimore and Ohio pushed its way westward. Then followed efforts to secure control of roads that should give access to Chicago and other points in the Missis- sippi Valley. At length, five trunk lines were formed, controlling through routes from the West to the sea- board. In all directions a similar process went on. The reason for such consolidation was that the union of several short lines under one management diminished the expenses of operation. The establishment of trunk lines introduced a new era of railroad rate-making. The old local roads had enjoyed a practical monopoly in their several districts. , Competition existed only at a few points where com- peting roads met. But the trunk lines could compete with each other for the through freight between the West and the East, and the sharpest rivalry sprung up. The economies of operation made possible by consolida- tion enabled the trunk lines to reduce their charges, while competition for through traffic obliged them to do 80. Competition finally became so fierce as to lead to " railroad wars," in which rates were often lowered be- low the cost of transportation. Such " cut-throat com- SHIP BUILDING. 65 petition " was followed by pooling agreements between the different roads, by which rates were maintained at a higher level, and the profits thus secured were divided between the roads composing the pool. In 1887 Congress prohibited the formation of pools, and endeavored by an Inter-State Commerce Act to remedy certain abuses. But the roads have frequently succeeded in maintaining rates by traffic agreements of a more or less secret char- acter. The consolidation of railroads did not end with the establishment of through lines east of Chicago. West of that city the work of consolidation has ex- tended to the Missouri River, and from the Missouri to the Pacific. Between St. Louis and the Southwest the same process has gone on. In 1902 it was estimated that one tenth of the railway mileage of the country was under a single management, while over three fifths of the railroads had fallen under the control of eighteen other managements. The prospect is that a few great trans-continental lines will finally control all the trans- portation business of the country, except that which is of a purely local character. IV. Ship Building. § 40. The forests of the New World supplied abun- dant materials for ship building, which was begun in the first years of the colonial history. Massachu- coioniai ship setts had built one hundred and twenty ves- ^^^^i^e- sels as early as 1655. By 1700, many ships were built each year in New York, Pennsylvania, and Delaware. In the southern colonies less was accomplished until the 5 66 ECONOMIC HISTORY OF THE UNITED STATES. middle of the eigliteeutli century, when ship building developed rapidly in all of the colonies. In the year 1769 over three hundred and eighty vessels, with a total burden of 20,000 tons, were constructed in America. Between 1780 and 1800, wooden vessels were built upon some of the Great Lakes. Ship building was the first mechanical industry to be largely developed in the colo- nies, and it made possible the growth of a large and profitable commerce. § 41. In 1789 the tonnage of the ships registered in the foreign trade was 123,893 tons. For the next twenty-five vears Europe was in a state American , " shipping from of continual war, and American ships se- cured a large part of the carrying trade of Europe. By 1806, the ships registered in foreign trade had a tonnage of 795,507 tons. In the same year the ships in the coasting trade had a tonnage of 340,540 tons, while the sea fisheries employed ships with a ton- nage of over 69,000 tons. The United States, in 1790 and 1792, levied discriminating taxes upon foreign ships, with the possible result of throwing more of our com- merce into the hands of American ship owners. After 1816 the restoration of peace in Europe caused us to lose a part of the carrying trade of European countries. In 1840 our foreign trade employed no larger tonnage than in 1806, but our coasting trade employed ships with a tonnage of 1,176,000 tons. Between 1817 and 1820 our navigation laws were extended, and made especially severe against foreign ships. The reason for such illib- eral measures was the resentment aroused by the harsh SHIP BUILDING. 67 policy pursued by England until 1830. The laws en- acted by Congress at that date are mainly unchanged at the present day. They aim to prevent Americans from purchasing foreign ships and entering them under Amer- ican registry. They exclude foreign vessels from our coasting trade, and impose discriminating charges upon foreign ships. Many of these regulations prove hin- drances to American interests, while they have not bene- fited American ship builders materially. § 42. From 1840 to 1861 the tonnage of the vessels registered in the foreign trade increased from 762,838 to 2,496,894 tons, while the tonnage of the , , . ' ' ' ° Ship building coasting fleet increased to 2,704,544 tons, from i84o to During this period seventy per cent of our foreign commerce was carried in American vessels, while our ships did a large part of the carrying trade of the world. In producing wooden sailing vessels American ship builders were unequaled, and their magnificent clip- per ships were superior to all others. This was ac- complished, moreover, when wages and the cost of all materials except wood were much higher than in other countries. But, after 1850, steamships began to replace sailing vessels in ocean commerce. In the construction of steamships the United States was soon outstripped by Great Britain. The Civil War struck a terrible blow to American shipping interests, and our merchant marine rapidly diminished. § 43. Since the war our foreign marine has also con- stantly declined, although the ships engaged in the coast- ing trade have increased. On the Great Lakes there has 68 ECONOMIC HISTORY OF THE UNITED STATES. been wonderful progress. The foreign merchant marine of the United States diminished from 2,496,000 tons in 1861 to 863,000 tons in 1911. At the same time, tha proportion of our foreign trade carried in American ships decreased from 75 per cent in 1855 to 9 per cent in Causes for the 1911. The causes of this decline are par- decline of our ^iaiiy in dispute. But it certainly besran a few merchant ma- - ^ .' o rine. years before the Civil War, so that the rav- ages of Confederate privateers only hastened a process that had already commenced. One primary cause is the fact that iron and steel ships have so largely replaced wooden vessels. As early as 1855 it was determined that iron sliips, although more expensive to construct, were in the end more durable and consequently cheaper than wooden ships. It also appeared that iron vessels better withstand the strain of heavy steam machinery. More recently, steel has replaced iron for ship construc- tion. Now, American builders had a great advantage in the cheapness of their wood supply, as well as in their skill in constructing wooden vessels. Iron ships, how- ever, could be built more cheaply in England ; and there- fore the ocean-carrying trade passed to ships of English construction. More than this, American builders were handicapped by the fact that they were very slow in turn- ing from sailing vessels to the construction of steam- ships. So long as steel vessels retain their present superiority, American ship builders will not regain their former position until they are able to construct steel vessels as cheaply as the builders of foreign nations. In recent years the outlook has improved. The creation TEXTILE INDUSTRIES. 69 of our new navy has stimulated the construction of steel vessels, while the cost of building them has greatly de- creased. The expeuse for labor is the principal item of cost that is larger here than in England, but this dis- parity seems to be diminishing. Unquestionably, the steel ships now constructed in this country are unex- celled in any particular by ships manufactured in any country of the world. V. The Textile Industries. § 44. Spinning machinery was introduced into the cotton industry in 1790, but nearly twenty years passed before as much was accomplished in the '■ The cotton woolen industry. The period of commercial and woolen restriction following the embargo in 1807 practically shut off foreign supplies. This caused a rapid development of woolen and cotton manufactures. Many of the mills built at this time, however, were badly constructed and equipped, so that they turned out a very coarse product. Between 1815 and 1825 the power loom was introduced into this country. Large factory towns grew up in such places as Lowell, Lawrence, Fall River, Cohoes, and Patterson. § 45. Since 1820 the growth of cotton manufactures has been continuous. The industry has been concen- trated largely in New England from the be- T ^/^/^r 1 • The COttOU ginnmg. In 1905 about sixty per cent of the industry cotton spindles were located in that section, ^^^'^"^o. Massachusetts having the largest number. Since 1870 there has been a marked development of cotton manu- 70 ECONOMIC HISTORY OF THE UNITED STATES. facture in the South. The capital so invested increased from $17,375,000 in 1880 to 1230,240,000 in 1906. Since these factories can obtain raw cotton without incurring any considerable expense for cost of transportation, it seems probable that the future development of this industry in the South will be rapid. The following table shows the rapid growth of cotton manufactures in the United States: — 1840. 1880. 1909. Value of product Pounds of raw cotton ) consumed J Number of spindles in \ factories \ Capital invested $46,350,000 126,000,000 2,284,000 $51,102,000 $192,090,000 750,343,000 10,653,000 $208,280,000 $628,391,000 2,335,000,000 27,425,000 $822,238,000 The cotton manufacture in the United States has been conducted hitherto mainly for supplying the domestic market. In the Tenth Census, Mr. Atkinson summed up the situation as follows : " The principal ^tioD°o/°°' market for our own fabrics is found among the cotton ^|-^g thrifty working people, who constitute IndusttT' , . the great mass of our population. It has therefore happened that, although we have not until re- cently undertaken the manufacture of very fine fabrics, the average quality of the fabrics that we do make is better than that of any other nation, with the possible exception of France. It is for the wants of the million TEXTILE INDUSTRIES. 71 that our cotton factories are mainly woriced, and we have ceased to import staple goods, and shall never be likely to resume their import. On the other hand, we may for a long period continue to import the finer goods that depend mainly on fashion and style for their use, and that are purely articles of luxury." Yet in 1911 we exported over 140,851,000 of cotton manufactures, while imports of this sort amounted to -166,996,000. In the future it is probable that the United States, hav- ing the advantage of immediate proximity to the great source of the world's supply of raw cotton, will surpass other countries not similarly situated. § 46. The manufacture of woolen fabrics did not de- velop as rapidly as the manufacture of cotton. One reason for this was that the domestic supply jhe woolen of wool has never been sufficient, while of ^