Industrialization in USA | History Optional for UPSC (Notes) PDF Download

Economic Progress in North America (18th & 19th Centuries)

• The economic development of North America during the 18th and 19th centuries was unprecedented and unmatched in history.
• Throughout these two centuries, North America consistently maintained the highest rate of growth in the world. Initially, this growth was primarily driven by the exploitation of natural resources, both agricultural and mineral. However, by the early 19th century,industrialization began to play an increasingly significant role.
• By 1850, the United States was firmly on the path of industrialization, and by 1900, it had not only become a fully industrialized economy but also one of the world’s top three economic powers. In the 20th century, the U.S. economy continued to grow, becoming the largest and most advanced economy in the world.

The pattern of industrialization in America was similar to that of Western Europe, but the reasons behind this pattern were often quite different. 

Key phases included:

• Slow industrial development during the 18th century.
• Acceleration of industrialization during the European French and Napoleonic wars.
• Post-war dislocation and de-industrialization with the return of peace and renewed British competition.
• Recovery and sustained growth during the second quarter of the 19th century.

However, the changes in the pace of industrialization were often driven by external factors rather than any inherent issues within the domestic economy or its socio-political and cultural context.

The Eighteenth Century

• From the 16th to the late 18th century, the North American continent was divided among various European empires, primarily the Spanish, French, and Dutch. During the colonial period, the American economic development was heavily influenced by the “British Colonial System,” which evolved gradually in the context of mercantilist economic philosophies in the 17th century.
• The British colonial policy essentially viewed colonies as existing primarily to serve the “mother country.” Colonies were expected to provide goods that the mother country could not obtain otherwise, both for consumption and re-export, and to furnish markets for the mother country's domestic industry. As a result, the American colonies were encouraged to develop primarily as producers of food and raw materials, such as tobacco, rice, sugar, and timber products, while being discouraged from developing most forms of manufacturing.
• Despite the frustrations these restrictions caused among colonists—who, with increasing wealth and a growing distance from England, desired more political freedom—the colonial system also offered significant economic benefits. Colonists enjoyed privileged access to the rapidly expanding British market, opportunities for trade within the growing British Empire, and the development of their economy within a framework of British cultural, social, and political institutions that were more supportive of private enterprise and capitalist expansion than any other system at the time. This set the stage for the differing economic performances of North and South America since the 18th century.
• After a successful revolution, the British were expelled, the constraints of the old colonial system were lifted, and American entrepreneurs were free to pursue independent development. However, the initial period of independence was challenging. The newly independent nation quickly realized the advantages it had previously enjoyed under British protection. Without the British defensive umbrella, the very independence of the United States was in jeopardy.

Fortunately, the situation improved dramatically with the outbreak of general warfare in Europe.

The French and Napoleonic Wars (1794 to 1815)

• War in Europe led to naval conflicts as the British, French, and their allies fought for control of sea lanes to their colonies and long-distance markets. The British emerged victorious, cutting off other European powers from their empires. This left neutral shipping as the only means for maintaining trade and other links, a role the Americans eagerly accepted. American ports, particularly in New England, experienced a resurgence of commercial prosperity.
• Markets for American primary products, especially the large tobacco crop, also improved. Capital was invested in planting, shipping, and commerce, while the supply of manufactured products was left to old British manufacturers, who were eager to re-establish good relations after past conflicts had faded from memory.
• However, this period of prosperity was disrupted when economic warfare in Europe replaced major military activities after 1806. Both Napoleon and Britain sought to inflict economic harm through their respective Continental System and Orders in Council. While these measures arguably stimulated the process of “continental” industrialization, they made life increasingly difficult for neutrals trying to sustain Europe’s external trade.
• In response, America enacted the Embargo Act in 1807. Relations with Britain deteriorated over time, culminating in a second outbreak of war in 1812. The economic and military conflicts had severe consequences for American primary producers and mercantile and shipping interests. However, they also created the first significant opportunity for the development of large-scale domestic industry.
• Similar to continental Europe, the protective conditions during this period spurred a surge of industrial activity, particularly in textiles and metal manufacturing. While much of this took the form of stimulating traditional, small-scale production units, Americans, unlike their continental counterparts, found it easier to learn from British practices. For instance, between 1805 and 1815, 94 new cotton mills were established in New England, many employing the latest British spinning and weaving machinery, such as the renowned Lowell Mill at Waltham, near Boston.

Nonetheless, even these new enterprises faced relatively high costs and struggled to survive once peace and normal trading relations were restored.

The Post-War Period (1815 to Early 1820s)

In the time right after the war, Britain flooded the market with imports, thanks to their advanced technology and strategic price cuts aimed at eliminating future competition. This severely hampered the progress of industrialization.

• Many manufacturing companies had to shut down.
• Entrepreneurs shifted their focus away from industry and returned to primary production and commercial activities.
• The population was growing rapidly; the frontier had moved beyond the Appalachian Mountains and was advancing across the Midwest. The nation was increasingly able to focus on exploiting its own domestic potential rather than relying on the international economy that had dominated its earlier years.

However, there was still a significant international opportunity to be seized: supplying raw cotton to the ever-growing British and European textile industries.

• Throughout the 1810s, 1820s, 1830s, and 1840s, rapid economic growth in the nation was driven by the expansion of the cotton crop and the rise of the southern “Cotton Kingdom.”
• Despite the vast earning potential of cotton, the wider economy remained balanced. The need for additional food supplies on southern plantations spurred the expansion of commercial agriculture in the West. The growing wealth of both regions created a demand for manufactured goods, which the Northeast began to supply alongside British manufacturers.

Revived Industrialization (1820s – 1850s)

• Just as the war had created favorable market conditions for a surge in manufacturing between 1812 and 1814, the introduction of a protective tariff in 1816 played a crucial role in stopping the decline, initiating recovery, and eventually fostering sustained industrial progress.
• The “protective effect” of the tariff was gradually strengthened in the following decades by a steady decrease in the prices of manufactured goods. This process was accelerated by a series of increases in the duty itself.
• As a result, British manufacturers slowly withdrew from the market for basic, low-quality utility goods, where profit margins were slim, and focused instead on the higher-end market. Alongside various other factors, such as resource abundance and high labor costs, this market structure prompted experiments with entirely new forms of mass production technology, leading to a distinctively American style of manufacturing.
• Equally important for fostering growth was the constant westward shift in the functional center of the U.S. economy and the gradual improvement of domestic transport facilities. This significantly expanded the market available to American producers while still providing a protective effect due to relatively high transport costs, which acted as a barrier against British competition.
• For instance, to undercut the manufacturing companies producing agricultural machinery and frontier implements for local markets in new western towns like Pittsburgh, British manufacturers had to overcome not only high tariff barriers but also expensive sea and land transport costs. This was particularly challenging during the critical early years of the pre-railway era in the 1820s and 1830s.
• Under these circumstances, with cotton production and earnings propelling the economy forward, the continuous influx of new resources from the West, and a booming population due to high natural increase and immigration, it became increasingly difficult for manufacturers to fail.
• By 1860, the cotton textile industry, predominantly located in the Northeast, had become almost entirely mechanized and was on par with the technology commonly used in England.
• In the iron industry, the latest British coal-fueled techniques in smelting and refining were adopted, although traditional wood fuel was still used. America also began to develop its own new technologies, reflecting the different market forces present there compared to Europe.
• For example, the sewing machine, developed by Howe, Singer, and Wilson from the late 1840s, greatly eased the work of women in remote western farmsteads and revolutionized the shoe and garment trades by facilitating the production of utility products for working men.

Throughout this extended period of growth and transformation, there were inevitably moments of uncertainty and crisis, distortions caused by civil war and internal conflict. However, America remained the “land of the free,” where entrepreneurs could thrive, and the market was left to promote unrestrained social Darwinism. It was a roller-coaster journey of success.

Early Innovations in the USA

In 1787, Thomas Somers and the Cabot Brothers established the Beverly Cotton Manufactory, marking the birth of America's first and largest cotton mill of its time. This venture was pivotal in setting the stage for future advancements in cotton mill technology.

The original design of the mill relied on horse power. However, the operators soon realized that the horse-drawn platform was economically unfeasible, leading to years of financial losses. Despite these challenges, the Manufactory became a hub of innovation, not only in processing large quantities of cotton but also in developing the water-powered milling structure later utilized in Slater’s Mill.

In 1793, Samuel Slater, an English apprentice with knowledge of new textile technologies, founded the Slater Mill in Rhode Island after emigrating to New York in defiance of laws against skilled worker emigration. Slater's expertise led him to own 13 textile mills.

In 1809, Daniel Day set up a wool carding mill in Massachusetts, the third woollen mill in the US, following one in Connecticut. The Blackstone River and its tributaries, spanning over 45 miles from Massachusetts to Rhode Island, became the cradle of America’s Industrial Revolution, with over 1100 mills operating in the valley at its peak.

Merchant Francis Cabot Lowell, after observing British textile factories in 1810, recognized the potential for domestic cloth production post-War of 1812. He established the Boston Manufacturing Company upon his return to the US. Following his death in 1817, his associates founded America’s first planned factory town, Lowell, Massachusetts, which significantly contributed to the American Industrial Revolution.

The industrialization of the watch industry began in 1854 in Waltham, Massachusetts, at the Waltham Watch Company, where machine tools and assembling methods were developed for the micro precision required in watchmaking.

Industrialization and Reform in the USA - Second Industrial Revolution Era (1870-1916)

The industrial growth that began in the United States in the early 1800s continued steadily up to and through the American Civil War. Still, by the end of the war, the typical American industry was small. Hand labor remained widespread, limiting the production capacity of industry. Most businesses lacked the capital needed for business expansion. After the Civil War, however, American industry changed dramatically. Machines replaced hand labor as the main means of manufacturing, increasing the production capacity of industry tremendously. A new nationwide network of railways distributed goods far and wide. Inventors developed new products the public wanted, and businesses made the products in large quantities. Investors and bankers supplied the huge amounts of money that business leaders needed to expand their operations. The industrial growth centered chiefly on the North. The war-torn South lagged behind the rest of the country economically. America’s role in foreign affairs also changed during the late 1800s and early 1900s. The country built up its military strength and became a world power.

The Rise of Big Business

The value of goods produced by American industry increased almost tenfold between 1870 and 1916. Many interrelated developments contributed to this growth.

Improved Production Methods

• After the Civil War, the use of machines in manufacturing spread throughout American industry. With machines, workers could produce goods many times faster than they could by hand.
• The new large manufacturing firms hired hundreds, or even thousands, of workers. Each worker was assigned a specific job in the production process. This system of organizing laborers, called the division of labor, also sped up production.

Development of New Products

Inventors created, and business leaders produced and sold, a variety of new products. The products included:

• Typewriter (1867)
• Barbed wire (1874)
• Telephone (1876)
• Phonograph (early form of record player) (1877)
• Electric light (1879)
• Petrol engine car (1885)

Natural Resources

America’s rich and varied natural resources played a key role in the rise of big business.

• The nation’s abundant water supply helped power the industrial machines.
• Forests provided timber for construction and wooden products.
• Miners took large quantities of coal and iron ore from the ground.

A Growing Population

More than 25 million immigrants entered the United States between 1870 and 1916. As American wages were much higher than those in Europe, especially for skilled workers, the period saw an influx of millions of European immigrants. The rapid expansion of industrialization led to real wage growth of 60% between 1860 and 1890, spread over an ever-increasing labor force. Immigration plus natural growth caused the U.S. population to more than double during the same period, rising from about 40 million to about 100 million.

Distribution and Communication

• In the late 1800s, the American railway system became a nationwide transportation network. The total distance of all railway lines in operation in the United States soared from about 14,500 kilometers in 1850 to almost 320,000 kilometers in 1900.
• A high point in railway development came in 1869, when workers laid tracks that joined the Central Pacific and Union Pacific railways near Ogden, Utah. This event marked the completion of the world’s first transcontinental railway system. The system linked the United States by rail from coast to coast. Mining companies used them to ship raw materials to factories over long distances quickly. Manufacturers distributed their finished products by rail to points throughout the country. The railways became highly profitable businesses for their owners.
• In 1876, Alexander Graham Bell invented the telephone. These developments, along with the telegraph, provided the quick communication that is vital to the smooth operation of big business.

Investment and Banking

• The business boom triggered a sharp increase in investments in the stocks and bonds of corporations. As businesses prospered, people eager to share in the profits invested heavily. Their investments provided capital that companies needed to expand their operations.
• New banks sprang up throughout the country. Banks helped finance the nation’s economic growth by making loans to businesses.

Life During the Industrial Era

The industrial boom had major effects on the lives of the American people. The availability of jobs in industries drew people from farms to cities in record numbers. In 1870, only about 25 percent of the American people lived in urban areas. By 1916, the figure had reached almost 50 percent. The lives of people in the cities contrasted sharply. A small percentage of them had enormous wealth and enjoyed lives of luxury. Below them economically, the larger middle class lived comfortably. But at the bottom of the economic ladder, a huge mass of city people lived in extreme poverty.

The Wealthy:

• The business boom opened up many opportunities for financial gain. The economic activity it generated enabled many people to establish successful businesses, expand existing ones, and profit from investments.

The Middle Class:

• Other city people prospered enough to live lives of comfort, if not wealth. They included owners of small businesses, and such workers as factory and office managers. They became part of America’s growing middle class.

The Underprivileged:

• The laborers who toiled in factories, mills, and mines did not share in the benefits of the economic growth. They usually worked at least 60 hours a week and had no fringe benefits. As the nation’s population grew, so did the competition for jobs. The supply of workers outstripped the demand. The oversupply of workers led to high unemployment. In addition, depressions slowed the economy to a near standstill in 1873, 1884, 1893, and 1907. 
• The everyday life of the city poor was dismal and drab. The poor lived crowded together in slums. Much of their housing consisted of cheap apartment buildings called tenements. The crowded slum neighborhoods bred crime. Overwork, poor sanitation, and inadequate diet left slum dwellers vulnerable to disease. Many poor children received little or no education because they had to work to contribute to their families’ welfare.

The Farmers:

• American farmers also suffered hardships after the Civil War. Advances in agricultural equipment and techniques had enabled most farmers to increase their production. However, middlemen between the farmers and the consumers took a large share of the money earned from farm products. The middlemen included owners of railways, mills, and gins.

The Government:

• Political leaders strongly favored business interests. But the government of the era was marked by widespread corruption. Corruption also flourished in state and local government.

The Gilded Age:

• American author Mark Twain called the era of industrialization “The Gilded Age.” Twain used this term to describe the culture of the newly rich of the period. Lacking tradition, the wealthy developed a showy culture. He called it an era of serious social problems masked by a thin gold gilding. For example, the era was marked by rapid industrialization and increasing wages, but also by abject poverty and inequality.
• Most Americans, however, had a far different idea of culture. They enjoyed fairs that exhibited industrial machines, the latest inventions, and other items related to America’s material progress. The American people were eager spectators at circuses, vaudeville shows, and sporting events. Baseball became so popular after 1900 that it was called the national pastime. Also after 1900, a new kind of entertainment, the cinema, began attracting public interest.

Reform Movement in the Late 1800s and Early 1900s

• A powerful wave of reform swept across the United States in the late 1800s and early 1900s. Many Americans demanded changes in the country's economic, political, and social systems. They aimed to reduce poverty, enhance the living conditions of the poor, and regulate large businesses. Their efforts focused on eradicating corruption in government, making it more responsive to the people, and achieving various other goals.
• By 1917, these reformers had successfully brought about numerous changes. Some of them identified as progressives, leading to the period from around 1890 to 1917 being commonly referred to as the Progressive Era in American history.

Early Reform Efforts:

• Labor and Farmers: Early reform initiatives included efforts to organize laborers and farmers. In 1886, skilled laborers established the American Federation of Labor (AFL), a union that negotiated with employers to secure better wages and working conditions for its members.
• Farmers' Organizations: Farmers formed groups like the National Grange in 1867 and Farmers' Alliances in the 1870s and 1880s. These organizations pressured railways to reduce their charges for transporting farm products and provided various forms of assistance to farmers.

Women Suffrage Movement:

• The push for women's suffrage gained momentum after the Civil War. In 1869, the National Woman Suffrage Association was established, and the Territory of Wyoming granted women the right to vote in the same year. Gradually, some states allowed women to vote, but initially only in local elections.

Progressive Era: 1890 Onward:

• The demand for reform intensified sharply after 1890. Clergy members, social workers, and others examined life in the slums and reported on the terrible living conditions there. Educators criticized the nation's school system.
• As public support for reform grew, so did the political influence of reformers. In 1891, farmers and some laborers formed the Populist Party, advocating for government action to assist farmers and laborers. Their influence prompted many Democrats and Republicans to support reforms.
• Reformers gained control of various city and state governments and elected numerous representatives to Congress who aligned with their views. The first three presidents after 1900—Theodore Roosevelt, William Howard Taft, and Woodrow Wilson—supported certain reform laws.

Theodore Roosevelt's Presidency (1901-1909):

• Square Deal: Roosevelt, a liberal Republican, advocated for a "square deal" for all Americans.
• Support for Labor: He was the first president to assist laborers in a strike against employers. In 1902, when the United Mine Workers went on strike for better wages and working conditions, Roosevelt intervened.
• Mediation: Roosevelt initially proposed arbitration to settle the dispute between the miners and mine owners. When the owners refused, he threatened to have the army take control of the mines, leading to a compromise between the parties.

Woodrow Wilson's Presidency (1913-1921):

• Wilson's administration saw the flourishing of the reform movement, with numerous reform measures being enacted. One significant achievement was the reduction of a high tariff in 1913, which had protected American businesses from foreign competition.