FREE ESSAY ON ECONOMIC CHANGE IN AMERICA

ECONOMIC CHANGE IN AMERICA

The Economic Change in America
The United States of America is a country that has gone through many changes in it's
economical system even though we are still considered one of the youngest countries in
the world. The United States is also considered one of the wealthiest countries in the
world as well. This country however did not start out this way there were hard times.
Hard times that helped shape this nation and it's people. Yet along with the hard times
there were good times as well. Yet through these times our economic system has changed,
to evolve with the country. The events that changed our economic system was the South's
dependence on cotton, the Civil War and reformation, and then The Great Depression. 
With the end of the War of 1812, few people in the United States envisioned a civil war
in the future. With a developing Western section of the country, the future looked bright
for a stable growing economy based on extraction of resources (agriculture, timber, and
various resources in the ground). With the shipping resources of New England and
financial centers in the North, agriculture and extraction of resources seemed to be the
foundation to base the country's economy. Within a short period of time, the North was
beginning to industrialize, while the Southern states stayed Agrarian. The South did not
industrialize, because cotton provided an economic system for the whole country that was
as rewarding to the Southern farmers as to the Northern industrialists. Cotton had a huge
impact not only in the United States, but the rest of the world as well. 
Factors that contributed to the economic system that this attitude was a part of were:
the sale of government land in the South, foreign and domestic demand for cotton, and the
contrast between free and slave labor. These were some of the factors that made cotton
king. Cotton was king, with the expansion into the west and the huge labor source that
was available at that time. Slave labor was such a big factor that Mississippi did not
outlaw slavery until two years ago. Also with the transportation evolution during this
era, the demand for cotton grew even more, since the textiles were being exported just as
fast. From all of this one must realize the importance that cotton had in the world.
After the War of 1812, the U.S. government sold large amounts of land in the Southern
territories of Alabama and Mississippi. Sales of government land in the two territories
went from 27,000 acres in 1815 to almost 3 million acres in 1819. Many of the purchasers
of the land were farmers from South Carolina and Georgia. These farmers looked forward to
planting on previously uncultivated land. The land could take heavy cultivation before
the output suffered. As an example, three acres of land could be bought for the same cost
of the lime used to restore productivity on one acre of land in South Carolina. The crop
the farmers planted on this land was cotton. The reason they planted cotton was that the
price of cotton per pound surged from 14 cents before the War of 1812 to 21 cents in 1815
and to 29.5 cents in 1816. The high price was due to a heavy demand for raw cotton in
Great Britain. In the 1830's and 1840's, over 80 percent of all cotton produced was
exported. Of this, around 85 percent of all exported cotton went to Great Britain. Once
the new lands had been prepared for and planted with cotton, the supply of raw cotton
increased to help bring the price of cotton down to 12 cents a pound by 1824. This added
to the demand for cotton which was already high. The South in the most part rejoiced from
this economic high and with this came political power to keep their labor force.
Even though the price of cotton was high in the early years, the cotton grower had
challenges to making money. Between goods bought from the outside for the farmer's family
and slave labor, the farmer managed a subsistence living. The steamboat provided a way
for the farmer to make a living. Prior to the steamboat, goods purchased had to come over
the Appalachians at a large premium. The steamboat helped solve this problem by reducing
the freight rates going to and from New Orleans. The money saved on goods provided a
margin that could be used for investment. The investment made by the farmers was in more
and more productive land. The productivity of the land in pounds per acre in 1850 as
follows: Tennessee, 300; South Carolina, 320; Georgia, 500; Alabama, 525; Mississippi,
650; Texas, 750. From the income received by the cotton South residents reached levels
greater than the average person in the North.
As can be seen, the free population in the West South Central states had a per-capita
income far above the other regions in the country. This contrasts with the older regions
of the South that had incomes below the nation's average. But looking at only free
population, the Cotton South per-capita income was much greater than the Northeast. The
surplus income mostly came from the slave labor used in the cotton economy. The slave
population in the south during this time also grew at an extremely rapid rate. This only
added to the high production in the South.
The slowness to industrialize on the part of the South was a reaction to the
profitability of cotton. If cotton had not gotten a hold on the South as it's economic
base in the early years, industry may have had a better chance of growing. But the land
sales and presence of the steamboat allowed the cotton grower the chance to make money.
By using slave labor to grow and harvest the cotton, the slave owners attained a standard
of living much greater than the average American. Many of the few Southern industrialists
that built factories used slaves in the factories but found that it was not as profitable
as what they thought. With the demand of English and American textile makers, cotton
became the engine that drove the American economy forward every respect from the
steamboat company that transported the cotton to the companies that sold the final
product.
In the first section of this paper we discussed the mire importance that cotton played in
the economy of the South and how cotton was king. In this section things will be a bit
different due to the fact that the South is involved with a war and the North has set up
a blockade. Than we will see how the economy has changed after the war with the demise of
the huge plantation system to the sharecropping system of small farms. After the war even
the laws of the South changed, with the involvement of the Jim Crow laws. All of these
things combine to change the face of the South as an economic system and in general. The
Civil war, and then the Reconstruction made a new South that was never to be the same.
During this time period the South was involved with what some may consider hell, and a
winless war. This war was terrible due to the fact that they were outnumbered more than
three to one. However this is not the way the South saw it, they felt that God, and the
Southern cause could defeat any enemy and they almost did. Simply because of the Southern
generals like Stonewall Jackson, and Robert E. Lee. Whose tactics are still studied today
in almost all-military institutions. Yet even with such superior leaders the South had
many problems, problems that added up to destroy the South as they knew it.
The South also had almost no significant transportation system other than the Mississippi
River and after that was taken the South was then divided it. This also hindered their
trade of cotton, which was their primary source of money at the time. Then with the Naval
Blockade becoming effective there was even less trade going on at this time. Another
major factor in this as well was the condition and the lack of railroad at this time.
Compared to the North the South's Rail system was extremely outmatched. And after the
North would tare it up the South would be for the most part unable to lay any back down
for the lack of steel. And just the amount compared to the North far out ways the South.
This was a huge factor in the war, because the South took longer to transport men and
goods slower than the North. All of this led to almost no trade of cotton, which was
their primary source of income. Interesting enough however, is the fact that the South
wanted to hinder trade with England in the hope that they would enter the war. This
however did not occur and the South had its problems mount.
As these matters were not hard enough for the South, one must look again at the Southern
population which had no significant population. Walton and Rockoff state that 1.1 million
military-aged slaves in the South could not be used for fighting on the front, and
probably fewer than 30 percent of eligible whites in the Border States sided with the
Southern cause...By the end of the war, blacks in the Union army alone out numbered the
Confederate forces. (Walton and Rockoff, 304) Many of the battles that were won by the
South did not deal with just brute force much of it can be attributed to the generals who
did the best thing they could do with their numbers. And for the fact that the Northern
generals like Little Mac were extremely wary to fight because they had no idea of numbers
or even better position of their opposing forces. Yet they out numbered them normally
three or more to one. This led to an even more devastating effect on the south since all
of there men were gone who ran the farms and take care of menial duties since the
majority of the whites in the South did not run a plantation or have huge numbers of
slave if any. The South could not produce or sell any agricultural products. Or even
worse many of the men died during this time from the age of 16 - 28 who were getting
ready or already running farms and families. That may be the most disturbing part of the
war was that it ruined their whole family structure and economic system.
The government's attempts to reconstruct the South's political, social, and
economic systems were ineffective. Economically blacks were cheated by the
white Southerners. Share cropping and local stores cheated the blacks into a
never ending cycle of debt. Socially the blacks were segregated by unfair laws.
Politically, elections were rigged so that the people were not allowed to vote
for those parties that supported reconstruction. It was also very rare for a
black Southerner to be elected to an important political position. 
The economic situation for freedmen was very dire. After the civil war the
blacks had nothing. Their owners had supplied them with everything they had
needed to survive before. Now during reconstruction they had no money,
therefore many couldn't even leave the plantation where they had worked
before the Civil War. The southern plantation owners took advantage of the
poor slaves situation. They hired the freedmen as sharecroppers.
Sharecropping is a situation that was designed to benefit both the plantation
owners and the poor blacks but ended in the plantation owners taking
advantage of the freedman. The plantation owners would give 40 acres of
land to one black family in return for half of the crops they grew that season.
This in itself was not a bad deal. Unfortunately, the plantation owners then
tried to take advantage of the fact that the plantations were far from the
towns by setting up stores on the plantations. The plantation owners would
charge overly inflated prices at these stores but the sharecroppers had nowhere
else to go. They were too far from the towns to use the stores there. So,
because of the convenience of these stores, the sharecroppers would go there
to buy the goods they needed to support their farm and their family. The
extremely high prices of these stores soon caused the sharecroppers to go into
debt. This debt forced them to stay at the plantation to try to work off their
debt but, because of the inaccessibility of cheaply priced goods the
sharecroppers could never pay off their debts causing their children and their
children's children to continue to work there. 
Blacks in the South were cheated socially by laws called the Jim Crow laws, which made
segregation of the blacks legal. These laws were fought by some
blacks. For example, in the Plessy vs. Ferguson case where Hommer Plessy
fought in the supreme court to end segregation, but to the dismay of many
civil rights leaders, the supreme court ruled that segregation was legal as long
as the facilities for both blacks and whites were equal. Unfortunately this was
not always true. Many times the facilities provided for blacks were totally
inferior to those provided for whites. Therefore it was hard for blacks to
receive an equal opportunity for education. The Klu Klux Klan was a secret
society in the south whose major goal was to keep the freedmen totally
powerless through tactics of fear. The KKK would attack black families and
burn their farms. 
The blacks were deprived politically, too. Which led to an economic stagnation in their
society, also with the KKK that would scare them into staying at their same position in
life and not advancing economically nor politically as well. Members of the KKK would rig
the elections so that the people would be afraid to vote for the Republican party who
supported radical reconstruction. Election of black officials in local, state and federal
government was very uncommon in the South although some blacks from the North were
elected as representatives of the people and fought for equality. Eventually politics led
to the downfall of reconstruction. During the election of 1876 a corrupt deal was reached
when Rutherford B. Hayes, the Republican candidate, was elected in exchange for the end
of reconstruction. 
The black freedmen of the south were in no better condition after reconstruction than
they were while slavery was a common practice. Even though they had the rights to be
treated equally they were cheated, swindled and abused by whites until they were in
nearly the same position they were in before reconstruction. In conclusion, the
government's attempts to reconstruct the South's social, political and economical systems
was ineffective. 
In the first two sections of this paper we discussed the South's dependence on cotton the
we discussed the Civil War and how it effected the South and the North economically. Now
we are going to skip a head a little bit past the first W.W.I, since the next major
change in the economy was the collapse of the stock market. This section will discuss the
general state in which the entire country was in economically, and what our government
did to end it and what exactly brought us out of the depression.
The Great Depression was one of the largest calamities to ever lay it's unmerciful claws
on the U.S. The Depression was so devastating that the economy needed years to recover .
Millions of Americans were left homeless, jobless, and foodless. There was little to no
hope in the country and many felt that the Depression was going to last forever. In fact
the whole world was in a Depression. One must understand this economic crash and then how
our society over came the Depression. To understand the cause one must look at the
backlog of inventory, and the banking crisis and then to see how the economy overcame
this by looking at Franklin Delano Roosevelt, and World War II.
The Roaring Twenties were an era dominated by Republican presidents: Warren Harding
(1920-1923), Calvin Coolidge (1923-1929) and Herbert Hoover (1929-1933). Under their
conservative economic philosophy of laissez-faire (leave it alone), markets were allowed
to operate without government interference. Taxes and regulation were slashed
dramatically, monopolies were allowed to form, and inequality of wealth and income
reached record levels. The country was on the conservative's preferred gold standard, and
the Federal Reserve was not allowed to significantly change the money supply.
For most of the Roaring Twenties, the economy grew as long as it's capital facilities
grew. By the time the stock market crashed, there was so much plant space producing so
many goods that the backlog of inventory was three times greater than normal. Half of
America was living at or below the minimum subsistence level and could not afford to buy
these products. Factory workers were paid so little that they often could not afford the
goods they were producing. According to Say's Law, supply creates its own demand. A glut
of goods on the market is supposed to be impossible, because the public's demand is
infinite; therefore, there can only be shortages of supply. It is a fact of economics
that all recessions are preceded by a glut of goods on the market, and this was
especially true before the stock market crash of '29. Supply was everywhere; demand
nowhere. Simply because a growing number of poor people chose to hoard their money rather
than spend it. This is a rational anti-poverty strategy for individuals, but it has
unintended and damaging consequences for the group. The Law that Roosevelt would use
would be the Keynesian economics which suggests an increase of spending, to put money in
the lower end of the population. This is shown in this statement  Orthodox Keynesians
would add that the administration should have deliberately raised spending for whatever
purpose and cut taxes to generate multiplier effects. (Walton Rockoff 531) The division
of wealth was to great for the economy to bare, and it was bound to crash. The fact that
the rest of the world was hurting did not help the problem.
The fact that the Great Depression began in 1929, then, on the Republicans' watch, is a
great embarrassment to conservative economists. Many try to blame the worsening of the
Depression on Hoover, for supposedly betraying the laissez-faire ideology. Hoover's
government action occurred during his last year in office, long after the worst of the
Depression had hit. In fact, he was voted out of office for doing too little too late.
The only notable exception to his earlier idleness was the Smoot-Hawley tariff of 1930.
Which was a tariff that was especially hard on agricultural products. Many economists of
the day did not believe in this tariff due to the fact that they feared that the
countries importing their products would also raise there tariffs on the U.S. as
retaliation. In all actuality it really had little effect on the countries foreign
affairs
But much more importantly, the economy was clearly turning downward even before Hoover
took office in 1929. Entire sectors of the economy were depressed throughout the decade,
like agriculture, energy and mining. Even the two industries with the most spectacular
growth --construction and automobile manufacturing -- were contracting in the year before
the stock market crash of 1929. Which shows the economy was already suffering from a
recession.
Adding to the problems of an unbalanced wealth and the over production of goods one then
must look at the banks. The first banking panic occurred in late 1930; the second in the
spring of 1931, and the third in March 1933. When it was over, 10,000 banks had gone out
of business, with well over $2 billion in deposits lost. Banking panics occur when the
public fears that monetary institutions are on the verge of collapse. The securities
market falls so fast that investors scramble to convert their holdings into cash, thus
creating a public run on banks. But banks, whose loans are based on fractional reserves,
cannot afford to give everyone their money all at once, and therefore go bankrupt. A
chain reaction follows as deposit owners who have lost their money can no longer afford
to pay off other debts and costs of business, driving others to scramble for cash as
well. Roosevelt would go on to create the Federal Deposit Insurance Commission to protect
the American economy from bank runs in the future. Although the 1987 crash on Wall Street
was the largest in American history, these safeguards worked admirably to prevent a bank
panic from depressing the economy. 
When one discuses the Great Depression, one must mention Franklin Delano Roosevelt since
had an more of an impact on the people, then the economy. He had an effect on the people
of the times by giving them hope and at this time in our history as Americans, hope was a
lot. He also eased their pain by trying to solve the economic problems of the time.
Franklin Delano Roosevelt was the 32nd President of the US. He was born in Hyde Park,
N.Y. Admitted to the New York bar in 1907, he served as a progressive state senator and
assistant navy secretary. After a crippling attack of polio in 1921, he resumed his
political career, becoming governor of New York. With the country in a deep depression,
he easily defeated Herbert Hoover in the Presidential election of 1932. Roosevelt came to
office in the hope that he would have a solution to the economic calamity of the nation.
His answer was the 'New Deal', a recovery program to provide immediate relief and
reforms. While the nation's economy did not fully revive until wartime, his actions
earned Roosevelt the gratitude of working people that outweighed the hatred of
conservatives. Reelected by a landslide in 1936, he won unprecedented third and fourth
terms in 1940 and 1944. And is regarded as one of the best presidents of all time.
After Roosevelt became president in his first term he and the Brain Trust came up with an
idea, an idea called The New Deala far reaching program, for the forgotten man. Which
took action to bring immediate relief as well as reforms for business as well as
agriculture. The new administration's first objective was to alleviate the suffering of
the unemployed. Within the first hundred days after the inauguration dozens of agencies
were set up to dispense emergency and short term governmental aid and to provide
temporary jobs, construction projects, and youth work in national forests. Some of the
projects were The Federal Emergency Relief Agency, that was directed by Harry Hopkins
that pumped a half a billion into bankrupt states and other areas. The most effective of
all was the Tennessee River Authority which was done to provide essential flood control,
hydroelectric power, and economic reconstruction for a seven state area. Many of these
planes were thought to undermine Americans as workers, one should not take that into full
consideration since people must survive and would do anything to survive. 
Roosevelt and the Brain trust also took another step to provide wider safeguards. The
Social Security Act provided for nation wide systems for the elderly and unemployment.
Maximum hours and a minimum wages were also set in certain industries in 1938. Some New
Deal laws were declared unconstitutional by the U.S. Supreme Court, but by 1937 Roosevelt
made enough new appointments to achieve a court majority favoring most of his measures.
Despite resistance from the business community most of the New Deal reforms became a part
of the U.S.A. For the last 60 years the social safety of the New Deal has cushioned the
severity of the cyclical business downturns and prevented so far a repetition of a full
scale depression. These Acts that were passed were needed and are still extremely
relevant in today's society.
Although, at first, Roosevelt kept the U.S.A. out of the second World War, he supported
Great Britain through the 'lend-lease' act with much needed war material. After the
Japanese attack on Pearl Harbor he allied the U.S.A. with Great Britain and the USSR to
defeat Germany and Japan in World War II. Now with the U.S. involved with the largest war
of all times, and Roosevelt leading our country through an extremely tough time died less
than four weeks before the German surrender. Soon after that the Manhattan project took
full form with the dropping of little boy and fat man, then with the surrender of Japan
and the end of the war. This war just through it's brief summary was what in all
actuality is what ended The Great Depression in it's entirety. With the majority of
factories being converted into a war machine. The war also gave out as many jobs that
were wanted and then some extra, even women were working on the factory lines as well.
The machines that were being produced was not only for the American troops, but also for
sale to the other countries involved with the allied forces. This all added to a giant
boom in our economy, that would last for decades.
One thing that happened from The Great Depression was that our country now knows how to
avert a banking panic. It also taught us about the value of a middle class which aids in
the distribution of wealth. The distribution of wealth is probably the most important
factor so that our economy is not unbalanced and there are people out there to buy the
products that our economy produces. However though the most important thing in my opinion
is how our country was able to deal with the Depression. The strategy that the President
and high ranking officials had taken to create immediate action which would end the
Depression and then by how far our country has come together. An example of this is
monopoly which was created during this time and in all actuality gave hope to the people
who played during this hard time. And as I had mentioned earlier, hope was and is a great
thing during hard times.
Bibliography
Bruchey, Stuart. The Wealth of the Nation: An Economic History of the United States (New
York: W.W. Norton, 1984).
Handlin, Oscar and Mary Handlin, The Wealth of the American People (New York:
McGraw-Hill, 1975).
Lebergott, Stanley. The Americans: An Economic Record (New York: W.W. Norton, 1984).
Levine, Bruce and others. Who Built America?: Working People and the Nation's Economy,
Politics Culture, and Society (New York: Pantheon Books, 1989).
Poulson, Barry W. Economic History of the United States (New York: Macmillian Publishing,
1981).
Walton, Gary M. and Ross M. Robertson, History of the American Economy, 5th ed. (New
York: Harcourt Brace Jovanovich, 1983.