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February 22, 2005

20050222: Econ 113: Lecture: Civil War and Gilded Age

20050222: Econ 113 Lecture: Civil War-Gilded Age

Part I: Civil War

Stephen Douglas

• Senator from Illinois
• Chair, Committee on Territories
• Believes in the West
• Wants settlement of the west, wants transcontinental railroad w/ terminus in Chicago
• Wants to open Kansas-Nebraska territory for settlement
• "Popular sovereignty"--slaveholders can move into any territory, and when the territory becomes a state it can vote to be a slave state or a free state

Douglas thinks that he is:

• Not giving away anything substantive by endorsing "popular sovereignty" (after all, no water in Kansas--so no slave plantation agriculture)
• Pleasing the South with this purely rhetorical concession
• Advancing the ball on western settlement and the railroad

What Douglas actually does is:

• Create a low-leel guerrilla war in Kansas
• Create the Republican Party
• Elect Lincoln president in 1860
• And the South then secedes
• And Lincoln says that he will fight

The Civil War:

• Everyone expects a short war
• It isn't
• First industrial war
• A long war
• A war fought with rifles rather than muskets--hence the horrendous butcher's bill of more than 600,000--charges now impossible

Cost of the Civil War:

• In perspective, it would have cost $90 per capita to buy and free all the slaves
• Cost of Civil War to North: $140 per capita (including only economic damages for dead and wounded)
• Cost of Civil War to South: $340 per capita (including only economic damages for dead and wounded)
• "Indirect" additional cost of Civil War to South: $450 per capita
• Is this a real cost? Composed of:
  • Loss of "economies of scale" of plantation agriculture. (But are those EoS really there? Or are they from sweating the workers. If they are really there, the Coase Theorem says there ought to be a way to recreate them...)
  • Withdrawal of female labor from the cotton fields (once again, is this a loss?)
  • Shift back toward self-sufficiency due to decreased tolerance for risk on the part of poor Blacks compared to that of rich whites. (I'm not usre whether this is a cost or not)
  • Underinvestment in infrastructure
  • Ransom and Sutch, One Kind of Freedom
  • Robert Penn Warren, All the King's Men (Willie Stark = Huey Long)

South stuck at 60% or so of the per capita income of the rest of America for nearly a century.

---

Part II: Gilded Age

From 1860-1910:

• Population grows from 30M to 90M: 2.2% per year
• Commodity output per capita grows at 2.4% per year--to which we should add an allowance for new goods and new kinds of goods
• Faster growth of wealth and income makes for a prosperous-seeming America: income growth roughly twice as fast as before the Civil War
• The "Gilded Age"

Key Features of the Gilded Age:

• iron-hulled ocean-going steamship--staple commodities become tradeable for the first time ever
• mass immigration (except from China and Japan)
• the "great traverse"--an enormous increase in the capital-output ratio: nominal investment share up from 19% to 26%. Real investment share up by considerably more
• the U.S. changes from being a nation of farms to a nation of cities and factories
• the U.S. acquires its productivity edge over the rest of the world
• the U.S. acquires its applied science edge over the rest of the world
• bloody labor history
• great inequality
• crony capitalism
• corruption

Political Reactions:

• Populism
  • Farmers oppressed by railroads--high freight rates
  • Farmers oppressed by bankers--falling price level
  • Free coinage of silver at 16-1
  • Quantity theory of money: MV = PY
  • William Jennings Bryan loses election of 1896
  • But then comes Alaska, the Yukon, and South African gold
  • The inflation the populists wanted to see comes anyway, in spite of their defeat
• Establishment reaction
  • The ICC: "fair" RR rates *and* guaranteed profits for RRs
  • The FDA: blocking state-level regulation in the interest of national regulation
  • The Sherman Antitrust Act

Then comes Progressivism...

corruption malefactors of great wealth

Posted by DeLong at February 22, 2005 06:56 PM