Evolution of the Nation

Evolution of the Nation

A major economic reversal began in Europe and reached the United States in the fall of 1873. The signal event on this side of the Atlantic was the failure of Jay Cooke and Company, the country's preeminent investment banking concern. The firm was the principal backer of the Northern Pacific Railroad and had handled most of the government's wartime loans. (Bancroft, 1902).

Cooke's fall touched off a series of events that encompassed the entire nation. The New York Stock Exchange was closed for 10 days. Credit dried up, foreclosures were common and banks failed. Factories closed their doors, costing thousands of workers' jobs. The volume of destitute people soon overwhelmed the abilities of charities to function. Most of the major railroads failed. (Bancroft, 1902).

The public tended to blame President Grant and Congress for mishandling the economy. The causes were much broader, however. The postwar period was one of frenetic, unregulated growth with the government playing no role in curbing abuses. More than any other single event, the extreme overbuilding of the nation's railroad system laid the groundwork of the Panic and the depression that followed. (Bancroft, 1902).

The blow was felt for years in impaired credit, pressure for payment of dues, the lowering of securities and general dread of even safe enterprises. United States bonds fell from five to ten per cent. Savings were exhausted and many banks went under. Labor felt the cruel stroke for long after in the shutting down of factories and the half-time employment. The country was in a state of alarm and disgust at the bitter consequences of questionable acts in Congress. (Bancroft, 1902).

The expansion and prosperity enjoyed in the period following the Civil War was followed by the economic collapse of the Panic of 1873, brought on by rapid industrial expansion and inflated credit. The enormous railroad expansion after the war, as well as other manufacturing growth and land speculation, was part of a great tide of business investment and uncontrolled optimism. Though profits were large, prices were inflated. The United States sold bonds and other securities abroad to fund this expansion while increasing imports beyond the balance of exports, necessitating the loss of specie abroad to pay the foreign debt and trade deficit (Bogart and Thompson 1922:274-287). The suspension of investment firms and bankruptcies began in the east. Between 1873 and 1877, commerce fell off and unemployment rose (Burbank 1966:5).The transportation system was hit hard. By 1877 only one in fifteen railroad lines tributary to St. Louis was paying dividends. The railroads passed their losses down to the employees by cutting wages, forcing them to perform unpaid labor, eliminating jobs, and cutting back on hours. When employees fell so far into debt that their wages were garnished, they were discharged. (Burbank,1966).

In the decades following the Civil War, the United States emerged as an industrial giant. Old industries expanded and many new ones, including petroleum refining, steel manufacturing, and electrical power, emerged. Railroads expanded significantly, bringing even remote parts of the country into a national market economy.

Industrial growth transformed American society. It produced a new class of wealthy industrialists and a prosperous middle class. It also produced a vastly expanded blue collar working class. The labor force that made industrialization possible was made up of millions of newly arrived immigrants and even larger numbers of migrants from rural areas. American society became more diverse than ever before. (Burbank,1966).

The World's Breadbasket:

America Becomes the World's Breadbasket the revolution in agricultural technology between 1820 and 1870, created a demand for a larger and stronger horse to power the new equipment. The new and improved farm equipment greatly increased the productivity of the American farmer. With the McCormick reaper, which both cut and tied grains into stocks, one man could do the work of thirty. New steel plows, double-width harrows and seed drills, mowers, binders, combines and thresher's decreased the need for manpower, but increased the demand for horsepower. (Norton, 2004).

During the 1870s and 1800s, hundreds of thousands of hopeful farmers streamed into the Great Plains region. More acres were put under cultivation in states such as Kansas, Nebraska, and Texas during these two decades than in the entire country during the previous 250 years. The number of farms tripled from 2 million to over 6 million between 1860 and 1910. Several states opened offices in the East to lure migrants westward. Land-rich railroads were especially aggressive, advertising cheap land,