In 750-800 words, answer the following question on economic history: "What factors were responsible for US economic growth after 1800?  Specifically outline the role played and importance of (1) natural resources; (2) the frontier ;(3) migration; and (4) technological innovation." Use the following information as need to help answer the question:

"The colonial economy:
-The Colonial economy was dependent on Atlantic trade.
-The Southern US developed a plantation economy.
-Cotton, rice, and tobacco became the basis of the economy.
-Slave labor was imported to produce this.
-Slavery was extremely profitable; it formed the basis of individual wealth and power in the South. But in the long-run it retarded economic development.

Deep causes for US growth and the divergence within the Americas:
- Institutions
▶Market-Preserving Federalism; Private Property Rights. But also slavery;
tariffs; monetary instability.
- Human capital
▶High literacy; broad-based education (High School Movement, Land grant
Universities. But mass migration of unskilled workers.
Culture
▶Protestantism (different variants); cultural diversity; Enlightenment culture.
- Technology
▶Labor-saving (biased) technology change.
- Natural Resources
▶Abundant agricultural land & timber, coal, later oil and gas.

Institutional Persistence:
South America:
- Spanish take over extractive
institutions of Aztecs and
Incas.
- Economy based on silver
mining and exploitation of
natives.
- Creation of extremely rich elite
and high de facto inequality.
- Post-independence societies
incapable of building inclusive
institutions and prone to
autocracy
North America:
-Settlers unable to exploit
native population and find no
gold or silver.
- To attract settlers, inclusive
political and economic
institutions are established.
- By 1750 slavery leads to
extractive economic
institutions being established
in US South.
- But early legacy of inclusivity
prevails.

Engerman and Sokoloff (1997,2000) (separately) developed a similar
argument to Acemoglu and Robinson.
They argue that different factor endowments shaped differential
institutional trajectories in north and south America.
South America had crops like sugar, coffee, and industries like silver
mining.
North America lacked these cash crops.
Riches of south America gave rise to large estates, with slaves and
extreme levels of inequality (between those who owned land and those
who did not)
Initial levels of inequality have persisted from the 18th century to
today.
Engerman and Sokoloff argue that the institutions established in
colonial times explain this persistence.
Elites in south America were able to impose institutions which
benefited them and their descendants.
Land remains concentrated among an elite in south America. The
franchise remained restricted to an elite.
Elites in Latin America did not invest in schooling unlike the United
States

Economic Rise of the USA:
The First Industrial Revolution (1760-1830)
▶
Begins in England spreads to USA & Belgium in 1820s, Germany in the
1840s-1850s.
▶
Key technologies: cotton textiles, steam engine, iron & steel
The Second Industrial Revolution (1850-1900)
▶
Starts in USA and Germany
▶
Key technologies: machine tools, chemicals, petroleum, electricity

Industrialization in New England
Why did industrialization spread rapidly from Britain to the US?
One explanation is factor prices: wages were high in the US North,
energy was cheap.
Industrialization began in New England:
▶
The Beverly Cotton Manufactury in Massachusetts in 1787
▶
Slater Mill in Rhode Island in 1790
▶
Waltham Mill in Massachusetts in 1814
Timber, water, coal, iron, copper were abundant.
Another explanation would emphasize a shared mechanical and
Enlightenment culture with Britain

Why was growth so fast?
America was a technological follower in the early 19th century. Yet it
grew very fast.
Growth was not driven by the efficiency so much as enormous
increases in effective land and natural resources per worker from 1790
to 1860.
Population growth was very rapid but extra land and natural
resources were added to the economy at an even faster rate.
Waterpower remained the main source of energy.
The growth of industrial production accelerated from 1820
onwards—it expanded 100-fold between 1790 and 1850.
This pattern changed after 1850 as industrial and manufacturing
became more important and America became the technological leader

Allen’s Biased Technological Change Model Applied to
America
Wages were high in America and energy cheap.
Hence a strong incentive for labor-saving innovation.
Examples include the first automatic flour mill invented by Oliver
Evans in 1782 and Eli Whitney’s cotton jin and Joseph Roe’s
innovations in milling and machine parts.
Allen writes: “The success of the American economy depended on the
application of inventive engineering across the full spectrum of
industries. The incentive to mechanize was provided by the high cost
of labour. The successful response required a large pool of potential
inventors. The interplay between challenge and response made the
USA the world’s productivity leader by the First World War.”

Biased-Technological Change?
Peter Temin developed a counter-argument. Capital was more
expensive in American than England. US interest rates were higher
than British interest rates.
However, skilled labour was more expensive in America than in
England. So US manufacturing used unskilled labour but saved on
skilled labour. This generates a biased towards more capital intensive
machinery even though capital was more expensive in the US.
Machines substituted for skilled workmen.
45 / 1
There was something distinctive or ‘peculiar’ about American innovation.
In 1860:
average English spinning and weaving factory had 17,000 spindles and
276 looms
average New England factory had 7,000 spindles and 163 looms.
A much higher ratio of more capital intensive loams to more labor
intensive spindles

There was something distinctive or ‘peculiar’ about American innovation.
In 1860:
average English spinning and weaving factory had 17,000 spindles and 276
looms
average New England factory had 7,000 spindles and 163 looms.
A much higher ratio of more capital intensive loams to more labor
intensive spindles.
American industry was relatively more capital intensive and hence had
higher labour productivity.
This can be explained in terms of factor proportions: expensive labour and
cheaper capital or natural resources?
Abundant natural resources meant that technologies which were not
feasible in Europe were profitable in America.
46 / 1
Recall the argument of Mokyr
(2009, 2016): a culture of
growth or the Industrial
Enlightenment was critical for
the onset of economic growth
America and Britain shared a
common language and culture
Despite attempts to restrict the
spread of industrial revolution
technologies to North America,
this proved impossible
Economic growth diffused first
to Northern European societies
that had participated in the
Enlightenment and the
Scientific Revolution

The Role of Science
While the 1st Industrial Revolution was larger driven by “tinkerers” and
with the exception of the steam engine did not directly rely on scientific
breakthroughs, this was not true of the 2nd Industrial Revolution.
The Diesel engine - built by Rudolf Diesel “not a tinkerer . . . but a trained
German engineer, working with state-of-the-art scientific techniques”
(Mokyr, 1990).
“He started off searching for an engineer incorporating the theoretical Carnot
cycle, in whichj maximum efficiency is obtained by isothermal expansion so
that no energy is wasted”
Elias Howe, an American, perfected the stewing machine. Achieving
perhaps a 500% increase in productivity.
Innovations in fertilizer and food processing. Gail Borden invented milk
powder in 1860. Mechanical refrigeration.

The Tariff?
The tariff was designed to protect infant industries. It transferred
resources from domestic consumers to domestic producers.
It was supported by industrial interests in the North and opposed by
agricultural exporters in the South.
Knick Harley shows that the tariff reduced American imports and reduced
the exports of foodstuffs, hurting the West and the South.
Harley finds that the tariff doubled the size of the domestic cotton industry.
The tariff speed up early industrialization. But it was not a fundamental
cause of growth.

The tariff induced resources to move into manufacturing (and out of
agriculture) soon than would have occurred under free trade.
In the late 19th c., however TFP and productivity growth was comparable
in agriculture to manufacturing.
Irwin (2000) estimates the possible costs of moving from protection to free
trade; he finds them to be very small (perhaps 0.8 of GDP).
At the same time protection was costly — it raised prices for consumers
and it also could have harmed efficiency by shielding inefficient firms from
import competition.
TFP growth in the non-traded sector, such as transportation, services,
utilities, and communications, was much more rapid than in traded sectors
such as agriculture or manufacturing.

American Manufactures
The American system of manufacturing centered on machine tools and the
development of inter-changeable parts .
A large market and homogeneous tastes encouraged product
standardization.
Standardized products could be easy tweaked or improved upon.
Standardized products encouraged the standardization of other parts and
this made further innovation easier.
America becomes the leader in global manufacturing and in technology
(but not in science).

Nathan Rosenberg argues that this American system of manufacturing
based on interchangeable parts led to, and made possible, future
innovations in: Bicycles, automobiles, and aviation
The American system of manufacturing led to a finer and more specialized
division of labour. This led to Fordism and to mass-production.
Further increases in labor-saving technologies and capital investment could
then occur after 1900

The Second Industrial Revolution
Industrialization took several decades to significantly raise living standards
in Britain during the 1st Industrial Revolution (c. 1760-1830 or 1850).
The 2nd Industrial Revolution (c. 1850-1900) was associated with a more
dramatic rise in living standards and the diffusion of growth across North
America and Europe.

The demographic transition at the end of the 19th century accelerated
economic growth as did the transformative technologies of the Second
Industrial Revolution such as electricity, chemical fertilizers, and the
automobile engine
Human capital became more important for growth during this era
The United States was the fastest growing economy in the second half of
the 19th century, taking a lead in the new technologies of the period
In particular, the United States pioneered the development of machine
tools and mass production, which in the 20th century were epitomize by
Frederick Taylor and Henry Ford"