Wall Street History

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Wall Street History

05/25/2001

Early American Business Facts

You''ll have to forgive me. I''m on the road and don''t have
access to my research library, but I promised to get something
out today. A special issue of American Heritage magazine has
helped to bail me out. Put together by historian John Steele
Gordon, it delves into the "Business of America." I thought I''d
summarize some of the key events of the period from about 1850
to the early 1900s. A lot of the following is simply great
statistical research, the kind that best summarizes trends. Like I
always say, when in doubt, reach for the facts.

--In the North, the leading export back in 1850 was ice. It was
cut from ponds in winter and stored beneath mounds of sawdust,
then shipped as far away as India.

For the South, of course the leading export was cotton, demand
for which exploded with the invention of the cotton gin, which
allowed the price to plummet. *The more affordable something
is, the more you use.think cheap gasoline of 2-3 years ago and
SUVs.

The cotton was brokered through New York, however, as this
was the leading financial center. At the time the South''s
institutions were weak. Cotton also required slave labor.

[Cotton remained America''s largest export until the 1930s.]

--The discovery of gold in California occurred in 1848. John B.
L. Soule wrote in the Terra Haute Express, "Go west, young
man, go west!" [This was picked up and attributed to Horace
Greeley.] In 1847, a typical pre-California year, the U.S.
produced 43,000 ounces of gold. In 1848, the country produced
484,000 ounces. By 1853 it was up to 3,144,000. This helped
our nation''s money supply immensely, as banks could back the
notes they issued with gold.

--While he didn''t necessarily invent it, Cyrus McCormick of
Chicago came up with the best reaper, which set up the
mechanization of agriculture in 1851.

--The economy expanded rapidly. In 1850, there were 9,021
miles of railroad track in the U.S. By 1860 it was 30,626.
[1890: 166,700 miles.]

--Pig-iron production soared from 63,000 tons in 1850 to
883,000 tons in 1856.

--But the expansion led to crashes, many of which we have
covered in previous pieces. 1856 witnessed a collapse of the
financial system, leading to 4 years of depression prior to the
Civil War.

--During the Civil War, federal government debt rose from $64.8
million in 1860 to $2.677 billion in 1865.

--Following the war, America soared in areas like the harvesting
of wheat; from 15 million acres in 1866 to 49 million in 1900.

--Steel was difficult to manufacture until 1857, when Englishman
Henry Bessemer developed his converter, able to turn large
amounts of iron to steel quickly. Coupled with later inventions,
this helped to make steel cheap.

In 1860, the nation produced 13,000 tons. By 1880, the total was
1,397,000 tons. By 1900 it was 11,227,000. Steel rails replaced
wrought iron ones in 1884, because they were more durable and
were one-third the cost.

Steel was also used for tall buildings, allowing cities to soar.

[Incidentally, the first human structure higher than the Great
Pyramid of Egypt (2800 B.C.) was the Eiffel Tower in 1889.le
tour Eiffel was made of iron, meaning it should collapse and kill
hundreds any day now.]

--John D. Rockefeller established Standard Oil Company in
1870. By 1878 Standard Oil controlled 90% of the nation''s
petroleum.

U.S. petroleum production:
1859: 2,000 barrels
1869: 4,215,000
1900: 63,621,000

--Andrew Carnegie, whose Carnegie Steel was the largest in the
world, had two business principles. As told by John Steele
Gordon:

"In good times, plow profits back into the company to acquire
the latest technology and to be the low-cost producer in order to
remain profitable during downswings; in bad times, use the cash
surplus to buy up less efficient competitors and expand market
share."

--Thomas Edison invented the research laboratory in the 1880s,
helping to create General Electric. His methodology was then
emulated by the likes of AT&T (Bell Labs) and DuPont.

--The New York Stock Exchange had its first million share day
in 1886.

--With the advent of World War I, the wheat producing nations
of Europe saw production drop sharply as young men were
called into military service. Great for American exports.
Between Dec. 1913 and April 1914, the U.S. exported 18 million
bushels of wheat. For the same period a year later, it was 98
million.

--World War I proved to be a bonanza for U.S. manufacturers as
well. Bethlehem Steel''s largest contract had been $10 million,
prior to the war. Then in 1914, it received one for $135 million
from the British Royal Navy.

DuPont''s total business rose 26-fold, as it provided the Allies
with 40% of their munitions during the war, establishing the
company as a post-war industrial giant.

--As war seemed imminent in July 1914, stocks plunged.
General Motors, for example, dropped from $59 to $39, before
the Exchange was closed for a spell. But GM finished 1915 at
$500, and Bessie Steel rose from $46 to $459.

--After the war, with the economies of Europe devastated, the
U.S. was the victor. New York replaced London as the world''s
financial capital, while the dollar was clearly the strongest
currency.

We will return next week at our regularly slotted time.

Brian Trumbore

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