The Beginning of the Industrial Revolution in America

 



PRECONDITIONS OF THE INDUSTRIAL REVOLUTION IN AMERICA

 

In the Beginning

Before industrialization began in the 1820s, there was a set of political institutions and cultural values, mostly inherited from England, that encouraged profit-seeking individuals to start new companies.  They included fairly secure property rights, increasing legal limits on monopolies, an independent judiciary that enforced contracts, emphasis on individual rights rather than social obligations, patents, tolerance of markets, and less government regulation of markets than in the past.  Much of this was stated or implied in the Constitution; an activist Supreme Court under John Marshall extended these trends. The Constitution also helped to create a national market and reduce transaction costs by mandating a national currency and limiting states’ ability to make economic policy that favored their own residents.

 

What America did not inherit from England was important. Unlike England, the new United States did not have a king and a landowning nobility to siphon off capital. Settled by members of dissenting sects and persecuted religious minorities, there would be no state-supported national religion. As a consequence, capital would not be diverted to royal palaces, aristocratic castles, or cathedrals.

 

Economists interested in economic development often advocate land reform in a traditional agricultural society as a necessary first step to modernization. This breaks the power of the conservative landlord class. America did not have to go through this step. Laws were passed even before the Constitution that made free and cheap land available to everyone. America began as a nation of landowning farmers. Thomas Jefferson saw independent farmers as the foundation of a democratic society.

 

By winning the American Revolution, the new United States retained from England the political policies and ideas that would encourage individual economic “striving” and reject most of the English institutions opposed to progress and change. America was fortunate that it created a political structure, a democratic society, and an ideology that would support the coming Industrial Revolution. 

 

In the early period of industrialization (1820-1870), a rapidly growing population (from 3 million in 1790 to almost 10 million in 1820 to 30 million in 1860) created an increased potential demand for new consumer products. Western expansion generated an agricultural surplus of commercial crops that were exchanged for cash to buy manufactured goods. Exports of cotton helped pay for imports of machinery, locomotives and manufactured goods.

 

These conditions together could encourage economic growth but not necessarily industrialization, the large-scale production of capital goods (machinery) and consumer goods using inanimate power (steam engines and waterwheels) to drive faster, more powerful machinery. For that to happen, mechanics, tinkerers, investors, and entrepreneurs had to invent, innovate and organize new finance, production, distribution and marketing methods. Economic development drove economic growth.

The Beginning of the Industrial Revolution in America

A key factor explaining why America industrialized so early and so quickly was the country’s continuing ties with England after the American Revolution. Americans quickly understood the profitable opportunities of the new production methods being created in England. Americans also had access to much of the scientific and technical knowledge being created and applied in England. Ambitious Englishmen with technical knowledge, like Samuel Slater the founder of the American textile industry, came to America because they had more opportunity here to get rich. Americans read English scientific and technical journals; often, American like Robert Fulton went to England to see the new methods and machinery. The future Baltimore and Ohio Railroad sent an engineer over to England to find out about English railroad technology even before England had completed its first general purpose railroad.

One reason industrialization spread was the association of entrepreneurs with investment capital looking for new profit opportunities with mechanics interested in designing and developing new power-driven machinery, especially metal-working machinery.  In the beginning, many of the machine tools and power-driven machinery could be built using traditional craft skills, using traditional materials like wood and hand (or foot) operated tools. The power sources to drive the machinery were not a problem. Waterwheels had been used for hundreds of years in Europe; steam engines could be imported from England. They would soon be designed, improved and produced in America. 

There were inspired geniuses like James Watt in England and Oliver Evans in America who greatly improved the steam engine, which had been in use in England since the early 1700s. Then modifications and adaptations of existing power-driven machinery and machine tools like lathes often led to large increases in productivity of particular products. In one early example, an American axe manufacturer hired a mechanic to design and development a die forging machine to produce axe heads. His machine increased the productivity of a single skilled striker and an assistant from 12 to 300 axe heads per day. It was these kinds of innovations that drove the Industrial Revolution.

Americans often surpassed the English in their ability to mass-produce products at a lower cost. American products were generally not as good as English products but their lower cost, plus constant improvement, led to a great deal of innovation and high growth rates. Americans developed a reputation of making it fast, making it cheap today and improving it tomorrow. 

                                                                                                             
LABOR

There was no labor shortage for the factories and mines because of high birthrates, high rates of population growth, open immigration, and the use of women in the industrial workforce. This was also a high quality labor force with high literacy rates among native-born workers. Also, there were no entrenched guilds of craft workers to discourage introduction of new production techniques or influence the organization of work in the factories.

ADVANCES IN RAW MATERIAL PRODUCTION

The Industrial Revolution would have been a limited affair if not for the huge increase in the production of metals, especially iron. The new steam engines, machine tools and machinery were made out of iron and other metals. Fortunately, much of the new production technology - smelting iron ore with anthracite (hard) coal or coke and puddling pig iron to reduce the carbon content for forging - had been worked out in England and Wales in the 1700s. Americans had access to or knowledge of this technology when the demand for iron skyrocketed after 1820. Entrepreneurs built larger furnaces, brought over the new Welsh technology of smelting iron ore with anthracite coal, installed steam engines to heat and blow air into the furnace, and recycled waste heat to raise temperatures. The result was a big increase in iron production at a lower cost per ton. The increasing production of iron for casting and forging eliminated a potential bottleneck to rapid industrialization.

Large amounts of iron would be vital to the development of the railroad industry.

TRANSPORTATION COSTS

The single largest transaction cost at the beginning of the Industrial Revolution was transportation costs. High overland transportation costs because of long distances and rugged terrain limited the size of markets and made products expensive.

These high costs were first attacked on a large scale with the building of canals, inspired by the spectacular success of the Erie Canal (fully opened in 1825). Overland transportation costs fell by about 80%. At the same time, steamboats on Western rivers reduced costs and permitted upstream navigation. America had the largest navigable river network in the world. Then, starting in the 1830s, came railroads, another new technology developed in England. Within two years, American mechanics and engineers were modifying English designs to match America's harsher conditions. American companies began producing locomotives and other rolling stock. American railroad companies figured out how to lay down track quicker and at a lower cost than the better built railroads of England. This was an early example of the American business ethos – build it fast, build it cheap, get it up and running, generate revenue, then fix it.

Compared to canals and steamboats, railroads offered huge increases in total carrying capacity, year-round operation, lower cost, greater flexibility and reliability, and big savings in time moving goods, people, and information. The explosion of needed information to run a large railroad created serious management problems, to say nothing of trains crashing into each other. The problem was partly solved by the creation of the telegraph. Railroads financed many of the early telegraph lines, often strung alongside railroad tracks. 
Railroads also pioneered the decentralization of operations management into divisions that suggested the organizational structure for later industrial corporations.

Throughout the Industrial Revolution, America had by far the largest railroad transportation system in the world. It overcame large distances and supported western expansion. Railroads moved agricultural goods to urban markets and ports, and manufactured goods to rural areas. They were vital to the creation of a national market.

THE SPREAD OF THE INDUSTRIAL REVOLUTION

The thinking of Francis Cabot Lowell, a Boston merchant, was indicative of a new kind of mentality that was crucial to the success of the Industrial Revolution in America. He was a newly rich merchant looking for new investments. Lowell saw cotton textile production as an integrated system in one factory. He thought about how the different production steps could be coordinated in one, large mill to reduce handling costs and increase overall productivity. Lowell raised the investment funds from fellow Boston merchants to pay for the high upfront capital costs of constructing large buildings and textile machinery. He is the founder of America’s first large-scale manufacturing industry – cotton textiles. He is also famous because he went to England to steal the designs of power-driven looms.

What mill managers and mechanics subsequently learned from experience was that whenever they increased the productivity in any part of the production system it created bottlenecks elsewhere in the system. Better, faster machines would then have to be designed for other stages of production. This would create new bottlenecks; the process was one of continuous improvement in the production flow.

Back to the axe example. When die-forging machines made many more axe heads per hour, this created a serious bottleneck problem in the milling (or grinding) of the head into the right shape.  New power equipment was invented to plane (or sand) the heads faster than the old technology. This, in turn, put pressure on the methods to temper (or harden) the heads; innovative new specialized ovens were designed to increase the product flow and improve quality. This same process worked in all successful companies in all industries that adopted power-driven machinery.

Americans like Thomas Jefferson, Eli Whitney, and the technically trained officers of the army realized early the potential of the mass production of interchangeable parts that could be fitted together quickly by unskilled labor to produce and repair guns. Interchangeable parts, when fitted together with other interchangeable parts, eliminated the slow and expensive need for hand filing and fitting to make metal parts fit together. It took over 30 years to make the system operational. It made possible the mass production of new metal products such as sewing machines, typewriters, and automobiles. This new manufacturing process was so radical that English engineers called it the American System of Manufacturing.

The cumulative effect of this industrializing process was increasing productivity, higher volume of output, better quality and lower unit cost. This trend spread to other industries with the application of general-purpose machine tools to new uses. Itinerant mechanics adapted their knowledge and experience to modernize the production of new products. Techniques developed in one industry were often transferable to new industries. Success in one industry inspired entrepreneurs to apply the same methods in other industries.  This is how the Waltham Watch Company got started; the founder was inspired by a visit to the Springfield Armory, famous for the mass production of rifles. Sometimes this occurred in the same company; Remington went from producing guns to producing sewing machines to producing typewriters.

At first, industrial products were familiar products just produced at a lower unit cost by power-driven machinery in factories. Examples included cloth, shoes, paper, nails, clocks, and guns. Lower prices had the same effect as higher income; consumers had money left over to buy more of other products. But as production technology advanced - new and more specialized machine tools, the mass production of steel and the ability to work new materials - it became possible to design and produce new, complicated metal consumer and producer durables. New production techniques developed, such as the stamping rather than the grinding of parts. This led to the mass production of the automobile.
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See related posts:

How America Became Wealthy:   Introductory Remarks. 

A Stylized Model of Innovation:  The Dynamics of Capitalism.


Compare the American experience with that of England:



For an excellent example of an entrepreneur at the beginning of the Industrial Revolution in England, see


Josiah Wedgwood, the Wedgwood Pottery Company, and the Beginning of the Industrial Revolution.


For the story of how England lost its economic leadership, see A Cautionary Tale:  England and the Industrial Revolution.


For a list of posts, see List of Posts by Topic.





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