IV.Reconstruction through the Roaring Twenties (1865 – 1929)

Date: 2015-10-07; view: 437.

III.The Economics of War

The 1848 discovery of gold in California not only drew hundreds of thousands of people out West; it also shifted the balance of economic attention of the United States. By the beginning of the Civil War in 1861, gold not only backed American currency. Before long, however, both the North and the South resorted to paper currency.

By the Civil War, already a third of the national economy was powered by manufacturing, most of which was in the North. Following the war, the American economy was driven by innovation and invention that spurred tremendous growth of the industrial infrastructure. In short, rapid development—and much of it a result of advances in mass production. Individual business enterprise became the backbone of the United States economy. It was a “Gilded Age” in America, built by entrepreneurs in manufacturing and commerce, which outpaced the economic contribution of agriculture by the beginning of the 20^th century.

In the economic history of the United States, the early twentieth century remains critical for major advancements in technology. The steam- and water-powered economy received a jolt by the spread of modern electricity, and the advent of the automobile. Entering late into World War I, the United States was primed to shift its industry and vast amounts of raw materials to wartime.

At the time, America was sticking to a gold standard to back its currency, so avoiding simply printing additional money was meant to help preserve the standard, while preventing inflation. The war altered the American economy in many ways. The Federal Reserve assumed a more dominant role as New York became the financial center of the world. The federal government, in short, showed it could be a dominant force in the American economy.