Economics & Entrepreneurs of the early 1800’s

1. The First Industrial Revolution & The American System Economics & Entrepreneurs of the early 1800’s

2. What famous American?... • As a 19 year old, left home on a flatboat for a 1000 mile journey to New Orleans. • Took wheat from Ohio by going down the Mississippi River, then sent it on a boat to Philadelphia…even though it was much shorter distance by going over land. • Sold your boat for lumber after you get there, rather taking back home. • Ride a steamboat, invented by Robert Fulton, back upstream to Iliinois…and later got a patent for an improvement in the flatboat industry?

3. Abe Lincoln: Flatboat Pilot/ Entrepreneur? • In 1831, a 22 year old farm boy named Abe went on a flatboat trip downriver from Indiana to New Orleans. He then sold the boat to someone who would destroy it for the timber. He then took a new invention, the steamboat back upstream on the Mississippi. • The Industrial Revolution changed the way commerce was done in the United States.

4. In your group, define and give examples of “entrepreneurs” What would your definition be? What 4 “rules/ principles” would make a businessman also be an entrepreneur?

5. Entrepreneurs of the Industrial Revolution • Entrepreneurs: • Identify an opportunity • Willing to take a financial loss in hope of making a profit • Secure financial capital • Bring together productive resources to produce a good or service

6. Who is an entrepreneur today? • What are some ideas of entrepreneur products for the future?

7. How does a democracy… …encourage entrepreneurs?

8. Eli Whitney: Opportunist or Entrepreneur? • The first major contributor to the Industrial Revolution was Eli Whitney. • Both of his major contributions (interchangeable parts for guns & the cotton gin) were a result of him understanding the need to make work more efficient.

9. Interchangeable Cotton GinParts

10. “ Eli Whitney’s letter to his family (10/11/1793) • “I went from New York with the family of the late Major General Nathaniel Greene to…their plantation 12 miles from Savannah. During this time, I heard much said of the extreme difficulty of ginning cotton, that is, separating it from its seeds. A number or respected men at Mrs. Greene’s all agreed that if a machine could be invented which would clean the cotton (quickly & easily) , it would be a great thing to the Country and the inventor. I involuntarily happened to be thinking on the subject and struck out on a plan of a Machine in my mind, which I communicated to Mr. Miller. He was pleased with the Plan and said if I would pursue it and try an experiment to see if would answer. He would be at the whole expense, I should lose nothing but my time, and if I succeeded, we would share the profits…I concluded to turn my attention to perfecting the machine.” Who’s the entrepreneur here?

11. Cotton Productivity • Before cotton gin (1792): • 120,000 bales = 18 cents a bale • 1 Man = 1 pound of “Clean Cotton” • After cotton gin: (1850): • 2,100,000 bales= 13 cents • 1 Man= 50 pounds of “Clean Cotton”

12. Situation in the early 1800’s • 1. Normal trade partnerships with England, Spain, and Portugal was weakened after the American Revolution. • 2. Rice prices were falling; tobacco markets were stagnant • Yet, one invention led to a dramatic change in the Southern economy and the growth of the slave trade: • 1800- 200,000 bales produced in South • 1860- 4,000,000 bales are produced in South

13. The Law of One Price • Economists call the tendency of goods to sell for the same price everywhere as “The Law of One Price.” • This works when transportation is easy and inexpensive. • They do this by buying goods for low prices in one place, and then taking them to places where the supply is low and the best price can be found. • How would an entrepreneur use this situation to his/her advantage?

14. Samuel Slater &Francis Lowell • England tried to protect its leadership in the textile industry by forbidding people from take plans for a factory out of the country. • Samuel Slater memorized how to build a machine that would spin cotton into thread. Cotton fabric could be washed without shrinking and were inexpensive, so people could own more clothes. • Francis Lowell, a Boston merchant, secretly went to England to observe the textile mills there. Because of President Jefferson’s Embargo Act and the Napoleonic Wars, he figured he would bring the industry to the U.S. H returned to Boston and sold $400,000 worth of stock in his factory.

15. Lowell Girls: A New Opportunity? • Lowell also decided he’d hire young single girls from New England farms for his primary work force. His terms: • He paid them $2.50 a week, with $1.25 of that being deducted to pay for room and board. By working 6 days a week, that came to 4 cents/hour for their pay. • They’d stay in dorms, have night classes and hear guest lecturers like Ralph Waldo Emerson and Horace Mann. • Most worked 2-3 years, long enough to earn a dowry.

16. A Lowell Girl: Her Own Words • “It so happens that I was born in New Hampshire, where my mother still resides, with a large family of young children dependent on her for support, and hard does she have to struggle to gain a livelihood for herself and her offspring; and but for the charity of several kinds of friends and neighbors, she would have to put them out before they knew the first rudiments taught in our common schools. Sensible that she had a weight upon her heavy to be borne, to lighten the load, I left home and came to Cabotville. When I came here, I could not read, except by spelling out words like a child of very few years. I had not commenced learning to write, and all the learning I now have has been gained without instruction, having obtained it alone and that too, after I had labored in the mill twelve hours a day.”

17. Transportation: Important Issues to the American System • How would these stats affect producers & consumers? • Turnpike: 0.7 tons per horse; can travel 2 m.p.h. • Canal: 10.0 tons per horse; can travel 4 m.p.h. • Railroad: 20.0 tons per horse; can travel 6 m.p.h. Henry Clay’s calling for “An American System” Reasons for the Erie Canal

18. Is Governor Clinton an Entrepreneur? • Cost of sending a ton of wheat from Buffalo to New York City- in dollars: • 1817- $100 (by wagon) • 1829- $10 (by Erie Canal) • Cost of freight from New Orleans to Louisville—in time: • 1810: 3-4 months (keelboat) • 1820: 1 month (steamboat) • 1860: 1 week (steamboat, with freight rates down 90% from 1814)

19. How Did American System Help each region of the U.S.? • The North? • The South? • The West? • What do you think President Monroe thought of Henry Clay’s plan?

20. How did economics lead to our “Manifest Destiny”?

21. Bibliography • Schug, Mark & Wood, William C. Economic Episodes in American History (2011) • Schug, Mark. Focus: Understanding Economics in U.S. History (2006)