Industry
Alexander Hamilton: Debt, Banks, and Manufactures.
U.S. Revolutionary War hyperinflation: $241 million continental dollars worth $1 million gold dollars by the end of the war.
Value of Revolutionary War debt tripled as debt assumption was discussed and debated.
- Alexander Hamilton believed that an America which owed lots of rich merchants lots of money--an America that "assumed" the debts the states had run up during the Revolutionary War and were not likely to pay--would be a stronger and better America. Why did he believe this?
Megasthenes: the coming of cotton to the Mediterranean...
David Ricardo: Why didn't the U.S. become one big unindustralized Canada?
- Answer: the tariff
Could the tariff have been good for the country?
- Answer--yes, if the infant industry argument holds.
What is the infant industry argument?
- There has to be some benefit--external to the firm and to the worker--from production.
- Future productivity has to be positively influenced by past production in order to make it beneficial in the long run to upset the Ricardian pattern of comparative advantage.
- The infant industry argument is plausible, but not certain, for the case of U.S. textile manufacture.
- Even so, it's not good for the cotton-exporting tariff-paying south.
The history of the cotton textile business: Samuel Slater, Francis Cabot Lowell, Lowell Massachusetts, et cetera...
Peter Temin's article: the American system:
- The Crystal Palace exhibition
- What is special about American industry
- Eli Whitney
- Interchangeable parts
- The "American System"
- Resource-using technological style.
Consequences for post-Civil War industrialization...
Slavery
The Slave Trade: Guns. Slaves. Sugar/molasses/tobacco/cotton. Very profitable. Extraordinarily inhumane
Adam Smith expected slavery to come to a rapid end after 1776.
- Inefficient--slave has no incentive
- An incentive-compatible system produces a larger economic pie
- And people can decide on a system better for everyone--a system that's still unequal, but not as brutal and vicious
Adam Smith was wrong. Why?
What maintains slavery?
- Extreme cheapness of slaves--makes vicious discipline credible
- Extreme control--slaves cannot run away
- Extreme monitoring--easy to see if slaves are working hard
- Caesar; classical Roman slavery; Arabic slavery; mamelukes
The American South
- Quick end of indentured servitude
- The assumption that everyone black was a slave makes control easy
- Plantation staple crops make monitoring easy?
- Cheapness? That became a problem after 1807
Still slavery persisted; Domar's argument; free land made it impossible to strike the emancipatory bargain--hence the coming of the Civil War...
The Persistence of Southern Slavery the Result of:
- Free land (which makes emancipatory bargains unworkable) (Marx: Swann River Colony)
- Cotton gin (which gives you another staple crop you can grow for which monitoring is easy)
- Geographical distribution of slavery:
- Plantation south--slavery
- Mountain south--not much slavery
- North--no slavery
- Border state antislavery--Cassius Clay--get rid of the "Peculiar Institution"--no desire to free African Americans
- The northern desire to see slavery set on the "course of ultimate extinction"
Ulpian: Roman jurist: Cui Bono? Who Benefits? Who benefitted from the crime of American slavery?
Do comparative statics with a counterfactual world in which cotton was grown using free labor rather than with slaves...
That is the "cotton is king" problem set that will be handed out on Wednesday, and will be due on the 19th
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