The End of Laissez Faire in the U.S. Economy

Civil war period marks a period of great change in the American Economy
Per capita GNP increasing at 2 % per Year
average value of manufacturing increasing greater than agriculture

What happened in England in 1801 was happening in the U.S.- 2nd industrial revolution

**transformed the U.S. economy into something other than Adam Smith's world of small shops and factories--after Lynne what happens next.

The Transformation of the nature of business organization

Robber Barrons-

Conditions

**amount of capital needed to finance large scale industry meant seeking private banks and stock and bond market for money

** Few gov regulations on business--separtation of ownership and production opened the door for irresponsible financial manipulation at a time when competition became intense

**Competiton obsolete--too risky

**Investment in plant and equipment necessary

1893-97 Financial panic

1897 on--revolution caused by
1. sudden mergers
2. capitalization of new combinations

These were restricted to a minority of dominant American industries-

Causes:

1. growth of capital market for industrial stocks
2. shifting economic interests--institutionsal struggles to raise funds- mergers-monopoly
3. capital in 1890 form st loans and profits (stock 1890 xchange 1893
4. instability bankruptcy in depressions
5. mergers created new sources of capital

Results:

1. growing competition
2. expansion
3. greater concentration in many industries
a. of capital
b. of output

Paved way for political importance--many worse off after mergers

Decline due to

1. technological concervitivism
2. lack of flexible leadership
3. rapid growth in industry/innovation
4. increased competition

Private control failed