Helpful Vocab Natural resources:: raw materials Commerce: buying and selling of goods Federalism: system of govt when power is shared between fed/state Stabilize: to make stable Regulation: government control/decisions related to business and the economy

Free-Enterprise System Definition: private companies compete for $ profits $ ALSO KNOWN AS: CAPITALISM Key feature: Rewards people who can find better, faster, efficient ways of running their business. Effect: Encourages innovation, productivity, and creation of new industries, jobs, and wealth

Reminder: Industrial Revolution Definition: increase in production using new technology and mechanization Important invention: Steam engine Started in Britain in 1700s (textile industry using flowing water to run mills). Ideas brought over in 1780s.

Eli Whitney's Invention Changes America Forever Changed industry with interchangeable parts (parts are made to the exact same standard) Cotton Gin: separates out cotton seeds 1794 patent Before, one worker could clean 1lb of cotton per day. Now one worker...1,000 lbs per day! HOLY SMOKES!

Cotton Gin - The Effects COTTON EXPORTS GO UP 6000% IN 25 YEARS! 1) profit skyrocketed, exports boomed 2) south begins to depend on cotton 3) need for new land increased (Alabama, Mississippi, Louisiana, Texas) 4) increased use of slave labor Enslaved population doubled between

Transportation & Communication Many innovative building projects 1)Roads Cumberland Road Mostly private investors

(Before, they had to float down to New Orleans, then go through Gulf of Mexico around Florida, and north to ports on Atlantic Coast – took forever! Then, had to walk back too!) 2) River travel: Country’s first major transportation routes Ohio & Mississippi River important Steam Boat changes everything! could travel upriver much faster carries more IMPACT: Southern planters & Western farmers increase trade & profits! Transportation & Communication Many innovative building projects

Canals: artificial waterways By 1840, 3000 miles of canals! Erie Canal built by NY linked Atlantic Coast to Great Lakes IMPACT? made possible settlement in Great Lakes region. (Farms could easily ship products to Eastern markets!) NYC becomes powerful center of business Transportation & Communication Many innovative building projects Railroads (steam- locomotive): Even more efficient! More goods and more passengers than steamboats First one? Baltimore and Ohio Line By 1840, more than 3,300 miles of track (more than any other in world) Communication Postal services National network of information: newspapers, magazines, books Increasing literacy and communication links = free exchange of ideas, helped tie together different parts of country

Market Revolution Definition: Change in the way we made, bought, and sold goods and our system of borrowing and circulating money to create wealth. Before the Marker Revolution, America had been mostly farmers. Causes: Industrial Revolution = manufacturing is spreading. LOTS of workers… and shoppers Free-enterprise system and private investors

Market Revolution Effects: Dramatically increased production Manufacturing industries spread Becomes backbone of North’s economy Rise of… Working outside the home Movement to cities Specialization: performing one part of production process "Products made at an astounding rate." Shopping!

Market Revolution BIG IDEAS: A free-enterprise system encourages economic growth and consumerism. The growing supply of goods will forever change the pattern of American life. Also… the argument over the role that government should play in business, large building projects, and the economy begins.

The Role of Banks First banks arrive in 1780s and 1790s How did they make money? People deposit money in bank for safe keeping (and promise of interest from the bank) Made loans using money people deposited Offer loans to other people and charge interest How do people use loans? As "Investment Capital" = money that a business spends in hopes of future gain Goal: increase production & create more profit for business

The Role of Banks Early Banks Helped the economy by providing investment capital Uh oh… uncontrolled lending? States & national govt did not restrict “runaway lending” Gave loans to people who could NOT pay back Banks might not have enough cash on hand to pay depositors back PANIC would lead to BANK RUNS (sending the bank out of business) Depression! Cycles of “boom and bust” common Bank & business failures & widespread unemployment

It’s a Wonderful Life Anyone?

Another issue: Bank Notes (Remember early republic = no paper money, used gold/silver coins) What are they? Piece of paper (like a check) banks gave to customers, could use to pay for goods and services In theory: could bring bank note back and cash it for specie Why problematic? Banks printed more than actually had. Value became unpredictable.

BIG IDEA Banks played a key role in economic expansion. Different areas grew at different rates. As a whole, the US achieved a new level of prosperity in the 1800s.

Check your comprehension: 1. What American inventions and new technologies came about during the Industrial Revolution? Steamboats, cotton gin, steam shovel, interchangeable parts, mechanized cotton mills, canning factories, agricultural inventions, canal system. new roads, RR!

Check your comprehension: 2. Describe the effects of manufacturing and investment capital on the U.S. economy. Manufacturing made more goods available for purchase, so money became more widely used. For the first time, the producers of goods were not the people that used then. Items people used to have to make for themselves were now available for purchase. The availability of investment capital enabled business owners to improve and expand their businesses. This, in turn, enabled the economy as a whole to expand, creating new wealth.

Check your comprehension: 3. What are the advantages of a centralized production process? Centralization dramatically increased production, which brought great prosperity to the economy of the North.

Check your comprehension: 4. How did banks spur economic growth? Banks provided the capital entrepreneurs needed to build new factories or expand and improve existing facilities. They did this by loaning out some of the money that depositors had placed in banks. These loans then had to be repaid with interest. If the product/business is successful, EVERYBODY WINS!

Objectives Continue to explain the role of Presidents and political parties before 1850 Describe the Market Revolution, including: reasons for technical innovation and transportation revolution banking revolution impact Analyze growing sectional tensions

Cambridge Objectives Key Question 1: Why was there a “market revolution” during the years 1754 to 1900? Focus Points: How did technical innovation and the transportation revolution affect the “market revolution”? How did political and legal systems influence the “market revolution”? What were the social consequences of the “market revolution”? Specified Content: The rise of manufacturing in the early 19th century: the Francis Lowell textile factory, the importance of New England and the Ohio River Valley, the free enterprise system The Banking Revolution: early banks, circulation of bank notes, controls (McCulloch v. Maryland 1819), other regulations on business and commerce ( Dartmouth College v. Woodward 1819), Gibbons v. Ogden 1824 New technology: Eli Whitney, “interchangeable parts” and the cotton gin 1793; steam power, canals, railroads, roads The impact of the Industrial Revolution on living and working conditions