Session 13.

Globalization and the Transformation of Northern Agriculture

1. The rise of Populism in the late 19th century.

a) Monetary-financial conditions, notably the adoption of the gold standard.
b) Increasing economic integration (combined with biased trade policy).

2. After the Civil War, the US became one of the leading suppliers of foodstuffs
in world (esp. European) markets.
a) Rapid productivity growth and territorial expansion.
b) Innovations in transportation and communication but also in agricultural
technologies.

3. Globalization part 1: the formation of a national market.

a) The dynamics of postbellum RR construction: expansion and consolidation.
b) Productivity growth (and lower freight rates) through technological and
organizational/institutional innovations.

4. Settlement and development of “new” agricultural regions in the plains, along

the Pacific coast.
a) A “Ricardian” process? Extension of the extensive but also intensive
margin.

5. Globalization did not stop at the coasts but integrated US farmers into
increasingly competitive global markets.
a) Global convergence of (e.g.) grain prices; formation of a truly global
market.
b) Increased competition and worsening terms of trade for American farmers.

6. Did these factors play a role in the presidential elections in the 1890s?
366 THE REVIEW OF ECONOMICS AND STATISTICS

TABLE 1.—LEADING U.S. EXPORTS, SELECTED YEARS BETWEEN 1890 AND 1913
1890 1895 1900 1913
1. Cotton $250.9 Cotton $204.9 Grains $262.7 Cotton $546.3
(29.7%) (25.8%) (19.2%) (22.5%)

2. Grains $154.9 Meat & Dairy $135.2 Cotton $241.8 Iron & Steel $304.6
(18.3%) (16.8%) (17.6%) (12.5%)

3. Meat & Dairy $136.2 Grains $114.6 Meat & Dairy $184.5 Grains $211.1
(16.1%) (14.4%) (13.5%) (8.7%)

4. Petroleum $51.4 Petroleum $46.7 Iron & Steel $121.9 Meat & Dairy $153.9
(6.1%) (5.9%) (9.0%) (6.3%)

5. Animals $33.6 Animals $35.7 Petroleum $75.6 Copper & Mfgs. $140.2
(3.9%) (4.5%) (5.5%) (5.8%)

6. Wood & Mfgs. $28.3 Iron & Steel $32.0 Copper & Mfgs. $58.9 Petroleum $129.7
(3.3%) (4.0%) (4.3%) (5.3%)

7. Iron & Steel $25.5 Tobacco & Mfgs. $29.8 Wood & Mfgs. $50.6 Wood & Mfgs. $115.7
(3.0%) (3.8%) (3.7%) (4.8%)
Source: Statistical Abstract of the United States, various years. Figures in millions of dollars; percentages of total exports in parentheses.

From D. Irwin (2003).

period (Broadberry, 1997, p. 106). In the 1880s, a decade in
which there was essentially no change in the commodity
composition of U.S. trade, capital per worker in U.S. man-
ufacturing rose rapidly compared to the United Kingdom.
During the 1890s, a period in which U.S. exports of man-
ufactures expanded rapidly, growth in capital per worker in
U.S. manufacturing also increased relative to the United
Kingdom, but at a much slower pace. The relative produc-
tivity performance of U.S. manufacturers was essentially
unchanged throughout this period. Thus, in some sense,
changes at the aggregate level fail to provide an obvious
explanation for the timing of the export surge, because there
are no striking developments in the 1890s that would lead
one to single out that decade as the one in which the
structure of U.S. exports would undergo a sharp change.
Yet capital accumulation and technological change al-
most surely contributed to the export surge in some way,
and perhaps these aggregate movements mask important
changes at the industry level. Indeed, the export boom was
not broadly based across manufacturing industries, but con-
centrated in iron and steel products. Table 1 presents the
leading U.S. exports between 1890 and 1913 and shows that
iron and steel was the largest category of manufactured
exports. Iron and steel exports jumped from 4.0% of all
exports in 1895 to 9.0% in 1900. In these five years, the
volume of iron and steel exports rose by a factor of more
than 6, as shown on figure 3 (Lipsey, 1963, p. 257).1 The
ratio of iron and steel exports to production rose from 4.4%
in 1889 to 11.7% in 1899 (Statistical Abstract of the United
States, 1904, pp. 218, 522).
1 Lipsey presents two series for iron and steel export volume, one for
semimanufactured exports (069) and another for manufactured exports
(070). This paper uses a value-weighted average of these two series to
represent overall iron and steel export volume (the weights are from
Lipsey, 1963, pp. 168–169).
Exports of all iron and steel products increased sharply in
these five years. The largest single category was machinery,
which included engines, electrical machines, sewing ma-
chines, typewriters, cash registers, and printing presses.
Other prominent categories included steel rails, pipes and
fittings, wire, tools, locks and hinges, billets, and structural
iron and steel. Europe and North America were the most
important destinations for these exports. Iron and steel
exports to Europe grew from $8.5 million in 1895 to $45.8
million in 1900, while exports to North America (mainly
structural steel to Canada and steel rails to Mexico) grew
from $14.1 million to $42.4 million. Much of this export
growth took place in what had been traditional British
export markets; in fact, exports of iron and steel to the
United Kingdom rose from $4.6 million in 1895 to $21.2
million in 1900 (U.S. Department of Commerce and Labor,
1907, p. 41).
As shown in figure 3, however, export growth slammed to
a halt between 1900 and 1908. The volume of iron and steel
exports was even slightly lower in 1908 than in 1900. After
1908, these exports surged again: the iron and steel export
volume rose by a factor of more than 2 in the five years to
1913. In this second surge, the iron-and-steel share of total
exports rose from 10.0% in 1908 to 12.5% in 1913, but this
time export growth matched the growth in domestic pro-
duction as the ratio of iron and steel exports to production
fell from 11.7% in 1899 to 10.5% in 1909 (Statistical
Abstract of the United States, 1915, pp. 436, 452, 192).
Although exports of other manufactured goods grew
rapidly during this period, no other industry played such a
leading role in propelling the United States toward a net
export position in manufactured goods. The key to under-
standing the changing composition of U.S. exports, there-
fore, involves an explanation of why American iron and
 Unit Labor Requirements in Corn, Wheat and Cotton Cultivation
700

601
600

500

438

400 373
Labor hours

344 1800
1840
303
300 276 284 1880
1900
233

200 180 185

147 152
135
119112
108
100 86
69
46 38 56
35
20 15
0
Per acre Per 100 bushels Per acre Per 100 bushels Per acre Per bale
Corn Wheat Cotton

Source: Historical Statistics of the U.S., ch. Da, Table Da1143-1171

 TABLE1
PARKER AND KLEIN'S ANALYSIS OF LABOR-PRODUCTIVITY GROWTH IN WHEAT CULT
United R R2 R3 Corn Western
Period States Northeast South West Belt Dai
A: preharvestlabor 1 13.6 19.1 11.3 12.4 12.4
(hoursper acre) 2 5.5 11.6 10.7 4.7 5.5 6.1
B: harvestlabor 1 13.9 15.0 12.5 15.0 15.0
(hoursper acre) 2 2.4 3.0 3.0 2.3 3.0 3.0
Y: yield per acre 1 11.3 14.5 8.4 13.0 13.0
(bushelsper acre) 2 14.0 17.5 12.3 14.0 15.8 15.3
C: postharvestlabor 1 0.73 0.73 0.73 0.73 0.73
(hoursper bushels) 2 0.20 0.19 0.29 0.19 0.224 0.165
W: acreageshares 1 1.00 0.26 0.46 0.28 0.282
2 1.00 0.04 0.09 0.88 0.207 0.098
V: outputshares 1 1.00 0.33 0.34 0.32 0.324
2 1.00 0.05 0.08 0.88 0.235 0.108
Totallaborperbushel 1 3.17 3.08 3.56 2.84 2.838
((a+b)/y)+c 2 0.76 1.02 1.40 0.69 0.762 0.760
"Mechanizationeffect" 1.29
"Yieldeffect" 2.68
"Westernsettlementeffect" 2.90
"Combinedmechanization 0.84
andsettlementeffects"
Notes:Period1 is 1839;Period2 is 1907-1911. ND meansno data.Forregionaldefinitions,see the text of footnote11. In 1
segregated."Mechanization Effect"measureshoursper bushel using 1907-1911 laborcoefficientsand 1839 valuesof yield
2; Y, V = 1;"YieldEffect"uses 1907-1911 yields and 1839 laborcoefficientsandregionaloutputshares,Y = 2, A, B, C, V 1=
regionaloutputsharesand 1839 laborcoefficientsandyields, V = 2; A, B, C, Y = 1, "CombinedMechanizationandSettlem
andregionaloutputsharesand 1839 yields A, B, C, V = 2; Y = 1.
Source:ParkerandKlein, "ProductivityGrowth,"pp. 532-35.
in Wheat Culture, 1840-1910
Labor productivity growth
L
 RedQueenandHardReds 935

FIGURE2A
WHEATPRODUCTION,1839
Note: Eachdot represent100,000bushels.
Sources:Paullin,Atlas,plate 143P,usedby permission.

FIGURE2B
WHEATPRODUCTION,1909

Note:Eachdot represents50,000 bushels.

Source:U.S. Bureauof the Census,ThirteenthCensus,Vol. 5, plateno. 3.
Agr. Experiment
Stations, 1962
 New Railroad Construction: Miles Operated and Owned
14000

12000 Operated

Owned

10000
Miles off new road construction

8000

6000

4000

2000

0
 Miles in Receivership

10000
15000
20000
25000
30000

5000

0
18
70
18
71
18
72
18
73
18
74
18
75
18
76
18
77
18
78
Mileage

18
79
% total Miles

18
80
18
81
18
82
18
83
18
84
18
85
18
86
18
87
18
Railroads in Receivership

88
18
89
18
90
18
91
18
92
18
93
18
94
18
95
18
96
18
97
0
2
4
6
8
10
12
14
16
18

% of Total Miles
 Railroad Construction after the Civil War
Period
Region 1868-1873 1879-1883 1886-1892
New England 1,376 5.6% 358 0.9% 605 1.3%
Middle Atlantic 3,833 15.6% 2,873 7.3% 2,557 5.5%
Central North 3,847 15.6% 7,539 19.1% 6,839 14.6%
Western North 3,749 15.2% 9,036 22.8% 9,396 20.1%
South Atlantic 1,937 7.9% 2,881 7.3% 6,639 14.2%
Gulf 2,041 8.3% 2,323 5.9% 4,409 9.4%
Western South 5,709 23.2% 10,343 26.1% 11,754 25.1%
Pacific 2,097 8.5% 4,200 10.6% 4,619 9.9%
Total 24,589 39,553 46,818
Expansion of the U.S. Rail Network,
1860‐1900
1860 1870
Expansion of the U.S. Rail Network,
1860‐1900
1880 1890
 United States Railroads, 1901
Jacques W. Redway, Natural Advanced Geography (New York, New York: American Book Company, 1901)
Downloaded from Maps ETC, on the web at http://etc.usf.edu/maps [map #02588]
Important Commercial Routes, 1901
Important Commercial Routes, 1901
Map of the Pennsylvania Railroad System, 1909
 3

the United States and the United Kingdom, the archetypal producer and consumer
countries. Section Three explores the patterns of integration in a wider range of countries,
Williamson’s “Atlantic” economy. Section Four assesses the importance of domestic
versus international convergence. Section Five deals with the causes of integration, and
section Six concludes.

2) What happened, I: price convergence across the Atlantic

As a starting point, Graph 1 compares ratios of wheat prices in the United Kingdom
with prices in New York (1800-1900) and Chicago (1840 to present). Both series
fluctuate widely in the short run – so the graph reports also the results of a Kernel fitting
2

Graph 1. Price convergence, United States to United Kingdom, 1800-2000

(Ratio of UK to NYC or Chicago prices)
3.5

3.0

2.5

Chicago
2.0

1.5

1.0
New York
0.5
1800 1825 1850 1875 1900 1925 1950 1975

United Kingdom New York (series) Source: Federico and

United Kingdom New York (Kernel) Persson (2006).
United Kingdom Chicago (series)
United Kingdom Chicago (Kernel)

Source: See Appendix 2.

2
Each point is obtained by fitting a polynomial, weighting the observations with a Epanechnikov
kernel. All the rates of change quoted in this article are computed with linear interpolation, adding
a AR(1) term when necessary.

3
 Railroad Output, Efficiency, and Rates

100.00 3

Output
2.5
TFP
80.00
Rates
Index of Output and TFP (1910=100)

Ave. Freight Rates (cents/ton-mile)

2

60.00

1.5

40.00

20.00
0.5

0.00 0
1839 1849 1859 1870 1880 1890 1900 1910
Percent of Land in Farms by County http://nac.unl.edu/atlas/Map_Html/Demographics/National/Land_in_Far...

2 of 3 4/10/2013 4:51 PM
 52 agricultural history

Table2. Real Value per Improved Farm Acre, Adjusted for Interstate Drift, by
Region,1850-1986 (in 1960 New England consumer dollars per acre)

1850 1860 1870 1880 1890 1900

N. England 41.26 46.22 33.54 49.07 54.04 71.04

38.4%
M. Atl. 78.00 98.61 82.23 102.41 112.32 113.83
E.N.C. 57.37 92.66 77.96 99.44 121.53 141.64 81.5%

W.N.C. 19.03 31.67 30.39 34.01 51.29 67.50

S. Atl. 20.23 29.28 14.98 26.34 41.35 45.30
E.S.C. 32.47 58.85 26.31 30.93 37.96 41.44
W.S.C. 21.73 26.89 16.75 23.43 35.39 38.90
Mountain
Pacific
NATIONAL 34.06 49.08 34.78 47.43 59.82 70.88
US % real capital 3.72 -3.38 3.15 2.35 1.71
gain/yr.:
US % nominal capi- 4.42 0.06 0.52 1.73 0.71
tal gain/yr:

19 10 19 15 1920 1930 1940 1945 1950

N. England 91.57 90.39 74.90 72.19 65.54 83.29 72.92

M.Atl. 126.66 115.94 86.81 91.46 79.54 93.84 97.49
E.N.C. 233.35 232.29 205.20 116.37 104.54 129.01 137.77
W.N.C. 136.22 147.60 146.63 89.71 57.64 67.78 75.24
S. Atl. 87.31 91.24 109.00 87.51 75.02 90.97 87.35
E.S.C. 65.00 70.49 83.04 73.74 67.71 78.01 77.08
W.S.C. 86.12 87.53 89.19 83.91 68.83 87.28 93.55
Mountain 69.22 54.11 43.09 34.67 48.36 49.90
Pacific 241.57 181.95 213.04 148.60 226.44 202.54
NATIONAL 128.19 137.95 114.35 86.98 67.19 83.86 86.26
6.10 1.48 -3.68 -2.70 -2.55 4.53 0.57
7.48 2.93 10.31 -4.45 -4.25 9.91 6.58

The overall price increase occurred despite a 29 percent national drop

in farmiand prices in the Civil War decade.7 The era famous for farm

7. Two major qualifications must be noted about the CivilWardecade. First,the real drop
from 1860to 1870 may have been less severe than the 29 percentcited here. The Census Bureau
markeddown its farmiandvaluations for 1870 by 20 percentto convert from "currencyvalues"
to "gold values" [see the 1920 Census of Agricu/ture,vol. V (Washington:GPO,1922), pp. 50-
55]. Yet the cost-of-livingdeflatortaken from the Bureauof LaborStatistics is based on work(by
Ethel D. Hoover for 1851-1B90) that does not mention the issue of greenbacks versus gold
dollars. If the Hoover-BLSseries is based on greenback prices, the national decline should be
only about 9 percent, not 29 percent, for 1860-1870, with similar optimistic adjustments for
regions. Correspondingly,the increase from 1870to 1900 should be lower.
Second, the decline across the CivilWar was worse than that cited for the whole decade

This content downloaded from 160.39.116.143 on Wed, 10 Apr 2013 15:38:31 PM

All use subject to JSTOR Terms and Conditions
 Value of Dairy Products, 1839
United States Department of Agriculture Yearbook 1922, Washington D.C.: Government Printing Office, 1923
Downloaded from Maps ETC, on the web at http://etc.usf.edu/maps [map #00185]
 Milch Cows, 1900
United States Department of Agriculture Yearbook 1922, Washington D.C.: Government Printing Office, 1923
Downloaded from Maps ETC, on the web at http://etc.usf.edu/maps [map #00177]
 3

the United States and the United Kingdom, the archetypal producer and consumer
countries. Section Three explores the patterns of integration in a wider range of countries,
Williamson’s “Atlantic” economy. Section Four assesses the importance of domestic
versus international convergence. Section Five deals with the causes of integration, and
section Six concludes.

2) What happened, I: price convergence across the Atlantic

As a starting point, Graph 1 compares ratios of wheat prices in the United Kingdom
with prices in New York (1800-1900) and Chicago (1840 to present). Both series
fluctuate widely in the short run – so the graph reports also the results of a Kernel fitting
2

Graph 1. Price convergence, United States to United Kingdom, 1800-2000

(Ratio of UK to NYC or Chicago prices)
3.5

3.0

2.5

2.0

1.5

1.0

0.5
1800 1825 1850 1875 1900 1925 1950 1975

United Kingdom New York (series) Source: Federico and

United Kingdom New York (Kernel) Persson (2006).
United Kingdom Chicago (series)
United Kingdom Chicago (Kernel)

Source: See Appendix 2.

2
Each point is obtained by fitting a polynomial, weighting the observations with a Epanechnikov
kernel. All the rates of change quoted in this article are computed with linear interpolation, adding
a AR(1) term when necessary.

3
230 C. KNICK HARLEY

FIG. 3. World wheat production and trade.

then it is easy to find the distance at which nonland cost just equals price
and identify the extensive margin. Now the extensive. margin will move
either if the Liverpool price increases or transportation costs fall (lines DE
and CE, respectively). In both cases the frontier will move to F. This is a
grossly oversimplified view of the development of the late 19th-century
wheat market but it is sufficient to illustrate the main issues regarding the
role of growing demand and transportation costs.14

I4 In particular transportation costs were not a simple function of distance. More impor-
tantly the opportunity cost of wheat production was higher near the consuming center
because of the relatively high transportation cost of other agricultural commodities. This
 Trends in Nominal and Real Farm Prices

90 1.200

80
1.000
70

60 0.800

Real Farm Prices

Price Indices

50
0.600
40

30 0.400

Implicit Price Deflator

20
Wholesale Farm Prices
0.200
Real Farm Prices
10

0 0.000
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906