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  • Gold Standard, Restrictive Monetary Policies and Deflation: A Theory for the Great Depression and American Recovery

    Jeremiah R. Blocker

    HIUS 713: American Entrepreneurship Since 1900

    Introduction –

    The Great Depression was the most severe and prolonged economic downturn in modern history, lasting from 1929 to 1939. It began in the United States and spread worldwide, characterized by mass unemployment, sharp declines in industrial production and trade, and widespread bank and business failures.  The Great Depression had detrimental effect on the global economy damaging the United States and including but limited to the economically developed countries of Europe.

    The start of the Great Depression is generally accepted to have started with the Stock Market Crash of 1929 which crushed consumer confidence and business expenditures leading to huge reduction in spending.  The unemployment rate skyrocketed, and economic upheaval wrecked the economy in the United States and globally.[1]

    What caused the Great Depression in the United States and made it spread around the globe?  And what ultimately led to the recover both in the United States and globally?

    There are many different and complex theories as to what caused the Great Depression.  These theories are debated among economists and historians with varying degrees of acceptance.  However, there is some general consensus on what factors contributed to the underlying cause, and most importantly, led to recovery.[2]

    One of the most interesting and plausible theory that has been advanced is that reliance on the Gold standard in the United States and Europe was a major contributor to the Great Depression and the eventual moving away from it helped with the recovery.

    The international gold standard linked countries in a system of fixed currency exchange rates, which transmitted the US economic downturn to the rest of the world. Adherence to the standard often forced countries to adopt contractionary monetary policies (raising interest rates), which further depressed spending and investment.

    Methodology of Assessment –

    A number of economist and historians have evaluated how the Gold Standard played a role in the Great Depression.  Some have identified it as the primary cause.  In measuring the effects of the Gold standard on cause and recovery from the Great Depression, economist have looked at countries that quickly moved away from the Gold standard such as the United Kingdom as compared to countries like the United States that delayed leaving or waited several years into the Great Depression as France did.  The estimation of economist and historians there was a cause and effect in recovery for how quickly a developed country’s economy recovered based on the timing of leaving the Gold standard.[3]

    Reasons why the Gold Standard was Cause –

    The theory that identifies the Gold standard in the United States as being the primary or, at least, a significant contributor is based on several key factors.

    Under the gold standard, a nation’s money supply is tied to its gold reserves. When the United States’ money supply contracted after the 1929 stock market crash and subsequent bank failures, the gold standard forced a global monetary contraction. This led to a period of severe deflation, which discouraged spending and worsened the economic downturn.[4]

    When a financial crisis occurred, particularly in the U.S., the gold standard dictated a global monetary contraction to match the one in the U.S., causing widespread deflation (falling prices) and reducing the value of bank collateral.  This is known in economics as a “forced deflation” is and can be caused by policy inflexibility such as reliance on the Gold standard to the detriment of the economy.[5]

    The Federal Reserve was unable to expand the money supply sufficiently to stop bank failures, and its actions or inactions were seen as contributing to the collapse of the money stock.  A limited stimulus handicaps economic recovery.[6]

    Because exchange rates were fixed to gold, central banks in countries losing gold reserves to the U.S. were required to raise interest rates and contract their money supplies to protect their currency. This led to a worldwide decline in output and prices, as other nations deflated along with the U.S.

    Moving Away from the Gold Standard as a Solution –

    Countries that abandoned the gold standard sooner were often able to recover more quickly because they were not constrained by its deflationary pressures. 

    The gold standard tied the hands of central banks, forcing them to prioritize maintaining a fixed exchange rate over supporting their domestic economies. Exiting the gold standard and devaluing their currency gave countries the flexibility to increase their money supply and stimulate their economies, a critical step toward recovery. Research has shown that countries that left the gold standard earlier, like Britain, began their economic recovery sooner.[7]

    Great Britain moved away from the Gold standard in 1931 which led to a noticeable recovery period.  The United States waited to move away from the Gold standard until 1933 which did delay recovery.  Other countries such as France, waited even longer which led to a delayed recovery.[8]

    In the United States, by abandoning the Gold standard, the nation and Federal Reserve were able to increase the money supply.  By increasing the money supply and freed of the limitation of the Gold standard, expansion increased spending and lending by businesses and individual investors.

    Also, devaluation of the U.S. dollar relative to other currencies made American goods cheaper abroad and foreign goods more expensive in the U.S. leading to boost in the economy. This encouraged exports and discouraged imports, strengthening the U.S. economic outlook.

    Conclusions –

    There were many factors that contributed to the Great Depression with the Gold standard being one of the many factors.  The constraints of being on the Gold standard help amplify the causes and effects of the economic crises. This was true in Europe and globally.  The eventual moving away from the Gold standard, thought not fully understood, led to a economic improvement and recovery.

    Bibliography

    Bemanke, Ben & Harold James. “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison.” In Financial Markets and Financial Crises (National Bureau of Economic Research Project Report), edited by R. Glenn Hubbard, 33–68. Chicago, IL: University of Chicago Press, 1991.

    Duignan, Brian. “Causes of the Great Depression.” Encyclopedia Britannica, 2025. https://www.britannica.com/story/causes-of-the-great-depression.

    Konkel, Lindsey. “How Did the Gold Standard Contribute to the Great Depression?” HISTORY, May 8, 2018. https://www.history.com/articles/how-did-the-gold-standard-contribute-to-the-great-depression.

    Paker, Meredith and Jason Lennard. “The End of the Gold Standard and the Beginning of the Recovery from the Great Depression.” CEPR, 2024. https://cepr.org/voxeu/columns/end-gold-standard-and-beginning-recovery-great-depression.

    Samuelson, Robert. “Revisiting the Great Depression.” The Wilson Quarterly (1976-) 36, no. 1 (2012): 36–43.

    Williams, David. “London and the 1931 Financial Crisis.” The Economic History Review 15, no. 3 (1963): 513. https://doi.org/10.2307/2592922.

    [1]              Brian Duignan, “Causes of the Great Depression.” Encyclopedia Britannica, 2025. https://www.britannica.com/story/causes-of-the-great-depression.

    [2]                  Ibid.

    [3]                  Meredith Parker and Jason Lennard, “The End of the Gold Standard and the Beginning of the Recovery from the Great Depression.” CEPR, 2024. https://cepr.org/voxeu/columns/end-gold-standard-and-beginning-recovery-great-depression.

    [4]                  Lindsey Konkel, “How Did the Gold Standard Contribute to the Great Depression?” HISTORY, May 8, 2018. https://www.history.com/articles/how-did-the-gold-standard-contribute-to-the-great-depression.

    [5]                  Robert Samuelson, “Revisiting the Great Depression.” The Wilson Quarterly (1976-) 36, no. 1 (2012): 36–43.

    [6]                  Ibid.

    [7]                  Ben Bemanke and Harold James, “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison.” In Financial Markets and Financial Crises (National Bureau of Economic Research Project Report), edited by R. Glenn Hubbard, 33–68. Chicago, IL: University of Chicago Press, 1991.

    [8]                  David Williams, “London and the 1931 Financial Crisis.” The Economic History Review 15, no. 3 (1963): 513. https://doi.org/10.2307/2592922.

  • Henry Ford: American Innovator and Early 20th Century Business Leader

    Jeremiah R. Blocker

    HIUS 713: American Entrepreneurship Since 1900

    Introduction –

    Henry Ford is remembered as one of the great American innovators and business leaders during the formative years of the early 20th Century.  Primarily remembered as the founder of the Ford Motor Company and creator of mass production, his influence extended well beyond these narrow areas of influence.  Ford was a business magnate and philanthropist who made important innovations available to middle-class American families.[1]

    Born to a middle-class family on a farm near Dearborn, Michigan, on July 30, 1863, Ford demonstrated an early interest in mechanics and machinery. As a young teenager, he left the farm to work as a machinist’s apprentice in Detroit, which later led to working for the Westinghouse Company to set up and repair steam engines. In 1891, Ford became an engineer with the Edison Illuminating Company and was promoted to chief engineer in 1893. This role gave him enough time and money to experiment with gasoline engines, leading to the completion of his first self-propelled vehicle, the Quadricycle, in 1896.[2]

    After several efforts and failed attempts at starting an automobile company, the Ford Motor Company was incorporated in 1903. Ford created, developed introduced the iconic Model T in October 1908, as a durable, simple, and inexpensive car that became immensely popular across the economic spectrum. To meet overwhelming demand, Ford and his engineers developed the first moving assembly line for automobiles in 1913, dramatically reducing production time and cost. [3]

    Ford’s systematic approach to lowering costs and increasing efficiency is known as “Fordism”. He implemented an eight-hour workday and, in 1914, famously announced a $5 daily wage for his workers, nearly double the standard rate at the time. This move increased productivity, reduced employee turnover, and enabled his workers to afford the cars they were producing, fostering the rise of an American middle class. 

    Methodology of Assessment –

    Ford’s method of industrial engineering and manufacturing system has long been studied in different fields for applications.  These applications include the medical field as well as the obvious fields of manufacturing and mass production that have assessed the importance of Ford’s system.  Defects and waste can be evaluated through a system of standardized visual data incorporated through a daily management system. [4]

    Ford’s Impact on the American Economy –

    Ford’s creation of the Model T introduced an affordable, innovative vehicle that help revolutionize the American economy in the early years of the 20th Century.  It rapidly became the first car for millions of Americans who owned the affordable and easy to operate vehicle, changing the economic outlook for many.[5]

    Creating an improved workforce by increasing pay and compensation was one of the lasting hallmarks of Henry Ford.  The Ford Motor Company under Henry Ford committed to paying workers $5 dollars per day which reduced employee turnover, attracted better workers and tremendously boosted productivity.  In turn, profits increased for shareholders and led to further economic growth in the markets.

    These changes helped boost the quality of life and economic outlook for the American middle-class who were greatly impacted by these and other important changes fostered by Ford.

    Ford’s Impact on American Innovation –

    Henry Ford was so effective in creating a system of production and innovation that it has its own name, “Fordism”.  This is a system of mass production and standardization of processes.  Some important aspects of Fordism include assembly line mass production, standardization, high wages, clear division of labor, scientific management and mass consumption.

    The system of mass production and mass consumption that defined Fordism had a global appeal of developed economies during the 20th Century.  Who economic systems were reliant on the principles encapsulated in the innovative, reliant design of industrialism.  Ford was able to identify methods for increasing profit while at the same time improving the lives and economic abilities of middle-class workers unlike anyone else during this period.[6]

    Through a vision for creating a center for production, Ford created a massive, vertically integrated industrial complex.  Located at the River Rouge Plant in Dearborn, Michigan, this became a hallmark for implementing Ford’s long-term vision. The plant could turn raw materials like iron ore and coal into a finished automobile within 28 hours, without reliance on outside suppliers for most parts. 

    Conclusions –

    Henry Ford died on April 7, 1947, at his home in Dearborn, Michigan, at the age of 83. He left most of his vast fortune to the Ford Foundation, a philanthropic organization he established in 1936.  

    Ford was a complex and controversial figure. He was a vocal pacifist during the early years of World War I, organizing a “Peace Ship” expedition to Europe in 1915 that was largely unsuccessful. In the 1920s, he gained widespread criticism for promoting antisemitic views through his newspaper, The Dearborn Independent.  He published articles that were compiled into tome called The International Jew.  Most of these writings he renounced later in life but the controversy remained.  In addition, Ford was strongly against labor unions and was the last of the major automakers to recognize unions pre-Second World War.[7]

    His legacy is monumental, fundamentally reshaping modern industry and everyday life through mass production and the widespread availability of the automobile.

    Bibliography

    Cankovic, Milena, Ruan C. Varney, Lisa Whiteley, Ron Brown, Rita D’Angelo, Dhananjay Chitale, and Richard J. Zarbo. “The Henry Ford Production System: LEAN Process Redesign Improves Service in the Molecular Diagnostic Laboratory.” The Journal of Molecular Diagnostics: JMD 11, no. 5 (2009): 390–99. https://doi.org/10.2353/jmoldx.2009.090002.

    Goodman, Peter. “Lessons From Henry Ford About Today’s Supply Chain Mess.” Nytimes.com, June 10 2024. https://www.nytimes.com/2022/06/10/business/henry-ford-supply-chain.html.

    McGraw, Bill. “Henry Ford and the Jews, the Story Dearborn Didn’t Want Told.” Bridge Michigan, February 4, 2019. https://bridgemi.com/michigan-government/henry-ford-and-jews-story-dearborn-didnt-want-told/.

    Tolliday, Steven, and Jonathan Zeitlin. The Automobile Industry and Its Workers: Between Fordism and Flexibility. New York: St. Martin’s Press, 1987.

    Watts, Steven. The People’s Tycoon: Henry Ford and the American Century. Vintage Books: New York, NY, 2005.

    [1]              Steven Watts, The People’s Tycoon: Henry Ford and the American Century (Vintage Books: New York, NY, 2005).

    [2]              Ibid.

    [3]              Ibid.

    [4]              Cankovic, Milena, Ruan C. Varney, Lisa Whiteley, Ron Brown, Rita D’Angelo, Dhananjay Chitale, and Richard J. Zarbo. “The Henry Ford Production System: LEAN Process Redesign Improves Service in the Molecular Diagnostic Laboratory.” The Journal of Molecular Diagnostics: JMD 11, no. 5 (2009): 390–99. https://doi.org/10.2353/jmoldx.2009.090002.

    [5]              Peter Goodman, “Lessons From Henry Ford About Today’s Supply Chain Mess.” Nytimes.com, June 10 2024. https://www.nytimes.com/2022/06/10/business/henry-ford-supply-chain.html.

    [6]              Steven Tolliday and Jonathan Zeitlin, The Automobile Industry and Its Workers: Between Fordism and Flexibility (New York: St. Martin’s Press, 1987).

    [7]              Bill McGraw, “Henry Ford and the Jews, the Story Dearborn Didn’t Want Told.” Bridge Michigan, February 4, 2019. https://bridgemi.com/michigan-government/henry-ford-and-jews-story-dearborn-didnt-want-told/.

  • A Comparison of Post Antebellum Economic Growth in the South and Northern States

    Jeremiah R. Blocker

    HIUS 713: American Entrepreneurship Since 1900

    Introduction –

    In the immediate aftermath of the American Civil War, the Northern States went through a sustained period of rapid economic growth that was mostly driven by industrial expansion throughout Northern states.  In contrast, the Southern states, including those from the old Confederacy as well as regional, border states impacted by the Civil War, faced decades of long economic collapse and stagnation.  The Northern economy was mostly industrial while the economy of the South was overwhelmingly agrarian.  The Southern economy was devastated by the triple factors of over reliance of slavery for labor, a war ravished communities and primarily agrarian economic outlook.  Post Antebellum there was an effort restore the economy of the South, called the “New South” by modeling after the Northern Industrial economic model.  As Alfred Chandler notes in his article on organization capabilities in the Industrial Age, that the 19th Century witnessed old industries being transformed with, at the same time, new industries emerging.[1]  One can see this unfolding with both the Northern and Southern economies during this period.  

    Methodology of Assessment –

    The methodology for assessing the economic growth in the Post Antebellum Southern states compared to the Northern states can be established through a number of sources.  Primary sources that identify the economic conditions, measure the income of residents of the states and examine GDP.  Secondary, scholarly sources can be helpful in providing analysis of the data and provide important indicators of economic conditions that were present during this period.  In addition, non-market activities and other factors that are harder to capture through the standard economic measures can be assessed through secondary sources such as newspaper and journal articles.

    Northern Economic Growth –

    There was very little economic damage or destruction to Northern economic infrastructure during the Civil War.  The overall economic infrastructure remained largely intact and fully functional in the immediate aftermath of the conflict.  For the most, the industrial capacity of the North was primed and ready for significant growth and expansion with an expanding labor market available to build the economy.

    The economy of the Northern states prospered and grew during the Post Antebellum period as its industrial base grew and expanded.  The demands of the war stimulated manufacturing industries such as textiles and iron through a process that expanded after the Civil War.  At this time, the Northern states produced the vast majority of the nation’s manufactured goods and products.  The war stimulated the growth of railroads, and post-conflict government subsidies assisted in expanding the transportation nodes, rail network, international trade and expanded settlement in the Western territories.[2]

    Population increase and urbanization of Northern states were enhanced through large scale immigration from Europe.  This population growth, along with migration from war ravished Southern states provided a significant labor pool for industrial growth in the North.  Agriculture in Northern states was mostly mechanized before the war and continued on that trajectory leading to increased production.[3]

    Overall, the Northern economy experienced tremendous growth in the Post Antebellum period in comparison to the Southern economy.  The diversification of the labor market along with a mixed economy that included agriculture, manufacturing and commerce created a resilient, dominant economic outlook. Older industries such as manufacturing grew and improved while newer industries such as new steel manufacturing methods.

    Southern Economic Growth –

    The Civil War altered the economy of the Southern states in a dramatic fashion creating significant economic upheaval post-Civil War.  Most battles were fought on Southern soil, leading to widespread destruction of cities, factories and economic infrastructure. Being that the South’s economy was reliant on an agricultural, slave-based system, the devastation of the Civil War made recovery even more challenging.[4]

    The freeing of the slave population through abolition led to a massive loss of wealth and completely uprooted the South’s primary resource for labor.  Sharecropping became the primary means of labor for the Southern agrarian economy.  Though replacing slavery, sharecropping and tenant farming systems did significantly benefit the agrarian economy by creating a long-term system of poverty.  There was little motivation or incentive for innovation in agricultural methods and soil conservation.  All of these factors created obstacles to a diversified economy that could emerge from the Civil War.[5]

    In the Post Antebellum Southern economy, there was little incentive for capital investment from outside of the region.  Most of the South was under military occupation for a period of time following the Civil War and most economic investment was politicized and directed to helping former slaves integrate into society.  The South’s banking system completely collapsed and failed to attract Northern investors who financial interest was more focused on growing the economy in the new Western territories and states.[6]

    Efforts were made to change the economic outlook and to diversify the Southern economy through proponents such as Henry W. Grady, an Atlanta journalist.  Calling for a “New South” based on industry that could grow the manufacturing, textiles and commerce of Southern states in response to the economic upheaval of Reconstruction.  Increasing the infrastructure and transportation nodes was emphasized along with stabilizing the labor force.  These efforts attracted widespread attention but were largely focused on larger cities in the South such as Atlanta, Birmingham, Jacksonville and Memphis.[7]

    In contrast to the North, the South was unable to emerge successfully from the Post Antebellum era by improving its economic growth in any significant way prior to 1900.  The South remained mostly agrarian, small in its industrial base and limited in its economic diversification.

    Conclusions –

    The North and South were economically unequal prior to the Civil War and, for the most part, remained unequal in the Post Antebellum period.  War devastation, the overreliance on slavery for labor, an overwhelmingly agrarian economy with a very limited manufacturing created the conditions that stunted economic growth.  In Northern states, the economic base was rapidly expanded with all the conditions for a dominant economy in place.  Free of political restraints, war devastation and benefiting from a diversified economy, the North states grew economically stronger as the Southern states struggled.

    Bibliography

    Bhat, Vasanthakumar N. “Economic Conditions of the States Before and After the American Civil War.” Journal of Social Sciences 10, no. 3 (2014): 97–103.

    Burton, Vernon. “Review: Economics as Postbellum Southern History.” Reviews in American History 16, no. 2 (June 1988): 233–40.

    Chandler, Alfred D. “Organizational Capabilities and the Economic History of the Industrial Enterprise.” The Journal of Economic Perspectives 6, no. 3 (Summer 1992): 79–100.

    Dixon, Rob. “New South Era.” Encyclopedia of Alabama, May 5, 2009. https://encyclopediaofalabama.org/article/new-south-era/.

    Friedmann, Harriet. “Review: Economic Analysis of the Postbellum South: Regional Economies and World Markets. A Review Article.” Comparative Studies in Society and History 22, no. 4 (October 1980): 639–52.

    O’Brian, James Irwin &. Anthony. “The Post-Bellum Recovery of the South and the Cost of the Civil War.” Explorations in Economic History 38, no. 1 (January 2001): 166–80.

    Rust, Owen. “The Economic Impact of the American Civil War.” The Collector, July 18, 2022. https://www.thecollector.com/economic-impact-of-the-american-civil-war/.

    [1]              Alfred D. Chandler, Organizational Capabilities and the Economic History of the Industrial Enterprise.” The Journal of Economic Perspectives 6, no. 3 (Summer 1992): 79–100.

    [2]              Vasanthakumar N. Bhat, “Economic Conditions of the States Before and After the American Civil War.” Journal of Social Sciences 10, no. 3 (2014): 97–103.

    [3]              Owen Rust, “The Economic Impact of the American Civil War.” The Collector, July 18, 2022. https://www.thecollector.com/economic-impact-of-the-american-civil-war/.

    [4]              O’Brian, James Irwin &. Anthony. “The Post-Bellum Recovery of the South and the Cost of the Civil War.” Explorations in Economic History 38, no. 1 (January 2001): 166–80.

    [5]              Harriet Friedman, “Review: Economic Analysis of the Postbellum South: Regional Economies and World Markets. A Review Article.” Comparative Studies in Society and History 22, no. 4 (October 1980): 639–52.

    [6]              Vernon Burton, “Review: Economics as Postbellum Southern History.” Reviews in American History 16, no.2 (June 1988): 233-40.

    [7]              Rob Dixon, “New South Era.” Encyclopedia of Alabama, May 5, 2009. https://encyclopediaofalabama.org/article/new-south-era/.

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