Some Macroeconomic Implications of the Second Industrial Revolution

University Of Rochester, Rochester NY

Investigators

Abstract

The Second Industrial Revolution is a major cusp on the chart of economic progress. It saw the rise of electricity, the internal combustion engine, steel, and the petrochemical industry. A massive transformation occurred in industry as steam, water, and horse-drawn power were supplanted by electricity and gas. A revolution just as great was taking place in the household sector of the economy. This research focuses on the household revolution. The idea is that technological progress can have profound implications in the microeconomy of the household that in turn can have enormous consequences for the macroeconomy of the nation. The Second Industrial Revolution is a major event in American economic history. There is little work in modern macroeconomics that addresses it. Understanding this period better is a worthy goal in its own right. But, it may have lessons for today. In many poor countries female labor-force participation is still low. Fertility is high and children still work. Most people live on farms. Maybe these countries resemble the US at the turn of the last century? As society moves into the information age, technological progress may lead to another shift in work patterns. Some speculate that it may favor working at home and outside of cities. Understanding how technological progress affected life in the past may aid in predicting how it will affect life in the future. A revolution in consumer durables was associated with the Second Industrial Revolution. Life at the turn of the last century was primitive. Most households didn't have electricity, central heating, or running water. This changed with the Second Industrial Revolution. It ushered in clothes dryers, electric irons, refrigerators, vacuum cleaners, and washing machines. A fruit of this technological advance was a dramatic decline in the time required for housework. Along with the spread of new appliances, there was a tremendous rise in female labor-force participation over the last century. Was the durable goods revolution responsible for the rise in female labor-force participation? How did this affect economic welfare? The Second Industrial Revolution transformed everyday life in other ways. It witnessed a spectacular decline in fertility. It also unshackled children from serfdom. The percentage of children that were gainfully employed dropped precipitously with the dawning of the Second Industrial Revolution. Almost no children worked by the Revolution's end. Could it be that before the Second Industrial Revolution children were needed for farm and housework? Labor- saving technological progress lifted this requirement. Children could now attend more school. The consequence was a fall in fertility, the end of child labor, and a rise in educational attainment. Before the Second Industrial Revolution most Americans lived on a farm. Technological advance meant that less labor was required on the farm. Technological progress meant that new types of consumer goods could be produced for two reasons. First, it reduced the cost of producing these goods. Second, the rising incomes associated with technological progress in other areas of the economy increased the demand for new consumer goods. Thus, while less labor was needed on the farm, more labor was being demanded in manufacturing to produce these new goods. This project analyzes the wave of migration that occurred during the Second Industrial Revolution as people moved from rural to urban areas. It studies urbanization.