MANUFACTURING SINCE 1860
Introduction. The history of the United States during this period is marked by the enormous expansion that took place in manufacturing. As a result this branch of economic activity became the largest contributor to the national income. In 1890 the net value added in manufacturing exceeded the value of agricultural products; since then the excess has tended to increase. By 1920 the number of people employed in manufacturing exceeded the number engaged in agriculture and it could be said that the country was primarily an industrial rather than an agricultural nation. Furthermore, although the proportion of the population engaged in this pursuit was not so large as in some countries, the gross value of the output of manufactures far exceeded that of any other nation. In fact before the first World War it was estimated to exceed that of Great Britain and Germany combined, though typically the products were less highly finished than theirs.
Another result was to make the nation relatively self-sufficing as regards manufactured products in general, though still lacking in various special branches, particularly those requiring a relatively large amount of skilled labor. In fact by 1923-1925 the stage had been reached where, on the basis of the government classifications in each field, admittedly not strictly comparable, the imports of manufactured or semimanufactured goods were only a trifle over 3 per cent of the value of domestic manufactures and the exports of such goods exceeded imports in value, being about 4.5 per cent of the domestic production. The fact that the exports of manufactured goods exceed the imports is a striking change when compared with the situation before 1860.
The second outstanding feature in the history of manufacturing during this period was the rapid progress made in the introduction of machinery and capitalistic methods of production, with all the changes in economic organization that this involved. The increasing use of fixed and specialized capital in the form of machinery gave greater scope for the operation of the law of decreasing costs under which there is a fall in unit cost as the output increases. At the same time the expansion of the market made it possible to dispose of a larger output; combined, these developments resulted in a marked growth in the scale of production.