In our era, the burgeoning BRIC countries represent the developing economies forcing their way onto the global stage and arguably even threatening to dominate the financial arena in the decades ahead. It is hard to remember now, but in the late 19th century, the developing economy that was pushing its way into the global financial stage was that of the United States.
The captivating story of how our country became a global economic powerhouse is entertainingly told in H.W. Brands’ fascinating new book, "American Colossus: The Triumph of Capitalism 1865-1900." Brands portrays the transformation as part of a struggle between the principles of democracy and the exigencies of capitalism.
In Brands’ account, though the forces of democracy predominated in the early nineteenth century, in the late nineteenth century, the animal spirits of capitalism emerged triumphant. While the country was transformed, the results included some rather unsavory side-effects, many of which suggest some rather sober reflections on our present circumstances.
The picture of the United States in the late 19th century, as the country emerged from a devastating civil war and struggled to overcome challenges imposed by immense geographic distances, is one of stark contrasts, between the seemingly unlimited opportunities available and the astonishing excesses perpetrated in pursuit of those opportunities.
If the country’s transformation produced unprecedented economic expansion and vast wealth, it also entailed environmental devastation, rampant corruption, labor exploitation, a deliberate policy of ethnic cleansing targeting a vulnerable indigenous population, and a destructive cycle of boom and bust.
The story of the United States transformation into a global powerhouse involves some familiar details, such as the almost incredible accumulation of immense wealth by Rockefeller, Carnegie, Vanderbilt and others. But in Brands’ account, the transformation also involves a host of other important but sometimes overlooked developments and processes, such as the conversion of the vast central plains from untamed grasslands full of roaming buffalo herds into industrial cattle ranches and monoculture farms encompassing wheat fields of previously unimaginable size and scale.
As the American economy was transformed it also was forced to adapt to or perhaps even invent the processes and practices required by modern capitalist economies. Among other things, the development of a transcontinental rail system was a project of such enormous size that it simply outstripped the existing accounting and management tools and controls, a situation that almost inevitably led to waste and corruption. The unexpected part is not that the waste and corruption took place but that the railroad nevertheless was completed, opening the country’s virtually unexplored interior both to settlement and development.
The country’s growth into a global powerhouse involved more than just an increased exploitation of geographic and material assets. It also meant the adaptation to new requirements and the elimination of old structures.
For example, the transformation of the South’s failed slavery economy to a functioning labor economy was an evolution required for the Southern states to advance. Though the transformation was only partially completed during the nineteenth century, the region’s movement from a feudal slave economy based on compulsion and exploitation to a capitalist labor economy built on supply and demand was an indispensible part of the country’s overall conversion into a modern economy.
Perhaps the most compelling aspect of Brands’ book is the way the earlier era suggestively prefigures our own. As events associated with the development of industrial scale agriculture demonstrate, the world was "flat" long before Tom Friedman declared it to be so:
Even in the best years, the Red River farmers were at the mercy of occurrences half a world away. Price tickets in managers’ offices recorded fluctuations in the grain markets in Minneapolis and Duluth and Buffalo, which in turn responded to developments in the world market. "A rainfall in India or a hot wind in South America is felt upon the Dakota farm in a few hours. The nerves of trade thrill around the globe, and the wages of the harvester in the Red River Valley are fixed by conditions in the fields of Russia , or in Argentina, or in India. The distance between the fields has been lost. The world’s wheat crop might as well lie in one great field, for the scattered acres are wired together in the markets, and those markets are brought to the farmer’s door."
In our own time, we struggle to understand the weaknesses and systemic failures that allowed the recent global financial crisis to occur. We might do better to understand that these kinds of weaknesses have been around for a long time; indeed many of the same questions we are now asking ourselves were being asked following the periodic crises and busts that occurred with devastating regularity during the late nineteenth century.
For example, in the aftermath of the Jay Gould’s and James Fisk’s audacious attempt to corner the gold market, then-Congressman (and future President) James Garfield wrote that "however strongly we may condemn the conspirators themselves, we cannot lose sight of those causes which lie behind the actors and spring from our financial condition. The conspiracy and its baneful consequences must be set down as one of the items in the great bill of costs which the nation is paying for the support of its present financial machinery."
Brands’ book is full of fascinating anecdote and telling detail. He ranges across a multitude of topics and issues, including immigration, politics, racial integration, technological innovation and change, as well as all of the attendant social and economic consequences involved. If the book has one fault, it is perhaps in its very range. Brands’ framework sweeps so broadly that at times he leave the impression of simply moving from topic heading to topic heading, with less connective tissue than many readers might desire.
Despite the overall celebratory tone of his book – it is, after all, subtitled as "The Triumph of Capitalism" -- Brands also seems ambivalent about capitalism itself. At different times (and occasionally, at the same time) he is exhilarated by the irresistible force of unbridled capitalism or appalled by its exploitative and corrupt excesses. Perhaps in the end however, that is the moral of his book, that capitalism encompasses both, and that what is required most is a watchful and wary eye.
Time Marches On: During Back-to-School Night this fall, I asked my son’s high school U.S. history teacher where the semester break would fall chronologically in the curriculum. When the teacher said they aimed to get through the nineteenth century by the semester break, I expressed surprise, noting that when I studied U.S. history, the Civil War had been dividing point. The teacher eyed me carefully and then commented that there is quite a bit more U.S. history to be studied now than there was when I was in school. (I did not tell my son later that I think his history teacher is a wiseass.)