I thought this book is a masterpiece as it walks us through USA’s history from a Capitalism perspective - how the economy evolved, centered around innovations of the day and it gives a good insight into how people and industries coalesced around the demand of what people wanted. It was also fitting that I read this book (which lists how different technologies shaped up the U.S) right after finishing reading Future is Faster Than You Think (which lists technologies that will revolutionize the world).
It starts from the point when sending ships to faraway unknown lands was a thing. Mayflower landed on the shores in 1619 after successfully financing its journey. That itself is remarkable that in the 17th century there existed a concept where a bunch of investors came together to finance a “startup” trying to accomplish a difficult thing. And their idea of return on investments was to have the ship bring back the much talked about abundances of wood, furs, or other commodities from the New World. That financing (venture capital) as a concept existed back then was a revelation to me.
Dutch adventurers with English financing set out to the U.S. The whole endeavor was a money guzzler bankrupting the investors. When they arrived in the U.S (New England region) they traded with Indians for furs/beaver skins in exchange for goods (blankets).
The focus of the nascent economy shifted to how Tobacco captured the imagination as settlers observed how Native Americans smoked it through a variety of methods. It took off specially in Virginia and quickly became the most exported item as tobacco smoking became a symbol of upper class/luxury in the U.K. No wonder people growing tobacco on their plantations amassed political power. Incidentally, 10 of the first 12 POTUS were from Virginia. Worth mentioning at this point lot of slaves were being brought from ashore to work on the plantations. Virginia became a single crop economy thus suffering whenever tobacco prices fluctuated.
Also, the settlers who came to the U.S were mainly vagabonds, orphan children who had no family. The monarchy did not want them and granted them permission to the ship company to take them against their will as servants. The contract was if you work for 7 years - you are then free and you will be given a piece of land in the U.S (Virginia/New England). Since there was a lot of land, it made total sense.
The book also gives a very unique perspective on how the then 13 states united behind a single cause “freedom”. It says -
what the threats of the French and Native Americans had failed to do, the intrusions into the pocketbook (taxes imposed by the British) had successfully done - unite the various U.S states. Thus, in a way we can say money was at the root of the foundation of the nation.
Also, as the standards of living increased, more people could afford more, thus widening the market for all sorts of new goods which would create new forms of work. (a phenomenon that has been happening regularly ever since). Around the 18th century, steam engine was invented, spawning the Industrial Age and people started improving efficiency in the processes. Cotton had become a huge crop in the U.S by then but the process to separate cotton from the seeds was very manual and tedious. During that time, an enterprising guy Eli Whitney invented the cotton gin - thus massively improving productivity and kickstarting America’s role in global cotton production.
The invention of the steam engine opened many possibilities which would require harnessing steam. Then America was mostly on the east coast - and enterprising folks over the years figured out steam boats that could travel on the river connecting faraway points thus drastically reducing travel times via foot and starting off many riverboat companies. Not only that it also demanded that many canals be dug to connect places and many such projects took off (Erie Canal). Eventually, projects to connect the country via railroads took off with huge state incentives as it was very capital intensive. During this same span, many arrived in the U.S from the European mainland fleeing revolution and counterrevolution (Ireland, Germany).
Railroads were closely followed by the telegraph. Morse code had been invented and it was decided that telegraph lines would be laid alongside railroads and railroad companies would be in-charge of maintaining them. It made sense as railroad construction was capital intensive and telegraph lines were a high margin endeavor. Interestingly, Andrew Carnegie’s journey began working in a telegraph office.
Gold rush happened in 1849 in California encouraging massive hordes of people to congregate there to strike riches. I like how the author described it - “America stumbled into the greatest discovery of Gold”. Also, California was admitted to the Union in 1850. And the cost of living was high even then in the San Francisco region. Slavery issues came to a head in 1863 sparking a civil war.
In the Civil War, capitalism played an important role.
The South couldn’t get its hands on industrial goods from Britain because of the Union blockade.
North went on an industrialization spree - connecting the coasts and laying railroads.
A person could pay $300 to avoid being drafted which many wealthy like JP Morgan did.
Oil and Steel built fortunes for many (Rockefeller, Carnegie) as they became key components to the economy and the war effort.
Oil was the first industrial supply chain to grow full scale. Teamsters resisted technological innovation of pipes to transport oil.
The way Carnegie amassed his empire was by merging many small steel plants into his. Thus, shining light on the feature of modern capitalism - to consolidate for efficiencies than be a marketplace. Capitalism favors giant entities. Economies of scale is a huge factor. On the flip side, there is an innate tendency to collude and form cartels and establish some sort of monopoly/duopoly.
With factories being set up, machines like typewriters came into offices thus demanding skilled typists thus opening the door for women to join the workforce.
Once railroads had connected the corners of the country and there was a postal service - some enterprising folks figured out that they could advertise their products via physical mail and also ship them anywhere thus kickstarting the retail shopping era. It morphed into huge physical spaces like malls. Retail stores used to plough the day’s earnings into advertising for next day sales i.e the modern day business strategy of growth via spending. And no different than today, newspaper revenues from advertising from businesses, especially advertising for drugs was a major source.
Ofcourse, when things shaped up to become businesses (like cotton gin factories) there was a conscious effort to improve efficiency which often resulted in conflicts with workers and unions. It brought to the fore the question - what was the government’s role in a private battle between a union and an industry?
These frictions highlighted that Capitalism is not ideologically rigid. The strength of the system within democracy is to compromise - best form of insurance against any revolution. This middle ground within capitalism & democracies is a way to check the free markets (a regulatory framework in some way). It’s quite evident over the years that market forces alone are not enough. Some regulatory oversight is needed for excess checks.
Major global events like World War 1 also massively shaped America. It forced the federal govt to spend immensely and to finance the war efforts Income Tax was authorized in 1913 by all the states. Also, the wars required a mandatory draft which was eventually done away with in 1973. WW 2 would disprove the notion that only-profit motive could lead to invention or maximize production. Capitalism then came to a grinding halt as the govt took over all the industries and manufacturing and directed them to do things in direction for the battlefront needs. There was huge uptick in innovation which happened under hardly capitalist dynamics.
There was an odd phase where prohibition was in-effect which highlighted how a perfect storm of political forces can halt even a big industry (alcohol was the 5th largest industry then).
Another thing that has shaped American life are the suburbs and the author provides us with a good capitalist defense of the suburbs. In principle, suburbs are the same patterns of life aka family factories- bland and conforming sameness. The Ford Model-T had shown to achieve quality at the best possible price, the only formula was to build the exact same thing over and over again! It started post WW2 and anyone with a job alone could buy a home without any requirement of downpayment.
I caught some interesting sociological nuggets from that chapter. The reason many people moved out from their homes within 7 years or so after buying them was due to an observed (unsaid) social contract to not stand out too much relative to one’s neighbors. When a family's consumption significantly outpaced their neighbors they upgraded their home and moved away.
Finally, the author leaves it for us to answer whether capitalism is good or bad, he provides us arguments for both sides though. The ultimate decision maker in capitalism is the consumer. For a long period, the consumer and laborer were on the same level but now the gap has widened. The consumer, wants cheaper clothing, but not job security for everyone in the factory.
She, the consumer, has sympathies from the heart for the worker, yes, maybe;
Actual $$ from the purse - no!
The author says somewhere - if American capitalism ever found itself on trial, Andrew Carnegie’s career would be defense exhibit #1. Similarly, prosecution’s exhibit #1 would be asking a significant population enslaved for 200 years, legally segregated for another 100 years and then blocked from housing options by developers/landlords/mortgage and real-estate agents - to pick themselves by their bootstraps.
