Unit 4: Expanding Nationmac's History

The end of the Civil War in 1865 resolved any questions of whether the young nation would eventually grow into a single, integrated national economy. Of course, it wasn’t fully yet an integrated economy at the end of the war, but it was on its way. Also clearly different regions were in different states of development. The North, particularly the mid-Atlantic, New England and Great Lakes states had experienced an enormous economic boom during the war. Yet, the process of building a single nation with an integrated national economy would continue. The new “high tech” growth industries of railroads, telegraph, and farm machinery led to a boom on Wall Street. Profits soared. The Transcontinental Railroad (now called the Union Pacific) would be complete in 1869. Telegraph lines criss-crossed the nation and expanded their reach into the West and South with the railroad. Growth, propelled by technical invention/innovation, expansion to the West, immigration, capital investment from the East and abroad (especially Britain and France) powered the expansion. The U.S. was on its way to becoming the largest market and economy in the world by the end of the 19th century.

Unit 4 - The Age of Exploration. Below are the chapter of the World History textbook. New Nations Emerge.pdf (17409k). View Test Prep - Unit 4.pdf from WORLD HISTORY? At Connections Program. Unit 4: Nationalism and the Spread of Democracy Lesson 1: Change in Europe and Latin America 1. Who was a major leader in the. Yet the fur trade also brought conflict. Indian nations fought over it. American traders did too. The two groups also fought each other. Everyone wanted to control this booming. The United States government built a military post. It was near Council Bluffs, Iowa. This Social Studies Curriculum resource is the fourth unit of the Grade 7 Scope & Sequence: A Nation Grows: Expansion and Reform 1800–1860. It was developed by a team of NYCDOE Social Studies staff and teachers, in collaboration with scholars of the humanities and social studies as well as museum curators.

The journey would not be smooth, nor certain. The booms of the 1860’s were soon followed by financial market and banking crises and depression. In the 1870’s a serious depression developed with business profits falling and bankruptcies increasing. Commodity prices suffered and farmers suffered along with them. Starting in the 1870’s a series of very short booms followed by repeat depressions took hold. Taken together, this period launched what economists call the “Long Depression” Where integration was the prime challenge of the period 1780-1865, the prime challenges of the 1865-1920 period involved competition. To understand these competitions, let’s first take a look at the U.S. economy just after the end of the Civil War and what was happening.

Post-War Opportunities and Problems

Rebuilding Post-War

The war had a mixed impact on the U.S. economy. In the North, a boom period had accompanied the war as government spending on war materials, supplies, and machinery made for an expanding economy. In addition, since the population in the North was larger and immigration remained open, the North experienced a lesser human cost relative to it’s population. Most importantly, the North had the good fortune to fight the war elsewhere. The South, however, suffered greatly. The human toll, both in absolute and relative numbers was immense. The war had not only been fought in the South, but the war had been the first example of modern “total warfare”. No longer were wars a death fight only between soldiers on a battlefield. Instead, opponents (most notably General John Sherman) actively sought to destroy capital and the economy. Farms and plantations were burned (see the movie “Gone With the Wind”), railroads and bridges destroyed, and factories leveled. Even worse, the entire economic model was eliminated. The plantation-slavery system was ended and slaves freed. The first challenge facing the nation post-war was the reconstruction of the South and it’s economy. Actually, although it was widely described as “reconstruction”, it was actually a “new construction”. The old South was gone. Slaves were freed. An entire social structure had changed. Even Southern cotton, which pre-war was dominant in the world had found new competition on world markets from India, Egypt, and elsewhere. Efforts were made to re-build the South as an agricultural economy of small farmers much like the West (Midwest) states were. Slaves were encouraged to settle on “40 acres with a mule”. For the most part such homesteading efforts failed. The South, hindered by poor schools, poor transport, and persistent racial conflict, settled into a share-cropping system. The South wouldn’t fully recover economically from the Civil War until the mid-20th century.

Depression, Deflation, and Banking Crises

The post-Civil War saw strong booms and growth for a while. Growth in the U.S. was the strongest of the leading industrial nations in the world at 6.2% per year. Railroad growth increased over 50% after the war until 1873. Capital investment also soared, especially foreign investment from Britain and France. Wall Street and banks boomed. But so did fraud and speculation. In 1873, a combination of events produced a panic on Wall Street. In Europe, banking crises were also happening. The resulting crash destroyed banks, savings, and businesses. The result has been named the “Long Depression“. In the U.S., it lasted for 65 months, from 1873-1878. In Europe, it lasted for over 26 years. In the U.S., durable goods production plunged by over 30%. Deflation took hold. Industrial unemployment reached 25% in some states. Real wages (purchasing power) of workers stagnated for over a decade. Even after the Long Depression ended in the U.S., it ushered in a period where the U.S. alternated between short depressions and even shorter boom periods. In the 253 months between 1879 and 1901, the U.S. experienced recession/depression conditions for 114 of them. Granted, the Long Depression was worse in Europe. In Europe, the worsening economic conditions over these 3 decades fueled interest in Marxism and Socialism as workers real wages declined. It also fueled outward migration from Europe into the U.S. So, even though technically the U.S. economy resumed a growth path after the 1880’s, the increased immigration and high birth rates grew the population even faster. Per capita income for all but the wealthiest classes stagnated or even declined.

In the mid-1800’s banking was a relatively new and unclear industry. Our modern conception of a bank as a joint-stock corporation owned by shareholders that takes deposits and lends money at interest, subject to Federal rules was only beginning to emerge. Certainly the Federal rules would largely not arrive until 1913 and the 1930’s. Each state regulated its banks, although there were some nationally chartered banks. Many banks were allowed to issue their own currency (paper money). Fraud and speculation were rampant, resulting in the frequent crises and recessions. Indeed, they were so common that the word most often used in this era for a recession was “panic”, as in a “banking panic”. The money supply was also very uncertain, not only in the U.S., but also in Europe and other developed nations. Gold and silver coin competed not only with each other as possible “money”, but with bank-issued paper backed with fractional reserves of gold or silver and with pure paper money (not redeemable into anything). The growing economy needed a growing supply of money to facilitate transactions. Previously before the Civil War, gold and silver coin had been the basis of both official U.S. money and bank-issued paper currency. The system resulted in a very unstable money supply, but it did accommodate the growing economy thanks to the discovery of gold in California in 1849. But the Civil War introduced pure, non-redeemable paper money (Greenbacks) into the mix. After the Civil War, gold production could not keep up with the demands of a growing economy for money to facilitate transactions or credit. The question of just what should be money and how much should be allowed into circulation became a highly contentious political and class issue. Bankers, industrialists, and the wealthy favored gold and gold-backed paper money issued by banks. Farmers and workers favored silver and greenbacks. By the end of the century, gold and gold-backed bank-issued paper money would win the day as it had in Europe by 1870.

Why would bankers, wealthy, and large industrialists favor Gold?
When the money supply cannot grow as fast as the real economy, then prices in general begin to decrease, a process economists call “deflation” (the opposite of inflation). When deflation happens, debtors become strapped. Since prices in general, including wages, are dropping, debtors have less income in dollar terms. But, their debts and payments stay at the previous high level. Debt becomes more burdensome. But lenders, such as bankers and the wealthy, benefit from this process. Their loans are repaid with dollars that have greater purchasing power. Lenders become even richer in real purchasing power terms. Large industrialists tend to favor deflation because it often leads to recessions and the failure of many smaller businesses. The failure of small businesses removes competition and makes acquisition of competitors cheaper.

Westward Expansion

Unit 4: Expanding Nationmac's History Definition

Population continued to push westward. By the end of the 1860’s, the Great Lakes states, which had been the “frontier” fifty years earlier, were now well settled and beginning to industrialize. The frontier was now further west to the Great Plains and ultimately the Rockies and West Coast. Immigration was driving a ripple effect: new immigrants from Europe settled in Eastern cities and drove down wage rates for unskilled labor. Laborers from the East then sought better fortunes on the Western Frontier. But as the Frontier itself filled and become settled, it was necessary to move the Frontier further West and force native Americans from their land. In the West a new competition for control of the land emerged. In the Western plains and mountain states a three-way struggle emerged between native Americans, ranchers, and farmers. In the Southwest, where low rainfall made farming more difficult, ranchers would win. But in most of the West, the farmers would win the battle to control the land. It wasn’t that farmers by themselves were such a formidable economic force, but the wealthy people who controlled railroads and banks were. And small private farms need bank credit and rail access to markets. The vast prairies and plains of America became the food and bread basket for not only the rest of the country, but Europe as well. Farm products from the midwest, especially flour, corn, hogs, beef, and lumber replaced cotton as the U.S.’s major exports. Unlike cotton, though, the profits from these exported farm products didn’t find their way back to the farmers. The railroads and banks absorbed the profits before the farmer could get his share. Of course, the biggest losers in the battle for land in the West were the original inhabitants. throughout the second-half of the 19th century the U.S. government would wage a brutal war of genocide and ethnic cleansing against native Americans, eventually pushing their greatly diminished numbers onto reservations with little means for economic sustenance. For the government, though, the “Indian Wars” were not a major economic drag or burden, unlike the Civil War had been.

Invention and Innovation

The Civil War demonstrated the usefulness of many new technologies such as telegraph, standardized rail networks, iron-making, steam-ships, and even iron-hulled ships. But that was only the start. After the war, the pace of technological invention and innovation begins to accelerate. Within only the first 15 years after the Civil War:

  • first trans-atlantic telegraph cable
  • first transcontinental railroad
  • first bicycles are manufactured in U.S.
  • the telephone is invented
  • electic lights are developed
  • the phonograph is developed
  • the Bessemer process transforms iron-and-steel making
  • Edison pioneers the modern industrial R-and-D “invention factory”
  • Petroleum was discovered, refining developed, and the oil business created
  • many, many others

These changes alone would mean transform the U.S. economy in the 55 years until 1920. Change was continuing in the U.S. economy. But again, to really understand, we need to look at the stories beneath and behind the headlines of events and great people.

The Main Story: Capitalists and Competition

The story that is usually told of this period is one of “onward and upward”. It is a tale of unbroken expansion, growth, and rising wealth. A story of settlers, pioneers, and enterprising industrialists. Reality was a little different for the people who actually lived it. Yes, there was growth. But it was largely growth born of increased resources (more people, more land) and improved technology (better transport, communication, and production processes). The path to growth was very uneven. Indeed, it was quite a roller-coaster. During the 50 year period between the two big wars (Civil and World War I), there were 13 separate depressions/recessions (periods of declining GDP) covering 312 of the 600 months. [NBER] That means the economy was shrinking more often than it was growing. Most of these depressions were accompanied by financial panics and crises in banking. A lack of currency, useful bank reserves, and financing was common complaint of the times. A more common complaint among business owners was declining profits. Among farmers the complaint was low prices and high railroad fees. And workers complained of poor wages. All of them attributed the problem to rising competition. They called it “ruinous” competition.

They were right. Competition was increasing and prices were falling. Meyer Weinberg explains in his book A Short History of American Capitalism, page 138:

Between 1865 and 1920, the United States became the world’s leading industrial capitalist nation. There was nothing inevitable about this development. Two principal obstacles blocked the way, each of them arising from capitalism itself: (1) a growing working class which increasingly insisted on sharing the fruits of industrial production and (2) competition among existing firms, originated over the years 1790-1865, grew extreme. (The former will be discussed in the next chapter.)

During the earliest phases of industrialization, as we saw above, “American industry … was … characterized by … local [miniature] monopolies protected from competition with each other by high transportation costs. By 1850, the average industrial plant in the country employed only seven workers. (See above, Chapter 5, p. 17.) A year later, “more than half of all British industrial enterprises had five or fewer employees.” At mid-century, the internal American market for manufactures was still smaller than that of the British. In no real sense was there much competition between two of the leading industrial countries of the world.

In the thirty-five years after the end of the Civil War, competition permeated American industry. In only a few industries were there dominant firms; instead, numerous small and medium-size companies populated the country. Competition took the form of price-cutting. As James Livingston observed, most capitalists during these years feared that “`ruinous competition’, overproduction, and price deflation had created a secular trend toward a stationary rate, in which profit incentives and their civilizing corollaries would disappear.” Livingston also reported that

Unit 4: Expanding Nationmac's History Textbook

[National Bureau of Economic Research] data show…that between 1870 and 1900 there were more months of contraction than expansion. Moreover, per capita output and growth in labor productivity declined persistently from 1870 until the turn of the century; interest rates (nominal and real), commodity prices, and yields on capital fell just as precipitously throughout the late nineteenth century.

Thus, most capitalists found little about which to celebrate during these “Gay Nineties”, despite the fact that during that decade the United States surpassed Britain in total industrial production.

Economic theory (which hadn’t yet been fully developed at the time) helps us understand. Price competition is primarily the result of increasing numbers of competitors (entrants). In the mid-19th century, the typical business was small and local. At most it had only a very small number of competitors. It also had a small number of employees. Think about all those Western movies you’ve ever seen. The town or village only ever has one blacksmith, at most it has two or three saloons or general stores. Even in large cities, competition was low. The city itself may have been large including thousands of residents and hundreds of businesses. But since transport was limited to horses, carriages, or walking, the reality was that any particular business sold only to the local neighborhood. Improved transportation, electric communications, and increased population density changed all this. As markets expanded, they included more competitors as well as more customers. Businesses begin to compete with each other by cutting prices. Profit margins begin to suffer. Microeconomic theory says that as long as new competitors are free to enter the market this process of increased price competition with open entry to new competitors will eventually drive profits to rock-bottom. In fact, theory says that profits will go so low that business owners will just survive, not get rich.

In addition, the monetary deflation occurring from the shift to gold-based money makes things worse. Inflation and deflation are difficult to see. The tendency for both businesses and workers is to see dropping prices as the result of “too much competition” and not how much is really deflation.

For the period between the Civil War and World War I, the real story, then,is the story of economic competition and how various groups tried to cope, escape, overcome, or profit from it. Instead of the key “actors” in our story being the different regions of the country, we can now identify the following actors:

  • small business owners – for the most part, business owners were intimately involved in their businesses. They managed them. They owned them. They knew the workers and customers. They knew the technology.
  • capitalists – The growing number of financiers, big bankers, and corporate managers that financed the expanding industrial enterprises. They were led by the giants of Wall Street and the emerging corporate world. None was greater or more powerful than J.P.Morgan and John D. Rockefeller, but there were others.
  • farmers – The growing numbers of small, independent farmers in the West and South struggled. They had to struggle against the elements and nature itself. Since they grew the same products, they competed against each other with prices declining. But their biggest problems were with banks and railroads. Farming requires financial capital and lending and money were in short supply during this period of long deflation. Farm products also require shipping and farmers were at a disadvantage in negotiating freight rates with railroads. As railroads ended their own “ruinous competition” through price-fixing and eventual regulation, they squeezed the farmers with high rates.
  • laborers – The working class, people employed by others rather than working for themselves or farming, grew dramatically as industry grew. Labor faced not only increasing numbers, but a decline in the demand for skilled labor and a rise in the demand for unskilled labor.. The blacksmith and skilled iron worker gave way to the giant mill steelworker which required far fewer skills, but more brute strength and endurance. As labor grew they struggled against the owners/managers for a share of the revenue and profits. Increasingly, the owners/managers were giant corporations managed by far-away capitalists instead of local business owners. Laborers would struggle to unionize, but usually with little success.
  • politicians – As usual, politicians are part of the mix. But in this part of American history, the politicians are more the object of struggle than they are the ones doing the struggling. As the economy grew and as the wealthy financiers and “barons of industry” obtained unheard of wealth, the profits from corruption grew. Some politicians, most notably William Jennings Bryan, attempted a “populist” appeal in supporting the causes of farmers and laborers. But most, and eventually the political system, largely fell under the influence of big business and Wall Street.

These actors played out their roles in three sub-plots, or ongoing struggles. We will look at these next.

Subplot #1: Control of Banking, Finance, and Government

As mentioned earlier, the period between the Civil War and World War I was marked by frequent economic depressions, deflations and financial panics. A major part of the difficulty was because the U.S. lacked a central bank that could produce a stable, sufficient, and sound currency. Instead, the nation depended upon multiple “monies”. Gold and gold coin was official money. But for much of this period, the Greenbacks, the paper money issued during the Civil War was also acceptable as money. Silver, too, was money. Each major bank would issue its own paper currency (“bank notes”) and these could be used as money. This patchwork money/currency system, combined with a banking system regulated primarily by states, wasn’t up to the needs of the era. The growing economy needed a growing currency base, but the gold standard limited the ability to produce the amount of money needed by the economy. Farmers, workers, and small businesses favored silver and paper money. But large banks and Wall Street favored the gold standard. Repeated banking and government financing crises occurred. The financial panic of 1893 produced a run against the government’s Treasury gold holdings (people demanding gold in return for other monies) forced the U.S. government to borrow from J.P. Morgan to finance continued operation. Morgan again was called upon when a massive run on banks in 1907 threatened to destroy the entire nation’s banking system and wipe-out depositors. Finally, in 1913 a plan developed in secrecy in Jekyll Island, Georgia by a few U.S. senators and Wall Street bankers was passed by Congress. The Federal Reserve Bank System was born. The U.S. had a central bank again. It would not mean the end of money and banking problems, though. We will see in the next unit that these problems would also play a role in the Great Depression.

If, like most people in the U.S., you have seen the movie The Wizard of Oz, you’ve seen a story that was at least partly inspired by these struggles over money, currency, and politics at the end of the 19th century. To learn more, see the Wikipedia entry for the Political Interpretations of The Wizard of Oz.

Subplot #2: The Fight Between Labor and Capital

Wall Street, bankers, and big business wanted and needed more from politicians than just sound-money based on upon gold. They also wanted help to prevent the formation of unions and other combinations of workers. Government obliged. This era is notable for the violence used against workers. Corporations used private security firms to spy on workers, infiltrate unions, and at times to violently stop strikes. A notable example is the Homestead strike where 16 people lost their lives as Carnegie Steel broke its union.

Labor in most cases, proved the loser in struggles throughout this period. Again, Weinberg describes on page 197.

By 1912-1913, wealth dispersion showed greater inequality than ever before and “was as unequally distributed here as in Western Europe.” From 1900 to the 1930s, a third of the population was in poverty. Thousands in New York City were living in houses “unfit for habitation.” Workplace accidents and illnesses occurred at high rates in coal mining, railroads, and steel. Very few unskilled workers had insurance. In a New York City hospital during 1910-1930, “differentials in infant mortality by social class increased.” Black children were under special health threats. The working-class districts of urban America were incubators of ill-health.

Early in the 20th Century, outright disfranchisement, poll taxes, complex voting registration procedures, literacy tests, and other mechanisms were tailored to fit working people especially and keep them from voting. They thus became less able to exert political power just at a time when they sorely needed protection from new economic and social problems.

Sub-plot #3: Corporations, Consolidation, and Control

The great institutional change of this era was the rise of corporations. In our world, we are accustomed to the idea that businesses are organized legally as corporations. But it hasn’t always been this way. Indeed, the modern industrial corporation is largely a U.S.-British invention of the 19th century. It has been adopted throughout the developed industrialized world, partly because it is well-suited to the needs of economies of large-scale, capital-intensive, complex production processes. Weinberg provides some historical context on page 5.

The modern business corporation is an original creation of the American imagination. It was first fashioned to extend local markets; then, it became an indispensable means to create a national market. Both American industrialization and capitalism were crucially dependent upon the corporate form of organization. The corporation was not, however, a disembodied “first cause”; it spread in response to concrete economic challenges. But the corporation had first to become a legal instrument before it could be anything else. While the law dealt amply with the internal affairs of corporations, no internal logic dictated the further development of the corporate form. Corporate law, after all, is not a branch of higher mathematics whose cogency requires a series of more elementary operations. External, primarily economic pressures helped generate the corporation. The combined force of those pressures and the nature of American legal thought determined the eventual shape of the modern business corporation.

In colonial America, the business corporation was almost unknown. During all the years before 1789, only thirty such firms were formed and virtually all of them failed.6 With the opening of the nineteenth century, however, the real history of the modern business corporation began. For the next half-century, the industrializing countries of the world turned America into a vast storehouse of cotton, wool, meat, and grain; in time, also lumber and coal. To produce these raw materials and get them to market, transportation improvements were crucial. But transportation is nothing if not expensive. Whether the task was to develop turnpikes, or steamboat lines, or canals, or railroads—a means had to be found of gathering together extensive capital investments. Foreign investors found it convenient to buy shares in American transportation corporations. By doing so, they helped feed and clothe their own industrial population and meanwhile laid the foundation for the modern business corporation in America. And they made a handsome profit. The corporation proved an excellent net, too, to catch scattered, though appreciable, domestic investment funds.

But what is a corporation? In ancient Rome collegia or corpora performed essentially public duties and later became part of municipal administration. In no meaningful sense could they be regarded as voluntary associations of private businessmen. A corporation, according to Roman law, had a distinct personality apart from that of its “owners” or members and existed beyond their lifetime. Also, the head of a Roman corporation who brought an action in law represented the corporation rather than its individual members.

In 17th century England, numerous corporations were chartered by the Crown as monopolies over definite lines of business. It was reasoned that such organizations were carrying out work in the public interest and thus deserved government privilege. Lord Coke, in the 17th Century, rendered a definition that was for long considered classic:

A corporation aggregate of many is invisible, immortal, and rests only in intendment and consideration of the law. They cannot commit treason, nor be outlawed, nor excommunicated, for they have no souls, neither can they appear in person, but by attorney. A corporation aggregate of many can’t do fealty for an invisible body can neither be in person nor swear; it is not subject to imbecilities or death or the natural body and divers other cases.

Coke’s definition of a corporation was much like the Roman one. A century later, Adam Smith barely discussed the corporation, pausing several times only to denounce it for conspiring to charge more than the “natural price” for goods.

Unit 4: expanding nationmac

When, at the beginning of the 19th century, Americans undertook to develop the corporate form, they found equally slim bodies of business practice and judicial doctrine. They had to fashion the doctrine out of the crucible of practice.

…No institution was more significant in that growth than the business corporation. The modern business corporation was the country’s second great contribution to the world economy. (How to fight a war with paper money was the first.)

A series of Supreme Court decisions, accompanied by a sympathetic Congress, empowered what had been a voluntary association of business people into the modern corporation. A critical step in the process was a U.S. Supreme Court decision where the court reporter and judge’s comments established what became firm legal precedent in the U.S. I quote from ratical.org:

This is the text of the 1886 Supreme Court decision granting corporations the same rights as living persons under the Fourteenth Amendment to the Constitution. Quoting from David Korten’s The Post-Corporate World, Life After Capitalism (pp.185-6):

“In 1886, . . . in the case of Santa Clara County v. Southern Pacific Railroad Company, the U.S. Supreme Court decided that a private corporation is a person and entitled to the legal rights and protections the Constitutions affords to any person. Because the Constitution makes no mention of corporations, it is a fairly clear case of the Court’s taking it upon itself to rewrite the Constitution.

Unit 4: Expanding Nationmac

Far more remarkable, however, is that the doctrine of corporate personhood, which subsequently became a cornerstone of corporate law, was introduced into this 1886 decision without argument. According to the official case record, Supreme Court Justice Morrison Remick Waite simply pronounced before the beginning of argument in the case of Santa Clara County v. Southern Pacific Railroad Company that

The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of opinion that it does.

The court reporter duly entered into the summary record of the Court’s findings that

The defendant Corporations are persons within the intent of the clause in section 1 of the Fourteen Amendment to the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws.

Thus it was that a two-sentence assertion by a single judge elevated corporations to the status of persons under the law, prepared the way for the rise of global corporate rule, and thereby changed the course of history.

The doctrine of corporate personhood creates an interesting legal contradiction. The corporation is owned by its shareholders and is therefore their property. If it is also a legal person, then it is a person owned by others and thus exists in a condition of slavery — a status explicitly forbidden by the Thirteenth Amendment to the Constitution. So is a corporation a person illegally held in servitude by its shareholders? Or is it a person who enjoys the rights of personhood that take precedence over the presumed ownership rights of its shareholders? So far as I have been able to determine, this contradiction has not been directly addressed by the courts.”

Endowed with legal rights by the Supreme Court, corporations would be empowered with financial resources by Wall Street. Led by the example of John D. Rockefeller’s Standard Oil and the efforts of J.P. Morgan’s bank, giant corporations (often mis-called “trusts”) began to emerge. Hundreds of small competitors in a particular industry would be merged into a giant corporation under the guidance of Wall Street. By eliminating competition, the corporations became monopolies earning high profits. By the time World War I breaks out, the American economy is no longer characterized by large numbers of small competitors. Instead, the economy is dominated by a small number of large firms. Standard Oil, General Electric, American Telephone and Telegraph, U.S. Steel, American Tobacco,

By 1900, the U.S. was already the largest industrial producer in the world, but it still faced stiff competition on the world’s industrial markets from Germany, France, Britain, and others. But when Europe became engulfed in World War I in 1914, the U.S. stayed out of hostilities until 1917. In the meantime, though, the U.S. became the producer for both sides. Upon entering the war, the consolidation of many industries became complete. The U.S. government formed the War Industries Board under the direction of key industry managers. Output and prices were centrally controlled by the government. The railroads were nationalized. Profits and output soared. By the end of the war, the U.S. was the undisputed economic super-power of the world. It appeared the American system of large corporate capitalism had triumphed. In the next unit we will find that system to be severely tested after the war.

Manifest Destiny

By the 1830s Americans dreamed of a country that stretched from the Atlantic to the Pacific, and the nation was well on its way to reaching that goal. In fact, during this period, many Americans believed it was their responsibility to spread the ideals of democracy.

One New York journalist expressed such ideals with his term “manifest destiny,” which is the idea that something is inevitable. A prime example of manifest destiny would be seen in the United States’ acquisition of Texas.

An excellent example of manifest destiny and how it affected the United States politically is the Monroe Doctrine. In 1823, President James Monroe explained this new policy in his State of the Union address to Congress. Monroe made it clear that the United Sates would view any attempts by European powers to further colonize land in the Western Hemisphere as an act of aggression. In this way, Monroe stepped up the ideal of manifest destiny to include the Western Hemisphere and preclude any European presence in the new nation’s half of the world.

Building a transportation system that could take goods and travelers from coast to coast was a necessity for manifest destiny to take shape physically, not just theoretically. The 1800s were a time of building the nation’s infrastructure, and railroads were the leading mode of transportation. Bridges, tracks, depots and railways all needed to be built to accommodate railroads. Towns sprang up where there had been nothing but wilderness a few years before. Jobs building the structures, as well as the actual railways, employed hundreds of thousands. Railroads had magnificent economic and social effects on the United States.

In 1869 the Central Pacific Railroad, which started in San Francisco, met up with the Union Pacific, which originated in Nebraska. These two railroad companies got together to build the transcontinental railroad, which stretched between East and West. This huge undertaking employed massive numbers of Irish and Chinese immigrants during the 1800s. The line was completed on May 10, 1869 when the two railways met and connected in Utah.