An Empire Of Wealth

PrintPrintEmailEmail

The British government, unlike those of France and Spain, had little at stake in its New World colonies in the early days. It was only too happy to export to the new colonies its troublemakers, both religious and criminal, as well as its unemployed. So instead of a population consisting largely of bureaucrats and establishmentarians, the British colonies consisted of many who marched to different drummers, pursuing their own ideas of happiness with little restraint on their doing so. That, too, was a powerful plus for economic development.

If this country is famous for its get-up-and-go, it is because its population is largely descended from those who got up and went, leaving all they had ever known to seek their fortunes or their God (or both) in North America. It is perhaps not a coincidence that the United States is at once both the most religious and the most secular nation on earth —devout and commercial.

However, the success of the American economy was not a slam dunk. Thank heavens, for that would make for very dull reading. The “epic” in the subtitle of my book reflects the fact that the history of the American economy has been a great adventure, one with disasters as well as triumphs. Its present success was no more foreordained than was Odysseus’s return to Ithaca from the Trojan War.

There were any number of times when the American economy could have gone off the tracks. Had that “bastard brat of a Scotch peddler,” as John Adams described Alexander Hamilton, not been able to rise to the top and serve as the country’s first Secretary of the Treasury, the new United States might have gotten off to a disastrous economic start. Had the Supreme Court in the case of Gibbons v. Ogden (1824) not aggressively asserted federal power in the regulation of interstate commerce, the country might not have become the world’s largest common market, with all the efficiencies of scale that became possible at the dawn of the Industrial Revolution. Had Congress in 1944 not passed the GI Bill, which it hoped would slow down the flow of returning soldiers into the civilian economy and stave off a renewed depression, we would not have so massively increased the country’s human capital just as the economy was moving from an industrial base to an information base.

Of course, we made plenty of big mistakes too. Thomas Jefferson’s hatred of banks, especially of large ones, would cast a pall over the American banking system that has still not been totally removed. The lack of a central bank after Andrew Jackson killed the Second Bank of the United States in 1836 caused the business cycle to have a much larger amplitude than in other countries, producing both euphoric booms and disastrous crashes, in 1837,1857,1873,1893,1907, and, of course, 1929. They in turn often foreshadowed deep and protracted depressions. (Jefferson’s contributions to the American economy were not wholly negative, however. It was he who devised the world’s first decimal currency system, an idea that has now spread to every other country on the globe. He even coined the word dime for the 10-cent piece.)

The greatest economic crisis in American history, of course, was the Great Depression of the 1930s. How bad was it? Consider this. On March 8,1933, the newly inaugurated President, Franklin Roosevelt, held his first news conference. One hundred and twenty-five reporters crowded into the Oval Office as Roosevelt read a statement detailing the emergency steps the administration had already taken and others it would propose to a special session of Congress the next day. The country’s banking system, the very beating heart of a modern economy, was completely closed down at that point. Many people thought revolution was in the offing. At the end of the President’s remarks, for what is surely the only time in history, the hard-boiled, cynical, professionally skeptical Washington press corps broke into applause. Even they were desperate for the new President to succeed.

The story of the American economy, the story I have tried to tell in An Empire of Wealth, is truly one of the great epics of the modern world, a story full of triumph and disaster, great daring and entrenched prejudice, giants and midgets, leaders and villains. But the story has only one real hero: the American people, who found a wilderness and turned it into a land of milk and honey beyond the wildest dreams of prophecy.