B005HFI0X2 EBOK

MICHAEL LIND

LAND OF PROMISE

AN ECONOMIC
HISTORY OF
THE UNITED STATES

Contents

My first wish is to see this plague to mankind [war] banished from off the earth, and the sons and daughters of this world employed in more pleasing and innocent amusements, than in preparing implements and exercising them for the destruction of mankind. Rather than quarrel about territory, let the poor, the needy, and oppressed of the earth, and those who want land, resort to the fertile plains of our western country, the
second land of promise
, and there dwell in peace, fulfilling the first and great commandment.

—George Washington, 1785
¹

From the beginning Americans have been anticipating and projecting a better future. From the beginning the Land of Democracy has been figured as the Land of Promise.

—Herbert Croly, 1909
²

A
t the Great Falls of the Passaic River in New Jersey, two dozen miles from New York City, a torrent rushes over the rocks and plunges with a thunderous roar to the river seventy-seven feet below. Thirteen thousand years ago during the last Ice Age, the Passaic River followed a different course. When the glacier that had covered much of North America melted, it deposited a moraine of boulders that formed a dam, blocking the river’s course. Diverted along the Watchung Mountains of New Jersey, the river gouged a new course, bursting through layers of two-hundred-million-year-old basalt to create the largest waterfall in North America south of Niagara Falls.

It was here, on July 10, 1778, during the American War of Independence, that General George Washington of the Continental Army chose to rest and dine. Relaxing with him that day were the marquis de Lafayette, the aristocratic young French volunteer who would return home to fight for liberal constitutionalism in the French Revolution, Colonel William McHenry, later to be secretary of war of the United States, and Washington’s young aide-de-camp, Alexander Hamilton.
³
The contents of the picnic are recorded by history—ham, tongue, and biscuits—but no record remains of the conversation.

It is certain, however, that Hamilton was impressed by the natural power of the falls. As the first Treasury secretary of the United States during the administration of President George Washington, Hamilton chose the Great Falls of the Passaic as the site for the Society for Establishing Useful Manufactures (SUM), an industrial corporation chartered in 1791 by the New Jersey legislature and Governor William Paterson, after whom the new factory town on the company’s land would be named.
⁴
The creation of the SUM followed the Report on Manufactures delivered to Congress in 1791, in which Hamilton called for a variety of federal policies to promote industry in the young United States.

Hamilton’s grandiose plans for the “National Manufactory” were not realized. But the SUM survived until 1945, when it sold its assets to the city of Paterson, by leasing its land to a number of increasingly sophisticated manufacturing concerns.
⁵
To create a system of raceways diverting water from the river through mills, the society hired the French engineer and urban planner Pierre L’Enfant, who later planned the city of Washington, DC, only to replace him with Peter Colt, who used a simpler plan.
⁶

With the water-power infrastructure in place, Paterson became a flourishing center of industrial production. The township was soon the site of a cotton mill (1794), a candlewick mill (1800), and a paper mill (1804).
⁷
As the new railroads spread across the continent, Paterson became a center of steam-powered locomotive production, leading the industry by the 1850s.
⁸

Hamilton, like Washington, was a champion of American manufacturing in part because of the difficulty experienced by the Continental Army during the American Revolution in obtaining adequate supplies. The tradition of US military support for the development of new technologies, including radio, atomic power, and computers, shaped the growth of Paterson from its earliest days. A deputy director of SUM, John Colt, perfected a nonmildewing cotton cloth that the navy used for the sails of all its ships in order to free itself from foreign suppliers.
⁹
When Samuel Colt, a relative of Peter and John Colt, invented the revolver, he opened his company in Paterson and found indispensable customers in the Texas Rangers and the US Army, whose procurement orders helped bankroll the development of the new technology. In the 1870s, an Irish American inventor in Paterson, John Philip Holland, experimented with submarine technology.
¹⁰
In 1890, the US Navy named its first commissioned submarine the USS
Holland
in his honor.
¹¹

By the end of the nineteenth century, when the town was the source of almost half of the silk in the United States, Paterson was known as “Silk City.” A strike by Paterson silk workers in 1913 attracted worldwide attention and the support of bohemian intellectuals like the journalist John Reed and Mabel Dodge Luhan, who sponsored an avant-garde pageant at Madison Square Garden to publicize the strike.
¹²
The pageant was a success but the workers were crushed and Paterson and other northern textile centers lost out to competitors in the American South.

But once again, Paterson reinvented itself by taking advantage of technological innovation. Two of the transformative technologies of what historians call the second industrial revolution were electricity and aviation. In the 1900s, the SUM enlisted Thomas Edison and his company to design one of the world’s first hydroelectric power plants.
¹³
The mills switched from old-fashioned waterpower to electricity from the plant, which opened in 1914 and still generates energy for Paterson today.

Soon the former Silk City became Aviation City, hosting the Wright Aeronautical Corporation, which was established by the inventors of the airplane, Orville and Wilbur Wright. Wright Aeronautical manufactured the custom-made engine that Charles Lindbergh used in his epochal solo flight across the Atlantic in 1927. The successor to Wright Aeronautical, the Curtiss-Wright Corporation, went on to play a major role in aircraft production during World War II, contributing to the Allied victory against the Axis powers in Europe and Asia.
¹⁴

In the second half of the twentieth century, Paterson declined because of competition first from the low-wage American South and then from the state-sponsored industries of Asia and Europe. Symbolizing the rising importance of real estate and financial interests in the US economy, realtors sought to destroy much of the old industrial neighborhoods, which were plagued by dereliction and crime. The federal government, however, turned the Great Falls and their environs into a national park, reflecting another trend in deindustrializing America: nostalgic historic preservation. It remained to be seen whether the alternatives proposed for the once-great manufacturing city of Paterson, New Jersey—speculator-built condos and apartments or relic-filled museums of a lost industrial past?—represented local decline or a prophetic vision of a future American economy that had completely ceded high-value-added manufacturing to its military and economic rivals.

For generations, Paterson was what Detroit and Silicon Valley would be later: a dynamic center of enterprise and innovation that brought together investors, inventors, engineers, merchants, and a large and competent workforce. Hamilton’s vision of an industrial city, after initial failures and delays, ultimately was realized. So was his vision of an industrial America. The opposition of the planter oligarchy of the South, which culminated in the Civil War, delayed but did not prevent the emergence of the United States as the greatest economic power of the world by the 1870s. Despite competition from Europe and East Asia, including newly industrializing China, the United States maintained its economic primacy into the early twenty-first century, with the third largest population in the world, an economy accounting for a quarter of global gross domestic product (GDP), and the privilege of having the dollar serve as the global reserve currency. In a little more than two centuries, a nation of four million people, mostly farmers and slaves, inhabiting a miscellany of former British colonies along the Atlantic rim of North America had grown into an economic and military colossus with a continental territory inhabited by a population that was predicted to grow to as much as half a billion by 2050.

INDUSTRIAL REVOLUTIONS AND AMERICAN REPUBLICS

Beginning with the Austrian American economist Joseph Schumpeter in the 1920s and 1930s, many students of economic history have argued that technological innovation comes in bursts of change, followed by long periods in which the implications of the latest innovations are worked out. Some economic historians have distinguished as many as five major waves of technological change since the industrial era began. Many identify three, based on radically new “general purpose technologies”: the first industrial revolution of the late 1700s, based on the steam engine; the second industrial revolution of the late nineteenth century, based on electricity, automobiles, and science-based chemical industries; and the third industrial revolution of the mid- and late twentieth century, based on the computer.
¹⁵

Students of American political history have argued that, despite the formal continuity of its political institutions, the United States has gone through two or three regimes or informal “republics.” In earlier works, I have made the case for three American republics, each originating in a prolonged crisis—the American Revolution and its aftermath, the Civil War and Reconstruction, and the Great Depression and World War II.
¹⁶
It remains to be seen whether the global economic crisis that began in 2008 will mark the end of the Third American Republic and the gradual construction of a fourth republic by the 2020s or 2030s.

What is the connection, if any, between successive industrial revolutions and successive American republics? As many scholars have observed, there tends to be a time lag of a generation or two between the invention of a general-purpose technology and its widespread adoption in ways that revolutionize the economy and society. For example, the steam engine was developed in Britain roughly at the time of the American War of Independence of 1775 to 1783, but it was only in the 1830s that many American industries began using steam power and railroads and steamboats began reshaping society. Electricity, telephony, and the internal combustion engine were developed in the 1860s and 1870s, but these technologies of the second industrial revolution began to spread widely only in the early twentieth century and achieved their full potential only after 1945. Similarly, the groundwork for the information revolution was laid in the 1940s and 1950s, but widespread adoption of computer technology had to wait until the 1980s and 1990s and the full maturation of the information technology (IT) revolution may still be in the future.

This means that, while the invention phase of each industrial revolution has coincided roughly with the foundation of each American republic—in the 1770s and 1780s, the 1860s and 1870s, and the 1930s and 1940s, respectively—the disruptive deployment phase of the new technology has generally come midway through the seventy- to-eighty-year lifespan of each successive American republic. The result is a lag of several decades between technology-driven change in America’s economy and society and the adaptation to the change of America’s political and legal institutions.

To put it another way, each American republic has been destabilized by a wave of technology-driven change. The gap between a rapidly evolving society and an outmoded political order grows for several decades. Finally, during a war or depression or both, the outmoded political order crumbles and a new American republic is constructed, built on the ruins of its predecessor.

THE FIRST AMERICAN REPUBLIC

The First Republic of the United States was founded on water and undermined by steam. James Watt radically improved the steam engine around the time of the American Revolution, and delegates to the Constitutional Convention in 1787 witnessed a demonstration by John Fitch of a steam-powered boat in the Delaware River. But there is often a gap of a generation or two between the invention of a new technology and its widespread diffusion and adoption. So it was with the steam engine. From the 1790s until the 1830s, the energy sources in the United States that augmented human and animal power were still water and wind. Sailing ships transported people and cargo more easily than overland forms of transportation like horses, carriages, and wagons. The population crowded along the Atlantic coastline and rivers, up to the north-south “fall line” beyond which ships powered by the wind could no longer sail. The first great achievements of US transportation infrastructure building were canals like the transformative Erie Canal that linked the Atlantic at New York City with that inland sea, the Great Lakes. The first factories in the United States were mills powered by waterwheels. Most towns were small and limited by the distance that people could walk, while counties were often defined by the distance that a horse could travel in a day.

It was only in the 1830s and the 1840s that the first industrial revolution began to change the nature of production, travel, and commerce in America. Steam engines began to replace waterwheels to provide the motive power of mills. The age of canal building came to an end and railroads sprang up, linking cities, regions, and then, just after the Civil War, the Atlantic and the Pacific edges of what by then was a continental nation. The first suburbs appeared, as the affluent began commuting from sylvan homes to urban businesses.

And in the South, the new technological power spawned a new political power that threatened to destroy the country. The cotton gin, along with the steamship, enabled southern slaveowners to switch from tobacco and rice and other crops and to specialize in producing cotton for the machine-powered textile mills of Britain. By the mid-nineteenth century, the cotton South was to industrial Britain what Saudi Arabia and the other oil-producing nations became in the late twentieth century to the industrial nations of the West and East Asia—the source of the key industrial raw material, ruled by an elite as reactionary as it was rich. Appeased by the cotton-mill capitalists of New England, the southern planters used their domination of the federal government to thwart plans for the state-sponsored industrialization and modernization of the United States, preferring a regime with a weak center and powerful states.