A History of the American Economy - Part 3

"If you have ten thousand regulations, you destroy all respect for the law." – Winston Churchill

...continued from "A History of the American Economy - Part 2"

There is this sense in American Media that the world began in the "Post War Period" (I often found that phrase somewhat dysfunctional, as if we live in the period when man came to his senses and wars are no longer fought...). That the end of WWII ushered in a brave new world unconnected to the past. Perhaps the advent of Television and mass communication had something to do with this.

In fact WWII WAS a dividing line of sorts in that immediately after the War the U.S. had almost of the world's Gold and almost all of the world's productive capacity - but that was not a permanent condition... we just thought it was.

The American Industrial Revolution meant Railroads ("RR"). In the years immediately after the Civil War the Railroad industry was the second largest employer after agriculture (Government jobs were not a significant portion of employment). The expansion of the RR's created markets where none existed and dramatically expanded those that did and provided access to farmland and natural resources that seemed almost boundless. And they were, from a short term economic view, boundless - attracting overwhelming investment for goods and services that could not find a market, leading to the inevitable bust. The 8 year period of over investment and over-capicity gave the U.S., and the world (although who gave who what is up for debate; the idea that this Depression was caused by the stock market crash in Vienna in May of 1873 is just as silly as the idea that the stock market crash of '29 caused the Depression of the 1930's) a nearly 25 year period of deflation and alternating recession and stagnation that did not let up until the end of the century.

During that time the U.S. was not a world power and the U.S.$ was NOT the world reserve currency. The British Pound filled that function. Accordingly the American people had to fund their own government spending, as well as provide for their own end of life needs (Even Presidents. The president at the time of the Panic of 1873 was U.S. Grant. Grant lived most of his post-presidency in poverty, even enduring bankruptcy. It was not until 1958 that a presidential pension was passed into law).

It is worth noting that while the U.S. economy was in almost constant recession during the last 25 years of the 19th Century the population was exploding with U.S. cities experiencing a 15 million person growth spurt. Even so, the majority of Americans lived on farms or small towns supporting farm land. at the turn of the Century. To understand what life was like for the over 30% of Americans employed in agriculture a definition of a "farm" is in order. Most farms had a small family house, often one large room with lofts. There was no indoor plumbing for toilets or the kitchen sink. Water was had from a well. There was no heating or A.C. Sanitation was an outhouse. Cooking was done outside in a "cook tent" until heat was desired in doors. Most boys went to school until 8th grade (so did many, but fewer, girls), but the graduation test for an 8th grade education in 1900 would stump 90% of the kids at the best high schools today. For farm families, at 14 you were a man and you had skills (and not video game skills).

"Roads" we merely dirt wagon paths and when wet they were mostly impassable. Local transportation was by wagon. Socializing was done in town on Saturday night and Sunday Church - hence, the Saturday night bath. Yes, there were the RR's but once off of the line, everything was transported by horse and carriage.

There were no federal income taxes... and if there were, how would they be collected? Most people today work for corporations or governments - easy collection points for the forced extraction of payroll deductions. Not so in the late 19th Century. The U.S. economy was as much a barter economy as a currency economy - particularly in rural communities. Trading using gold and silver NOT minted by the U.S. was also common place. I would argue that people were "freer" than now, but life was unforgiving. There were no social "safety nets" to speak of other than "faith based" charity - and that was not much.

In the absence of Corporations there existed REAL capitalism. If you failed, you went bankrupt. Life was an ongoing meritocracy.

(I am being summoned and will continue this shortly)