The Industrial Revolution, Capitalism and the United States of America
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
So began one of the most influential documents in the history of democracy on earth. The Constitution of the United States of America
In 1776, the same year the United States declared its independence from England, one of the most influential books in the history of economics was published in Scotland. It was written by Adam Smith and called “The Wealth of Nations.” In this book Smith laid down intellectual foundations for free-market capitalism and for the explosive growth of wealth and population in the 19th and 20th century Industrial Revolution.
All three of these beginnings—
the beginnings of the United States of America,
the beginnings of free-market capitalism
and the beginnings of the Industrial Revolution—
are closely related. All three rose directly from the great changes in western society called the Renaissance, the Reformation and the Enlightenment. And all three have had profound effects on the world of the 21st century—a world that is becoming more industrial, more free-market and more democratic with each new generation.
How did it all happen?
Almost all of the early settlers in what was to become the United States of America came from northern Europe. Most of them came from England where the Enlightenment had taken firmest root. Many of these early settlers brought with them enlightenment-founded cultural ideas that favored free inquiry, human rights and a determined pursuit of happiness. Many of them also brought a work ethic fostered by the Protestant Reformation that linked commercial success with religious virtue.
The Enlightenment was powerful, but it did not wipe away all earlier stages of history. Religious wars, for instance, had plagued Europe and England for more than a hundred years. Slavery was still common in the late 18th century as it had been for many centuries before in almost all agriculturally-based civilizations, east and west, north and south.
Thus besides Enlightenment-inspired ideas, some of the settlers in what was to become the United States also brought enduring ideas, habits of thought and action, that had survived from earlier ages. Some of these ancient-founded ideas said things like: wealth comes from land and gold; slavery is necessary and just; literacy is elitist and to be scorned, masculine honor is important and to be defended, witches are evil and need to be destroyed; only one religion is the true religion,.
These first settlers found a new continent rich in land and natural resources. They proceeded to use these resources with hard work and ever-improving technology and skill, creating new wealth for themselves and for the growing nation.
They also found a continent already inhabited by tribes of human beings living, for the most part, in a hunter/gathering life style. Some of the settlers imported slaves from Africa to work their new plantations. Conflicts between the new settlers, their African-born slaves, and Native Americans were inevitable. Some of the legacies from these conflicts are still with us today.
America’s founding fathers brokered many compromises along the way but in the end they put together a remarkable document, the Constitution of the United States of America. Along with its first ten amendments (the Bill of Rights) this document spelled out for the first time in human history the rudiments of a genuinely democratic state. (The founding fathers preferred the term republic to democracy. Democracy to them implied, as it had to philosophers in ancient Athens who first coined the word, the chaos of mob rule.)
For the first time in world history the dreams of the Enlightenment were made reality in one small corner of planet earth. Thomas Jefferson, Alexander Hamilton, Benjamin Franklin, and George Washington were inspired in their thinking by Enlightenment philosophers like Thomas Hobbes, Baron de Montesquieu, David Hume and especially by the Englishman John Locke.
Following their lead the Constitution firmly rejected ideas of a Divine Right to rule. It just as firmly established the principle that citizens were all created equal under the law. Rulers were to serve at the pleasure of the people they served. Who ruled was to be decided by election. Rulers had to take care not to step on the inalienable rights of the people they ruled. Among these rights were a free press, freedom of assembly, free speech, trial by jury, ownership of private property, and freedom of religion.
When it came to religion, the US Constitution went further than European states of the Enlightenment and later days. Most of these states, including England, had an established Church, either Catholic or Protestant. The American Constitution called for a separation of church and state so that there would be complete religious freedom, but there would not be theologically-based law, clerical rule or religious wars.
Ground-breaking as it was in world-wide democratic evolution, the Constitution compromised its own principles in order to keep slave-holding southern states in the new Union and to protect the new republic from the possibility of what they saw as democratic chaos.
It did not outlaw slavery. It even allowed the importation of more slaves until 1808. The Constitution counted a slave as just 3/5 of a human being when it came to taking the census which was needed for elections to Congress. And in those elections slaves would not have a vote. Nor would Native Americans. Nor would women. Nor in many of the states would citizens who did not own property.
To further protect against the feared mob rule of democracy, the Constitution spelled out a series of checks and balances. Governmental power would be divided into legislative, judicial and executive branches. Included as an important part of the legislative branch would be a Senate representing states, not voters at large. And the Chief Executive, the President, would be elected not by popular vote but by a complicated Electoral College system.
In time most of the most serious flaws were remedied. But it took a long time. It took a devastating civil war in the middle of the 19th century to abolish slavery. Women did not get the right to vote until the early 20th century. The descendants of slaves, African-Americans, did not get full civil rights until the late 20th century. And finding ways to assure equal rights and opportunities for all citizens in the American democracy is still an on-going struggle as the 21st century proceeds.
In 1776 the United States was a country in transition. For the most part it was populated by small farmers in both northern and southern states. In southern states larger plantation farms were worked by slaves. In new cities like Philadelphia, Boston, Charleston and New York, however, there was also a small but growing commercial class of merchants and entrepreneurs like Benjamin Franklin.
For the most part the small farmers were self-sufficient. They grew their own crops, raised their own animals. They cut their own trees for lumber to build their own houses, to heat them and to cook their food. Since there were no banks in the colonies, money was scarce. Exchange of goods was often by barter. All material goods they could not make for themselves—pots and pans, plows, candles, carriages, guns, nails, printing presses, paper, etc.-- were made by local artisans or cottage industries or more likely were imported from abroad, usually from England.
The imports, including imports of slaves from Africa, were paid for by exporting tobacco, cotton, lumber and other basic raw materials and food stuffs. This commerce, both domestic and foreign, was expedited by letters of credit and other new financial tools that would later evolve into the modern banking system.
For settlers of North America (unlike the Spanish explorers and settlers in Central and South America) there was no gold or silver to be found (or stolen from native inhabitants). A big difference in the new world of North America, however, was the sudden abundance of land that was not privately owned or intensively cultivated.
Native Americans, of course, occupied and “owned” this land in a tribal corporate way, but being for the most part hunter-gatherers, there was no individual private ownership and only very limited agricultural cultivation. There were exceptions. In New England and in the Southwestern part of what would later become the United States, Native Americans did have some agriculture and indeed taught the colonists useful lessons on growing corn and other new world vegetables.
By and large though, the land in North America was very sparsely occupied by agriculturally-based standards. When the world of Europe, the Middle East and much of Asia, for instance, changed from hunter-gathering bands to agriculturally-based civilizations a few thousand years before, the population supported on the same land increased from 2 or 3 million to 200 to 300 million people.
There was never a census but historians today estimate that the entire North American continent had a population of somewhere between two and eight million Native Americans when European settlers arrived. By taking over most of the land that was occupied by the Native Americans and converting much of it to cropland and pasture, the same acreage would support many times the population a hunter/gathering society could support. And that, of course, is what the colonists did. Sometimes by treaty, sometimes by force.
At the time the Constitution was written, the early vision of Thomas Jefferson (along with many of his followers) was for a new nation that would forever be a republic built on an independent small farmer base.
Other founding fathers, led by Alexander Hamilton, the nation’s first Treasury Secretary and the founder of the first National Bank, saw the future of the nation being built on the growing industrial, business and commercial life in the cities.
Hamilton turned out to be closer to the mark because ....
When the U.S. Constitution went into effect two other world-wide revolutions were fast brewing. One was the Industrial Revolution. The other was the dramatic growth of free-market capitalism. Both of these revolutions had their early beginnings in England and northern Europe in the middle and final decades of the 18th century.
In the midlands of England newly invented machinery to spin thread and weave cloth rapidly made England the center of a worldwide textile industry. In nearby Coalbrookdale, iron makers were learning how to make iron in stronger, larger batches, using coke instead of wood or coal as the energy source. With this new iron they built the first iron bridge in the world. Using this new iron an engineer, James Watt, perfected the world’s first practical steam engine that would soon power factories, steamships and railroads all over the world.
As the Industrial Revolution picked up steam in England and a little later in Germany and the United States--eventually in just about every country in the world—it linked together free-market capitalism to bring whole new ways of thinking about progress and about wealth. These new ways of thought and action changed forever all of the agriculturally-based societies on earth.
For instance, what is wealth?
In agriculturally-based civilizations, wealth was based for the most part on land and the muscle power of animals and of human laborers (usually peasants, serfs or slaves). Money was gold or silver. Wealth was limited to the available supply of land, animals and agricultural laborers and of gold or silver. Any gain in wealth to one person, family, clan or kingdom was offset by a loss of wealth to some other person, family, clan or kingdom. In other words it was a zero-sum game. And the result, only too often, was conflict, violence and wars of conquest.
In the new world of capitalism and industry, wealth was no longer based solely on land, animals, labor and gold. Instead, more and more, it was based on innovation, on doing more with less, on science and technology and on free-trade between innovators.
Like other revolutionary changes, this new view did not spring out of nowhere. In classical times, in the late Middle Ages and then especially in the Renaissance there was a beginning of what came to be called capitalism. Some new wealth and capital was generated by sailing ships and by increasing trade, especially in luxury goods like jewelry, silk, ceramics, spices and exotic foods. And in the heady days of world-wide exploration in the 15th and 16th centuries wealth in western European countries increased substantially.
In the Industrial Revolution of the 18th and 19th centuries, however, there was a explosion of new wealth that dwarfed all that had gone before. And just as important, there began to take root a whole new way of thinking about wealth.
You still needed land and labor You still needed a way to measure value. That measure was still money, but the money was based now on potentially unlimited trust rather than on a finite supply of gold or silver. And the real trick was not how many natural resources, or how much raw land and labor or money you owned, but how imaginatively and how efficiently you used natural resources, land, labor and money to produce old and new kinds of needed goods and services..
With the progress of science, technology, finance and business management in the 19th and 20th centuries the same physical resources now produced hundreds of times as much wealth as it had before. And the same human labor produced thousands of times as much wealth as it had ever done before.
Before the Industrial Revolution, for instance, the primary source of energy for civilizations was muscle power, human and animal. This muscle power was supplemented with small amounts of wind and water power. As the Industrial Revolution advanced, however, science and technology discovered whole new sources of energy in coal, oil and gas—and later in nuclear fission-- that would multiply by thousands and then by millions of times the amount of work that human labor could accomplish.
An early steam engine, for instance, could do the work of hundreds of horses, windmills or watermills—and it could do the work much faster. A modern power plant or jet engine can do the work of millions of horses or windmills in a fraction of the time. And people could use that vastly expanded power for millions of new jobs that never existed before.
The Industrial Revolution did more than increase dramatically the amount of energy and power human beings could command. Within the next two hundred years (a relatively short time span as human history is concerned) inquiry and innovation as well as world-wide trade and finance multiplied the number and quality of new products almost beyond counting.
Industrialists like Andrew Carnegie, John D. Rockefeller and Henry Ford along with bankers and financial managers like J.P. Morgan joined forces with scientists like Thomas Edison and Alexander Graham Bell to create giant new industries in steel, oil, transportation and communication. Chemists like Louis Pasteur, biologists like Robert Koch and physicians like Ignaz Semmelweis, made giant strides in understanding and controlling human diseases and in promoting health.
The enduring ideas that power political evolution are often in conflict and rarely develop in easy-to-follow straight lines. The new surge of industrial progress, for instance, was not always free-market in ways that Adam Smith had theorized. Nor was it always progressive in the ways of freedom and democracy that John Locke and Thomas Jefferson had envisioned.
In the early 19th century, for instance, the free-market included slavery. Southern states of the United States used the products of slave labor, cotton and tobacco, as key exports. The capital wealth generated from these exports supported not only the growth of wealth in the south but also in the northern states, as well as in England and other European countries that consumed the cotton and tobacco and in turn exported textiles and machinery back to the North America.
In the United States as well as in England and other western countries, governments often compromised the freedom of markets by awarding large subsidies to certain favored industries and companies. They used the power of taxation, especially the tariff, to favor certain industries and companies. Governments also used their power to directly regulate industries in order to protect the public from fraud, to break up monopolies, to prevent the sale of dangerous foods and drugs and to ensure environmental safety. And finally, especially in the 20th century many of the democratic governments in Europe as well as in America passed extensive welfare legislation to help smooth out the inequalities of wealth that came with free-market capitalism.
For wealth in a free-market capitalist economy is not distributed equally. Sometimes, as in agriculturally-based societies, it can even be produced using slave labor. In a free-market capitalist society, however, the total amount of wealth is much greater, and is increasing –and has been for at least 200 years. One important result is that the old zero-sum rule no longer applies. An increase in wealth to one does not necessarily mean a loss to another. There may be and there are disputes, often bitter ones, about how it is produced and how fairly it is distributed, but over the long run wealth does increase for almost all citizens.
Consider some numbers: Population more than doubled from 1760 to 1900, adding more intelligence to earth than had existed in all previous ages combined. From 1900 to 2000 it multiplied again, this time reaching a world population of over 6 billion people.
Food supply though multiplied even faster. As did energy supply, transportation supply (both in speed and comfort), as well as the supply of just about all other material goods from furniture and homes, to clothing and computers. Not only have all of these goods and power sources increased in quantity, they have also gained in quality. And in many cases, new kinds of goods and services, luxuries even the richest king could not have imagined a hundred years before, have become widely and cheaply available for the average citizen..
The result: Despite continued wars, epidemics and famines, the average person in Europe and North America saw life expectancy jump from just over 30 years in 1700 to over 45 years in 1900 and to over 75 years in 2000. In production, the average worker in 1700 could produce about $250 worth of goods a year. By 1900 that figure had leaped to $2500. And by the turn of the century, 2000, the figure had leaped to over $15,000.
The American poet, Walt Whitman, may have been speaking for the average citizen of this new world when we wrote, “O God, if I am to have so much, let me have more.”
This revolutionary change in human history did not happen without strain, conflict and violence. Back in the 18th century the workers in cottage industries in England did not like the new textile factories that were taking away their livelihoods. Some poets and artists were appalled by the black smoke and the city slums and the “dark satanic mills” as William Blake called the new factory towns of England.
Some, who called themselves Luddites, took it into their own hands to destroy the machines they felt were taking away their livelihood and enslaving them. Others retreated into a lush romanticism.
By the middle of the 19th century, the Industrial Revolution had picked up steam in the United States, in England, in Germany and to a lesser degree in other countries of western Europe. Disputes about the conditions for the creation of this wealth and disputes about the distribution of the new wealth were growing louder and more bitter. Strikes of working men and women were called more and more often to protest inadequate wages, dangerous working conditions and crushing long hours. Industrialists often called in police or private security forces to break up these strikes.
Many of the new capitalist-driven countries – still influenced by outdated ideas of zero-sum agricultural-age wealth -- expanded into imperialistic ventures, colonizing large areas of Asia, Africa and South America in attempts to find and exploit natural resources, to create new markets for their manufactures and to enhance national prestige.
Throughout the 19th century the United States, Canada, England and a few small countries of western Europe were alone in the world in having relatively free, if seriously flawed, democratic societies. All of the rest of the countries and regions of Europe, Asia, Africa and South America were still living in an age where kings, emperors, Czars, or colonial rulers were in power.
The change-over from an authoritarian agricultural age to a democratic industrial age came to a critical breaking point in the American Civil War. This was the first of modern wars that drafted ordinary citizens for the fighting. It was a war between northern and southern states that lasted four long years and cost over 500,000 lives. The North, the more industrialized and democratic of the United States, fought to preserve that Union and to abolish slavery. The South, still primarily agricultural, fought to preserve its way of life which included slavery at its economic foundation.
President Abraham Lincoln, in his address at Gettysburg, one of the bloodiest of the battlefields in that war, summed up the cause of freedom in November of 1863.
“Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal. Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure.”
He concluded his short but never-to-be-forgotten speech.
“It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth.”
And it did not.
The trials and the triumphs of that democratic way in the 19th and 20th centuries are stories yet to come in the final three parts of DEMOCRACY IN WORLD HISTORY.