the story of american business -- 6/28/21

Today's selection -- from An Illustrated Business History of the United States by Richard Vague.

"This book is a brief history of business in the United States. Less has been written on this subject than on U.S. political, military, or social history, even though the importance of the history of business is equal to any of those fields and arguably greater, since America’s power and influence from the very beginning derived from its wealth, resources, and economic might.

"This is a history of business in the broadest sense, encompassing all commercial ventures and the resources and labor that they involve. And since an economy is largely the sum of the businesses within that economy, it will touch on economics as well.

"The story of American business is a story of real estate--a story of more than two hundred years of claiming, seizing, developing, settling, and speculating in vast areas of land. The United States was blessed with perhaps the best land in the world, with abundantly fertile soil, a superb river system, and oceans that buffered it from its enemies.

"Wealthy colonials had organized massive land companies well before the American Revolution, and real estate has been an outsized part of the American business story ever since.

British dominions in North America, according to the treaty of 1763, divided into the several provinces and jurisdictions.

"Land had been the source of power and wealth in the Old World, and the vast acreage of the New World held great promise. The early British American years included land charters and grants, such as those to William Penn and George Calvert, but these often went to absentee landlords who would see little of this land.

"From the outset, ambitious Americans well understood that buying land and waiting for the population to increase was a path to riches, and we can perhaps date the beginning of truly American business to 1748, with the Ohio Company of Virginia, many of whose shareholders and administrators--Virginia’s elite, including George Washington--were born on American soil. Since then the history of American business has had as one of its key elements an unbroken march through time of real estate speculators and developers, from Robert Morris to John Jacob Astor, Fred French, Abraham Levitt, Eli Broad, Trammell Crow, and beyond.

"This should not surprise us. At $60 trillion in 2019, real estate was the single highest-value asset in the United States, greater than the value of stocks, bonds, or any other major asset category. Its massive size is also evident in debt markets, with real estate related debt totaling $16 trillion, or 50 percent of all 2019 private sector debt (the commercial real estate portion of this debt alone totaled $4.8 trillion), while no other non-financial business sector, including information technology, health care, energy, and utilities, totaled much above $1.5 trillion in debt.

"Yet extensive as it is, real estate has always had much more fragmented ownership than other businesses, and has not lent itself as readily to conventional corporate and public equity structures, so has not shown up as prominently in the lists of largest businesses, industries, and wealthiest individuals. Even with this, I have endeavored to give this business its historical due.

"Propitiously, the United States was founded at the dawn of the Industrial Revolution. After unshackling itself from Britain, the new country plunged headlong into the manufacturing revolution that provides a second key element of U.S. business history. The nation matured into the world’s largest manufacturer within decades of its founding, with early manufacturing innovations in such
places as Philadelphia, Pennsylvania; Paterson, New Jersey; and Lowell, Massachusetts.

"In this foment, American business became the world’s greatest innovator, with inventions from telegraphs to telephones, from electric lights to power-generation plants, from plastics to the internet itself. Basic science and rigorous research and development were often at the very heart of business progress. This innovative, inventive spirit became a third key and constant facet of American business history.

"With the Industrial Revolution, infant mortality fell, life spans increased, and the world saw an unprecedented explosion in population growth. Business, especially the real estate business, does very well when the population grows rapidly. American real estate and manufacturing flourished with population growth, since more people meant more buyers.

"Owning and improving land necessitated getting to that land, and so America became a country of transportation, a fourth consequential aspect of its business history. This history threads through the centuries, from the earliest toll road and canal companies to the almost century-long, tumultuous domination of the railroad industry, to the twentieth-century web of roads and highways to serve the automobile revolution. The mammoth steel and coal power industries that tower above much of U.S. business history can be interpreted as suppliers to the transportation industry. Alongside this came the financiers that supplied the funds to make it all possible.

"Even as the country spent billions to build these canals, railroads, and highways, the money spent to buy and develop homes, offices, retail, and farms in the land surrounding these new transportation arteries exceeded that amount.

"The United States quickly dominated the economic world. By the 1870s, less than a hundred years after its founding, it had grown larger than any European economy in both population and gross domestic product (GDP), and shortly thereafter surpassed the huge but preindustrial China to become the largest economy in the world. In business, the companies with the largest markets usually prevail since with greater scale they have greater profits and thus more resources to reinvest in growth and innovation. American companies were now in the world’s largest domestic economic market, and so they soon became the most advanced.

"By World War I, the U.S. economy was almost as large as those of England, France, and Germany combined. And by the conclusion of World War II, U.S. business dominated the global economy. The U.S. economy constituted more than 25 percent of the world’s GDP, the nation had a broad and thriving middle class, the United States had become by far the world’s wealthiest country, and such companies as General Motors, DuPont, General Electric, and IBM had become global business giants.

"Through the centuries much of America’s business growth depended on credit and loans, and so American business history has also always been intertwined with its financial industry--the banks, bond houses, and other institutions that financed its ascent. Financial institutions ranked among the largest U.S. businesses from the nation’s earliest days and are a fifth constant of the country’s business history. America chartered the Bank of North America in 1781, and financial institutions have shaped and orchestrated much of the economic and business landscape ever since.

"Along the way, the United States has contended with five main rivals in business. First, it fought for more than a century for manufacturing supremacy with Britain, waging wars and near-wars at fraught moments along the way. At the moment when the United States had become so large that its rivalry with Britain abated, it began a struggle with Germany for military and manufacturing supremacy that spanned two world wars. Next came its Cold War with the U.S.S.R., a contest between two vastly different political systems in which U.S. economists were briefly but wrongly convinced that the Soviet economy had surpassed that of the United States. As the Soviet rivalry crumbled, Japan emerged to vie with the United States in manufacturing, especially in the all-important automobile sector, and for another brief moment Americans feared that Japan’s economy would overtake its own. China has now emerged as the latest rival and the only one yet with a population larger than the United States’, spurring a contest for leadership in critical emerging technologies such as genetic engineering, advanced telecommunications, supercomputing, electric vehicles, and alternative energy.

"Throughout these pages the U.S. government will often appear in a key role since the lines between government and business have always been permeable and blurred, and the two have always been enmeshed both for better and for worse. War, perhaps the ultimate act of government, has profoundly affected the course of U.S. business and incubated technological innovations that propel business forward. In the early republic, the U.S. government organized and taught the small craftsmen how to become large-scale manufacturers of arms and provisions for its Revolutionary War, and in the mid-twentieth century, that government organized the Manhattan Project to produce the atomic bomb. It was government that financed the Erie Canal, the Transcontinental Railroad, and the U.S. highway system. Government led in the development of radio, GPS technology, and the internet.

"The list of government-led innovation is long, and the government gets full credit for thousands of innovations that became integral thereafter to American business progress. But it has also been responsible for any number of inefficiencies and scandals and debacles, from the blot of unwieldy bureaucracies to the stain of corruption and graft."



Richard Vague


An Illustrated Business History of the United States


Penn Press


Copyright 2021, University of Pennsylvania


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