The Land of Enterprise: A Business History of the United States

Benjamin C. Waterhouse, “The Land of Enterprise: A Business History of the United States,” Simon & Schuster, 2017, 243 pp.

This author charts the development of American business from the colonial period to the present and makes his case that the story of private enterprise has been undervalued as a window into the history of the United States.  

Additionally, Waterhouse convincingly maintains that the US was founded as much on the search for wealth and prosperity as the desire for freedom.  The twelve chapters in this book chart the major developments in the history of American business and argue for their indispensable importance to vital issues in our national history, from slavery and immigration to foreign affairs and modern political debates. 

Within the space of only a few generations, industrial manufacturing brought unimaginable changes to American economic, social, and political life.  A nation of farmers became a country of factories and cities with locomotives and telegraphs.

After WWII, American business stood nearly unchallenged as the world’s foremost producer of industrial goods.  What’s more, within a few years, the Cold War created an even more advantageous environment for business.  That post-war conflict fueled proxy wars in Korea and Vietnam as well as a technological space and arms race, all of which tied the national government ever closer to business. However, American businessmen and workers attributed their success between the end of the war and 1970 to their smart business practices; in fact, their success was due to their lack of competition.  That lack of competition vanished; also a new term, ‘stagflation,’ entering the economic lexicon.

By the year 2000, fewer than 5 percent of Americans worked in agriculture, and only 15 percent worked in manufacturing.  The remaining 80 percent had service-sector jobs.  Globalization and financialization have redefined both employment opportunities and the balance of power and are the chief destabilizing forces at this time.  (Artificial Intelligence, I predict, is the coming destabilizing force).

My Notes:

Pg. 4:  Today’s corporations, even the largest and wealthiest, are structurally leaner and more inclined to outsource business functions around the country and around the world.  Corporations both shaped and were shaped by global trade, competition, and the consumption patterns of people around the world. 

Pg. 10:  Historians have traditionally tried to capture the changes in European social, political, :and economic life that developed around 1500 in response to increased global trade by suggesting a transition between the earlier medieval period and the subsequent modern period.  Essentially, what happened was a change from a feudal model of economic organization to a mercantilist model, the forerunner to a capitalist system.

Feudalism: an economic system in which power relations among people formed the building blocks of society.  Most people in a feudal society worked as farmers, giving over their agricultural product to a local ruler (the lord) in exchange for military security.  Political power flowed from the strength of these personal connections.  The concepts of private property and individual rights did not factor into these arrangements, and most people’s socioeconomic status was fixed at birth. Most agricultural yield was consumed locally.  Europe transitioned away from feudalism in the 15^th and 16^th centuries as countries formed and Mercantilism through trade spread.

Pg. 12:  Mercantilism:  the conviction that economic activity should bolster the wealth and power of nations.  This decidedly unfeudal attitude toward external trade led European powers to business opportunities, such as setting up colonies, emerging in the New World.

Pg. 19:  The American slave population became self-sustaining in the early 18^th century (births eliminated the need for importing more slaves). By the 1770s, nearly 700,000 people, or 15 percent of the total non-Indian population of the US were enslaved but slavery was, nevertheless, increasingly rare north of Pennsylvania.  (Approximately one-third of all southern households owned slaves).  In 1807, both the British Parliament and the US Congress outlawed the international trade of slaves.  (The 1787 Constitution had included a clause prohibiting any move to ban international slavery trade for twenty years.)  Nonetheless, the internal slave trade remained a vital part of the economy of the US until the Thirteenth Amendment abolished slavery after the Civil War.

Pg. 33:  By the eve of the Civil War, historians estimate that the total cash value of the 4 million slaves in the American South was $3.5 billion in 1860 money.  At more than 80 percent of the country’s total economic output, that figure would be roughly $13.8 trillion today.  Understood in that way, enslaved people were capital assets worth more than the country’s entire productive capacity from manufacturing, trade, and railroads combined.

Note: if 1967 CPI is set at 100, then 1860 = 27 and 2005 = 582

Pg. 36:  Eli Whitney’s invention of the Cotton Gin, enabled the cotton industry to explode. In the early 1790s southern planters produced around 3,000 bales of cotton per year, by the eve of the Civil War, the South grew and exported nearly 5.5 million bales of cotton per year. 

Pg. 46:  Prior to the Industrial Revolution, industrial activities, such as mining and smelting were organized around family units, and the production of textiles, metals, and farm equipment took place either in homes or in small artisanal shops.  The situation began to change at the end of the 18^th century.  Businesses began to specialize and general merchants were replaced by a network of enterprises devoted to specific business activities—from canal building to money lending from wholesaling to textile production.

Among the most important factors for this change were the new opportunities to trade that opened up after the American Revolution.  No longer bound by their place within the British Empire, American merchants could seek markets in continental Europe, the Middle East, and China.  Additionally, immigration from Europe brought about rapid population growth, creating a vast domestic market that manufacturers back East could serve.

Pg. 100ff:  UNIONS:

*Knights of Labor formed in 1869 and unlike most trade unions, they welcomed both skilled and unskilled workers from the craft, retail, and manufacturing sectors, and quite notable for their day, they encouraged membership by both African Americans and women.  The only people the group actively excluded were ‘nonproducers’—liquor dealers, gamblers, lawyers, and bankers, for example. By the 1880s they had some 700,000 members.  However in the 1886 Haymarket Square incident, someone threw a bomb that killed ten people.  Although the Knights themselves were not involved, eight suspects, all loosely affiliated with the Knights, were convicted of murder.  From then on their membership declined.

AFL:  The American Federation of Labor, founded in 1886 under Samuel Gompers, rose as the Knights faded.  Not a union itself but rather a federation of craft unions dedicated to collective bargaining, unlike the Knights who promoted socialism. 

1894 Pullman Strike:   The labor violence that began at the Pullman Palace Car Company of Illinois grew out of the hardships that befell the overextended railroad industry after the Panic of 1893 when the Pullman Company cut wages for its workers.  The workers were particularly aggrieved because most of them lived in the Pullman company town, where they paid rent to the corporation—and those rents remained at pre-crisis levels.  So in 1894 more than three thousand workers walked off the job in protest.  The American Railway Union (ARU), under Eugene Debs, supported the strike and thereby nationalized the strike-- and union members far removed from Pullman itself refused to work on railcars that had been manufactured at Pullman.  The now 250,000 workers involved brought the nation’s rail system to a halt.  President Cleveland, with vocal support from Samuel Gompers of the AFL, dispatched twelve thousand federal soldiers to break the strike.  Troops killed several dozen strikers in clashes. 

Pg. 108:  Bimetallists, or ‘silverites,’ like William Jennings Bryan, called on Congress to reverse the Coinage Act of 1873, which had ordered the US Mint to issue dollar coins only in gold, not in silver  This law effectively reduced the total amount of money circulating.  A smaller money supply led to economic contractions, including the prolonged depression of the 1870s.

Pg. 115:  The Progressive era, the years between the turn of the century and WWI, was a result of public discontent with industrial capitalism—from the predations of giant corporations and price-fixing to the exploitation of workers and deflationary monetary policy.  Progressivism sought to mitigate capitalism’s excesses while retaining its benefits.  Major changes included: the 1906 Pure Food and Drug Act which established nationally applicable rules about the contents of food and medicines; the 1913 Sixteenth Amendment authorizing the income tax and the Seventeenth providing for direct election of Senators, rather than election by state legislators; the 1914 Federal Trade Commission which bureaucratized the process of antitrust enforcement to make competition policy more transparent and nonpartisan; 1920 Nineteenth Amendment giving women the right to vote (my grandmother was 35 years old that year).

Pg. 124f:  Revolutions in business practices have historically relied on developments not only in production but also in distribution.  Just as the Market Revolution in the early 19^th century relied on improvements in roads, shipping routes, and ultimately railroads, so, too, did the mass consumption economy in the early 20^th century depend on new ways of moving goods to consumers.  (Department stores, chain stores, mail-order, advertising).

Pg. 146: The Dow Jones Industrial Average increased fivefold in the decade from its low point in 1921.  The fastest increases in overall stock valuations took place in 1928 and the first half of 1929.  The driving force was speculation and the ability to buy on margin (as little as 10% down).

Pg. 149:  By 1932, more than one hundred thousand businesses had closed.  Unemployment reached 30 percent of the civilian private nonfarm labor force by 1933, or 11.5 million people.  By the market bottom in 1933, nominal gross domestic product was nearly half what it had been in 1929.  Speculative investment and the oversaturation of consumer products certainly helped bring about the Depression. But its severity and length is more a result of poor government response.  The 2008 crash could have been every bit as bad had we not learned from the past.

Pg. 151: Progressive Era reforms had mostly come to an end during the ‘Roaring Twenties’, they now returned with a vengeance with Roosevelt’s election.  FDIC 1933; Glass-Steagall ACT 1933; NRA 1933 brought together representatives from business and labor to create ‘codes of fair competition,’ (later struck down by the Supreme Court); NLRB & Wagner Act 1935 ensuring workers right to organize and collectively bargain; Social Security Act 1935, configured as a tax with half paid by the workers so no future politician could take it away.

Pg. 160:  From the 1940s through the 1960s, the dominant trend in American business was toward bigness (from the Apollo mission to the War on Poverty).

Pg. 161:  All told, the US spent approximately $320 billion (in 1940s money; multiply by 20 for 2017 money) on WWII.  About half of this was borrowed from the public through bond sales and the other half raised in taxes.  That spending provided a massive boost to the gross national product, which shot up from $88.6 billion in 1939 to $135 billion in 1945.

Pg. 167:  IBM’s 1964 release of the System/360 computer, the first designed to perform a wide range of functions, marked the arrival of the modern computer industry in the business world.

Pg. 190:  In the early 1970s, Congress overhauled the laws governing campaign finance contributions.  The federal government had regulated campaign giving to various degrees since the Tillman Act of 1907, which barred corporations and unions from donating to political campaigns on the rather explicit grounds that they were not humans.  Yet both businesses and unions had found end runs around the law, the latter by creating separate committees, known as political action committees, or PACs, as early as the 1940s.

Pg. 196:  By the turn of the 21^st century, global capitalism was undergoing a tumultuous revolution.  Between 2001 and 2012, sixty-three thousand American factories shut, taking 5 million jobs with them, even while Chinese manufacturers added 14.1 million new positions.  Deindustrialization and its accompanying phenomena—outsourcing and globalization—were the new buzzwords. 

Pg. 201:  In the mid-20^th century, franchises became a common alternative to the chain store model that dominated grocery and other retail fields, particularly in areas such as fast food and hospitality.  The automobile industry picked up on the concept by the 1920s with specially licensed sellers to both sell and service their products.  In the mid-1950s, Ray Kroc led the way in bringing the franchise model to the service sector in his McDonald’ establishments.  By the 2010s, the US was home to more than 750,000 franchise units, which employed more than 8.2 million people.  These units have had a homogenizing effect on American culture as each unit is predictably the same one-to-another.

Pg. 204:  Between 2010 and 2012, researchers found that the majority of fast-food employees had a high school degree, nearly a third had at least some college experience, and 40 percent were over the age of twenty-five.  Seventy percent earned ten dollars an hour or less.

Pg. 211:  Productivity accelerated in the late 1990s with the spread of the Internet.  The number of Internet users grew dramatically, from about ninety thousand in 1993 to 90 million by 2000 as electronic mail developed.

Pg. 212:  Globalization today is actually a reglobalization.  On the eve of WWI, the global industrial powers presided over massive empires.  Corporations operated and financial institutions invested across national and imperial boundaries at a rate, if we hold global economic output constant, not seen again until 2004.  The conflict between 1914 and 1945 ripped apart the political institutions, alliances, and empires that had governed the world economy of the 19^th century and destroyed that first moment of globalization.  The history of global business in the 20^th century is thus one of the gradual reconstruction of an inter-connected world of free trade agreement between France and Germany in 1957 evolved into the twenty-eight member European Union of today.  Major world powers reduced barriers to international commerce with the first General Agreement on Tariffs and Trade (GATT) in 1947; this eventually transformed into the World Trade Organization in 1994.  NAFTA created a free trade zone between the US, Canada, and Mexico.  However, after expanding for thirty years, the average wage of American workers has stagnated since the 1970s. 

Pg. 220:  From 1973 to 1983 the Consumer Price Index increased by an average of 8.2 percent per year; in several of those years, inflation topped 10 percent.  By 1980 a barrel of oil cost about twelve times what it had cost in 1970. 

Pg. 224:  The deregulatory binge of the 1970s, which continued through the 1990s, had dramatic effects on business.  Airline fares fell sharply, allowing more people to take airplanes.  The number of air passengers rose from 297 million in 1980 to 770 million in 2007.  Long-distance telephone rates disappeared.

Pg. 228:  What distinguished the economic recovery of the 1980s was the new emphasis on finance.  The face of Corporate America was now represented by people like Michael Miliken and the movie character, Gordon Gekko (“greed is good”).  Corporate raiders and leveraged buy-outs were in fashion. 

Pg. 231:  The Dot-Com Bubble inflated in the mid-to-late 1990s. The fixation on stock valuation became a hallmark of business culture.  All business sectors defined their success by the market price of their stocks, rather than by more traditional metrics such as production or even profit margins.  By the year 2000, American business culture had developed a single-minded obsession with stocks.  The NASDAQ index, which included only high-technology firms, launched in 1971 and grew from its baseline of 100 to more than 4,500 (and passed 7,000 in Jan 2018)..

Pg. 233:  By the early years of the 2000s, speculation in housing replaced the now discredited dot-com bubble.  Before the mid-20^th century, just under 50 percent of American households owned their own home.  Excluding farmers, the rate of homeownership was below 40 percent.  By 1970 homeownership had risen to about 65 percent as a result of government mortgage loan assistance programs created through the New Deal, the G.I. Bill, and the overall expansion of the middle class.  After hovering around 65 percent for several decades, homeownership rates rose quickly between the late 1990s and 2007, reaching 69 percent.  People who had no business owning a house were now offered loans, called subprime.  This all ended in 2008.