There is a tradition that the Americans were marvellously inventive with labour-saving devices. That is to be qualified. Their special genius lay rather in the adaptation and enthusiastic use of such devices. The introduction of them was not resisted as in the older countries by labour unwilling to change its habits and fearful of unemployment. This was an important advantage.
The American textile industry was founded by British artisans who came to this country carrying contraband in their heads, that is, the plans of weaving, spinning, and knitting machines which the English guarded as carefully as military secrets.... The pre-eminence of this country in the manufacture and use of agricultural implements is set out in elementary school-books as proof of American inventiveness; yet the essential principles of the reaper were evolved in Great Britain forty years before the appearance of the historic McCormick reaper (1831) in this country, and threshing-machines were in general use in England while primitive methods of flailing, trampling, and dragging prevailed in America. As recently as 1850 the scythe and cradle reaped the American harvest and there still existed the superstition that an iron plough poisoned the soil and stimulated weeds. Of all the tools invented or adopted the one which Americans were to make the most prodigious use of was the railroad; yet the first locomotive was brought from England in 1829, the embargo on machinery having by this time been lifted—and it failed because it was too heavy!
Twenty years passed and still the possibilities of rail transportation were unperceived, which is perhaps somewhat explained by the fact that the one largest vested interest of that time existed in canals. On the map of 1850 the railroads resemble earthworms afraid to leave water and go inland. The notion of a railroad was that it supplemented water transportation, connecting lake, canal, and river routes, helping traffic over the high places.
But in the next ten years—1850 to 1860—destiny surrendered. There was that rare coincidence of seed, weather, deep ploughing, and mysterious sanction which the miracle requires. The essential power of the American was suddenly liberated. There was the discovery of gold in California. There was the Crimean War, which created a high demand abroad for our commodities. The telegraph put its indignities upon time and space. The idea of a railroad as a tool of empire seized the imagination. Railroads were deliriously constructed. The map of 1860 shows a glistening steel web from the seaboard to the Mississippi.
The gigantesque was enthroned as the national fetich. Votive offerings were mass, velocity, quantity. True cities began. The spirit of Chicago was born. Bigness and be-damnedness. In this decade the outlines of our economic development were cast for good.
In the exclusive perspective of business the Civil War is an indistinct episode. It stimulated industry in the North, shattered it in the South. The net result in a purely economic sense is a matter of free opinion. The Morse telegraph code probably created more wealth than the war directly destroyed. Or the bitter sectional row over the route of the first transcontinental railroad which postponed that project for ten years possibly cost the country more than the struggle to preserve the Union. But that is all forgotten.
After 1860 the momentum of growth, notwithstanding the war and two terrible panics, was cumulative. In the next fifty years, down to 1910, we built half as much railroad mileage as all the rest of the world. Population trebled. This fact stands alone in the data of vital statistics. Yet even more remarkable were the alterations of human activity. The number of city dwellers increased 3½ times faster than the population; the number of wage-earners, 2 times faster; clerks, salesmen, and typists, 6½ times faster; banks, 7 times faster; corporations, 6½ times faster; miners, 3 times faster; transportation-workers, 20 times faster, and the number of independent farmers decreased. Wealth in this time increased from about $500 to more than $1,500 per capita.
If America in its present state of being had been revealed to the imagination of any hard-headed economist in, say, 1850, as a mirage or dream, he would have said: “There is in all the world not enough labour and capital to do it.” He could not have guessed how the power of both would be multiplied.
First there was the enormous simple addition to the labour supply in the form of immigration. Then the evolution of machinery and time-saving methods incredibly increased the productivity of labour per human unit. Thirdly, the application of power to agriculture and the opening of all that virgin country west of the Mississippi to bonanza-farming so greatly increased the production of food per unit of rural labour that at length it required only half the population to feed the whole. The other half was free. Business and industry absorbed it.
Of what happened at the same time to capital, in which term we include also credit, there could have been no prescience at all. Even now when we think of building a railroad, a telephone system, or an automobile factory the thought is that it will take capital, as of course it will at first, but one should consider also how anything that increases the velocity with which goods are exchanged, or reduces the time in which a given amount of business may be transacted, adds to the functioning power of capital. To illustrate this: the merchant of 1850 did business very largely with his own capital unaided. He was obliged to invest heavily in merchandise stocks. The turn-over was slow. His margin of profit necessarily had to be large. But with the development of transportation and means of communication—the railroad, telegraph, and telephone—and with the parallel growth of banking facilities, the conditions of doing business were fundamentally changed. All the time-factors were foreshortened.