Author: ABDUL MALIK ABDUR RAHIM

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When I first walked into class, I was expecting to delve deep into the specific macroeconomic policy positions taken by different figures and their effects on specific markets as if the class was just another macroeconomic lecture. Instead, I learned something different but just as valuable, and that is the history of American business over time told from multiple perspectives. I had learned about the period of American history that was largely laissez-faire but not about how capitalism may have helped facilitate early 19th-century slavery in America. The different definitions of capitalism and the ambiguity surrounding them challenged my initial perceptions and helped me improve my understanding of what capitalism is, especially as it was instituted in America. Hearing differing views on business history and comparing them to my own helped me develop my own views on American Business history as well as learn more about it in general.

The surprising aspect of this course for me was the overall evolution of business in America, and how different socio-economic policies changed the business landscape. Even the short period from 1860 to 1880 saw significant changes to business operation and power along with recessions I had not previously heard of. Economics is interwoven in the history of every nation, but America’s long-standing focus on building oneself from the ground up, whether feasible or not, is heavily tied to both economics and American business history. To have a full understanding or as much as a person can of American history, analyzing the history of business in America is important and helps shape your overall view of American history.

The New Deal was one of the most openly transformative policies presented during the 20th century, regardless of whether or not it “solved” the great depression. In Rauchway’s Reflation and Relief , he delves into not only explanations of certain New Deal Policies, but the philosophy behind its implementation. This commentary on the New Deal adds context to the policy and improves on my previous understanding of the bill.

To begin, Rauchway uses a quote to describe the philosophy of the New Deal as “isolationist” and “disregard for the outside world”(Rauchway 1). Unlike with the Marshall plan seen in the 1940s post Roosevelt, the new deal was purely aimed at reviving the American economy, and the many policies of the New Deal reflect this. One of the ways to ease the pain of the depression was to increase consumption, but to do this Americans needed money. When wartime preparations started to begin, even seen with the early Lend Lease act, Americans found themselves new employment opportunities and subsequently money to spend on goods. Roosevelt’s suspension of the gold standard and further transition to the inconvertible fiat helped banks recover from their run offs, and this along with the Federal Reserves increased monetary power was able to save capitalism in 8 days as stated by his advisor Raymond Moley. Rauchway does not go as far as Moley and says only part of capitalism was saved, but the positive impact is undeniable.

 Accompanied with his policies that stretched constitutionality, Rauchway tells of Roosevelt’s approach to communicating his policy to the public. He would explain what the government was doing and why and gave a “teacherly explanation”(Rauchway 2). The New Deal is often referred to and talked about, but the former president’s descriptive approach when addressing the public is something new to me and further illustrated Roosevelt’s philosophy.

Further delving into the gold standard and banking crisis, Rauchway describes the issues caused by adhering to the gold standard and how responses attempted to address them. The Federal Reserve was worried about bank run offs after a large amount of gold was withdrawn worldwide following an Australian bank’s closure. To prevent this, the FED raised interest rates, providing a positive incentive to keep gold in the bank and as Rauchway describes “to reduce the amount in circulation, thus defending the dollar’s convertibility to gold”(Rauchway 3). However, this made money more expensive to borrow, slowing down economic growth and is why Roosevelt made the banking changes relating to the gold standard that he did.

Continuing on the theme of increasing consumption through employment, the CCC was created. This gave work to unemployed men aged 18 to 35 and separated out a portion of their wages for their family(Rauchway 5). Hundreds of thousands of men signed up for this and the idea was to help the young men become future heads of households and to prevent them from heading into delinquency. The FERA was created and a large amount of grants were distributed to states, assisting in relief efforts. These efforts or more specifically heavy government spending designed to shift demand,  display the underlying Keynesian economic theory that was prevalent at the time.

The New Deal was an expansive program that attempted to help the American economy recover from the disastrous great depression. Although it is hard to determine the degree to which the programs assisted recovery,  Rauchway would certainly say that the New Deal helped and I agree with that sentiment. Roosevelt’s philosophy both in addressing the nation and in regards to economic policy are important components of New Deal history, and context to the bill.

Throughout the many history classes and texts that I have read, most related to economics refer back to the great depression and the 2008 recession, while leaving out the recessions that preceded them. In David Montgomery’s Beyond Equality, he delves into the reasons and economic conditions behind the panic of 1873, adding to my knowledge of downswings in the business cycle. Interestingly, he does not attribute the panic to a single component of industry, like entrepreneurship, the telegraph or the rise of railroads, but rather the effect such inventions have had as a whole in increasing industrial output.

Montgomery describes a change in attitude and rise of production during the mid 19th century. America had purchased fabrics and other capital that would then be used to create the final good. But, speculators wanted to raise such capital on American soil, leading to a change in priorities regarding trade and an increase in manufacturing. At face value this seems beneficial to the American economy, but as more goods flooded the market the selling price began to rise at a slower rate than the cost of inputs in the production cycle. Competition also drove down prices culminating in troubling profit numbers for business owners. This increase in industrial might was driven largely by government provided capital and the “typical family firm” began to “cast his eye more frequently toward the government than his own concern”(Montgomery 6). Railroad companies in particular looked towards the government when faced with financial hardship or a lack of financing despite laissez faire capitalism being one of the predominant economic positions during the time period. Production took off as the 1870s quickly approached with an increase in manufacturing fueling economic growth that eventually led to economic crisis.

Industries like pig iron, coal, and building related trades expanded production at tremendous rates during the 1860s, but were plagued by issues. A large amount of production was “carried on by very small firms” that surrounded giant monopolistic companies(Montgomery 10). With the rise of railroads came a rise in the demand of its inputs like steel and iron, which saw a large increase in demand(Montgomery 11). However, the costs of building railroads were more than “individual industrialists” could finance, leading to a reliance on government subsidization, as the laissez faire capitalists went against their own philosophy(Montgomery 7). Adding to this, the successful business owners promulgated the “cult of self made man”, the idea that the successful capitalists pulled themselves up from the bottom on their own, but the reliance many had on government spending would counter that idea for some capitalists(Montgomery 14).

The panic of 1873 was caused by many factors, all centered around the rise of manufacturing. Increasing manufacturing continually without taking into account pricing and supply and demand can lead to negative consequences as seen during the years of the panic. Beyond Equality explains this, and gives insight to a downward period in the business cycle I was not familiar with before.

 

Property and Mandell’s Wealth and Power in the Early Republic

Global history can be described as a story of perpetual problems faced by humans throughout time, and their response to them. Whether it be the problem of greed for power and control resulting in many of the atrocities seen throughout the past few centuries, or the unequal distribution of property resulting in a quasi aristocracy formed on the basis of wealth; humans have thought extensively about such problems and responded with their own proposed solution. This theme is exactly what Mandell’s Wealth and Power in the Early Republic describes. After fighting for independence from colonial rule, colonists began to develop their own government that suits their interests. However, as is the theme in history, several conflicting views emerged about taxation, egalitarianism, wealth, and property.

Despite property being enshrined as a natural right by enlightenment philosophers like Locke, colonists argued over property limits and distribution. As described by Johann Schoepf, an emerging aristocracy had begun to form among colonists based on wealth and material attainments as opposed to the hereditary system seen in Britain(Mandell 79). Colonists who managed to gain wealth were able to “work the levers of power” and acted similarly to nobility seen in countries around the world(Mandell 79). This began to alarm the recently freed colonists and as a push back, proposed progressive taxation and a wealth limit to combat what they feared was an arising wealth based noble class. Prominent writers like Jacob Green started to chime in and equate property with freedom(Mandell 81). These views on property conflict with the prevalent narrative of unity behind a meritocratic society in even early America, and learning about these split thoughts on regulation of a natural right surprised me. Although I knew conflict regarding natural rights and others occurred, I did not expect that views on property were so split and divisive.

Mandell provides statements from multiple writers in early America that view property as far more significant than just wealth. David Daggert describes property as a means to prevent “oppression” and “slavery”(Mandell 83). While others like John Adams desired a natural or propertied aristocracy to govern the land(Mandell 83). These two thinkers, despite both valuing property ownership, have two very different reasons or ideas for its usage. One seeks for widespread property ownership to protect liberty, while the other views it as a means to determine who will lead the American populace. 

Newly independent Americans argued over many things, property being one of them. Throughout history, property rights and distribution has been a problem many thinkers proposed solutions for, but has continued to be a problem even in modern day America. Mandell’s text provides evidence of the chaotic period early America faced and represents, in part, the story of global history.