The wealth of America is wealth
Timing, ideology, and resources converged to create a powerhouse
As expected from its rather grand title, "An Empire of Wealth" is a paean to the United States' economic spirit. Historian John Steele Gordon calls the "American economy in the first six decades after the adoption of the Constitution one of the wonders of the world."
Without taking anything away from that spirit, he rightly points out that part of the country's success stemmed from good timing. America's economy formed during the publication of "The Wealth of Nations" and the demise of mercantilism. "It was much easier," Gordon writes, "for the United States to inculcate the ideas of Adam Smith into its economic system and politics than it was for the other major Western nations."
Easy or not, America's successes are celebrated in this sweeping history: the Erie Canal, the Atlantic Cable, the Hoover Dam, the interstate highway system, the Apollo project, and other megaprojects "that would become so much a part of the American experience." Gordon shows how the expansion of available labor, starting from around the Civil War, due to a parade of technological developments, fueled such progress.
The mobilization of women into the workforce and the drawing of African-Americans from the rural South to the cities accelerated it further. Franklin Roosevelt's G.I. Bill made college education more universal, increasing the ability of more Americans to get better jobs, buy homes, build equity, and thus accumulate financial assets. "Miracles" such as these, Gordon writes, "induced a mood of optimism and a belief in progress."
He dexterously explains how America's political ideology formed these economic foundations. The Founding Fathers believed "that men are not angels, that they are driven by self-interest, and that that self-interest can be exploited for the general good by an interlocking system of divided powers."
But he's completely aware that the country's progress has not been continuous or inevitable. He notes, for instance, how the early agricultural economics of the South and industrialism of the North created a schism that remains today, even if its roots have withered away.
He also provides a helpful explanation of the ideological struggle between Alexander Hamilton, who wanted to establish a financial regulatory system and create a central bank, and Thomas Jefferson, who loathed all banks. Jefferson, it turned out, was a better politician than Hamilton, "and a far better hater." Hamilton was able to create a Bank of the United States, but when Jefferson and his allies came to power, they allowed the bank to atrophy and disappear.
That, Gordon writes, left the United States "subject to an unending cycle of boom and bust whose amplitude far exceeded the ups and downs of the business cycle. American monetary authorities would not - indeed could not - intervene decisively to abort a market panic before it spiraled out of control for another 195 years."
"Capitalism without regulation and regulators is inherently unstable," Gordon claims, "as people will usually put their short-term interests ahead of the interests of the system as a whole, and either chaos or plutocracy will result."
Yet throughout the country's history, there have been men like the "Robber Barons," who believed that "government was part of the problem, not the solution." The Great Depression and the New Deal proved them at least partly wrong, when a majority of Americans came to see government as the provider of last resort.
"The country since the New Deal has been a far richer, far more economically secure, far more just society," Gordon writes. "It has been one that has proved to offer far more opportunity for all and produce far more wealth as a consequence." Indeed, the United States has been more democratic than most, its history characterized by "the tendency of new fortunes to supplant the old ones."
One of the book's many illuminating services is the way it traces today's economic debates back into history. Those who think that "trickledown" economics have their roots in the Reagan era will be interested to learn that such thinking pre-dates the Gipper, as Gordon notes in his discussion of William Jennings Bryan. Politicians have been facing "tough choices between raising unpopular taxes and controlling popular spending" since the earliest days of the Republic. The ideological struggle over how to allocate wealth between labor and capital remains a pitched battle.
Sometimes the author tries to be too encompassing, especially when he hurriedly closes the book with a discussion of the period from the 1990s to the attack on the World Trade Center. But otherwise, "An Empire of Wealth" is elegantly lucid in how it explains the ideological and institutional underpinnings of the United States. It's particularly welcome for anyone who believes that a survey of American history must include a look at its economic roots.
• Wayne E. Yang's writing appears in the North American Review and the Asian Review of Books.