leaf

"Prosperity and Decline" is a book co-authored by former Chairman of the Federal Reserve Alan Greenspan and economist Adrian Wooldridge.

"Capitalism in America: A History"

My Heart Will Go On(我心永恒).flac

Céline Dion

Greenspan, the Longest-Serving Chairman of the Federal Reserve#

Born on March 6, 1926, in New York City. He earned a Ph.D. in economics in 1977. He served as the Chairman of the President's Council of Economic Advisers from 1974 to 1977. Appointed by President Reagan as Chairman of the Federal Reserve in 1987, he served until his retirement in 2006. His work includes "The Turbulent World."

I. Introduction#

In previous articles, we shared the first book on the theme of "What Controls National Economies," titled "The Unavoidable Economic Cycle," discussing the three most important economic cycle phenomena and the different roles of government and businesses in economic cycles. You should have a basic cognitive framework for the laws of economic cycles.

With an analytical framework in place, we also need to further observe and study historical facts. To study a complete economic cycle, the United States is undoubtedly the best subject. Therefore, I will analyze this through three books, starting with the overall economy of the United States in the first book, and then focusing on specific periods in the latter two books to analyze the economic cycle issues of the United States.

In the 15th century, influenced by the Renaissance movement, Europeans gradually accepted the theory of a spherical Earth.#

By the end of the 15th century, the rise of the Ottoman Turks in Central Asia monopolized trade routes between Europe, India, and China. They demanded that European caravans support high tolls, causing prices of silk, porcelain, tea, and Indian spices to soar in Europe. For trade profits, many European countries supported navigators to explore new routes to the East.

On August 3, 1492, the Genoese navigator Christopher Columbus, supported by Queen Isabella of Spain, set sail from the port of Palos, Spain, with three ships and over a hundred crew members, searching for a route to India and China. On October 12 of the same year, Columbus reached a new continent, believing it to be India, but it was actually the Bahamas and Cuba. Although Columbus insisted he had reached India (until his death in 1506), he never actually arrived there; due to this misconception, the so-called "West Indies" was named between the Caribbean Sea and the Gulf of Mexico.

Despite Columbus not discovering a new route to Asia, he opened a new path for Europeans to colonize America. Subsequently, the Florentine navigator Amerigo Vespucci, also funded by Spain, traveled extensively along the coasts of Central and South America. In honor of his contributions, this new continent was named "America."

0x1: Why Do I Recommend This Book?#

The first book I want to share is "Prosperity and Decline: A History of American Economic Development," authored by the prominent former Federal Reserve Chairman Alan Greenspan. I recommend this book because I believe it has two very obvious characteristics:

The first is its completeness of content. From 1776 to 2018, over 200 years of American economic development history is condensed into this 510,000-word book. If you want to read just one book to understand American economic history, this is the one to read.
The second is its accessibility in narration. Greenspan is a financial expert and central banker who worked on Wall Street for over 30 years, accumulating rich market experience and deep connections. He later became the longest-serving Chairman of the Federal Reserve in the United States. He has a co-author named Adrian Wooldridge, a media colleague and a reporter for The Economist in Washington, whose involvement added value to the writing style and content dissemination of this book. Even if you do not have a deep background in finance and economics, you can understand it.

Of course, everything has two sides. Since Greenspan is not an economic historian and the other author is a journalist, "Prosperity and Decline" has not held a high academic status in the American economic community since its publication.

However, in my view, it is precisely Greenspan's rich market experience and regulatory history that give him direct and in-depth insights into the historical and current issues of the American economy.

For example, at the annual meeting of Caijing on November 12, 2019, someone asked Greenspan about digital currency. He replied that only central banks can issue currency; other organizations cannot. However, the issuance of sovereign digital currency by central banks is not an economic issue but more of a political issue. You see, with just a simple statement, he defined the issue: currency support requires national sovereignty, and other institutions do not have such authority.

In "Prosperity and Decline," you will find that Greenspan does not work in isolation but discusses matters as they arise, analyzing issues layer by layer from phenomena to essence, from present to past, and from the United States to the world. Therefore, after carefully reading this book, I solemnly recommend it to you.

0x2: How to Observe the Context of American Economic History?
It is worth noting that the starting point of the narrative in "Prosperity and Decline" does not begin with the discovery of America by Europeans. The author believes that starting from the late 18th century, specifically 1776, is sufficient for two main reasons:

First, the author believes that the outbreak of the American War of Independence in 1775 marked the true beginning of an independent America in both political and economic terms.
Second, the author emphasizes that the publication of Adam Smith's famous work "The Wealth of Nations" in 1776 had a tremendous impact on the subsequent economic development of the United States.

Because "The Wealth of Nations" clearly argues that within the bounds of law and under the constraints of social morality, the pursuit of individual interests will bring more wealth to the entire nation. The author believes that the subsequent development of the United States fully demonstrates the foresight of "The Wealth of Nations."

Following this line of thought, we can outline the entire content of "Prosperity and Decline" and identify four main lines through which the author observes American economic history, which run through different periods of American economic development:

Although they were all colonies, America did not suffer from endless plundering like the Spanish colonies; instead, it became a highly autonomous British overseas territory.

America was fortunate to have Britain as its colonial power, as Britain was the origin of the First Industrial Revolution, and thus the technological dividends of the Industrial Revolution also propelled the economic development of the United States. At the same time, America continuously received British immigrants, who not only brought advanced technology but also advanced experiences and concepts in finance and government management. From 1600 to 1766, the economic growth of the colonial states was among the world's leaders, equivalent to more than twice the growth rate of the British economy. By the time of independence, the per capita output of Americans was already close to that of the British, and their average height was generally 5-7 cm taller than Europeans (due to sufficient nutrition), with a fertility rate significantly higher than that of Europe (American couples had 6-7 children, while British couples had 4-5).

Protestantism was the second force driving American independence, as Calvinist Protestantism leaned more towards individual equality, thus inherently opposing royal authority. The church established many schools in America, including high schools and universities. By the time of American independence, there were already 16 universities in America (such as Harvard and Yale), while the colonial power, Britain, had only 6 universities at the same time. Considering the population at that time, the number of universities in America was astonishing, as there were about 2.8 million people in America, while Britain had over 15 million.

Talent created America's high productivity, and economic strength laid the foundation for America's independence. After the United States declared independence in 1776, it immediately attracted global populations like a magnet. In 1776, the population of America was 2.8 million; by 1790, it had increased to 3.9 million; by 1820, it was nearly 10 million; and by 1870, it was close to 40 million.

During the War of Independence, many public buildings and private homes in America were destroyed, and a large amount of strategic materials were consumed, with a total of 25,000 Americans dying in the war. The Continental Congress passed the issuance of "Continental Currency" to provide financial support for the war, initially issuing currency worth $242 million. However, as the war continued, inflation gradually appeared, and by 1780, currency could only purchase goods at 1/40 of its face value, forcing America to suspend the circulation of Continental Currency. After the war, the federal government owed $51 million, and the states owed $25 million in local debts. The new federal government's Treasury Secretary, Alexander Hamilton, proposed raising tariffs to repay the debts, thus opening the door to American trade protectionism and the centralization of federal government power.

Because America was commerce-based, the tariff levels were very low at the beginning. For most of the past 200 years, America mainly implemented a relatively open foreign trade cooperation strategy. At the same time, America vigorously developed industrial and manufacturing industries and corresponding financial services, but commerce was always the foundation.

However, after a relatively sufficient period of free competition, by the second half of the 19th century, America gradually formed a high industry concentration, with oligopolies appearing in fields such as railroads, steel, shipping, energy, finance, and even consumption, such as Carnegie's steel industry and the Rockefeller family's oil industry. This also led to government intervention and legal regulations, as the American free-market economy gradually evolved into a rule-bound legal market economy.

In 1864, America still retained the self-sufficient characteristics of an agricultural society, with more animals like horses, cows, pigs, and chickens than people in cities. By 1914, Americans had begun to drink Coca-Cola, drive Ford cars, take subways, fly, make phone calls, work in skyscrapers, and advocate scientific management methods.

Americans gained a leading advantage in emerging industries such as steel, automobiles, and electricity. At the same time, American agriculture also occupied a large share of the global market, with American grain trading accounting for 30-50% of the global total and meat trading accounting for 70-80% of the global total in the late 1870s.

During this period, America also became a consumption-led country, as it had the most millionaires in the world and the wealthiest working class. In 1914, the per capita income in America was $346, compared to $244 in the UK, $184 in Germany, $153 in France, and $108 in Italy. In addition to having purchasing power, America also created many consumer brands during this time, such as Kellogg's cereal, Wrigley's gum, Pabst Blue Ribbon beer, and Quaker oats. During this period, American companies were desperately promoting themselves, and creatively designed advertisements adorned people's lives everywhere. People's means of transportation changed from bicycles to cars, while skyscrapers replaced the previously low wooden buildings.

By the end of the 19th century and the beginning of the 20th century, the American economy began to show rapid growth. From 1800 to 1890, the average annual productivity growth rate in America was 1.4%, while from 1889 to 1899, this growth rate exceeded 2%. This reflects that the actual economic growth rate behind it increased by about 40%, and this growth rate saw a significant increase again in the 1920s.

During most of the time after the Civil War, the Republican Party was in power in the United States, favoring growth and trade. In 1864, Congress passed the "Immigration Act," and a special immigration bureau was established under the State Department to attract foreign labor.

During this period, America rapidly surpassed its former colonial power, Britain. By 1857, the population of America surpassed that of Britain; from 1870 to 1910, America's share of global manufacturing increased from 23.3% to 35.3%, while Britain's share decreased from 31.8% to 14.7%; in 1894, America's GDP surpassed that of Britain, and by 1910, American per capita income was 26% higher than that of Britain.

Technological and social ideas began to flow in reverse. In the second half of the 19th century, Americans stole technology and productivity ideas from Britain, but by the end of the century, this relationship had reversed. Charles Tyson Yerkes, originally a businessman from Chicago, acquired most of the operating rights of London's underground and built three new lines, introducing electric trains, thus unifying all underground lines into one system. J.P. Morgan turned Morgan Grenfell into a branch of his global business empire. Britain once mocked America for being technologically backward, but now the tables had turned. In 1896, the first film in America was released, featuring Uncle Sam defeating the small, domineering John Bull.

In 1870, the population of America was 40 million, and by 1914, it had increased to 99 million, with an average annual growth rate of 2.1%. During the same period, Germany's growth rate was 1.2%, France's was 0.2%, and Britain's was 1.9%. Two-thirds of the population was born locally, indicating that Americans were optimistic about the future; one-third of the population came from immigrants, showing that America had strong appeal. The youthful demographic structure of the population made America vibrant, with a strong spirit of adventure and a willingness to try new things. By 1920, immigrants and their descendants accounted for more than half of the total workforce in American manufacturing, many of whom brought skills from their home countries.

Starting from 1870, various railway companies constructed railways at a rate of 13 miles per day for 40 years, and by 1917, the railway mileage in America had increased fivefold, accounting for 35% of the total railway mileage in the world. Railroads significantly reduced transportation costs, saving 96% compared to horse-drawn carriages, and by the 1940s, the railway network in America had expanded to 5,000 miles and later to 20,000 miles. By the time of the Civil War, the railway mileage in America had exceeded the total mileage of the railways in Britain, France, and Germany combined.

With the birth of railroads came another disruptive technology: the telegraph, which allowed information that previously took weeks to spread to be transmitted instantly. By 1852, the total length of telegraph lines in America had reached 22,000 miles, connecting the east and west of the country. The rapid development of cities like San Francisco was closely related to the development of railroads and telegraphs. On July 28, 1866, the transatlantic cable was connected, allowing for information exchange between London and America, forming a unified global financial market.

During this period, America's capital reserves grew rapidly. From 1774 to 1799, the capital reserves of America doubled, and by the end of the Civil War, they had increased 15-fold. From 1820 to 1870, the average annual growth rate of America's real GDP was 4.2%, while the annual growth rate in Europe was about 1.6%, and in Asia (excluding Japan), it was about 0.03%, with the global annual growth rate around 0.9%. America clearly outperformed other countries.

Amidst this prosperity, risks were also present. In 1819, America experienced its first financial crisis. In August 1818, the Second Bank of the United States began to worry about the high levels of social debt and refused to accept paper currency. Subsequently, in October, the Treasury forced the Second Bank to repay $2 million worth of debt issued when purchasing Louisiana. This exacerbated credit tightening. Southern and western states began to tighten loan collections, and many loans were primarily to farmers who used their farms as collateral, leading banks to reclaim ownership of the farms used as collateral and transfer them to the Second Bank. The price of farms fell by 50%, and the price of cotton dropped by 25% in a single day, plunging America into economic recession, which did not ease until 1821.

Afterward, America experienced economic crises in 1837, 1857, 1873, 1884, 1893, and 1907, all of which shared a common point: the divergence between the supply of metallic currency and economic growth, where economic growth led to a shortage of currency supply, resulting in deflation. This phenomenon fluctuated with the discovery of gold mines; gold was discovered in California in 1848, in South Africa in 1886, and in the Yukon Valley in 1896, while methods like cyanide leaching increased gold production, thus boosting currency supply. However, changes in gold production did not always stabilize the economy, and the economic crisis of 1893 was triggered by the discovery of silver mines in Nevada, which increased silver production and led to a misalignment in the gold-silver exchange ratio. To stabilize the gold-silver ratio, the U.S. Treasury decided in 1890 to purchase 4.5 million ounces of silver monthly, but this had loopholes, allowing many Americans to buy silver coins on the black market and then exchange them for gold coins at the Treasury, thus profiting from the price difference, leading to a reduction in the Treasury's gold reserves and instability in the currency's status, ultimately resulting in an economic crisis. This crisis will be discussed in detail later.

II. The American Civil War (1861-1865)#

The American Civil War was the only internal war in American history, but it was exceptionally brutal, with 3.5 million people participating, 750,000 deaths, and 400,000 disabled. The fundamental cause of the war was the conflict between the plantation owners of the North and the capitalist industrial system of the South, which ultimately evolved into a movement for the liberation of slaves.

During the westward expansion of America, knights, churches, and British aristocrats played important roles, but there were significant ideological differences among these groups. The knights retained a noble mindset, valuing social hierarchy, keeping slaves, and indulging in horse racing and gambling. British aristocrats, who practiced primogeniture, sought to gain the same status and honor as their elder brothers, leading them to America to create their own fortunes. These early groups, along with immigrants from other European countries and millions of African slaves, created a complex population structure that provided fertile ground for conflict.

In the first 70 years of American independence, a capitalist economic entity formed in the North, while a slave plantation economy developed in the South. The North was filled with industrial entities; investments were used to purchase new production machinery, while the South was filled with plantations, where investments were used to buy slaves. From 1790 to 1860, 93% of all patents obtained in America came from industrial states that used free labor. In 1817, the production of cotton was 4 million yards, which increased to 308 million yards 20 years later.

The large-scale industrial needs required a large amount of free labor, but by 1860, of the 4.5 million African Americans in the United States, 4 million were still slaves and were the private property of Southern plantation owners. Due to the introduction of agricultural machinery, agricultural output continued to grow, leading to increased income for plantation owners, which in turn drove up the prices they were willing to pay for slaves. The price of an adult slave rose from $520 in 1800 to $1,800 just before the outbreak of the Civil War. Therefore, despite the signing of the "Act Prohibiting the Importation of Slaves" in 1807, and the emergence of abolitionist sentiments influenced by the British anti-slavery movement in 1833-1834, by 1860, only one-ninth of slaves had gained freedom, all due to the interests of Southern plantation owners.

All conflicts ultimately converged into two factions: one advocating an industrialization route in the North, represented by Alexander Hamilton (the first Secretary of the Treasury); the other advocating an agricultural route represented by Thomas Jefferson (the third President of the United States). Alexander Hamilton came from a small merchant family, while Thomas Jefferson was born into a plantation owner family and amassed a large amount of land and slaves by the age of 21. Initially, both sides only engaged in verbal debates, but as their differences grew, in February 1861, the "two Americas" became a reality, with the Confederate States of America (the South) declaring itself an independent nation, with Jefferson Davis as its first president and Richmond as its capital.

The Civil War broke out, with the Northern states holding 70% of the nation's wealth and 80% of the nation's bank assets. The manufacturing assets of three Northern states (Massachusetts, Pennsylvania, and New York) accounted for 53% of the nation's manufacturing assets and 54% of the nation's output, giving the North advantages in funding and equipment. Southern states, primarily engaged in agriculture, could only muster half the manpower of the North. Additionally, Southern crops needed to be exported to generate profits, but transportation, ports, and borders were mostly controlled by the North, giving the North control over the economic lifeline of the South.

Although the North had clear economic and equipment advantages over the South, winning the war was not easy. After the war broke out in 1861, the North remained at a disadvantage until the turning point at the Battle of Gettysburg in 1863, ultimately leading to the South's surrender on April 9, 1865.

The main economic reasons for the South's defeat include the following:

1. Southern states overissued a large amount of currency for the war, leading to a 9,000% devaluation of their currency and leaving the army without enough money to purchase adequate equipment. The North's economy was better, and after the war, the greenback issued by the North maintained 70% of its purchasing power.

2. The liberation of slaves.

On September 22, 1862, Lincoln issued the preliminary Emancipation Proclamation, declaring that if the Southern rebels did not lay down their arms by January 1, 1863, the slaves in the rebellious states would be freed. Upon hearing this news, thousands of slaves escaped to the North.

3. The Homestead Act.

In May 1862, Lincoln issued the Homestead Act, which stipulated that any loyal adult could receive 160 acres of land in the West by paying a $10 registration fee, and after farming the land for five years, they could become the owners of that land. This attracted a large number of freedmen from the South.

The significance of the Civil War lies in the fact that the North's victory not only consolidated national unity but also established the dominance of the Northern bourgeoisie across the nation; the war abolished slavery, paving the way for the rapid development of capitalism in America; and the implementation of the Homestead Act accelerated the development of the West, contributing to the victory of the American-style path in agricultural capitalism, leading to America's leap to become the most advanced industrial and agricultural capitalist country by the end of the 19th century.

III. The Development of Capitalism (1865-1914)#

From the end of the American Civil War to the eve of World War I, America successfully transformed into a modern society.

In 1864, America still retained the self-sufficient characteristics of an agricultural society, with more animals like horses, cows, pigs, and chickens than people in cities. By 1914, Americans had begun to drink Coca-Cola, drive Ford cars, take subways, fly, make phone calls, work in skyscrapers, and advocate scientific management methods.

Americans gained a leading advantage in emerging industries such as steel, automobiles, and electricity. At the same time, American agriculture also occupied a large share of the global market, with American grain trading accounting for 30-50% of the global total and meat trading accounting for 70-80% of the global total in the late 1870s.

During this period, America also became a consumption-led country, as it had the most millionaires in the world and the wealthiest working class. In 1914, the per capita income in America was $346, compared to $244 in the UK, $184 in Germany, $153 in France, and $108 in Italy. In addition to having purchasing power, America also created many consumer brands during this time, such as Kellogg's cereal, Wrigley's gum, Pabst Blue Ribbon beer, and Quaker oats. During this period, American companies were desperately promoting themselves, and creatively designed advertisements adorned people's lives everywhere. People's means of transportation changed from bicycles to cars, while skyscrapers replaced the previously low wooden buildings.

By the end of the 19th century and the beginning of the 20th century, the American economy began to show rapid growth. From 1800 to 1890, the average annual productivity growth rate in America was 1.4%, while from 1889 to 1899, this growth rate exceeded 2%. This reflects that the actual economic growth rate behind it increased by about 40%, and this growth rate saw a significant increase again in the 1920s.

During most of the time after the Civil War, the Republican Party was in power in the United States, favoring growth and trade. In 1864, Congress passed the "Immigration Act," and a special immigration bureau was established under the State Department to attract foreign labor.

During this period, America rapidly surpassed its former colonial power, Britain. By 1857, the population of America surpassed that of Britain; from 1870 to 1910, America's share of global manufacturing increased from 23.3% to 35.3%, while Britain's share decreased from 31.8% to 14.7%; in 1894, America's GDP surpassed that of Britain, and by 1910, American per capita income was 26% higher than that of Britain.

Technological and social ideas began to flow in reverse. In the second half of the 19th century, Americans stole technology and productivity ideas from Britain, but by the end of the century, this relationship had reversed. Charles Tyson Yerkes, originally a businessman from Chicago, acquired most of the operating rights of London's underground and built three new lines, introducing electric trains, thus unifying all underground lines into one system. J.P. Morgan turned Morgan Grenfell into a branch of his global business empire. Britain once mocked America for being technologically backward, but now the tables had turned. In 1896, the first film in America was released, featuring Uncle Sam defeating the small, domineering John Bull.

In 1870, the population of America was 40 million, and by 1914, it had increased to 99 million, with an average annual growth rate of 2.1%. During the same period, Germany's growth rate was 1.2%, France's was 0.2%, and Britain's was 1.9%. Two-thirds of the population was born locally, indicating that Americans were optimistic about the future; one-third of the population came from immigrants, showing that America had strong appeal. The youthful demographic structure of the population made America vibrant, with a strong spirit of adventure and a willingness to try new things. By 1920, immigrants and their descendants accounted for more than half of the total workforce in American manufacturing, many of whom brought skills from their home countries.

Starting from 1870, various railway companies constructed railways at a rate of 13 miles per day for 40 years, and by 1917, the railway mileage in America had increased fivefold, accounting for 35% of the total railway mileage in the world. Railroads significantly reduced transportation costs, saving 96% compared to horse-drawn carriages, and by the 1940s, the railway network in America had expanded to 5,000 miles and later to 20,000 miles. By the time of the Civil War, the railway mileage in America had exceeded the total mileage of the railways in Britain, France, and Germany combined.

With the birth of railroads came another disruptive technology: the telegraph, which allowed information that previously took weeks to spread to be transmitted instantly. By 1852, the total length of telegraph lines in America had reached 22,000 miles, connecting the east and west of the country. The rapid development of cities like San Francisco was closely related to the development of railroads and telegraphs. On July 28, 1866, the transatlantic cable was connected, allowing for information exchange between London and America, forming a unified global financial market.

During this period, America's capital reserves grew rapidly. From 1774 to 1799, the capital reserves of America doubled, and by the end of the Civil War, they had increased 15-fold. From 1820 to 1870, the average annual growth rate of America's real GDP was 4.2%, while the annual growth rate in Europe was about 1.6%, and in Asia (excluding Japan), it was about 0.03%, with the global annual growth rate around 0.9%. America clearly outperformed other countries.

Amidst this prosperity, risks were also present. In 1819, America experienced its first financial crisis. In August 1818, the Second Bank of the United States began to worry about the high levels of social debt and refused to accept paper currency. Subsequently, in October, the Treasury forced the Second Bank to repay $2 million worth of debt issued when purchasing Louisiana. This exacerbated credit tightening. Southern and western states began to tighten loan collections, and many loans were primarily to farmers who used their farms as collateral, leading banks to reclaim ownership of the farms used as collateral and transfer them to the Second Bank. The price of farms fell by 50%, and the price of cotton dropped by 25% in a single day, plunging America into economic recession, which did not ease until 1821.

Afterward, America experienced economic crises in 1837, 1857, 1873, 1884, 1893, and 1907, all of which shared a common point: the divergence between the supply of metallic currency and economic growth, where economic growth led to a shortage of currency supply, resulting in deflation. This phenomenon fluctuated with the discovery of gold mines; gold was discovered in California in 1848, in South Africa in 1886, and in the Yukon Valley in 1896, while methods like cyanide leaching increased gold production, thus boosting currency supply. However, changes in gold production did not always stabilize the economy, and the economic crisis of 1893 was triggered by the discovery of silver mines in Nevada, which increased silver production and led to a misalignment in the gold-silver exchange ratio. To stabilize the gold-silver ratio, the U.S. Treasury decided in 1890 to purchase 4.5 million ounces of silver monthly, but this had loopholes, allowing many Americans to buy silver coins on the black market and then exchange them for gold coins at the Treasury, thus profiting from the price difference, leading to a reduction in the Treasury's gold reserves and instability in the currency's status, ultimately resulting in an economic crisis. This crisis will be discussed in detail later.

II. The American Civil War (1861-1865)#

The American Civil War was the only internal war in American history, but it was exceptionally brutal, with 3.5 million people participating, 750,000 deaths, and 400,000 disabled. The fundamental cause of the war was the conflict between the plantation owners of the North and the capitalist industrial system of the South, which ultimately evolved into a movement for the liberation of slaves.

During the westward expansion of America, knights, churches, and British aristocrats played important roles, but there were significant ideological differences among these groups. The knights retained a noble mindset, valuing social hierarchy, keeping slaves, and indulging in horse racing and gambling. British aristocrats, who practiced primogeniture, sought to gain the same status and honor as their elder brothers, leading them to America to create their own fortunes. These early groups, along with immigrants from other European countries and millions of African slaves, created a complex population structure that provided fertile ground for conflict.

In the first 70 years of American independence, a capitalist economic entity formed in the North, while a slave plantation economy developed in the South. The North was filled with industrial entities; investments were used to purchase new production machinery, while the South was filled with plantations, where investments were used to buy slaves. From 1790 to 1860, 93% of all patents obtained in America came from industrial states that used free labor. In 1817, the production of cotton was 4 million yards, which increased to 308 million yards 20 years later.

The large-scale industrial needs required a large amount of free labor, but by 1860, of the 4.5 million African Americans in the United States, 4 million were still slaves and were the private property of Southern plantation owners. Because of the introduction of agricultural machinery, agricultural output continued to grow, leading to increased income for plantation owners, which in turn drove up the prices they were willing to pay for slaves. The price of an adult slave rose from $520 in 1800 to $1,800 just before the outbreak of the Civil War. Therefore, despite the signing of the "Act Prohibiting the Importation of Slaves" in 1807, and the emergence of abolitionist sentiments influenced by the British anti-slavery movement in 1833-1834, by 1860, only one-ninth of slaves had gained freedom, all due to the interests of Southern plantation owners.

All conflicts ultimately converged into two factions: one advocating an industrialization route in the North, represented by Alexander Hamilton (the first Secretary of the Treasury); the other advocating an agricultural route represented by Thomas Jefferson (the third President of the United States). Alexander Hamilton came from a small merchant family, while Thomas Jefferson was born into a plantation owner family and amassed a large amount of land and slaves by the age of 21. Initially, both sides only engaged in verbal debates, but as their differences grew, in February 1861, the "two Americas" became a reality, with the Confederate States of America (the South) declaring itself an independent nation, with Jefferson Davis as its first president and Richmond as its capital.

The Civil War broke out, with the Northern states holding 70% of the nation's wealth and 80% of the nation's bank assets. The manufacturing assets of three Northern states (Massachusetts, Pennsylvania, and New York) accounted for 53% of the nation's manufacturing assets and 54% of the nation's output, giving the North advantages in funding and equipment. Southern states, primarily engaged in agriculture, could only muster half the manpower of the North. Additionally, Southern crops needed to be exported to generate profits, but transportation, ports, and borders were mostly controlled by the North, giving the North control over the economic lifeline of the South.

Although the North had clear economic and equipment advantages over the South, winning the war was not easy. After the war broke out in 1861, the North remained at a disadvantage until the turning point at the Battle of Gettysburg in 1863, ultimately leading to the South's surrender on April 9, 1865.

The main economic reasons for the South's defeat include the following:

1. Southern states overissued a large amount of currency for the war, leading to a 9,000% devaluation of their currency and leaving the army without enough money to purchase adequate equipment. The North's economy was better, and after the war, the greenback issued by the North maintained 70% of its purchasing power.

2. The liberation of slaves.

On September 22, 1862, Lincoln issued the preliminary Emancipation Proclamation, declaring that if the Southern rebels did not lay down their arms by January 1, 1863, the slaves in the rebellious states would be freed. Upon hearing this news, thousands of slaves escaped to the North.

3. The Homestead Act.

In May 1862, Lincoln issued the Homestead Act, which stipulated that any loyal adult could receive 160 acres of land in the West by paying a $10 registration fee, and after farming the land for five years, they could become the owners of that land. This attracted a large number of freedmen from the South.

The significance of the Civil War lies in the fact that the North's victory not only consolidated national unity but also established the dominance of the Northern bourgeoisie across the nation; the war abolished slavery, paving the way for the rapid development of capitalism in America; and the implementation of the Homestead Act accelerated the development of the West, contributing to the victory of the American-style path in agricultural capitalism, leading to America's leap to become the most advanced industrial and agricultural capitalist country by the end of the 19th century.

III. The Development of Capitalism (1865-1914)#

From the end of the American Civil War to the eve of World War I, America successfully transformed into a modern society.

In 1864, America still retained the self-sufficient characteristics of an agricultural society, with more animals like horses, cows, pigs, and chickens than people in cities. By 1914, Americans had begun to drink Coca-Cola, drive Ford cars, take subways, fly, make phone calls, work in skyscrapers, and advocate scientific management methods.

Americans gained a leading advantage in emerging industries such as steel, automobiles, and electricity. At the same time, American agriculture also occupied a large share of the global market, with American grain trading accounting for 30-50% of the global total and meat trading accounting for 70-80% of the global total in the late 1870s.

During this period, America also became a consumption-led country, as it had the most millionaires in the world and the wealthiest working class. In 1914, the per capita income in America was $346, compared to $244 in the UK, $184 in Germany, $153 in France, and $108 in Italy. In addition to having purchasing power, America also created many consumer brands during this time, such as Kellogg's cereal, Wrigley's gum, Pabst Blue Ribbon beer, and Quaker oats. During this period, American companies were desperately promoting themselves, and creatively designed advertisements adorned people's lives everywhere. People's means of transportation changed from bicycles to cars, while skyscrapers replaced the previously low wooden buildings.

By the end of the 19th century and the beginning of the 20th century, the American economy began to show rapid growth. From 1800 to 1890, the average annual productivity growth rate in America was 1.4%, while from 1889 to 1899, this growth rate exceeded 2%. This reflects that the actual economic growth rate behind it increased by about 40%, and this growth rate saw a significant increase again in the 1920s.

During most of the time after the Civil War, the Republican Party was in power in the United States, favoring growth and trade. In 1864, Congress passed the "Immigration Act," and a special immigration bureau was established under the State Department to attract foreign labor.

During this period, America rapidly surpassed its former colonial power, Britain. By 1857, the population of America surpassed that of Britain; from 1870 to 1910, America's share of global manufacturing increased from 23.3% to 35.3%, while Britain's share decreased from 31.8% to 14.7%; in 1894, America's GDP surpassed that of Britain, and by 1910, American per capita income was 26% higher than that of Britain.

Technological and social ideas began to flow in reverse. In the second half of the 19th century, Americans stole technology and productivity ideas from Britain, but by the end of the century, this relationship had reversed. Charles Tyson Yerkes, originally a businessman from Chicago, acquired most of the operating rights of London's underground and built three new lines, introducing electric trains, thus unifying all underground lines into one system. J.P. Morgan turned Morgan Grenfell into a branch of his global business empire. Britain once mocked America for being technologically backward, but now the tables had turned. In 1896, the first film in America was released, featuring Uncle Sam defeating the small, domineering John Bull.

In 1870, the population of America was 40 million, and by 1914, it had increased to 99 million, with an average annual growth rate of 2.1%. During the same period, Germany's growth rate was 1.2%, France's was 0.2%, and Britain's was 1.9%. Two-thirds of the population was born locally, indicating that Americans were optimistic about the future; one-third of the population came from immigrants, showing that America had strong appeal. The youthful demographic structure of the population made America vibrant, with a strong spirit of adventure and a willingness to try new things. By 1920, immigrants and their descendants accounted for more than half of the total workforce in American manufacturing, many of whom brought skills from their home countries.

Starting from 1870, various railway companies constructed railways at a rate of 13 miles per day for 40 years, and by 1917, the railway mileage in America had increased fivefold, accounting for 35% of the total railway mileage in the world. Railroads significantly reduced transportation costs, saving 96% compared to horse-drawn carriages, and by the 1940s, the railway network in America had expanded to 5,000 miles and later to 20,000 miles. By the time of the Civil War, the railway mileage in America had exceeded the total mileage of the railways in Britain, France, and Germany combined.

With the birth of railroads came another disruptive technology: the telegraph, which allowed information that previously took weeks to spread to be transmitted instantly. By 1852, the total length of telegraph lines in America had reached 22,000 miles, connecting the east and west of the country. The rapid development of cities like San Francisco was closely related to the development of railroads and telegraphs. On July 28, 1866, the transatlantic cable was connected, allowing for information exchange between London and America, forming a unified global financial market.

During this period, America's capital reserves grew rapidly. From 1774 to 1799, the capital reserves of America doubled, and by the end of the Civil War, they had increased 15-fold. From 1820 to 1870, the average annual growth rate of America's real GDP was 4.2%, while the annual growth rate in Europe was about 1.6%, and in Asia (excluding Japan), it was about 0.03%, with the global annual growth rate around 0.9%. America clearly outperformed other countries.

Amidst this prosperity, risks were also present. In 1819, America experienced its first financial crisis. In August 1818, the Second Bank of the United States began to worry about the high levels of social debt and refused to accept paper currency. Subsequently, in October, the Treasury forced the Second Bank to repay $2 million worth of debt issued when purchasing Louisiana. This exacerbated credit tightening. Southern and western states began to tighten loan collections, and many loans were primarily to farmers who used their farms as collateral, leading banks to reclaim ownership of the farms used as collateral and transfer them to the Second Bank. The price of farms fell by 50%, and the price of cotton dropped by 25% in a single day, plunging America into economic recession, which did not ease until 1821.

Afterward, America experienced economic crises in 1837, 1857, 1873, 1884, 1893, and 1907, all of which shared a common point: the divergence between the supply of metallic currency and economic growth, where economic growth led to a shortage of currency supply, resulting in deflation. This phenomenon fluctuated with the discovery of gold mines; gold was discovered in California in 1848, in South Africa in 1886, and in the Yukon Valley in 1896, while methods like cyanide leaching increased gold production, thus boosting currency supply. However, changes in gold production did not always stabilize the economy, and the economic crisis of 1893 was triggered by the discovery of silver mines in Nevada, which increased silver production and led to a misalignment in the gold-silver exchange ratio. To stabilize the gold-silver ratio, the U.S. Treasury decided in 1890 to purchase 4.5 million ounces of silver monthly, but this had loopholes, allowing many Americans to buy silver coins on the black market and then exchange them for gold coins at the Treasury, thus profiting from the price difference, leading to a reduction in the Treasury's gold reserves and instability in the currency's status, ultimately resulting in an economic crisis. This crisis will be discussed in detail later.

II. The American Civil War (1861-1865)#

The American Civil War was the only internal war in American history, but it was exceptionally brutal, with 3.5 million people participating, 750,000 deaths, and 400,000 disabled. The fundamental cause of the war was the conflict between the plantation owners of the North and the capitalist industrial system of the South, which ultimately evolved into a movement for the liberation of slaves.

During the westward expansion of America, knights, churches, and British aristocrats played important roles, but there were significant ideological differences among these groups. The knights retained a noble mindset, valuing social hierarchy, keeping slaves, and indulging in horse racing and gambling. British aristocrats, who practiced primogeniture, sought to gain the same status and honor as their elder brothers, leading them to America to create their own fortunes. These early groups, along with immigrants from other European countries and millions of African slaves, created a complex population structure that provided fertile ground for conflict.

In the first 70 years of American independence, a capitalist economic entity formed in the North, while a slave plantation economy developed in the South. The North was filled with industrial entities; investments were used to purchase new production machinery, while the South was filled with plantations, where investments were used to buy slaves. From 1790 to 1860, 93% of all patents obtained in America came from industrial states that used free labor. In 1817, the production of cotton was 4 million yards, which increased to 308 million yards 20 years later.

The large-scale industrial needs required a large amount of free labor, but by 1860, of the 4.5 million African Americans in the United States, 4 million were still slaves and were the private property of Southern plantation owners. Because of the introduction of agricultural machinery, agricultural output continued to grow, leading to increased income for plantation owners, which in turn drove up the prices they were willing to pay for slaves. The price of an adult slave rose from $520 in 1800 to $1,800 just before the outbreak of the Civil War. Therefore, despite the signing of the "Act Prohibiting the Importation of Slaves" in 1807, and the emergence of abolitionist sentiments influenced by the British anti-slavery movement in 1833-1834, by 1860, only one-ninth of slaves had gained freedom, all due to the interests of Southern plantation owners.

All conflicts ultimately converged into two factions: one advocating an industrialization route in the North, represented by Alexander Hamilton (the first Secretary of the Treasury); the other advocating an agricultural route represented by Thomas Jefferson (the third President of the United States). Alexander Hamilton came from a small merchant family, while Thomas Jefferson was born into a plantation owner family and amassed a large amount of land and slaves by the age of 21. Initially, both sides only engaged in verbal debates, but as their differences grew, in February 1861, the "two Americas" became a reality, with the Confederate States of America (the South) declaring itself an independent nation, with Jefferson Davis as its first president and Richmond as its capital.

The Civil War broke out, with the Northern states holding 70% of the nation's wealth and 80% of the nation's bank assets. The manufacturing assets of three Northern states (Massachusetts, Pennsylvania, and New York) accounted for 53% of the nation's manufacturing assets and 54% of the nation's output, giving the North advantages in funding and equipment. Southern states, primarily engaged in agriculture, could only muster half the manpower of the North. Additionally, Southern crops needed to be exported to generate profits, but transportation, ports, and borders were mostly controlled by the North, giving the North control over the economic lifeline of the South.

Although the North had clear economic and equipment advantages over the South, winning the war was not easy. After the war broke out in 1861, the North remained at a disadvantage until the turning point at the Battle of Gettysburg in 1863, ultimately leading to the South's surrender on April 9, 1865.

The main economic reasons for the South's defeat include the following:

1. Southern states overissued a large amount of currency for the war, leading to a 9,000% devaluation of their currency and leaving the army without enough money to purchase adequate equipment. The North's economy was better, and after the war, the greenback issued by the North maintained 70% of its purchasing power.

2. The liberation of slaves.

On September 22, 1862, Lincoln issued the preliminary Emancipation Proclamation, declaring that if the Southern rebels did not lay down their arms by January 1, 1863, the slaves in the rebellious states would be freed. Upon hearing this news, thousands of slaves escaped to the North.

3. The Homestead Act.

In May 1862, Lincoln issued the Homestead Act, which stipulated that any loyal adult could receive 160 acres of land in the West by paying a $10 registration fee, and after farming the land for five years, they could become the owners of that land. This attracted a large number of freedmen from the South.

The significance of the Civil War lies in the fact that the North's victory not only consolidated national unity but also established the dominance of the Northern bourgeoisie across the nation; the war abolished slavery, paving the way for the rapid development of capitalism in America; and the implementation of the Homestead Act accelerated the development of the West, contributing to the victory of the American-style path in agricultural capitalism, leading to America's leap to become the most advanced industrial and agricultural capitalist country by the end