Ages of American Capitalism: A History of the United States

by Jonathan Levy

Overview

A leading economic historian traces the evolution of American capitalism from the colonial era to the present—and argues that we’ve reached a turning point that will define the era ahead.

“A monumental achievement, sure to become a classic.”—Zachary D. Carter, author of The Price of Peace

In this ambitious single-volume history of the United States, economic historian Jonathan Levy reveals how capitalism in America has evolved through four distinct ages and how the country’s economic evolution is inseparable from the nature of American life itself. The Age of Commerce spans the colonial era through the outbreak of the Civil War, and the Age of Capital traces the lasting impact of the industrial revolution. The volatility of the Age of Capital ultimately led to the Great Depression, which sparked the Age of Control, during which the government took on a more active role in the economy, and finally, in the Age of Chaos, deregulation and the growth of the finance industry created a booming economy for some but also striking inequalities and a lack of oversight that led directly to the crash of 2008.

In Ages of American Capitalism, Levy proves that capitalism in the United States has never been just one thing. Instead, it has morphed through the country’s history—and it’s likely changing again right now.
“A stunning accomplishment . . . an indispensable guide to understanding American history—and what’s happening in today’s economy.”—Christian Science Monitor

“The best one-volume history of American capitalism.”—Sven Beckert, author of Empire of Cotton

Product Details

ISBN-13:	9780812985184
Publisher:	Random House Publishing Group
Publication date:	04/05/2022
Pages:	944
Sales rank:	98,279
Product dimensions:	6.10(w) x 9.10(h) x 1.60(d)

About the Author

Jonathan Levy is a professor in the Department of History and the John U. Nef Committee on Social Thought at the University of Chicago. His first book, Freaks of Fortune: The Emerging World of Capitalism and Risk in America, won the Organization of American Historians’ Frederick Jackson Turner Award, Ellis W. Hawley Prize, and Avery O. Craven Award, as well as the American Society for Legal History’s William Nelson Cromwell Book Prize. He lives in Chicago, Illinois.

Read an Excerpt

Chapter 1

Mercantilism

Wealth is power, and power is wealth. The aphorism commonly attributed to the Englishman Thomas Hobbes, author of the great political philosophical treatise Leviathan (1651), was later invoked by Adam Smith in the greatest treatise ever written on commerce, An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Smith was a Scot, not an American, but up until 1776, Scots and Americans shared something in common: both were subjects of the British Empire. In the Age of Commerce, empire and capitalism grew up together.

For centuries, empires had long assessed their control over land, population, and taxable resources. In Europe by the eighteenth century, commerce had become the most dynamic generator of imperial wealth and imperial power. How states might best promote commerce was Smith’s focus in The Wealth of Nations, published the year the thirteen North American colonies declared their independence from the British Empire.

Smith said Britain might let the colonies go, arguing that what he called the “mercantile system”—the imperial policies that defined the commercial relationship between Great Britain and its colonies, against which the North American colonists were then revolting—did not promote the wealth of nations. Smith admired the commercial character of British North America, and today many consider him to be something like a patron saint of capitalism, as, supposedly, he was critical of all government intervention into “the market.” That was not so. Smith was a theorist of political economy, of the relationship between the ordering of power and the generation of wealth. He made no categorical separation between the political and the economic, or state and market. The question for him was their relationship and the consequences of their complicated overlap. The wealth of nations could be the result only of good policy making.

However, The Wealth of Nations does not begin with a policy analysis. Rather, book one lays out Smith’s explanation of economic commercialization. To understand the dynamics of preindustrial capitalism, there is no better place to begin but here. Book one of The Wealth of Nations holds the key to explaining the development of American capitalism from seventeenth-century English colonial settlement through the American Civil War, the era spanning the Age of Commerce.

Smith explained how the self-interested pursuit of commercial gain, breeding more commerce, tends toward an increasing division of labor. When the “extent of the market” for goods expands on the demand side, spurred on by self-interest under the pressures of competition, producers specialize, and on the supply side the division of labor increases. So then does labor productivity. The ongoing search for “gains from trade” induces more capital investment. In the cumulative process, economic activity brings increasing returns. Everyone may gain from trade. The wealth of nations grows. This is what economists today call “Smithian growth,” the combined and interactive result of self-interest, the division of labor, and the extent of markets.

The analysis of commerce in book one of The Wealth of Nations is of great explanatory power, but it is incomplete. For the North American colonies, as well as their commercial character, were conscious political creations, in which politics and Smithian growth dynamically interacted. There was no capitalism in North America prior to the long-term British investment in imperial expansion. By force, states had to increase the “extent of the market.”

The British project to do so was imperialist in character, of a mercantilist variety. Mercantilism had no fixed body of doctrine. Smith named his own enemy when he spoke of the “mercantile system,” as neither he nor anyone who came before him had used the term mercantilism. Nonetheless, during the seventeenth and eighteenth centuries, a common set of basic assumptions about the relationship between political and economic life held together that can usefully be labeled mercantilist.

Foremost, mercantilists promoted an understanding of political economy in which there was no categorical separation between state and market. Smith inherited this legacy. But unlike Smith, mercantilists defined national economic prosperity as the existence of a positive “balance of trade” with other nations. Greater market access and more commerce were the sources of imperial wealth, but only when a nation exported goods of a value greater than it imported, including in relation to its colonies. More coin flowed into the nation’s coffers at the expense of its geopolitical competitors. “Foreign trade produces riches, riches power, power preserves our trade and religion,” insisted East India Company governor Josiah Child in 1681. Mercantilists took for granted a zero-sum global economy, occupied by warring states forever fighting over market access abroad.10 Not all nations could gain from trade, not all at once.

In this economic combat—because so much commerce was seaborne, as goods, in this era, moved far more economically over water than overland—overseas colonies could be of decisive commercial importance. After the English Civil War, the Restoration English state moved to incorporate its wayward early North American colonies into its expanding imperial, mercantilist orbit. As it did, mercantilism transformed, and American capitalism was born.

1. The First Earl of Shaftesbury

The great pivot for British North American commercial development was the period after 1660, when Parliament restored Charles II to the British throne eleven years after the execution of his father in the English Civil War. Up until then, English colonization had been a haphazard affair, with early efforts leading to repeated failures—in terms of survival, let alone commercial gain. A few ventures had “planted” lasting settlements in the Caribbean, the Chesapeake, and New England, but these colonies were still afterthoughts back home. Asia, the “East Indies,” compelled much greater interest.

The Restoration English state reasserted authority over the Atlantic colonies. Legislation, including a series of parliamentary “Navigation Acts,” sought to restrict much American colonial commerce to within the English Empire (and within the British Empire after the 1707 Act of Union between England and Scotland). The political-economic settlement was to last throughout the eighteenth century. The British Empire strengthened in the Atlantic, commerce flourished, and the North American colonies prospered.

Among those who had crossed the English Channel to the Netherlands in order to persuade Charles II to return from exile was Sir Anthony Ashley Cooper, soon to be Lord Ashley. In 1672, serving as Charles II’s lord chancellor, Ashley became the first Earl of Shaftesbury. Shaftesbury was to be a leading figure in Restoration England. During the Civil War, he had played both sides, Crown and Parliament, before joining the victorious forces of Oliver Cromwell. After Cromwell’s death, Shaftesbury then helped to restore Charles II to the throne. But he remained a vocal critic of royal absolutism, becoming a founder of the liberal-minded Whig Party. He opposed Charles II’s wish for his Catholic brother James to follow him on the throne, and he fell out with the king in 1673. Eventually, in 1682, Shaftesbury fled England for his own Dutch exile. But he fell ill in Amsterdam and died in 1683.

By then, Shaftesbury’s name had been dragged through the mud. When the king first broke with him, the earl’s nemesis, the great French mercantilist Jean-Baptiste Colbert, had reveled in the political downfall of “the most knavish, unjust and dishonest man in England.” Meanwhile at home, Lord Ashley’s political opponents accused him of tarnishing “Old Beloved Commonwealth Principles” for the sake of his own private commercial self-interest.

A public figure, Shaftesbury did have a great number of private commercial interests. He was a “gentlemen capitalist” of the rising English Empire. As a member of the gentry class, his Dorchester landholdings were vast. Like many Whigs, and unlike many of their Tory political opponents, Shaftesbury was among the more enterprising of English lords. He sought to “improve” his lands and thereby increase their productivity and commercial yields. In that process, land became something more than the property and wealth that sustained gentry class rule. It also became a form of productive capital.

Shaftesbury was also involved in many commercial projects abroad, although he avoided established lines of commerce with Europe and Asia. He took little interest in New England. If Hobbes famously called the state of nature “nasty, brutish, and short,” Cromwell called New England “poor, cold & useless.” Shaftesbury’s private commercial interests concentrated on the West Indies.

Table of Contents

Introduction xi

Book 1 The Age of Commerce, 1660-1860

Preface: Commerce 3

Chapter 1 Mercantilism 9

Chapter 2 Organic Economy, Household Economy 39

Chapter 3 Republican Political Economy 65

Chapter 4 Capitalism and the Democracy 94

Chapter 5 Confidence Games 126

Chapter 6 Between Slavery and Freedom 150

Book 2 The Age of Capital, 1860-1932

Preface: Capital 189

Chapter 7 Civil War and the Reconstruction of Capital 195

Chapter 8 Industrialization 229

Chapter 9 Class War and Home Life 260

Chapter 10 The Populist Revolt 297

Chapter 11 Fordism 325

Chapter 12 The Great Depression 355

Book 3 The Age of Control, 1932-1980

Preface: Control 391

Chapter 13 New Deal Capitalism 397

Chapter 14 New World Hegemon 436

Chapter 15 Postwar Hinge 462

Chapter 16 Consumerism 488

Chapter 17 Ordeal of a Golden Age 516

Chapter 18 Crisis of Industrial Capital 544

Book 4 The Age of Chaos, 1980-

Preface: Chaos 587

Chapter 19 Magic of the Market 595

Chapter 20 The New Economy 633

Chapter 21 The Great Moderation 670

Chapter 22 The Great Recession 702

Afterword 733

Acknowledgments 743

Illustration Credits 747

Figure Credits 751

Note on Sources 755

Notes 757

Index 867

Editorial Reviews

Prodigiously researched, elegantly written, and relentlessly interesting . . . Ages of American Capitalism deftly weaves strands of economic, business, political, social and intellectual history into an engaging, accessible narrative.”—The Washington Post

“Prodigious . . . a vivid social and geopolitical history.”—Boston Review

“It is impossible to understand the United States without understanding its economic history. This book, from one of the nation’s foremost historians of capitalism, brings that important and endlessly fascinating story to life, taking the reader on a whirlwind tour of plantations and factories, boardrooms and government offices. If you want to get a better sense of where we are, think about how we got here.”—Sven Beckert, author of Empire of Cotton

“Ages of American Capitalism is a monumental achievement. Jonathan Levy has crafted an economic history that rivals Eric Hobsbawm’s and Charles Kindleberger’s in ambition, augmented by a thorough analysis of the legal and political currents that have shaped economic change across 350 years.”—Zachary D. Carter, author of The Price of Peace

“A remarkably shrewd, sweeping, and entertaining history of American capitalism that strikes at the heart of one of the great American fallacies: that markets can ever be separated from society, politics, and history.”—Richard White, author of The Republic for Which It Stands

“American capitalism is in crisis. To know how to get out of the mess, you need to know how we got into it. That takes a historian. This is a book with the ambition and originality of Adam Smith’s Wealth of Nations. . . . Unputdownable.”—James Robinson, co-author of Why Nations Fail

“In this monumental work, Jonathan Levy has written a history of economic life in the United States that puts capital back at the center of our nation’s history. In his sophisticated yet accessible assessment, Levy shows how the institutions that define the meaning and purpose of capital have evolved rather dramatically over the past few centuries, transforming not only the nation but the meaning of capitalism itself. Ages of American Capitalism is a splendid book.”—Stephen Mihm, author of A Nation of Counterfeiters

“The sprawling saga of a national economy that has gone through several phases, the lion’s share of ownership becoming ever narrower . . . Levy is an uncommonly lucid interpreter of numbers and theories and a nimble explainer. A rewarding exercise in understanding where we are and how we got there.”—Kirkus Reviews (starred review)

From the Publisher

04/01/2021

The history of the United States is the history of capitalism. The colonies began when property and trade were still new concepts in Europe and the country relied on the exploitation of human labor—first of Indigenous and enslaved peoples, and then of all workers—to grow the economy. Each era of exploitation was met with a violent response, until the political infrastructure turned to the divide-and-conquer plan that defines our modern era. Levy (history, Univ. of Chicago; Freaks of Fortune) has given us a textbook on America that successfully explains history through an economic perspective. The book breaks down centuries of history into four eras: the ages of commerce, capital, control, and chaos. Through these ages, we move from the foundation of the colonies and a new nation, to the current age, which Levy defines as one of investment and liquidity. This massive tome provides a clear narrative of how economic power in America has always resided with those rich enough to invest. An understanding of economic principles is helpful but not essential to following Levy's analysis. VERDICT Levy makes a cohesive argument that provides a new perspective on the trajectory of the U.S. but will still feel familiar to any student of history.—John Rodzvilla, Emerson Coll., Boston

Library Journal

★ 2021-01-06
The sprawling saga of a national economy that has gone through several phases, the lion’s share of ownership becoming ever narrower.

Capital, writes economic historian Levy, is “the process through which a legal asset is invested with pecuniary value, in light of its capacity to yield a future pecuniary profit.” The word invested is an important component, since investment, the trust that the future will reward present outlay, is critical. In early U.S. history, the wherewithal for investment was limited to White men, who enjoyed the benefit of an economy fueled by slaves. Racial domination was central, effected in part by “an assortment of odd tasks that masters and overseers ingeniously invented to keep their slaves busy” when they were not harvesting cotton. The current doctrine—fomented primarily by evangelists and so-called conservatives—that poverty is the poor person’s fault goes back a surprisingly long time. Levy links it to the social Darwinism of the 1870s and ’80s. “What the social classes owed to each other was, essentially, nothing,” he writes of that doctrine. Union membership helped improve the lot of many workers in the decades following, but even so, a certain social Darwinism prevailed, through which one can detect the origins of pay disparity between White and minority workers and, especially, male and female workers. As Levy notes in this detailed, discursive narrative, union political power was grudgingly granted after the owners of capital battled workers endlessly: “Between 1880 and 1930, according to one estimate, U.S. courts would issue no less than 4,300 injunctions against labor union activity.” In time, though, union power would erode as Richard Nixon and other right-wing politicians exploited “white blue-collar dissatisfaction,” a divide-and-conquer motif that continues into the present. It helps to have some knowledge of economics to read this book, though it’s not essential. Levy is an uncommonly lucid interpreter of numbers and theories and a nimble explainer.

A rewarding exercise in understanding where we are and how we got there.

Kirkus Reviews