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History of t he
American
Economy THIRTEENTH EDITION
Gary M. Walton
Hugh Rockoff
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History of the American
Economy
Thirteenth EDITION
G ARY M. WALTON
University of California, Davis
H U GH ROC KOF F
Rutgers University
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History of the American Economy, © 2018, 2014 Cengage Learning, Inc.
Thirteenth Edition
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Printed in the United States of America

Print Number: 01 Print Year: 2017
In memory of our dissertation advisors, the late
Douglass C. North and Robert W. Fogel,
Nobel Laureates in Economics, 1993
Brief Contents
PREFACE
Acknowledgments
About the Authors
Chapter 1 Growth, Welfare, and the American Economy
Part 1 The Colonial Era: 1607–1776

Chapter 2 Founding the Colonies
Chapter 3 Colonial Economic Activities
Chapter 4 The Economic Relations of the Colonies
Chapter 5 Economic Progress and Wealth
Chapter 6 Three Crises and Revolt
Part 2 The Revolutionary, Early National, and Antebellum Eras:

1776–1860
Chapter 7 Hard Realities for a New Nation
Chapter 8 Land and the Early Westward Movements
Chapter 9 Transportation and Market Growth
Chapter 10 Market Expansion and Industry in First Transition
Chapter 11 Labor during the Early Industrial Period
Chapter 12 Money and Banking in the Developing Economy
Chapter 13 The Entrenchment of Slavery and Regional Conflict
Part 3 The Reunification Era: 1860–1920

Chapter 14 War, Recovery, and Regional Divergence
Chapter 15 Agriculture’s Western Advance
Chapter 16 Railroads and Economic Change
Chapter 17 Industrial Expansion and Concentration
Chapter 18 The Emergence of America’s Labor Consciousness
Chapter 19 Money, Prices, and Finance in the Postbellum Era
Chapter 20 Commerce at Home and Abroad
vi Brief Contents
Part 4 War, Depression, and War Again: 1914–1946

Chapter 21 World War I, 1914–1918
Chapter 22 The Roaring Twenties
Chapter 23 The Great Depression
Chapter 24 The New Deal
Chapter 25 World War II
Part 5 The Postwar Era: 1946 to the Present

Chapter 26 The Changing Role of the Federal Government
Chapter 27 The Changing Role of the Federal Government: Consumer Safety,
Agriculture, the Environment, and Housing
Chapter 28 Monetary Policy, Fiscal Policy, and the Business Cycle after World War II
Chapter 29 Manufacturing, Productivity, and Labor
Chapter 30 Achievements of the Past, Challenges for the Future
Subject Index
Name Index
Contents
P R E F A C E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
A c k n o w l e d g m e n t s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi
A b o u t t h e A u t h o r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x i i i
CHAPTER 1
Growth, Welfare, and the American Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Americans 1900–2017 1
A Study with a Purpose 6
Nation Building 6
Critical Skills for Personal Development 8
The Long Road Out of Poverty 9
An Institutional Road Map to Plenty 13
Part 1 The Colonial Era: 1607–1776

Chapter 2
Founding the Colonies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
European Background to the Voyages of Discovery 22
European Roots and Expanding Empires 23
Portugal and the First Discoveries 23
Portugal and Spain: Expanding Empires 24
The Latecomers: Holland, France, and England 26
First British Settlements in North America 27
Perilous Beginnings 27
Early Reforms 28
Bringing in Settlers 30
Demographic Change 32
Underpopulation Despite High Rates of Population Growth 32
Population Growth in British North America 33
The Racial Profile 35
Imperial European Rivalries in North America 36
Chapter 3
Colonial Economic Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Land and Natural Resource Abundance, Labor Scarcity 40
Agriculture and Regional Specializations 41
The Southern Colonies 41
The Middle Colonies 46
New England 47
vii
viii Contents
The Extractive Industries 47

Furs, Forests, and Ores 47
Sea Products 48
The Manufacturing Industries 49
Household Manufacture and Craftshops 50
Mills and Yards 51
Shipbuilding 52
Occupational Groups 53
Chapter 4
The Economic Relations of the Colonies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
English Mercantilism and the Colonies 56
The Early Navigation Acts 57
Exports, Imports, and Markets 58
Overseas Shipping and Trade 59
Intercolonial Commerce 63
Money and Trade 64
Commodity Money 64
Coins, Specie, and Paper Money 65
Trade Deficits with England 66
Interpretations: Money, Debt, and Capital 67
Chapter 5
Economic Progress and Wealth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Growth and Change in the Colonial Economy 73
Productivity Change in Agriculture 73
Productivity Gains in Transportation and Distribution 77
Technological Change and Productivity 81
Wealth Holdings in the Colonies 84
Per Capita Wealth and Income, 1774 85
The Distribution of Income and Wealth 86
Chapter 6
Three Crises and Revolt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
The Old Colonial Policy 90
The New Colonial Policy and the First Crisis 93
More Changes and the Second Crisis 95
The Third Crisis and Rebellion 96
Support in the Countryside 98
Economic Exploitation Reconsidered 101
Part 2 The Revolutionary, Early National, and Antebellum Eras:

1776–1860
Chapter 7
Hard Realities for a New Nation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
The War and the Economy 106
The Constitution 108
Contents ix
American Independence and Economic Change 111

A Quantitative Analysis of Economic Change 112
War, Neutrality, and Economic Resurgence 115
Chapter 8
Land and the Early Westward Movements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
The Acquisition of the Public Domain 120
Disposing of the Public Domain 122
The Northwest Land Ordinance of 1785 123
The Northwest Ordinance of 1787 124
The Later Land Acts, 1796–1862 125
The Migrations to the West 127
The Northwestern Migration and Hogs, Corn, and Wheat 128
Agricultural Specialization and Regional Dislocation 130
The Southwestern Migration and Cotton 131
The Far Western Migration 135
Chapter 9
Transportation and Market Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
The Antebellum Transportation Revolution 138
The Routes of Western Commerce 140
Steamboats and the Natural Waterways 141
Competition, Productivity, and Endangered Species 143
Public versus Private Initiative on the Natural Waterways 145
The Canal Era 146
The Iron Horse 149
Roads 151
Turnpikes 152
The Antebellum Interregional Growth Hypothesis 153
Ocean Transport 153
Chapter 10
Market Expansion and Industry in First Transition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Early Changes in U.S. Manufacturing 157
The Decline of Household Production 157
Craftshops and Mills 158
The Emergence of U.S. Factories 159
The Lowell Shops and the Waltham System 159
Iron and Other Factories 161
The Rise of Corporate Organization 162
Leading Industries, 1860 163
Prerequisites to Factory Production 164
Machines and Technology 164
Standardized Interchangeable Parts 165
Continuous Process and Assembly Lines 165
Power and Energy 166
Factor Proportions and Borrowing and Adapting Technology 168
Productivity Advances in Manufactures 169
Protection from Foreign Competition 170
x Contents
Chapter 11
Labor during the Early Industrial Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
The Growth of the Population and the Labor Force 173
The Changing Labor Force Distribution and Composition 174
Factories and Workers 175
The Rhode Island and Waltham Systems 176
The Impact of Immigration 178
The Wages of Male Labor in Manufacturing 179
English–American Wage Gaps 181
Skilled–Unskilled Wage Ratios 182
Growing Inequality of Income 182
The Early Union Movement 183
Legal Setbacks and Gains 183
Organizational Gains 184
Political Gains for Common Working People 185
Suffrage 185
Public Education 185
Debts, Military Service, and Jail 186
The 10-Hour Day 187
Chapter 12
Money and Banking in the Developing Economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
The “Federalist Financial Revolution” 189
The Debt 190
The American Monetary Unit 190
The Bimetallic Standard 191
Bank Notes as Paper Money 192
The First Bank of the United States 193
The Second Bank of the United States 196
Economic Fluctuations and the Second Bank 200
Experiments in State Banking Controls 201
The Suffolk System 202
Free Banking 202
The Depression of 1837–1844 203
The Economic Consequences of the Gold Rush 204
Chapter 13
The Entrenchment of Slavery and Regional Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
African Slavery in the Western Hemisphere 207
First U.S. Constraints on Slavery 210
Northern Emancipation at Bargain Prices 210
The Persistence of Southern Slavery 211
Plantation Efficiency 212
Economic Exploitation 217
Economic Entrenchment and Regional Incomes 218
Political Compromises and Regional Conflict 220
Contents xi
Part 3 The Reunification Era: 1860–1920

Chapter 14
War, Recovery, and Regional Divergence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
The Economics of War 229
Trade and Finance Policies South and North 230
The Civil War and Northern Industrialization 232
Economic Retardation in the South 233
Decline in the Deep South 236
The Inequities of War 237
The Legacy of Slavery 238
Chapter 15
Agriculture’s Western Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246
The Expansion of Land under Cultivation 246
Federal Land Policy 247
The Impact of Federal Land Policy 249
Growth and Change in Agriculture 250
New Areas and Methods of Cultivation 250
Hard Times on the Farm, 1864–1896 252
Agrarian Political Organizations 256
The Grangers 256
The Greenback Movement 257
The Alliances 257
The Populists 258
The Beginnings of Federal Assistance to Agriculture 258
The Department of Agriculture 259
Agricultural Education 259
Natural Resource Conservation: The First Stages 259
Land, Water, and Timber Conservation 260
Chapter 16
Railroads and Economic Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
The Transcontinentals 263
Total Construction: Pace and Patterns 265
Productivity Advance and Slowdown 267
Building Ahead of Demand? 268
Land Grants, Financial Assistance, and Private Capital 269
Unscrupulous Financial Practices 270
Government Regulation of the Railroads 271
State Regulation 273
Federal Regulation 274
Capturing the Regulators? 275
Railroads and Economic Growth 276
xii Contents
Chapter 17
Industrial Expansion and Concentration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
Structural Change and Industry Composition 280
New Technologies 282
New Forms and Sources of Energy 284
Mass Production 286
Economies of Scale and Industry Concentration—“The Chandler Thesis” 288
Early Business Combinations 288
Trusts and Holding Companies 288
The Two Phases of the Concentration Movement 289
Phase 1: Horizontal Mergers (1879–1893) 289
Phase 2: The Vertical Mergers (1898–1904)—The “Chandler Thesis” 291
The Sherman Antitrust Act 293
The Supreme Court as Trustbuster 295
The Federal Trade Commission 296
Chapter 18
The Emergence of America’s Labor Consciousness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Demographic Change and the Supply of Labor 299
Birth and Death Rates 299
Immigration 301
Immigration: Politics and Economics 302
Foreign Workers and American Labor 303
Workers in the Postbellum Period 305
Hours and Wages 305
Women 306
Children 308
Unions, Employers, and Conflict, 1860–1914 309
The Unions and the Courts 312
Labor’s Gains and the Unions 313
Chapter 19
Money, Prices, and Finance in the Postbellum Era. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317
New Forms of Currency 318
A Dual Banking System 319
Gold, Greenbacks, or Bimetallism? 322
Returning to the Gold Standard after the Civil War 322
The Crime of ‘73 325
The Commitment to the Gold Standard 327
The International Gold Standard 329
The Rise of Investment Banking 330
Financial Panics and Depressions 333
National Monetary Commission 335
Federal Reserve Act 335
Contents xiii
Chapter 20
Commerce at Home and Abroad. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338
Urbanization 338
A Cornucopia of New Products 339
Marketing and Selling 340
Wholesaling 340
Retailing 343
Product Differentiation and Advertising 344
The First Steps toward Consumer Protection 346
Foreign Trade 347
Changing Composition of Exports and Imports 349
Changes in the Balance of Trade 350
Tariffs for Revenue and Protection 351
The Income Tax 353
The United States in an Imperialist World 354
Part 4 War, Depression, and War Again: 1914–1946

Chapter 21
World War I, 1914–1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362
The Origins of the War 362
The United States Goes to War 363
Financing the War 364
Attempting to Replace the Market with a Command System 367
The War Industries Board 367
The Food and Fuel Administrations 367
Labor during the War 369
The Costs of the War 371
The Legacies of the War 372
The Economy in the Aftermath of the War 372
The Domestic Legacies 373
The International Legacies: The Treaty of Versailles 373
Chapter 22
The Roaring Twenties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
Social Changes in the Aftermath of War 375
New Goods and the Rise of the Middle Class 376
The Automobile 377
Buy Now, Pay Later 378
Prohibition 380
The Labor Force in the Twenties 381
The Paycheck Rises 381
The Unions 382
Immigration Is Restricted 383
America Goes to High School 385
xiv Contents
On the Land 385

Economic Distress in Agriculture 386
First Steps toward Farm Subsidies 386
Inequality Increases 387
Macroeconomic Policies 389
Fiscal Policy 389
Monetary Policy 390
International Developments 391
An Age of Speculation 392
The Ponzi Scheme 392
The Florida Land Boom 392
The Stock Market Boom 393
The Crash 395
Chapter 23
The Great Depression. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398
Dimensions of the Depression 398
Causes of the Depression 400
The Stock Market Crash 401
The Banking Crises 403
Growing Inequality of Income? 406
Economic Distortions in the 1920s?—Hayek and the Austrian School 406
The Smoot-Hawley Tariff? 406
The Role of the Financial Crises 407
Monetary Effects of the Financial Crises 407
Nonmonetary Effects of the Financial Crisis 408
Why Didn’t the Federal Reserve Save the Banking System? 409
Roosevelt and the Gold Standard 410
Fiscal Policy in the 1930s 411
Partial Recovery and Then a New Downturn 412
Climbing Out of the Abyss 412
The Recession within the Depression 413
Why Did the Depression Last So Long? 414
Unintended Consequences of the New Deal? 414
Can It Happen Again? 416
What Does the Depression Tell Us about Capitalism? 416
Chapter 24
The New Deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419
The First New Deal 419
Relief 419
Recovery 423
Reform the Financial System 424
A Safety Net for the Banking System 425
Increased Regulation of Securities Markets 425
The Mortgage Market 425
The End of America’s Commitment to the Gold Standard 426
Centralization of Monetary Authority in the Federal Reserve Board 426
Contents xv
Reform of the Agricultural Sector 427

Labor and the New Deal 430
A New Institutional Framework for Labor Markets 431
Why Was Unemployment So High for So Long? 433
The Supreme Court and the New Deal 434
The Second New Deal: The Welfare State 435
The Critics of the New Deal 436
The Legacy of the New Deal 437
Chapter 25
World War II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
Mobilizing for War 440
Trade-Offs 443
Overwhelming Firepower 444
The “Gold Rush of 1942” 444
Fiscal and Monetary Policy 447
Wage and Price Controls 449
Hidden Price Increases and the Black Market 450
Rationing 450
Wartime Prosperity? 451
Labor during the War 452
Wartime Minority Experiences 454
Rosie the Riveter 454
African Americans 454
Agriculture during the War 457
Demobilization and Reconversion 457
Would the Depression Return? 457
The GI Bill of Rights 458
Birth of the Consumer Society 459
Part 5 The Postwar Era: 1946 to the Present

Chapter 26
The Changing Role of the Federal Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464
The Size of Government in the Postwar Era 464
Total Federal Spending 464
Federal Employment 467
Winners and Losers in the Federal Budget 467
The Liberal Era 468
The “Little New Deal” 469
The Conservative Era 470
Reaganomics 471
What Was Behind the Changing Ideological Tides? 472
Long-Run Trends 473
Wars—Hot and Cold 474
xvi Contents
Chapter 27
The Changing Role of the Federal Government: Consumer Safety,
Agriculture, the Environment, and Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
Regulating the Market to Protect the Consumer 477
Deregulation 479
Agriculture 480
Price Supports and Subsidies 482
The Environment 485
The Conservation Movement 485
The Rise of the Environmental Movement 485
Housing after World War II 488
Chapter 28
Monetary Policy, Fiscal Policy, and the Business Cycle after World War II. . . . . . . . . 492
The Keynesian Era 492
The Korean War and the Treasury-Federal Reserve Accord 496
Dwight D. Eisenhower: The Conservative Approach to the Business Cycle 496
John F. Kennedy and Lyndon Johnson: The New Economics 497
Richard M. Nixon: Price Controls and the End of Bretton Woods 498
Jimmy Carter: The Great Inflation Reaches a Climax 500
Was the Economy More Stable during the Keynesian Era Than before the Depression? 502
The Monetarist Era 503
Paul Volcker 503
Ronald Reagan: Supply-Side Economics 506
From Greenspan to Bernanke at the Federal Reserve 508
The Panic of 2008 and the Slow Recovery 510
Chapter 29
Manufacturing, Productivity, and Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515
Gales of Creative Destruction 515
Productivity Growth 519
The Energy Crisis 520
Changes in the Organization of Industry 521
Antitrust Policy 523
The Rise of the Service Sector 524
The Changing Role of Women in the Labor Force 525
The Gender Gap 527
The Baby Boom 528
Minorities 529
African Americans 529
Native Americans 531
The New Immigration 534
Unions 535
Real Wages 537
Contents xvii
Chapter 30
Achievements of the Past, Challenges for the Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . 540
Achievements of the Past 540
Real Incomes Have Grown Rapidly 540
Lagging Regions Have Caught Up 542
Alternative Measures of Well-Being Show Improvement 543
Education Levels Reached by Americans Have Increased Steadily 548
Challenges for the Future 549
Improving the Distribution of Income 549
Caring for an Aging Population 552
Winning the Race between Technology and Education 553
Protecting the Environment 554
The Search for a Meaningful Life 554
Prophets of Decline 555
Subject Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559

Name Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578
Preface
This new edition of History of the American Economy was deemed necessary because of the
continued advance of research in economic history and the rapid changes unfolding in the
United States and global economies. The struggle of many nations to convert from centrally
controlled to market-led economies in recent decades, the rapid economic expansion of
India and China, and the growing economic integration in Europe invite new perspec-
tives on the historical record of the American economy. Moreover, the terrorist attacks of
September 11, 2001, on the World Trade Center and the Pentagon and the subsequent wars
in Afghanistan and Iraq have created enduring challenges for the United States. The finan-
cial crisis of 2008 and the slow climb back to full employment have reawakened concerns
about stability of the financial system, about the level of economic inequality, and prospects
for economic growth that have not been seen since the Great Depression of the 1930s.
To properly convey the speed of change of American lifestyles and economic well-being,
chapter 1 begins with a focus on twentieth-century American life, mostly but not entirely
economic. The purpose is to show how dramatically different the way we live today is com-
pared with the times of our grandparents and great-grandparents. The remarkable contrasts
in living standards, length of life, and how we work and consume from 1900 to the present
provide a “wake-up call” for the nation on the changes soon to unfold in our lives and in
the lives of generations to come. This wake-up call serves a vital purpose: preparation for
the future. As Professor Deirdre McCloskey admonishes us in her book Second Thoughts,
in preparing for the future we best arm ourselves with a good understanding of the past.
Boxed discussions called “New Views” draw explicit analogies between current issues
and past experiences—drug prohibition today and alcohol prohibition in the 1920s, and
war finance today and war finance in the past, to name two. Economic historians, of course,
have always made these connections for their students, but we believe that by drawing at-
tention to them in the text, we reinforce the lesson that history has much to teach us about
the present, and perhaps the equally important lesson that detailed study of the past is
needed to determine both the relevance and the limitations of historical analogies.
We have retained the presentation of material in chronological order, albeit not rigidly.
Part 1, “The Colonial Era: 1607–1776,” focuses on the legacies of that era and the institu-
tions, policies, economic activities, and growth that brought the colonies to a point at which
they could challenge the mother country for their independence. Part 2, “The Revolu
tionary, Early National, and Antebellum Eras: 1776–1860,” and Part 3, “The Reunification
Era: 1860–1920,” each begin with a chapter on the impact of war and its aftermath. The oth-
er chapters in these parts follow a parallel sequence of discussion topics—land, agriculture,
and natural resources; transportation; product markets and structural change; conditions
of labor; and money, banking, and economic fluctuations. Each of these parts, as well as
Part 4, “War, Depression, and War Again: 1914–1946,” closes with a chapter on an issue
of special importance to the period: Part 1, the causes of the American Revolution; Part 2,
slavery; and Part 3, domestic markets and foreign trade. Part 4 closes with a discussion
of World War II. All the chapters have been rewritten to improve the exposition and to
incorporate the latest findings. Part 5, “The Postwar Era: 1946 to the Present” moreover, has
been extensively revised to reflect the greater clarity with which we can now view the key
developments that shaped postwar America.
xix
xx Preface
Throughout the text, the primary subject is economic growth, with an emphasis on insti-
tutions and institutional changes, especially markets and the role of government, including
monetary and fiscal policy. Three additional themes round out the foundation of the book:
the quest for security, international exchange (in goods, services, and people), and demo-
graphic forces.
Finally, this edition sustains a list of historical and economic perspectives, introducing
each of the five parts of the book, providing a summary of the key characteristics and events
that gave distinction to each era. Furthermore, each chapter retains a reference list of arti-
cles, books, and Web sites that form the basis of the scholarship underlying each chapter.
Additional sources and suggested readings are available on the Web site. In addition to
these pedagogical aids, each chapter begins with a “Chapter Theme” that provides a brief
overview and summary of the key lesson objectives and issues. In addition to the “New
Views” boxed feature described earlier, we have retained the “Perspectives” boxes that dis-
cuss policies and events affecting disadvantaged groups.
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Acknowledgments
We are especially grateful to the past reviewers of History of the American Economy: Phil
Coelho, Martha L. Olney, David Mitch, Michael R. Haines, Daniel Barbezat, and David
Mustard. Farley Grubb, Pamela Nickless, and John Wallis were of special help with ideas
for the first half of text. Richard England provided a detailed list of comments on and
criticisms of a previous edition that was extremely helpful.
This edition, moreover, reflects the contributions of many other individuals who have
helped us with this and previous editions. Here we gratefully acknowledge the contribu-
tions of Lee Alston, Terry Anderson, Fred Bateman, Diane Betts, Stuart Bruchey, Colleen
Callahan, Ann Carlos, Susan Carter, Phil Coelho, Raymond L. Cohn, James Cypher, Paul A.
David, Lance Davis, William Dougherty, Richard A. Easterlin, Barry Eichengreen, Stanley
Engerman, Dennis Farnsworth, Price Fishback, Robert W. Fogel, Andrew Foshee, Claudia
Goldin, Joseph Gowaskie, George Green, Robert Higgs, John A. James, Stewart Lee,
Gary D. Libecap, James Mak, Deirdre McCloskey, Russell Menard, Lloyd Mercer, Douglass
C. North, Anthony O’Brien, Jeff Owen, Edwin Perkins, Roger L. Ransom, David Rasmussen,
Joseph D. Reid Jr., Paul Rhode, Elyce Rotella, Barbara Sands, Don Schaefer, R. L. Sexton,
James Shepherd, Mark Siegler, Austin Spencer, Richard H. Steckel, Paul Uselding, Jeffrey
Williamson, Richard Winkelman, Gavin Wright, and Mary Yeager. The length of this list
(which is by no means complete) reflects the extraordinary enthusiasm and generosity that
characterizes the discipline of economic history.
Gary Walton is grateful to his colleagues at the University of California, Davis, for advice
and encouragement, especially Alan Olmstead, Alan Taylor, Greg Clark, and Peter Lindert.
Hugh Rockoff thanks his colleagues at Rutgers, especially Michael Bordo, John Landon-
Lane, Carolyn Moehling, and Eugene White. Hugh owes his largest debt to his wife, Hope
Corman, who provided instruction in the subtleties of labor economics and unflagging
encouragement for the whole project.
Gary Walton
Hugh Rockoff
xxi
About the Authors
Gary M. Walton became the Founding Dean of the Graduate School of Management at
the University of California, Davis, in 1981 and is Professor of Economics Emeritus at the
University of California, Davis. From 1991 to 2014, he served as President of the Foundation
for Teaching Economics, where he designed and administered highly acclaimed economics
and leadership programs (domestically and internationally) for high school seniors selected
for their leadership potential, as well as for high school teachers.
Walton credits much of his personal success to his coach at the University of California,
Berkeley, the legendary Brutus Hamilton (U.S. Head Coach of Track and Field in the 1952
Olympics), and his success as an economist to his doctoral dissertation advisor, the late
Douglass C. North (1993 Nobel Laureate in Economics).
Hugh Rockoff is Professor of Economics at Rutgers University and a research associate
of the National Bureau of Economic Research. He was a member of the inaugural class of
fellows of the Cliometrics Society. He has written extensively on banking and monetary
history and wartime economic policies. He enjoys teaching economic history to undergrad-
uates and credits his success as an economist to his doctoral dissertation advisor, the late
Robert W. Fogel (1993 Nobel Laureate in Economics).
xxiii
Chapter 1
Growth, Welfare, and the
American Economy
Americans 1900–2017
When Rutgers and Princeton played the first intercollegiate football game in 1869, it
is doubtful any person alive could have foreseen the impact football would have on
twenty-first-century American life. From the money and passion fans pour into their
favorite teams to the media hype and parties linked to season-ending bowl games, football
is truly big business, both in college and in the pros. And how the game has changed!
By the turn of the twentieth century, some of the land-grant colleges of the Midwest were
also fielding teams, one of the earliest being the University of Wisconsin–Madison (UW).
The Badgers, as they are popularly called today, enjoy a long-standing sports tradition,
which provides some historically interesting facts. As shown in Figure 1.1, in 1902, UW’s
football team was made up of players whose average size was 173 pounds. Most of the
athletes played “both sides of the ball,” on offense and on defense, and substitutions were
infrequent. Economists today would say they were short on specialization. By 1929, the
average size had increased modestly to 188 pounds, and players were increasingly, though
not yet exclusively, specializing on offense or defense. By 2016, the average weight of
Wisconsin football players was 240 pounds, and players routinely specialized not just on
defense or offense, but by particular positions and by special teams, and sometimes by
types of formations. Even more dramatic size changes are revealed by comparing the weight
of the five largest players. UW’s five biggest players in 1902 averaged 184 pounds, hardly
more than the average weight of the whole team. As shown in Figure 1.2, in 1929, the five
biggest players averaged 199 pounds. By 2016, the five largest offensive players averaged
334 pounds, more than a 60 percent jump over 1929.
UW alumni and students have also been big-time basketball enthusiasts, favoring
players with speed, shooting and jumping skills, and height. In 1939, the Badgers’ start-
ing five had a considerable range of heights by position just as they do today. Figure 1.3
conveys not only the consistent differences among guards, forwards, and centers, but also
the dramatic gains in height by players at every position taking the court today. The 2016
guards were taller than the 1939 forwards and center. Such dramatic height gains are partly
a result of the growing college entrance opportunities that exceptionally talented players
enjoy today compared with young players long ago. But the height gains also reflect more
general increases in average heights for the U.S. population overall, and these gains in turn
indicate improvements in diet and health.
Changes in average height tell us quite a lot about a society; nations whose people are
becoming taller—as they have in Japan over the last 50 years—are becoming richer and
eating better. Because of genetic differences among individuals, an individual woman who
1
2 Chapter 1: Growth, Welfare, and the American Economy
Figure 1.1 250

University of Wisconsin
Starting Football Players’
Average Weight 200
240 lbs.
150 188 lbs.
Pounds
173 lbs.
100
50
0
1902 1929 2016
Year
Source: Sport Information Office, University of Wisconsin–Madison.
Figure 1.2
University of Wisconsin 300
Football: Average Weight
of Five Largest Players 250 334 lbs.
200
Pounds
150 199 lbs.

184 lbs.
100
50
0
1902 1929 2016
Year
is short cannot be considered to be poor. Such a conclusion would not be unreasonable,

however, especially along with other evidence, for a society of short people. Adult heights
reflect the accumulative past nutritional experience during the growing years, the dis-
ease environment, and health care, as well as genetic factors (which change very slowly).
Americans are the heaviest people in the world; the Germans are second. Dutchmen are the
world’s tallest, with male adults averaging 6 feet 1 inches. Americans today, with adult males
averaging 5 feet 10 inches and 172 pounds, are nearly 2 inches taller than their grandparents.
The average height gain of Americans during the twentieth century was a little more than
3 inches. Americans are richer and eat more and better than they did 100 years ago, some-
times to excess, with a third of the population currently measured as obese or overweight.
Another, and arguably, even better measure of a society’s vitality and well-being is the
length of life of its citizens. Throughout most of history, individuals and societies have
fought against early death. The gain in life expectancy at birth from the low 20s to nearly 30
by around 1750 took thousands of years. Since then, life expectancy in advanced countries
has jumped to 75 years, or 150 percent, and in 2011, in the United States it was 79 years. This
phenomenal change is not merely a reflection of decline in infant mortality; as Table 1.1
shows for the United States, the advances in the length of life are spread across all age
groups. As a consequence, in 2017, 324 million people were living in the United States, up
from 76 million in 1900.
Chapter 1: Growth, Welfare, and the American Economy 3
Figure 1.3
University of Wisconsin
Basketball Players’ Heights 6'9"
6'9"
6'1" 6'2"
6'11"
6'4"
1939 2017 1939 2017
Forward Forward
6'6"
6'5"
5'11" 1939 2017 5'11"
Center
1939 2017 1939 2017

Guard Guard
Table 1.1 Li f e Ex p e c ta ncy by Ag e i n t h e U n i ted Stat es

AGE 1901 1954 2000 2014
0 49 70 77 78.7
15 62 72 78 79.4
45 70 74 79 81.0
75 82 84 86 87.1
90 94.6
Source: Data for 1901: U.S. Department of Commerce 1921, 52–53; and data for 1940–1996: National Center for Health Statistics, www.cdc.gov/nchs
/data/nvsr/nvsr60/nvsr60–04.pdf to see National Vital Statistics Reports, Vol. 64, Table 11, 2015.
The gains in population size and in length of life stem primarily from economic growth,
because such growth leads to better diets and cleaner water, to sewage disposal, and other
health-enhancing changes. The broadest and most commonly used measures of overall
economic performance are the levels and the rise in real gross domestic product (GDP).
The U.S. real GDP increased from $0.5 trillion in 1900 to more than $13.3 trillion in 2011,
measured in constant real purchasing power of 2005 dollars. When divided by the popu-
lation, GDP per capita averaged $5,557 (in 2005 constant dollars) in 1900. In 2011 it was
$42,671, almost eight times higher. Average yearly increases of 2 percent, which for any
given year appear small, have compounded year after year to realize this advance.
These gains have not been exclusive to the few, the middle class, or the very rich. Individ-
uals and households that the government classifies “officially poor” have incomes surpass-
ing those of average Americans in 1950 and all but the richest (top 5 percent) in 1900. The
poverty income level in the United States, about one-fourth the U.S. average, is far higher
than average per capita incomes in most of the rest of the world. To show how widespread
the gains from economic growth have been, Figure 1.4 lists items owned or used by a verage
households in the United States in 1950 compared to below poverty-threshold Americans
Figure 1.4
34% Below Poverty Level (2001)
Ownership by Poor Dishwasher
2%
Households (2001) versus All U.S. Households (1950)
Ownership by All U.S. 56%
Clothes Dryer
Households (1950) 2%
65%
Washing Machine
47%
76%
Air Conditioning
12% (1960)
73%
Automobile
59%
88% (1997)
Telephone
79% (1960)
97%
Television
10%
97%
Refrigerator
80%
99% (1997)
Flush Toilet
76%
99% (1997)
Electricity
94%
0% 20% 40% 60% 80% 100% 120%
Percentage of Households
Source: U.S. Census Bureau.
Figure 1.5
Cable or Satellite TV 96.1%
Amenities in Poor
Households 2011 Microwave 93.2%
Air Conditioner 83.4%
VCR 83.2%
Cell Phone* 80.9%
Cloth Washer 68.7%
Computers 58.2%
Dishwasher 44.9%
Internet Service 42.6%
0% 20% 40% 60% 80% 100%

Percent of Poor Households which Own Each Item
*Among poor families with children in 2011.
Source: U.S. Department of Energy.
in the last decade. Figure 1.5 further reveals the many amenities used by households labeled
poor. Air-conditioned homes with electricity, a refrigerator, a flush toilet, television, and
telephones are common among Americans, rich and poor. Indeed, the substantial gap
among income classes as measured by income or wealth becomes much narrower when
measured by basic categories: food, housing, and items and services for comfort and enter-
tainment. In the United States there are more radios owned than ears to listen to them.
Despite gains for people labeled “poor” in the United States, the gap between the rich
and the poor remains wide. This gap is an important element in drawing conclusions about
the success or failure of an economic system. It bears on the cohesion, welfare, and security
of a society. A useful starting point from which to consider this issue is to view a snapshot
of the division of income in the United States. Figure 1.6 shows this distribution in fifths
for all U.S. households for 2014. As in other years, a large gap existed between the top fifth
and the bottom fifth. In fact, the richest fifth of the population received more than half the
income (51.2 percent), about the amount the remaining four-fifths received. The poorest
fifth U.S. households received only 3.1 percent of total income in 2014 (not including food
stamps, assisted housing, Medicaid, and other such assistance).
The household quintile shares (bottom to top) were: for 1947, 5.0, 11.9, 17.0, 23.1, and
43.0; and for 1977, 4.1, 9.0, 14.7, 24.0, and 48.2. Such distribution changes, including the
2014 quintiles in Figure 1.6, appear rather modest, albeit rising in recent decades as many
observers emphasize.
The important question, however, is whether the people in the bottom fifth in one
period were also in that category decades later. If all the people in the top category in 1977
had switched places by 2014 with all the people in the bottom category (the bottom fifth
rising to the top fifth by 2014), no change would be observed in the data shown in these
measures. But surely such a switch would be considered a huge change in the distribution
of income among people.
Thanks to the Pew Charitable Trusts’ Economic Mobility Project (2012), data extending
back in time from 2009 show the degrees of change in family income between genera-
tions. Figure 1.7 shows the percentage gains of current Americans over their parents’ family
income: 84 percent for all adult children; those raised in the top quintile gained 70 percent
Figure 1.6 Middle fifth

The American Income Pie 14.3%
by Fifths, 2014 Fourth fifth
Second fifth 23.2%
8.2%
Lowest fifth
3.1%
Highest fifth
51.2%
Source: U.S. Census Bureau. “Share of A

ggregate Income
Received by Each Fifth and Top 5 Percent of Households,
All Races: 1967 to 2007” (www.census.gov/hhes/www
/income/histinc/h02AR.html).
Figure 1.7 Percent with Family Income above Their Parents, by Parents’ Quintile
The Percentage Gains of
Current Americans over All Adult Children 84%
Their Parents’ Family Raised in Top Quintile 70%
Income (2009)
Raised in Fourth Quintile 85%
Raised in Middle Quintile 88%
Raised in Second Quintile 86%
Raised in Bottom Quintile 93%
0% 20% 40% 60% 80% 100%
Percent with Higher Family Income than Their Parents
Note: Income is adjusted for family size.
Figure 1.8 Chances of Moving Up or Down the Family Income

The Mobility into Differ- Ladder, by Parents’ Quintile
ent Quintiles (2009) 100% 4%
9% 14% Percent of Adult
19% 24% 40% Children with
Percent of Adult Children in Each

are stuck
80% 17% at the top 40% Income in the:
20%
Family Income Quintile

Top Quintile
24%
24%
60% Fourth Quintile
27% 18%
Middle Quintile
23% 23%
40% 24% 23% Second Quintile
43% Bottom Quintile
are stuck 19%
20%
20% 43% at the
bottom 20%
25% 10%
14% 9% 8%
0%
Bottom Second Middle Fourth Top
Quintile Quintile Quintile Quintile Quintile
Parents’ Family Income Quintile
Note: Numbers are adjusted for family size.
over their “rich” parents and those in the bottom gained 93 percent. Figure 1.8 shows the
mobility into different quintiles. Forty-three percent in the bottom quintile stayed there,
but 57 percent moved into higher quintiles, albeit only 4 percent into the top quintile,
40 percent in the top stayed there, and 8 percent of this wealthy group fell to the bottom
quintile by adulthood. Clearly, this is considerable mobility both ways.
A Study with a Purpose

Nation Building
Why should you study economic history? The best short answer is to better prepare you for
the future. Economic history provides you with a clear perspective on the forces of change
and a good understanding of the lessons of the past. The study of economic history also
provides lessons on nation building and ways to analyze policies and institutions that affect
the nation as well as you personally.
One hundred years ago, citizens of Great Britain enjoyed the highest standards of living
in the world, and the British Empire was the leading world power. In 1892, the dominant
European powers upgraded the ranks of their diplomats in Washington, DC, from ministers
to ambassadors, thereby elevating the United States to first-division status among nations.
On economic grounds, this upgrading should have occurred much earlier, because in 1892,
output per capita in the United States was much higher than in France and Germany and
not far below that in Great Britain.
In 1950, the United States was the most powerful nation in the world, and Americans
enjoyed standards of living higher, by far, than those of any other people. Another “super
power,” however, was intensely challenging this supremacy. As the Cold War unfolded and
intensified after World War II, nations became divided into two clusters: communist nations
emphasizing command, control, and central planning systems; and free nations empha-
sizing markets, trade, competition, and limited government. This division into c lusters
was especially apparent in Europe and Asia, and many other nations sat on the sidelines
pondering their futures and which system to follow. By all appearances, the Soviet Union
displayed levels of economic, technological, and military strength rivaling those of the
United States. It launched its space satellite, called Sputnik, in 1957, placing the first vehicle
constructed on Earth in space. The Cold War ended in 1989, and many satellite nations of
the Soviet Union (e.g., Eastern Germany and the former Czechoslovakia) broke free. By the
mid-1990s, the Russian Federation desperately needed aid just to feed its people. The life
expectancy of men in Russia plummeted from the low 60s (mid-1980s) to 56 (mid-1990s).
The economic and political collapse of the Soviet Union and the overwhelming relative
success of market-driven systems provide another example of the importance of studying
economic history.
Such swings in international power, status, and relative well-being are sobering remind-
ers that the present is forever changing and slipping into the past. Are the changes that all of
us will see and experience in our lifetimes inevitable, or can destinies be steered? How did
we get where we are today?
It is unfortunate that history is often presented in forms that seem irrelevant to our
everyday lives. Merely memorizing and recalling dates and places, generals and wars,
presidents, and legislative acts misdirect our attention to what happened to whom (and
when) rather than the more useful focus on how and why events happened. One of the
special virtues of the study of economic history is its focus on how and why. It provides
us a deeper understanding of how we developed as a nation, how different segments of
the population have fared, and what principal policies or compelling forces brought about
differential progress (or regress) among regions and people. In short, the study of economic
history enriches our intellectual development and provides an essential perspective on
contemporary affairs. It also offers practical analytical guidance on matters of policy. The
study of economic history is best suited for those who care about the next 1 to 1,000 years
and who want to make the future better than the past.
This is no empty claim. Surely one of the primary reasons students major in economics or
American history is to ultimately enhance the operation and performance of the A merican
economy and to gain personally. Certainly instructors hope their students will be better-
informed citizens and more productive businesspeople, politicians, and professionals. “If
this is so,” as Gavin Wright recently properly chastised his economic colleagues,
if the whole operation has something to do with improving the performance of the U.S.
economy, then it is perfectly scandalous that the majority of economics students complete
their studies with no knowledge whatsoever about how the United States became the leading
economy in the world, as of the first half of the twentieth century. What sort of doctor would
diagnose and prescribe without taking a medical history? (1986, 81)
Too often, students are victims of economics textbooks that convey no information on
the rise and development of the U.S. economy. Rather, textbooks convey the status quo of
American preeminence as if it just happened, as if there were no puzzle to it, as if growth
were more or less an automatic, year-by-year, self-sustained process. Authors of such
textbooks need an eye-opening sabbatical in Greece, Russia, or Zimbabwe.
Economic history is a longitudinal study but not so long and slow as, say, geology,
in which only imperceptible changes occur in one’s lifetime. In contrast, the pace of
modern economic change is fast and accelerating in many dimensions. Within living
memory of most Americans, nations have risen from minor economic significance to
world prominence (Hong Kong, China; Japan; and the Republic of Korea), while others
have fallen from first-position powers to stagnation (Russia in the 1990s and Argentina
after 2002). Whole new systems of international economic trade and payments have
been developed (the North American Free Trade Agreement, European Union). New
institutions, regulations, and laws (Clean Air Act of 1990, Welfare Reform Act of 1996)
have swiftly emerged; these sometimes expand and sometimes constrain our range of
economic choices.
The role of government in the economy is vastly different from what it was only 60 or
70 years ago; undoubtedly, it will be strikingly different 50 years from now. The study of
economic history stresses the role of institutional change, how certain groups brought about
economic change, and why. The study of history, then, is more than an activity to amuse us
or sharpen our wits. History is a vast body of information essential to making public policy
decisions. Indeed, history is the testing grounds for the economic theory and principles
taught in economics classes, as well as for the theories taught in other subjects.
As an example of application, consider the state of our roads and highways. Policy
decisions require choices that bring benefits and impose cost. Repair and expand? Or
charge for use? We have the technology to identify every vehicle in use by place and time.
Vehicles in operation in dense traffic (morning and evening commutes) could be charged
more than at other times when traffic flows are uncongested. This would give people
incentives to be judicious in their selected times of travel. Taxes from gasoline sales, which
fund highway repairs, have been waning because rates have not been raised, and cars have
become efficient, and more and more users are driving electric-powered cars. Charges for
road use could replace the gasoline tax to finance new and improved infrastructures. Such
changes in the law would change incentives and help guide people’s choices in predictable
ways. Arguments about this policy suggestion and other policy issues are best addressed by
references to historical evidence and sound theory.
We encourage skepticism of mere statements of opinion. An opinion is a good way to
start a discussion but not a good way to end one. Not all opinions are equal, not when we
want to understand how and why things happen. Two of the great advantages of economic
history are its quantitative features and use of economic theory to give useful organization
to historical facts. In combination, use of theory and evidence enhances our ability to test
(refute or support) particular propositions and recommendations. This helps us choose
among opinions that differ.
Critical Skills for Personal

Development
Granted that economic history is important to the professional economist or economic
policymaker, but is there any practical reason for studying it if a student has other long-
term goals? The answer is yes. See Black, Sanders, and Taylor (2003), who show that under-
grad economics majors do better financially than do business, math, or physics majors. The
skills developed in studying economic history—critically analyzing the economic record,
drawing conclusions from it based on economic theory, and writing up the results in clear
English—are valuable in many lines of everyday work. The attorney who reviews banking
statutes to determine the intent of the law, the investment banker who studies past stock
market crashes to find clues on how to foretell a possible crash, and the owner-operator of
a small business who thinks about what happened to other small businesses that were sold
to larger firms are all taking on the role of economic historian. It will help them if they can
do it well.1
Besides the importance of historical study for its vital role in deliberating private and
public policy recommendations, knowledge of history has other merits. For one thing,
history can be fun—especially as we grow older and try to recapture parts of our lives
in nostalgic reminiscence. For another, history entertains as well as enriches our self-
consciousness, and, often, because of television, the historical account is provided almost
See McCloskey (1976).

1
instantly (e.g., news coverage of the 2003 war in Iraq). A sense of history is really a sense of
participation in high drama—a sense of having a part in the great flow of events that links
us with people of earlier times and with those yet to be born.
We conclude this section with the reminder that two of the principal tasks of economic
historians are to examine a society’s overall economic growth (or stagnation or decline) and
to find out what happens to the welfare of groups within the society as economic change
occurs. Our primary purpose in the following pages is to explain how the American econ-
omy grew and changed to fit into an evolving world economy. We study the past to better
understand the causes of economic change today and to learn how standards of living can
be affected by policies and other forces stemming from technological, demographical, and
institutional change.2
The Long Road out of Poverty

Before diving into the chronology of American economic history emphasizing the forces
of economic growth, it is essential to place the present-day circumstances of Americans
and others in proper historical perspective. As Winston Churchill (1956) is credited with
saying, “The longer back you look, the farther into the future you can see.” However, we
rarely see the distant past clearly, let alone the future.
Reflecting on some historical episode—perhaps from the Bible or Shakespeare or some
Hollywood epic—is an interesting exercise. For most of us, the stories we recall are about
great people, or great episodes, tales of love, war, religion, and other dramas of the human
experience. Kings, heroes, or religious leaders in castles, palaces, or cathedrals—engaging
armies in battles or discovering inventions or new worlds—readily come to mind, often
glorifying the past.3
To be sure, there were so-called golden ages, as in Ancient Greece and during the Roman
Era, the Sung Dynasty (in China), and other periods and places in which small fractions of
societies rose above the levels of meager subsistence and lived in reasonable comfort, and
still smaller fractions lived in splendor. But such periods of improvement were never sus-
tained.4 Taking the long view, and judging the lives of almost all our distant ancestors, their
reality was one of almost utter wretchedness. Except for the fortunate few, humans every-
where lived in abysmal squalor. To capture the magnitude of this deprivation and sheer
length of the road out of poverty, consider this time capsule summary of human history
from Douglass C. North’s 1993 Nobel address:
Let us represent the human experience to date as a 24-hour clock in which the beginning
consists of the time (apparently in Africa between 4 and 5 million years ago) when humans
became separate from other primates. Then the beginning of so-called civilization occurs
with the development of agriculture and permanent settlement in about 8000 b.c. in the
Fertile Crescent—in the last 3 of 4 minutes of the clock [emphasis added]. For the other
23 hours and 56 or 57 minutes, humans remained hunters and gatherers, and while popu-
lation grew, it did so at a very slow pace. Now if we make a new 24-hour clock for the time
of civilization—the 10,000 years from development of agriculture to the present—the pace of
2
For examples of institutional change, see Alston (1994) and Siniecki (1996).
3
Such glorification has a long tradition: “The humour of blaming the present, and admiring the past, is strongly
rooted in human nature, and has an influence even on persons endued with the profoundest judgment and most
extensive learning” (Hume 1742/1987, 464).
4
For example, see Churchill’s (1956) description of life in Britain during and after the Roman Era.
change appears to be very slow for the first 12 hours. … Historical demographers speculate
that the rate of population growth may have doubled as compared to the previous era but still
was very slow. The pace of change accelerates in the past 5,000 years with the rise and then
decline of economies and civilization. Population may have grown from about 300 million
at the time of Christ to about 800 million by 1750—a substantial acceleration as compared
to earlier rates of growth. The last 250 years—just 35 minutes on our new 24-hour clock
[emphasis added]—are the era of modern economic growth, accompanied by a population
explosion that now puts world population in excess of 6.8 billion (2008). If we focus on the
last 250 years, we see that growth was largely restricted to Western Europe and the overseas
extensions of Britain for 200 of those 250 years. (1994, 364–365)
Evidence supporting North’s observation that 1750 was a major turning point in the
human existence is provided in Figure 1.9.
This graph of the world population over the past 11,000 years, along with n oteworthy
inventions, discoveries, and events, conveys its literal explosion in the mid-eighteenth
century. Just a few decades before the United States won its independence from Britain,
the geographic line bolts upward like a rocket, powering past 7 billion humans today.
The advances in food production from new technologies, commonly labeled the second
Agricultural Revolution, and from the utilization of new resources (e.g., land in the New
World) coincide with this population explosion. Also noteworthy is the intense acceler-
ation in the pace of change in vital discoveries. Before 1600, centuries elapsed between
them. Improvements in and the spread of the use of the plow, for example, first introduced
in the Mesopotamian Valley around 4000 b.c., changed very little until around 1000 a.d.
Contrast this with air travel. The Wright brothers were responsible for the first successful
Figure 1.9
Genome Project
World Population and 6,000 PCs
Major Inventions and Man on moon
Advances in Knowledge Nuclear energy
High-speed computers
Discovery of DNA
5,000 War on malaria
Penicillin
Invention of airplane
Invention of automobile
Invention of telephone electrification
4,000
Population (millions)
Germ theory
Beginning of railroads
Invention of Watt engine
Beginning of Industrial Revolution
3,000 Beginning of 2nd Agricultural Revolution
Discovery of New World
Black Plague
Beginning of mathematics
1st Agricultural Revolution
Beginning of metallurgy
2,000
Beginning of pottery
Beginning of writing
1st irrigation works
Peak of Greece
Invention of plow
Peak of Rome
Beginning of
1st cities
1,000
0
−9,000 −6,000 −5,000 −4,000 −3,000 −2,000 −1,000 0 1,000 2,000
Time (years)
Source: Fogel 1999.
motor-driven flight, in 1903. In 1969, a mere 66 years later, Neil Armstrong became the first
human to step foot on the moon. In short, the speed of life’s changes, which many of us take
for granted, has been accelerating, especially in the last two-and-a-half centuries.
Before 1750, chronic hunger, malnutrition, disease, illness, and resulting early death
were the norm for almost all people everywhere. Even wealthy people ate poorly; as Nobel
laureate Robert Fogel reports:
Even the English peerage, with all its wealth, had a diet during the sixteenth and seventeenth
centuries that was deleterious to health. Although abundant in calories and proteins,
aristocratic diets were deficient in some nutrients and included large quantities of toxic
substances, especially alcoholic beverages and salt. (1986)
Exceedingly poor diets and chronic malnutrition were the norm because of the absence
of choices, or the fact of scarcity. Food production seldom rose above basic life-sustaining
levels. People were caught in a food trap: Meager yields severely limited energy for all kinds
of pursuits, including production. Inadequate diets were accompanied by high rates of
disease and low rates of resistance to them.
The maladies of malnourishment and widespread disease are revealed in evidence
regarding height and weight. As late as 1750, the average height of adult males in England,
the world’s most economically advanced nation, was about 5 feet 5 inches, and shorter in
France and Norway (Fogel 2004, 13). The average U.S. man today stands 5 inches taller. In
the 1750s, typical weight was 130 pounds for an Englishman and 110 pounds for a French-
man. Compare this with the weight of U.S. males today at about 190 pounds. It is startling to
see the suits of armor in the Tower of London that were worn for ancient wars; they vividly
remind us of how small even the supposedly largest people of long ago really were.
The second Agricultural Revolution, beginning in the mid-eighteenth century, soon fol-
lowed by the Industrial Revolution (first in England, then France, the United States, and
other Western countries), initiated and sustained the population explosion, lifting birth
rates and lowering death rates. Table 1.2 summarizes research findings on life expectancy at
birth for various nations, places, and times. From this and other empirical evidence we find
that for the world as a whole, the gain in life expectancy at birth took thousands of years to
rise from the low 20s to approximately 30 around 1750 (Preston 1995). Nations of Western
Europe led the breakaway from early death and the way out of the malnutrition, poor diet,
chronic disease, and low human energy of the past. Data in Table 1.2, for example, indicate
that by 1800, life expectancy in France was just 30 years, and in the United Kingdom about 36.
By comparison, India’s rate was still under 25 years in the first decade of the twentieth cen-
tury, and China’s ranged between 25 and 35 two decades later. By 1950, life expectancy in
the United Kingdom and France was in the high 60s, while in India and China it was 39 and
41, respectively, comparable to rates in other low-income, developing countries.
Table 1.2 Yea rs o f L i f e E x p ec ta n cy at B i rth

MIDDLE
PLACE AGES SELECT YEARS 1950–1955 1975–1980 2002 2010
France 30 (1800) 66 74 79 82
United Kingdom 20–30 36 (1799–1803) 69 73 78 80
India 25 (1901–1911) 39 53 64 64
China 25–35 (1929–1931) 41 65 71 76
Africa 38 48 51 53
World 20–30 46 60 67 69
Source: Lee and Feng 1999; Wrigley and Schofield 1981; World Resources Institute; and United Nations Development Program 1999.
In the period before 1750, children and infants, in particular, experienced high death
rates globally. At least 20 to 25 percent of babies died before their first birthday. By 1800,
infant mortality in France, the United States, and probably England had broken through
the 20 percent level, comparable to rates that prevailed in China and India and other low-
income, developing nations in 1950. For Europe, the United States, and other advanced
economies, this rate is currently below 1 percent, but that rate is 4 percent in China,
6 percent in India, and 9 percent in Africa (Maddison 2007).
To provide another long-term perspective on the escape from poverty, Tables 1.3 and
1.4 provide evidence, albeit inexact, on real income per person for various periods. Europe
led the gradual rise of real income over a 1,000-year period. By 1700, it had risen above the
lower level of per capita income it had shared with China (the most advanced empire/region
around 1000 a.d.). While the rest of the world slept and remained mostly unchanged eco-
nomically, Europe continued to advance. By the early 1800s, the United States had pushed
ahead of Europe, and by the mid-1900s, U.S. citizens enjoyed incomes well above those of
people residing in Europe and many multiples above those of people living elsewhere. One
thousand years ago, even just 500 years ago, Europe and the rest of the world lived at lev-
els of income similar to today’s poorest nations: Zimbabwe, Ethiopia, Tanzania, Myanmar
(formerly Burma), and Bangladesh (see Table 1.4).
Table 1.3 R
eal Gro ss D o m estic P ro duc t P er C a pi ta
(1990 DOL LARS)
AREA 1000 1500 1700 1820 1900 1950 2010
Western Europe $427 $772 $997 $1,202 $2,892 $5,513 $21,793
United States 527 1,257 4,091 9,561 30,491
India 550 533 599 619 3,372
China 450 600 600 600 545 439 8,032
Africa 425 414 421 420 601 893 2,034
World 450 566 615 667 1,262 2,114 7,814
Source: Maddison 1995, 23, 24; 2007. http://www.ggdc.net/maddison/.
Table 1.4 Gdp Pe r Ca p i ta f o r 5 6 C ou n tri es i n 19 9 0 D o lla rs

1820 1870 1900 1950 1973 2010
Western European Countries
Austria $1,218 $1,863 $2,882 $3,706 $11,235 $24,096
Belgium 1,319 2,692 3,731 5,462 12,170 23,557
Denmark 1,274 2,003 3,017 6,943 13,945 24,513
Finland 781 1,140 1,668 4,253 11,085 24,290
France 1,135 1,876 2,876 5,271 13,114 21,477
Germany 1,077 1,839 2,985 3,881 11,966 20,661
Italy 1,117 1,499 1,785 3,502 10,634 18,520
The Netherlands 1,838 2,757 3,424 5,996 13,081 24,303
Norway 801 1,360 1,877 5,430 11,324 27,987
Sweden 1,198 1,662 2,561 6,739 13,494 25,306
Table 1.4 (Conti n u e d )

1820 1870 1900 1950 1973 2010
Switzerland 1,090 2,102 3,833 9,064 18,204 25,633
United Kingdom 1,706 3,190 4,492 6,939 12,025 23,777
Western Offshoots
Australia 518 3,273 4,013 7,412 12,878 25,584
New Zealand 400 3,100 4,298 8,456 12,424 18,886
Canada 904 1,695 2,911 7,291 13,838 24,941
United States 1,257 2,445 4,091 9,561 16,689 30,491
Selected Asian Countries
China 600 530 545 439 838 8,032
India 533 533 599 619 853 3,372
Bangladesh 540 497 1,276
Burma 504 504 396 628 3,709
Pakistan 643 954 2,494
Selected African Countries
Côte d’Ivoire 1,041 1,899 1,195
Egypt 475 649 910 1,294 4,267
Eritrea & Ethiopia 390 630 935
Ghana 439 1,122 1,397 1,922
Kenya 651 970 1,141
Nigeria 753 1,388 1,876
Tanzania 424 593 804
Zimbabwe 701 1,432 750
Source: Development Centre Studies The World Economy: Historical Statistics, Maddison 2003. World Population, GDP and Per Capita GDP,
1–2003 a.d., Maddison, 2007, http://www.ggdc.net/maddison/, and http://www.ggdc.net/MADDISON/oriindex.htm for 2010 data.
An Institutional Road Map

to Plenty
From the preceding per capita income estimates, other evidence, and North’s fascinating
time capsule summary of human existence, the road out of poverty is clearly new. Few soci-
eties have traveled it: Western Europe, the United States, Canada, Australia, New Zealand
(Britain’s offshoots), Japan, Hong Kong (China), Singapore, and a few others. What steps
did Western Europe and Britain’s offshoots take to lead humanity along the road to plenty?
Why is China, the world’s most populous country (more than 1.4 billion), now far richer
than India (second with 1.3 billion) when merely 50 years ago both nations were about
equal in per capita income and more impoverished than most poor African nations today?
Is there a road map leading to a life of plenty, a set of policies and institutional arrange-
ments that nations can adopt to replicate the success of the United States, Europe, and
other advanced economies? An honest answer to this question is disappointing. Economic
development organizations, such as the International Monetary Fund and the World Bank,
as well as countless scholars who have committed their professional lives to the study of
economic growth and development are fully aware of the limited theoretical structure yet
pieced together.
It is well known that a nation’s total output is fundamentally determined (and con-
strained) by its total inputs—its natural resources, labor force, stock of capital, entrepreneur-
ial talents—and by the productivity of its inputs, measured as the output or service produced
by a worker (or unit of capital or acre of land, etc.). To measure standards of living, however,
we rely on output (or income) per capita, rather than total output. For changes in income
per capita, productivity advance dominates the story. For example, if a nation’s population
increases by 10 percent, and the labor force and other inputs also increase by 10 percent,
output per capita remains essentially unchanged unless productivity increases. Most people
(80 to 90 percent of the labor force) everywhere 250 years ago were engaged in agriculture,
with much of it being subsistence, self-sufficient, noncommercial farming. Today that pro-
portion is less than 5 percent in most advanced economies (3 percent in the United States).
During this transition, people grew bigger, ate more, and worked less (and lived in more
comfort). The sources of productivity advances or improvements that have raised output per
farmer (and per acre) and allowed sons and daughters of farming people to move into other
(commercial) employments and careers and into cities include the following:
1. Technology (knowledge).
2. Specialization and division of labor.
3. Economies of scale.
4. Organization and resource allocation.
5. Human capital (education and health).
These determinants are especially useful when analyzing a single nation’s rate and
sources of economic growth; however, they are less satisfactory for explaining the reasons
that productivity advances and resource reallocations have been so apparent and successful
in some parts of the world but not in others.
To explain why some nations grow faster than others, we need to examine the ways
nations apply and adapt these sources of productivity change. To use this perspec-
tive, we need to assess the complex relationships of a society’s rules, customs, and laws
(the institutions) and its economic performance. For clarification, consider just one source
of productivity change, technology. A new technology can introduce an entirely new prod-
uct or service such as the airplane (and faster travel) or a better product such as a 2017
BMW automobile compared with a 1930 Ford Model A. A new technology can also lead to
new materials, such as aluminum, that affect the cost of production. Aluminum provided a
relatively light but strong material for construction of buildings and equipment.
In short, technological changes can be thought of as advances in knowledge that raise
(improve) output or lower costs. They often encompass both invention and modifications
of new discoveries, called innovation. Both require basic scientific research, trial and error,
and then further study to adapt and modify the initial discoveries to put them to practical
use. The inventor or company pursuing research bears substantial risk and cost, including
the possibility of failure and no commercial gain. How are scientists, inventors, businesses,
and others encouraged to pursue high-cost, high-risk research ventures? How are these
ventures coordinated and moved along the discovery–adaptation–improvement path into
commercially useful applications for our personal welfare?
This is how laws and rules—or institutions as we call them—help us better understand
the causes of technological change. Institutions provide a society’s incentive framework,
including the incentives to invent and innovate. Patent laws, first introduced in 1789 in the
U.S. Constitution, provided property rights and exclusive ownership to inventors for their
patented inventions. This pathbreaking law spurred creative and inventive activity, albeit
not immediately. Importantly, this exclusive ownership right includes the right to sell it,
usually to people specialized in finding commercial uses of new inventions. The keys here
are the laws and rules—the institutions that generate dynamic forces for progress in some
societies and stifle creativity and enterprise in others. In advanced economies, laws provide
positive incentives to spur enterprise and help forge markets using commercial, legal, and
property right systems that allow new scientific breakthroughs (technologies) to realize
their full commercial-social potential. Much more could be added to describe in detail
the evolving and intricate connections among universities, other scientific research insti-
tutions, corporations, and various business entities (and lawyers and courts), all of which
form interrelated markets of production and exchange, hastening technological advances
(see Rosenberg and Birdzell 1986).
Developing and sustaining institutional changes that realize gains for society as a whole
are fundamental to the story of growth. The ideologies and rules of the game that form and
enforce contracts (in exchange), protect and set limits on the use of property, and influence
people’s incentives in work, creativity, and exchange are vital areas of analysis. These are the
key components paving the road out of poverty.
Examining the successful economies of Europe, North America, and Asia suggests a
partial list of the institutional determinants that allow modern economies to flourish:
• The rule of law, coupled with limited government and open political participation.
• Rights to private property that are clearly defined and consistently enforced.
• Open, competitive markets with the freedom of entry and exit, widespread access to cap-
ital and information, low transaction costs, mobile resource inputs, and reliable contract
enforcement.
• An atmosphere of individual freedom in which education and health are accessible and
valued.
North admonishes that, “it is adaptive rather than allocative efficiency which is the key to
long-term growth” (1994). The ability or inability to access, adapt, and apply new technol-
ogies and other sources of productivity advances points directly to a society’s institutions.
Institutional change often comes slowly (customs, values, laws, and constitutions evolve),
and established power centers sometimes deter and delay changes conducive to economic
progress. How accepting is a society to risk and change when outcomes of actions create
losers as well as winners? (Schumpeter 1934).
In the following chapters, we retrace the history of the American economy, not simply
by updating and recounting old facts and figures but also by emphasizing the forging of
institutions (customs, values, laws, and the constitution). The end of the Cold War and
the growing body of knowledge about the importance of institutions to economic progress
give solid reasons for recasting the historical record and bearing witness to the strengths
and shortcomings of an emerging democracy operating within the discipline of markets
constrained by laws and other institutions.
Perspective 1.1
Economic History Helps Us See into or joined the trek west. These forces and changes
the Future are addressed in great detail in later chapters, but
put succinctly in the long march of progress and
To rephrase Churchill’s words (“The longer back
upheaval to sectors and certain lines of employment,
you look, the farther into the future you can see”)
there is no evidence of a long-run increase in unem-
economic history helps us see into and prepare for
ployment.
the future. Consider the rapid pace of technologi-
But surely the displacement of taxi drivers and oth-
cal progress. Will advances in artificial intelligence
ers replaced by AI will require a lot of adaption. To pre-
(AI) cause mass unemployment leading to riots and
pare for the future, people will likely need a new form
chaos? AI as it is called is a rapidly advancing tech-
of education, not just pursuing a major but rather an
nology that is embodied in machines that can under-
area of expertise that can be modified and adapted
take tasks that once could only be done by humans.
by firms providing training in new specialized skills.
Now machines can read medical scans in MRIs and
Indeed AI experts are calling for an overhaul of educa-
x-rays better than licensed radiologists. Labor-saving
tion with greater use of online courses. The industrial
technologies will continue to displace workers in
revolutions in England and the United States and else-
many fields, including professors. Online courses
where have led to general government-funded pub-
are increasing with more and more s tudents learning
lic education as employers realized educated workers
outside classrooms.
were more productive. The challenges to adapt in the
On August 18, 2016, the Associate Press reported an
decades ahead will require similar new forms of mass
announcement from Uber that it was launching a fleet
education. More people than ever before are already
of driverless Uber cars for hire in Pittsburg, though
moving among careers, sometime three or four times in
attendants as backup for safety will be used in the cars
their lifetime. Fewer and fewer will stay in one career
temporarily. Entrepreneurs in Silicon Valley are pre-
from start to finish.
dicting that fleets of fully driverless cars will be avail-
To see where AI and other technological forces are
able for service throughout the country by the early
impacting employment, it is helpful to look at recent
2020s. The fleets of cars on the drawing board now
trends. Consider Figure 1.10 showing shares of work
are fully equipped with AI sensors that detect motion
by four categories. Jobs that can be described as routine
over 360 degrees and are vastly safer to operate than
are most threatened. Routine tasks, whether manual or
cars with humans behind the wheel. The steering and
cognitive, have grown little in the last 30 years of the
pedal-less cars are intended for use 24/7 and with four
computer/information revolution era. Nonroutine jobs
doors on the sides look like small stagecoaches. The
are less susceptible to AI displacement. More specific
seating is for one to four with occupants facing each
information on estimates of job vulnerability is given in
other. Phone apps will be used to call for service and
Table 1.5. One may quibble with the estimates for spe-
simplify monthly payments.
cific careers and jobs under threat but the estimates are
What will happen to all those displaced Uber and
consistent with recent history trends of work in routine
taxi drivers?
and nonroutine tasks.
Early nineteenth-century economists like David
How safe are jobs for truck drivers? In the AP arti-
Ricardo and Thomas Carlyle worried about that
cle cited above, Otto (a firm specializing in driverless
same job displacement problem by machines in the
Big Rigs) reported near readiness of driverless trucks,
heyday of the Industrial Revolution. But the surpris-
partly because most of the driving is long distance
ing outcome was that the broad effect of mechani-
and outside the more complicated terrain of intercity
zation was job creation. As productivity soared and
traffic. Picture driverless trucks on highways at night
prices of goods fell, more and more goods were pur-
going 90 miles per hour with 50 to 60 yards separat-
chased, creating jobs for people to tend the machines
ing them. One can imagine new laws that could keep
and to work as managers, accountants, and other
trucks off the roads during the day yet allow vast
staff in firms growing in size. As people moved west
increases in the movement of goods at night, at min-
in the nineteenth century, aided by steamboats on
imum risk, and without interfering with passenger
the western rivers followed by railroads, to settle and
cars and delivery vans. Cars and vans could monopo-
plant the vast western lands, agricultural workers
lize the roads ever more safely during the time trucks
and farms in the east were made redundant. Hoards
are not allowed.
of workers there left the lands and moved into towns
Perspective 1.1
Economic History Helps Us See into the Future, Continued
Figure 1.10 United States Employment, by type of work
Think
United States employment, by type of work, m
60
Routine cognitive
Routine manual
50 Non-routine cognitive
Non-routine manual
40
30
20
10
0
1983 1990 1995 2000 2005 2010 2014
Source: US Population Survey; Federal Reserve Bank of St. Louis.
With driverless cars, people could commute to work one set of priority tasks get met by machines, new
and work en route. Commutes would likely get longer. priorities for work immerge. Human tasks that are
Fewer people would bother to own their own car if the least susceptible to machine substitutions are services
fleets of rentals worked smoothly. Would houses need in health and personal care. P ersonality traits that
garages or driveways? There would be a lot of work remod- positively assist others, like a strong sense of caring for
eling homes and designing new ones with new space uses. people, empathy, patience, and understanding along
It is impossible to imagine all the new lines of work with skills in a host of services, will lead to new forms
that would be created, but history tells us that when of employment.
Perspective 1.1
Economic History Helps Us See into the Future, Continued
Table 1.5 C
atalogue of Fears. Probability
of Computerization of Different
Occupations, 2013 (1—CERTAIN)
JOB PROBABILITY
Recreational therapists 0.003
Dentists 0.004
Athletic trainers 0.007
Clergy 0.008
Chemical engineers 0.02
Editors 0.06
Firefighters 0.17
Actors 0.37
Health technologists 0.40
Economists 0.43
Commercial pilots 0.55
Machinists 0.65
Word processors and typists 0.81
Real-estate sales agents 0.86
Technical writers 0.89
Retail salespeople 0.92
Accountants and auditors 0.94
Telemarketers 0.99
Source: C. Frey and M. Osborne 2013, The Future of Employments: How Susceptible Are Jobs to
Computerisation? http://www.economist.com/news/special-report/21700758-will-smarter-machines
-cause-mass-unemployment-automation-and-anxiety?frsc=dg%7Ca.
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At length Livingston agreed to stand provided both Clinton and Gates
would run. Straightway, Burr rushed to Gates. It was a hard struggle. Burr
pleaded, cajoled, flattered, appealed to party pride. Finally Gates agreed to
run if Clinton would make the race. And there Burr almost met his
Waterloo. The rugged old war-horse was prejudiced against Jefferson. He
had ambitions for the Presidency himself, and they had been passed over.
Burr left the matter open, smiled, flattered, bowed, departed. Then, out from
his office committees began to make their way to Clinton with
importunities to stand. The personal friends of the stubborn old man were
sent to persuade him. He was adamant. A scene at Burr’s home at
Richmond Hill: Present, the nominating committee and Clinton. A mass
movement on Clinton—he would not budge. Then Burr’s master-stroke. A
community had a right to draft a man in a crisis—the crisis was at hand.
Without his consent they would nominate him. The rebellious veteran,
flattered, agreed not to repudiate the nomination. The victory was Burr’s—
and Jefferson’s.
A little later, the press announced that a meeting of the Democrats had
been held at the home of J. Adams, Jr., at 68 William Street, where the
Assembly ticket had been put up. Spirited resolutions were adopted. The
enthusiasm of the Jeffersonians reached fever heat. Hamilton and the
Federalists were paralyzed with amazement. The impossible had happened.
Against Hamilton’s mediocre tools—this ticket, composed of commanding
figures of national repute![1729] Immediately the frantic fears of the
Federalists were manifest in the efforts of ‘Portius’ in the ‘Commercial
Advertiser’ to frighten the party into action. Jefferson had become a
possibility—the author of the Mazzei letter! Clinton and Gates candidates
for the Assembly! Old men laden with honors who had retired, in harness
again! Clearly no office lured them—it must be the magnitude of the issue.
And who were Clinton, Gates, and Osgood? Enemies of the Constitution!
To your tents, O Federalists![1730] A few days later the merchants met at the
Tontine Coffee-House to endorse the Hamiltonian ticket because ‘the
election is peculiarly important to the mercantile interests.’[1731] In the ‘Pig
Pen’ the Tammanyites read of the action of the merchants, clicked their
glasses, and rejoiced. Hamilton, now thoroughly alarmed, redoubled his
efforts. The Federalist press began to teem with hysterical attacks on
Jefferson, Madison, and Clinton—men who were planning the destruction
of the Government.[1732]
Meanwhile, Burr, calm, confident, suave, silent, was giving New York
City its first example of practical politics. Money was needed—he formed a
finance committee to collect funds. Solicitors went forth to wealthy
members of the party to demand certain amounts—determined upon by
Burr. It was a master psychologist who scanned the subscription lists. One
parsimonious rich man was down for one hundred dollars.
‘Strike his name off,’ said Burr. ‘You will not get the money and ... his
exertions will cease and you will not see him at the polls.’
Another name—that of a lazy man liberal with donations. ‘Double the
amount and tell him no labor will be expected of him.’
With infinite care Burr card-indexed every voter in the city, his political
history, his present disposition, his temperament, his habits, his state of
health, the exertions probably necessary to get him to the polls. The people
had to be aroused—Burr organized precinct and ward meetings, sent
speakers, addressed them himself. And while Burr was working, the
lowliest too were working on the lowliest. One evening ‘a large corpulent
person with something of the appearance of Sir John Falstaff’ was seen in
the lobby of a theater ‘haranguing an old black man who sells peanuts and
apples to come forward and vote the Republican ticket.’
‘You pay heavy taxes this year.’
‘Yes, Massa, me pay ten dollars.’
‘Well, if you vote the Republican ticket you will have little or no taxes to
pay next year; for if we Republicans succeed, the standing army will be
disbanded, which cost us almost a million of money last year.’
The peanut vendor promised to appear at the polls ‘with six more free-
born sons of the African race.’[1733] Whereupon the campaigner had a tale
to tell to the boys at the Wigwam that night.
The polls opened on April 29th and closed at sunset on May 2d. Days of
intense ceaseless activity. Hamilton and Burr took the field. From one
polling-place to another they rushed to harangue the voters. When they met,
they treated each other with courtly courtesy. Handbills were put out,
flooding the city during the voting. In the midst of the fight Matthew L.
Davis found time at midnight to send a hasty report to Gallatin in
Philadelphia. ‘This day he [Burr] has remained at the polls of the Seventh
ward ten hours without intermission. Pardon this hasty scrawl. I have not
ate for fifteen hours.’[1734] The result was a sweeping triumph for the
Democrats. When the news reached the Senate at Philadelphia, the
Federalists were so depressed and the Democrats so jubilant that the
transaction of business was impossible, and it adjourned.[1735]
Hamilton was stunned, and ready for trickery to retrieve the lost battle.
The next night he was presiding over a secret meeting of Federalists where
it was agreed to ask Governor Jay to call an extra session of the Legislature
to deprive that body of the power to choose electors. Hamilton approached
Jay in a letter. ‘In times like these,’ he wrote, ‘it will not do to be over-
scrupulous.’ There should be no objections to ‘taking of legal and
constitutional steps to prevent an atheist in religion and a fanatic in politics
from getting possession of the helm of state.’[1736] Jay read the letter with
astonishment, made a notation that it was a plan to serve a party purpose,
and buried it in the archives. It was the blackest blot on Hamilton’s record.
That victory elected Jefferson.
It destroyed Hamilton—and it made Burr Vice-President.
Scarcely had the polls closed when Burr’s friends, giving him the whole
credit, as he deserved, began to urge on the leaders in Philadelphia his
selection for the Vice-Presidency. Davis wrote Gallatin that the Democrats
of New York were bent on Burr.[1737] Admiral James Nicholas, the father-
in-law of Gallatin, wrote that the triumph was a miraculous ‘intervention of
Supreme Power and our friend Burr, the agent.’ It was his ‘generalship,
perseverance, industry, and execution’ that did it, and he deserved ‘anything
and everything of his country.’ He had won ‘at the risk of his life.’[1738] On
May 12th Gallatin wrote his wife: ‘We had last night a very large meeting
of Republicans, in which it was unanimously agreed to support Burr for
Vice-President.’
That was a bitter month for the Federalists. In the gubernatorial contests
in New Hampshire and Massachusetts the Democrats had polled an
astonishing vote. Painfully labored were the efforts of the Federalist press to
explain these remarkable accessions. The ‘Centinel’ in Boston had
previously sounded a note of warning under the caption, ‘Americans, Why
Sleep Ye?’ The Democrats, it said, were ‘organized, officered, accoutered,
provided, and regularly paid.’ They were ‘systematized in all points.’ In
Pennsylvania a Jeffersonian Governor had thrown Federalist office-holders
‘headlong from their posts.’ In New Hampshire the Democrats were
fighting ‘under cover of an ambuscade.’ In all States new Jeffersonian
presses were established, ‘from Portsmouth in New Hampshire to Savannah
in Georgia,’ through which ‘the orders of Generals of the faction are
transmitted with professional punctuality; which presses serve as a
sounding board to the notes that issue through that great speaking trumpet
of the Devil, the Philadelphia Aurora.’ Did not Duane get the enormous
salary of eight hundred dollars a year? ‘Why Sleep Ye?’
Dismayed, disgruntled with Adams, but afraid to reject him openly, the
Federalist caucus convened in Philadelphia and selected Charles
Cotesworth Pinckney as his running mate with the idea of electing him to
the Presidency through treachery to Adams.
When Adams learned of the Federalist defeat in New York, he

momentarily went to pieces. His suspicious mind instantly saw in his
humiliation the hand of Hamilton and his supporters. He had long been
cognizant of the treachery about him, in his official household. On the
morning of May 5th, McHenry received a note from the house on Market
Street: ‘The President requests Mr. McHenry’s company for one minute.’
As the poet-politician walked up Market Street in response that spring
morning, he could not have conceived of any other issue than a brief
discussion of some departmental matter. Only a few weeks before he had,
with Adams’s knowledge, arranged for a house at Georgetown, and for the
removal of his family thither.[1739] As he had surmised, the subject which
had summoned him to the conference was a minor matter relating to the
appointment of a purveyor. This was satisfactorily disposed of. Was there
something smug or offensive in the manner of Hamilton’s messenger that
suddenly enraged the old man, smarting under the sting of the defeat in
New York? Suddenly he began to talk of McHenry’s derelictions, his anger
rising, his color mounting, his voice ringing with unrepressed rage.
McHenry thought him ‘mad.’ Washington, said Adams, had saddled him
with three Secretaries, Pickering, Wolcott, and McHenry. The latter had
refused to give a commission to the only elector in North Carolina who had
voted for Adams. He had influenced Washington to insist on giving
Hamilton the preference over Knox—which was true. In a report to
Congress, McHenry had eulogized Washington and sought to praise
Hamilton—the President’s enemy. He had urged the suspension of the
mission to France. The old man was spluttering with fury, and his disloyal
Secretary was dumb with amazement. It was time for him to resign.
McHenry beat a hasty retreat, returned to his office, prepared his
resignation, which in decency should have been voluntarily submitted long
before, and sent it in the next morning.[1740]
Having set himself to the task of ridding his household of his enemies,
Adams bethought himself of Pickering. Five days after the stormy scene
with McHenry, the austere Secretary of State received a note from the
President inviting a resignation. This was on Saturday. On Monday
morning, Pickering went to his office as usual, having been long
accustomed to ignoring or thwarting the wishes of his chief, and sent a
letter dealing, strangely enough, with his pecuniary embarrassments, and
refusing to resign.[1741] The letter had not been sent an hour before an
answer was in his hands. It was curt and comprehensive. ‘Divers causes and
considerations essential to the administration of the government, in my
judgment requiring a change in the department of state, you are hereby
discharged from any further service as Secretary of State.’[1742]
Hamilton, enraged at the dismissal of his servitors, hastened an
astonishing letter of instructions to Pickering. He should ‘take copies and
extracts of all such documents as will enable you to explain both Jefferson
and Adams.’ No doubt Pickering was ‘aware of a very curious journal of
the latter when he was in Europe—a tissue of weakness and vanity.’ The
time was coming when ‘men of real integrity and energy must write against
all empirics.’[1743] To McHenry he wrote that ‘a new and more dangerous
era has commenced’; that ‘Revolution and a new order of things are
avowed in this quarter’; and, with something of Adams’s hysteria, that
‘property, liberty, and even life are at stake.’[1744]
The news that Adams had rid himself of his betrayers, and found in John
Marshall and Samuel Dexter as successors men incapable of treachery,
made a profound impression. To Duane of ‘The Aurora’ it was a
vindication. Two months before he had divided the Cabinet into
Hamiltonians and Adamsites, with Pickering and McHenry bearing the
brand of Hamilton.[1745] Announcing the dismissals under the caption, ‘The
Hydra Dying,’ he described Pickering as ‘an uncommon instance of the
mischiefs that may be done in a country by small and contemptible talents
and a narrow mind when set on fire by malignity.’[1746] The Federalist
papers were hard put to sugar-coat the pill. The ‘Centinel’ cautiously said
that ‘the best men here have variant opinions on the measure’ of Pickering’s
dismissal.[1747] Three days later, it rushed to the defense of the humiliated
representative of the Essex Junto with the comment that the best eulogy on
his official conduct was ‘the chuckling of the Jacobins over his removal’
and the assurance that he carried into retirement ‘the regrets of all good
men.’[1748] The Essex Junto made no attempt to conceal their disgust.
Cabot, Ames, Gore, and Pickering were soon sending their versions to
Rufus King in London. ‘You are so well acquainted with the sort of
sensibility for which our chief is remarkable, that you will be less surprised
than most men,’ wrote Cabot.[1749] Gore wrote that the dismissal ‘produces
general discontent.’[1750] The delicate moral sensibilities of all these
politicians were much hurt because Adams had fallen into the habit of
swearing and using ‘billingsgate.’[1751] He was even speaking with
bitterness of the Essex Junto and the British faction, quite in the manner of
Jefferson. It was even ‘understood’ among the Hamiltonians that the
dismissals were the price of the alliance which had been formed between
Jefferson and Adams.[1752]
But Adams knew what he was about. He knew that a plan had been
made to trick him out of his reëlection. The scheme was bald, bold, stupid.
All the Federalist electors in the North would be urged to vote for Adams
and Pinckney; in the South enough would be asked to vote for Pinckney,
and not Adams, to bring the Hamiltonian Carolinian in ahead. Hamilton
was writing frankly to his friends in this vein, ready to ‘pursue Pinckney as
my single object’;[1753] while Gore was writing King that ‘the intention of
the Federalists is to run General Pinckney and Mr. Adams as President and
Vice-President.’[1754] When, in July, Adams appeared in Boston at a dinner
and toasted Sam Adams and John Hancock, the much-abused Jeffersonians,
as ‘the proscribed patriots,’ the Hamiltonians groaned their disgust and the
Democrats shouted with glee. ‘This was well understood by the Jacobins
whom it will not gain,’ wrote Ames.[1755] ‘The Aurora’ observed that ‘he
did not give the great orb [Franklin] around which he moved as a
satellite.’[1756] The rupture was now complete. When Adams was permitted
to leave Philadelphia without a demonstration the latter part of May, ‘The
Aurora’ was unseemly in its mirth. ‘Did the Blues parade? No? What—not
parade to salute him “whom the people delight to honor”—“the rock on
which the storm beats”—the “chief who now commands”? Did not the
officers of the standing army or the marines parade? The new army officers
are not fond of the President; he has dismissed Timothy.’[1757]
Meanwhile, the most consummate of the betrayers, Wolcott, unsuspected
still, remained within the fort to signal to Hamilton.
VI
It was common knowledge early in the spring that Hamilton would exert
his ingenuity to defeat Adams by hook or crook. ‘The Aurora’ declared,
March 12th, that ‘the party with Alexander Hamilton at their head have
determined to defeat Adams in the approaching elections.’ The watchful
eye of the suspicious Adams, who felt the treachery, unquestionably read
the article and heard the gossip. When, after the death of Washington, the
Cincinnati met in New York to select Hamilton as the head of the order,
Adams was informed that his enemy had electioneered against him among
the members. He heard particularly of the action of ‘the learned and pious
Doctors Dwight and Babcock, who ... were attending as two reverend
knights of the order, with their blue ribbons and bright eagles at their sable
button-holes,’ in saying repeatedly in the room where the society met, ‘We
must sacrifice Adams,’ ‘We must sacrifice Adams.’
Thus, when in June, Hamilton, under the pretext of disbanding the army
in person, fared forth in his carriage on a tour of the New England States,
no one doubted the political character of his mission. His purpose was to
prevail upon the leaders to give unanimous support to Pinckney and to drop
a few Adams votes, or, that impossible, to give Pinckney the same support
as Adams. The records of this dramatic journey are meager enough. It is
known that in New Hampshire he talked with Governor Gilman, who was
the popular leader, and ‘took pains’ to impress upon him ‘the errors and the
defects of Mr. Adams and of the danger that candidate cannot prevail by
mere Federal strength.’ He urged support of Pinckney on the ground that in
the South he would get some anti-Federal votes.[1758] In Rhode Island he
evidently encountered a spirited protest from Governor Fenner. The
Governor expressed the hope that all the electors would be Federalists, but
clearly gave no encouragement to the Pinckney candidacy, according to
Hamilton’s own version of the conference.[1759] There were other versions,
however, indicative of a stormy interview. The ‘Albany Register’ advised
Hamilton, in giving the story of his tour to the ‘Anglo-Federal party which
wishes to make Charles C. Pinckney President,’ to ‘forget his interview
with the Governor of Rhode Island.’[1760] ‘The Aurora’ followed in a few
days with a more circumstantial story. Hamilton had ‘warmly pressed
Governor Fenner to support Pinckney’ and ‘the old Governor’s eyes were
opened and he literally drove the gallant Alexander out of the door.’[1761] 3
But in Massachusetts, albeit the home of Adams, Hamilton could count
upon a cordial reception for his views, since it was also the home of the
Essex Junto. This was composed of the Big-Wigs of the party in that State,
all ardently devoted to Hamilton, sharing in his hate of democracy and
doubt of the Republic. For years these men had met at one another’s homes
and directed the politics of Massachusetts. They were men of intellect and
social prestige, intimately allied with commerce and the law. There was
George Cabot, the greatest and wisest of them all, and one of the few men
who dared tell Hamilton his faults. He was a man of fine appearance, tall,
well-moulded, elegant in his manners, aristocratic in his bearing, earnest but
never vehement in conversation; a man of wealth, and a merchant.[1762]
There was Fisher Ames, brilliant, vivacious, smiling, cynical, eloquent,
exclusive in his social tastes, and wealthy. There was Theophilus Parsons,
learned in the law, contemptuous of public opinion and democracy,
reactionary beyond most of his conservative contemporaries, more
concerned with property than with human rights. Tall, slender, cold in his
manner, colder in his reasoning, he stood out among the other members of
the Junto because of his slovenliness in dress. Among his friends, at the
dinner table, he was a brilliant conversationalist, for he liked nothing better
than to eat and drink, talk and laugh, unless it was to smoke, chew tobacco,
and use snuff.[1763] He was the personification of the political intolerance
of his class. There, too, was Stephen Higginson, one of the wealthiest and
most cultured merchants of his day, a handsome figure of a man who took
infinite pains with his toilet and always carried a gold-headed cane. Given
to writing for the press, he made ferocious attacks on John Hancock under
the nom-de-plume of ‘Laco,’ and the truckmen on State Street whom he
passed on his way to business taught a parrot to cry, ‘Hurrah for Hancock;
damn Laco.’ So intolerant and bigoted was his household that a child,
hearing a visitor suggest that a Democrat might be honest, was shocked.
[1764] There also was John Lowell, able lawyer, cultured, ultra-conservative,
disdainful of democracy; and there was Christopher Gore, who amassed a
fortune in speculation, and held a brilliant position at the Bar. A striking
figure he was, when he appeared at the unconventional meetings of the
group, tall, stout, with black eyes and florid complexion, his hair tied
behind and dressed with powder, courtly in his manners, eloquent in speech,
utterly intolerant in his Federalism, and completely devoted to Hamilton’s
policies.[1765] These and their satellites were Hamilton’s Boston friends;
more, they were the backbone of his personal organization, his shock
troops. Thus, when he crossed into Massachusetts on his tour, he was going
to his own with the knowledge that they would receive him gladly—and
they did.
Reaching Boston on Saturday evening, he conferred with his friends, and
on Sunday ‘attended divine services at the Rev. Mr. Kirkland’s.’ On
Monday a dinner was given in his honor, where, the party paper insisted,
‘the company was the most respectable ever assembled in the town on a
similar occasion.’ General Lincoln presided. Higginson and Major Russell
of the ‘Centinel’ were vice-presidents. Governor Strong, the Lieutenant-
Governor, the Speaker of the House, Chief Justice Dana, Ames, Cabot,
several members of Congress, and members of ‘the Reverend Clergy’ sat
about the boards. ‘The tables were loaded with every dainty the season
affords and every luxury which could be procured.’[1766] It appears that
some Adamsites or Jeffersonians declined to do homage, for we find the
‘Centinel’ commenting that ‘had a certain citizen known that General
Hamilton resembled his demi-god, Bonaparte, instead of refusing a ticket to
the dinner he would have solicited the honor of kissing—his hand.’[1767]
The Hamiltonians were clearly delighted with the occasion; Hamilton
himself expanded and talked with freedom in the friendly atmosphere. He
talked for Pinckney and against Adams; and in an especially expansive
moment, dwelling on the sinister presumption of democracy, said that
within four years ‘he would either lose his head or be the leader of a
triumphant army.’ The dinner over, the conference concluded, he made an
inspection of Fort Independence on Castle Island, and was on his way,
accompanied ‘as far as Lynn by a cavalcade of citizens.’[1768] Everything
had been carried off with becoming éclat, for had he not stayed at ‘the
elegant boarding house of Mrs. Carter?’[1769] Unhappily the carriage in
which he rode with the ‘cavalcade’ broke down in the middle of the street,
[1770] to the delight of the Jacobins, but his composure gave his followers
much satisfaction.
Had not the Adamsites implied that he had received the cold shoulder
elsewhere in Massachusetts we might never have known his activities
beyond Lynn. He was ‘everywhere welcomed with unequivocable marks of
respect, cordiality, and friendship.’ He dined in Salem with Mr. Pickman,
‘drank tea at Ipswich,’ arrived at Davenport’s late in the evening, departed
early in the morning for Portsmouth, and reached Newburyport on Sunday.
That is the reason there was no demonstration there. But there in the
evening he stayed with Parsons ‘in company with some of the most
respectable gentlemen of the town.’[1771]
But Hamilton and the Junto were not soon to hear the last of that tour.
The Democrats harped incessantly on the promise to lose his head or be the
leader of a triumphant army. ‘We have often heard of a French gasconade,’
said ‘The Aurora,’ ‘but we have now to place alongside of it a Creole
gasconade in America. Alexander Hamilton leading an army to effect a
Revolution! Why, the very idea is as pregnant with laughter as if we were to
be told of Sir John Falstaff’s military achievements.’[1772] ‘Manlius’ rushed
to the attack, ostensibly in behalf of Adams, in the ‘Chronicle.’ Why this
trip to ‘disband the army’? Had Hamilton ever been in the camp before?
Had he appeared ‘to plant the seed of distrust in the bosom of the troops?
against Adams?’ And what a painful effect upon the great men of Boston!
‘Your personal appearance threw poor Cabot into the shade. Even what had
been deemed eloquence in the smiling Ames was soon reduced to
commentary; and so petrifying was your power that our District Judge has
scarcely since dared to report an assertion from his Magnus Apollo of
Brookline, either on politics or banking.’ And lose his head or lead a
triumphant army if Pinckney were not elected? ‘Your vanity was more gross
than even your ignorance of the characters of the people of the eastern
States.’[1773] Two months later, the echoes were still heard. The Reverend
Mr. Kirkland, flattered by Hamilton’s cultivation and ingratiation, and
young, not content with indiscreetly repeating Hamilton’s observations
made in company, rushed into the papers with an attack on Adams and a
glorification of Hamilton. What a disgrace to the clergy, wrote ‘No
Politician,’ for this flattered youth ‘to vindicate the character of a confessed
adulterer, and artfully to sap the well-earned reputation of President
Adams.’[1774] Even King heard from a Bostonian that Hamilton ‘in his
mode of handling [political themes] did not appear to be the great General
which his great talents designate him.’[1775] But Hamilton made his
observations and reached his conclusions—that the leaders of the first order
were in a mood to repudiate Adams, but that those of the second order,
more numerous, were almost solidly for him. He merely changed his
tactics.
CHAPTER XX
HAMILTON’S RAMPAGE
F INDING that persuasion had failed to shake the fidelity of the second-
class leaders, Hamilton bethought himself of coercion. The moment he
returned to New York, he wrote Charles Carroll of Carrollton proposing
to ‘oppose their fears to their prejudices,’ by having the Middle States
declare that they would not support Adams at all. Thus they might be
‘driven to support Pinckney.’ Both New Jersey and Connecticut, he thought,
might agree to the plan, since in both places Adams’s popularity was on the
wane. In any event, it was not ‘advisable that Maryland should be too
deeply pledged to the support of Mr. Adams.’[1776] The effect on Carroll
was all that could have been desired. Two months later, an emissary of
McHenry’s, sent to interview the venerable patriot, found that he considered
Adams ‘totally unfit for the office of President, and would support ... the
election of General Pinckney.’[1777] Throughout the summer the leaders in
the inner circle of the Hamiltonian conspirators were busy with their pens.
Richard Stockton urged on Wolcott the wisdom of making a secret fight.
‘Prudent silence ... get in our tickets of electors ... they will be men who
will do right in the vote ... and Mr. Pinckney will be the man of their
choice.’[1778]
No one was deeper in the business than Wolcott, who, holding on to his
position, and presenting a suave, unblushing front to his chief, was writing
feverishly to the leaders of the conspiracy. While Hamilton was receiving
the homage of his New England idolaters in June, Wolcott was writing
Cabot that ‘if General Pinckney is not elected all good men will have cause
to regret the inactivity of the Federal party.’[1779] In July he was writing
McHenry that if ‘you will but do your part, we shall probably secure Mr.
Pinckney’s election,’[1780] and to Chauncey Goodrich that good men
thought Mr. ‘Adams ought not to be supported.’[1781] He was receiving
letters from Benjamin Goodhue, presumably Adams’s friend, concerning
‘Mr. Adams’ insufferable madness and vanity,’[1782] and from McHenry
that ‘Mr. Harper is now clearly of opinion that General Pinckney ought to
be preferred.’[1783] In August he was assuring Ames that ‘Adams ought not
to be supported,’[1784] and in September ‘The Aurora’ was charging that
during that month he had declared in Washington ‘that Mr. Adams did not
deserve a vote for President.’[1785] Clasping Adams’s hand with one of his,
this consummate master of intrigue was using the other to wig-wag
messages to Hamilton from the window of the fortress.
But Hamilton found much to disconcert him. Albeit Cabot rather boasted
that in July he had not yet paid a visit of courtesy to Braintree, and probably
would not,[1786] he was writing Hamilton that to discard Adams at that
juncture would mean defeat in Massachusetts.[1787] He was opposed,
however, only to an open rupture. Noah Webster, having made a New
England tour of his own, and lingered a moment under the trees at
Braintree, went over to Adams bag and baggage.[1788] All but two of the
Federalist papers were supporting Adams with spirit. To prod him more, the
Jeffersonian press was pouncing upon Hamilton ferociously. ‘Dictator of
the aristocratical party!’ ‘Father of the funding system!’ Working
desperately for Pinckney, ‘continually flying through the continent rousing
his partisans by the presence of their chief, prescribing and regulating every
plan,’ was Hamilton, charged a Jeffersonian editor. Author of ‘a little book’
in which he ‘endeavors to give an elegant and pleasant history of his
adulteries,’ he added.[1789] Hamilton began to meditate a sensational stroke.
II
Meanwhile, the Jeffersonians, united, enthusiastic, thoroughly organized,

confident, were waging war along the whole line. The mechanics who could
vote, the small farmers, the liberals and Democrats, the private soldiers of
the Revolution who felt they had been tricked, the small merchants, the
Germans because of taxes and the proscription of Muhlenberg, the Irish
because the Federalists abused them and passed the Alien Law, were almost
a unit behind their chief. All the cost of the army and navy, and the frequent
outrages of soldiers with nothing to do, brought support. In North Carolina,
Gales, in ‘The Register,’ was using the camp near Raleigh as a veritable
recruiting point for Democrats. The eight per cent loan of that day and the
Excise Law of the day before were bringing great accessions to the ranks.
The growing indebtedness of the Nation, and Wolcott’s admission that
another eight per cent loan would be necessary, was making converts. The
scandals in administration were creating havoc in Administration circles
and driving Wolcott to distraction. The scandal of Jonathan Dayton,
Federalist leader of New Jersey, broke, and the hailstones beat upon the
head of Wolcott, who was the victim of his credulity alone. While Speaker,
Dayton had made written application at the end of the session of 1798 for
thirty-three thousand dollars as compensation for the House. That amount
was not needed. Wolcott’s plea that he did not know he had given Dayton
more than necessary was greeted with jeers. His assertion that he had the
right to expect the unexpended balance to be immediately refunded only
met derisive laughter. Not until the winter of 1799 was the discovery made
that Dayton had retained more than eighteen thousand dollars since July,
1798. Wolcott, discovering this fraud, summoned Dayton, wrote him a
sharp letter, and recovered the money—but not the interest.[1790]
Meanwhile, Duane, in ‘The Aurora,’ was devoting pages to affidavits
concerning Dayton’s notorious land frauds.[1791] Defalcations were
numerous, due, according to the apologists of the Administration, to ‘the
difficulty of procuring men of standing and character ... to execute their
duties.’[1792]
Then, to darken the picture for the Federalists, stories were afloat
corroborative of the Jeffersonian charge that they favored aristocracy and
monarchy. Again Adams appeared as the champion of kingly government.
Senator John Langdon, a reputable man, personally vouched in a signed
letter to the truth of the charge that, in the presence of himself and John
Taylor of Caroline, Adams had said that ‘he expected to see the day when
Mr. Taylor and his friend, Mr. Giles, would be convinced that the people of
America would not be happy without an hereditary chief and Senate—or at
least for life.’[1793] This was greatly strengthened from Federalist sources.
‘The observations of the President when he went through town [New
Haven] last, made more Democrats than any other thing beside,’ wrote
Timothy Phelps to Wolcott. ‘He told Dr. Dana he did not believe the United
States could exist as a nation unless the Executive was hereditary.’[1794]
The lesser lights among the Federalists were likewise contributing to the
Jeffersonian cause. Noah Webster was being vigorously assailed in the
‘American Mercury’ for saying that reading and observation had convinced
him that republicanism was impossible unless the poorer classes were
excluded from the vote.[1795] But the climax came with the publication of
the stupid pamphlet of John Ward Fenno, who, with his father, had been
editor of the Federalist organ for years. In ‘Desultory Reflections on the
New Political Aspect of Public Affairs,’ he clearly reflected the views of
Hamilton, to whom he referred as having been pitched ‘down the Tarpeian
rock of oblivion, not for subsequent apostacy, but for the very deed of
greatness itself.’ It was a slashing assault on Adams for making peace with
France. Glorious prospects had been opening ‘the doors of the temple of
Janus,’ but Adams had acted in a ‘puerile’ fashion. The masses were
denounced as ‘the stupid populace, too abject in ignorance to think rightly,
and too depraved to draw honest deductions.’ The patriotic Federalists
were, by Adams’s action, ‘by one sudden stroke in one short hour, beaten
off their ground, overwhelmed with confusion, and left abandoned to all the
ridicule and all the rage of their antagonists ... and nauseating nonsense,
meanness, abject servility, and the effeminacy of Sybaris now reign with a
pomposity undisturbed even by any casual exertions of genius or common
sense.’ Pickering had been dismissed because he ‘approached too near to
holding a divided empire with [Adams] in the hearts of the people.’ The
time had come to ‘repudiate the author of our evils.’
More: the form of government should be changed. ‘The continent
[should be] divided into ten, fifteen, or twenty counties, to be governed by a
Lieutenant or Prefect appointed by the Executive; certain subaltern
appointments should be in his gift. These Prefects would constitute as
proper an upper House for one branch of the Legislature as could be
devised.’ The franchise should be ‘cut off from all paupers, vagabonds, and
outlaws’—the poor, the democrats—and ‘placed in those hands to which it
belongs, the proprietors of the country.’[1796] This from the man who had
edited the Hamilton Federalist organ in Philadelphia. Copies were carried
about in the pockets of the Jeffersonians and worn out by readings in the
taverns.
On top of this, Federalist leaders, writers, and papers began to hint at
secession in the event of Jefferson’s election. It had become a habit. There
had been talk of secession among them if the State debts were not assumed:
talk again if the Jay Treaty was not ratified. Wolcott’s father had written his
son, long before, of its desirability if Jefferson should be elected. Four years
previously the ‘Hartford Courant,’ the strongest Federalist paper in New
England, began to publish letters by ‘Pelham,’ paving the way for the
secession of the North. The South was bitterly assailed. There were more
interesting objects than the Union, thought ‘Pelham.’ The time had come to
secede. A year later, ‘Gustavus’ began writing in the same paper on the
same theme. Jefferson was denounced as an atheist and traitor.[1797] In
1800, ‘Burleigh’ took up his pen to advocate secession in the event of
Jefferson’s election. In this case the author was known—it was the fanatic
John Allen, who, as a member of Congress, had charged Livingston with
sedition because of his attack in the House on the Alien Law. In his initial
letter he urged all Federalist papers to copy, and some did. The election of
Jefferson would destroy the Constitution, result in anarchy, expel
Federalists from office, wreck the financial system, and lead to Revolution,
for ‘there is scarcely a possibility that we shall escape a civil war.’ This
would be bad, but ‘less, far less, than anarchy or slavery.’ Secession would
be almost certain. Where would the boundary be? At the Potomac?—the
Delaware?—the Hudson? New England might have trouble if New York
and Pennsylvania were included in the Northern Confederacy. ‘They are
large, wealthy, powerful. They have many men of intrigue and talent among
them, desperate in their fortunes, ambitious and unprincipled.’ It would be
hard to get them to join a peaceful body and keep them quiet.
These were the leading political articles in the leading Federalist paper in
the most uncompromising Federalist State through the campaign of 1800.
[1798] In the ‘American Mercury,’ ‘Rodolphus’ replied with a stinging
rebuke. ‘He tells us,’ wrote ‘Rodolphus,’ ‘that if Mr. Jefferson is elected our
towns will be pillaged, our inhabitants rendered miserable and our soil dyed
in blood; that we shall have a Jacobin government, that the Constitution ...
will fall a sacrifice, and finally if the man of his choice is not elected, the
Federal Union must be destroyed and that the Northern States must form a
separate Government. The writer is a Federalist indeed.’[1799]
The Jeffersonians made the most of ‘Burleigh’s’ secession articles.
III
Nowhere were the Jeffersonian activities more annoying to the

Federalists than in New England where Federalism thought itself
permanently entrenched. It had reached its peak in 1798 during the war
hysteria, and the next two years were marked by a notable decline. The
activities of the defiant Democrats were intensified. Denunciations of the
‘aristocracy’ that governed, of the political meddling of the clergy, brought
the fight personally home to the leaders. In Vermont, where Lyon had been
persecuted and his followers aroused, the stamp tax and the extravagance in
government made a deep impression on the small farmers. It was a scandal
in the best regulated households that ‘Matthew Lyon and his cubs’ were
prowling about the highways.[1800] In Massachusetts, where Gerry had
made a remarkable race for Governor in the spring, the fight was being
made in every quarter, and Ames was wailing that ‘on the whole the rabies
canina of Jacobinism has gradually passed of late years from the cities,
where it was confined to the docks and the mob, to the country.’[1801] In
New Hampshire, the Jeffersonians had made an astonishing showing in the
gubernatorial contest in the spring, carrying a number of the towns,
including Concord and Portsmouth. There, under the leadership of John
Langdon, they had capitalized the refusal of the Federalist Legislature to
grant a charter to a bank which proposed to loan money in small sums, and
place credit within the reach of the farmers and the poor.[1802] Their defeat,
notwithstanding their heavy vote, encouraged them to persevere in their
attacks on corporations and the ‘privileged few.’
But it was in Connecticut that the Jeffersonians gave the Federalists their
greatest shock by the audacity of their attacks. There the Democrats, though
few, made up in zeal and ability for what they lacked in numbers. In the
home of Pierrepont Edwards, a Federal Judge and a foremost citizen, they
perfected their plans for the campaign. Aaron Burr spent some time in the
State assisting in the creation of a militant organization. A Federalist
complained in a letter to Wolcott that ‘the Democrats spent all their time
and talents for eight weeks endeavoring to persuade the ignorant part of the
community that the Administration was endeavoring to establish a
monarchy; and even good Mr. Edwards told them he had held an important
office under government, but that he had found them so vile and corrupt, he
was determined to resign the office.’[1803] Nothing could have been more
distressing to the aristocratic and clerical oligarchy which had long lorded it
over the people. The ‘Courant’ piously prayed that Connecticut would not
‘exhibit the distressing spectacle of two parties rending the State with their
reproaches and whetting their swords for civic combat,’ and held up ‘the
awful condition in Pennsylvania and Virginia’ as a warning.[1804] The ‘New
York Commercial Advertiser,’ founded by a son of Connecticut, was
disheartened at the effrontery of the Democrats. ‘Jacobinism in
Connecticut,’ it said, ‘has heretofore been confined to back streets and dark
recesses; but in consequence of the successes in other States it begins to
creep forth and show its hideous front in good company.’[1805] In
September the ‘American Mercury’ of Hartford was boasting through
‘Gracchus’ that ‘in many towns where there was not a man who a few
months ago avowed the cause of republicanism, the friends of liberty and
the Constitution have now a majority,’ although ‘in most towns there was a
fight.’[1806]
To Abraham Bishop, the fighting leader of the Jeffersonians, was left the
congenial task of whipping the Federalists to a frenzy. A graduate of Yale,
of which Dwight, popularly known as ‘the Pope of Federalism,’ and a man
of scholarly attainments, was President, he was invited to deliver the Phi
Beta Kappa oration at the commencement. It was assumed that he would
speak on some literary or scientific subject, but nothing was more remote
from his intentions. Very carefully, and with malice aforethought, he
prepared a scathing arraignment of Federalist principles and policies. At the
last moment the clergy discovered the nature of the discourse and
recommended its rejection. One indignant partisan wrote Wolcott that ‘the
Society discovered the cheat before it was delivered and destroyed its effect
so far as was within their power.’[1807] The ‘Courant’ explained that when
the invitation was extended, the members of the fraternity were ‘ignorant of
his sentiments,’ and of the fact that ‘he had been once desired by a
committee of the society to resign the presidency because of profanity.’ The
moment it was found that the wicked man had written ‘a seditious and
inflammatory libel on the religion and government of the country,’ it was
decided to dispense with the oration.[1808] But the seditious and irreligious
Bishop had no notion of being robbed of an audience. The ‘Courant’
reported that ‘with an impudence and effrontery known only to weak or
wicked men,’ Bishop ‘proceeded at seven o’clock to palm off on the public
the production.’[1809] More than fifteen hundred men, women, and children,
including some members of the clergy, heard him,[1810] but the ‘Courant,’
looking over the assemblage, solemnly declared it as ‘a singular fact that
every open reviler of religion was there and highly gratified,’ but that the
young ladies of New Haven ‘refused to grace an audience thus collected
and consisting of such characters.’[1811]
No more slashing attack was heard during the campaign. The audience
was sympathetic, jubilant. The orator in fine fettle, the subject to his taste.
He attacked the extravagance in government, sneered at the ceremonious
launching of war vessels, ridiculed the military pretensions of Hamilton.
The army had not fought, but had ‘stood their ground bravely in their
cantonments.’ The funding system had ‘ruined thousands, but ... has also
led up to an aristocracy more numerous than the farmers-general in France,
more powerful than all others because it combined the men of wealth.’
But it was for the political preachers of Connecticut that Bishop reserved
his heaviest fire. ‘How much, think you, has religion been benefited by
sermons intended to show that Satan and Cain were Jacobins?’ Then a
contemptuous fling at ‘Pope’ Dwight—‘Would Paul of Tarsus have
preached to an anxious, listening audience on the propriety of sending
envoys?’ After all, ‘the Captain of Salvation is not so weak as to require an
army and navy and a majority in Congress to support His cause.’ Then,
falling into satire: ‘Let no one imagine that I would represent the clergy as
acting out of their sphere ... for is it not said unto them, “Go ye into all the
world and preach politics to every creature. When men oppose ye, call them
enemies of God and trample them under your feet.” ... When the people are
assembled, say to them that the Lord reigneth on the earth in the midst of
men of power and wealth; that he delighteth in the proud, even in those who
are lofty; that he will exalt the vain, and lay in the dust they who are humble
in his sight; that the great are gods; but that the little men are like the chaff
which he driveth before the wind; that in the day of his power he will shine
mightily on those who are in power, and that he will make the people under
them like the hay and the stubble and the sweepings of the threshing floor.’
Immediately the speech was published in pamphlet form and sent
broadcast over the country. Editions were printed in numerous towns and
States.[1812] Within a week an answer had been published in a pamphlet, ‘A
Rod for a Fool’s Back,’[1813] but it failed to affect the popularity of
Bishop’s ‘Oration on the Extent and Power of Political Delusions,’ and two
months later, when he was at Lancaster during a session of the Legislature,
he repeated the speech on invitation of Governor M’Kean.[1814] It was a
palpable hit.
IV
And it was a hit, primarily because it was an assault on the part the
clergy was playing in the campaign. All over New England, and in New
York and Philadelphia, ministers were preaching politics with an
intemperance of denunciation and a recklessness of truth that seems
incredible to-day. The game of the politicians to picture Jefferson as an
atheist, a scoffer at religion who despised the Church and laughed at the
Bible, was entrusted to the Ministerial Corps, which did the best it could. It
was a line of slander that had followed Jefferson from the moment he
forced religious liberty and toleration into the laws of Virginia. The only
campaign canard of which Jefferson took cognizance was set afloat by the
Reverend Cotton Smith, who proclaimed that the man of Monticello had
accumulated his property by robbing a widow and fatherless children of
their estate while acting as their executor. ‘If Mr. Smith thinks that the
precepts of the Gospel are intended for those who preach them as well as
for others,’ wrote Jefferson, ‘he will some day feel the duties of repentance
and acknowledgment in such forms as to correct the wrong he has done. All
this is left to his own conscience.’[1815] But if Jefferson was content to
leave to their consciences clergymen bearing false witness, his followers
were not. When the Reverend Dr. Abercrombie of Philadelphia gravely
warned his congregation against voting for an atheist, Duane made a biting
reply. ‘He is the man who opposed reading the Declaration of Independence
on 4th of July last,’ he wrote. ‘Need we wonder at his hatred of Mr.
Jefferson?’[1816] When the clergyman, stung by the attack, made a weak
reply, Duane asked: ‘During the prevalence of yellow fever ... in 1798 on a
day in the house of Mr. Richard Potter in Germantown did you not provoke
an argument in which you supported monarchical doctrines and assert that
the country would never be happy until it had a king?’[1817] To another
minister, fortunately ‘the late Rev. Dr. J. B. Smith of Virginia,’ was ascribed
one of the most amazing stories of the campaign, that Jefferson on passing a
dilapidated church had sneeringly said that ‘it was good enough for Him
Who was born in a manger.’[1818]
When the Reverend John M. Mason published a political pamphlet under
the cover of religion,[1819] accusing Jefferson of being a Deist, and the
Reverend Dr. Lynn of New York, actively electioneering for Pinckney
against both Adams and Jefferson at the instance of Hamilton, printed

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Chapter 1 Growth, Welfare, and the American Economy

Part 1 The Colonial Era: 1607–1776

Part 2 The Revolutionary, Early National, and Antebellum Eras:

Part 3 The Reunification Era: 1860–1920

Part 4 War, Depression, and War Again: 1914–1946

Part 5 The Postwar Era: 1946 to the Present

Part 1 The Colonial Era: 1607–1776

The Extractive Industries 47

Part 2 The Revolutionary, Early National, and Antebellum Eras:

American Independence and Economic Change 111

Part 3 The Reunification Era: 1860–1920

Part 4 War, Depression, and War Again: 1914–1946

On the Land 385

Reform of the Agricultural Sector 427

Part 5 The Postwar Era: 1946 to the Present

Subject Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559

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Figure 1.1 250

Source: Sport Information Office, University of Wisconsin–Madison.

150 199 lbs.

Source: Sport Information Office, University of Wisconsin–Madison.

is short cannot be considered to be poor. Such a conclusion would not be unreasonable,

1939 2017 1939 2017

Source: Sport Information Office, University of Wisconsin–Madison.

Table 1.1 Li f e Ex p e c ta ncy by Ag e i n t h e U n i ted Stat es

Source: U.S. Census Bureau.

Cell Phone* 80.9%

Cloth Washer 68.7%

Internet Service 42.6%

0% 20% 40% 60% 80% 100%

Source: U.S. Department of Energy.

Figure 1.6 Middle fifth

Source: U.S. ­Census Bureau. “Share of A

Figure 1.8 Chances of Moving Up or Down the Family Income

Percent of Adult Children in Each

Family Income Quintile

A Study with a Purpose

Critical Skills for Personal

See McCloskey (1976).

The Long Road out of Poverty

Source: Fogel 1999.

Table 1.2 Yea rs o f L i f e E x p ec ta n cy at B i rth

Table 1.4 Gdp Pe r Ca p i ta f o r 5 6 C ou n tri es i n 19 9 0 D o lla rs

Table 1.4 (Conti n u e d )

An Institutional Road Map

Economic History Helps Us See into the Future, Continued

Figure 1.10 United States Employment, by type of work

Source: U.S. Census Bureau. “Share of A