factory which makes harvesting machinery covers 140 acres, employs
24,000 men, and has made two million machines which are now in use. It
has fifty ships to bring its wood and iron, and every day loads a
hundred freight cars with its finished products. And enterprise on this
large scale is found not merely in staple articles, but in more trivial
wares. It is a familiar fact that in Germany the large department stores
make very slow progress against small shops, while in America the great
shops meet at once with popular favour. Their huge advertisements in
newspapers and magazines vie with their shop windows in attracting
trade. It is nothing uncommon for the manufacturer of a breakfast food
or some chemical preparation to spend over a million dollars a year for
humorous advertisements. In the _Ladies’ Home Journal_ one insertion on
the advertising pages costs six dollars per line, and the lines are
short. A short time ago a soap concern leased the back outside cover of
a magazine for a period of time and paid $150,000 therefor.
More impressive, however, than anything that the traveller is able to
see to-day is the comparison with what existed yesterday. Our figures
have very well shown that the speed of development has been rapid
everywhere and sometimes almost explosive. A typical example of this is
found in agricultural machinery. The manner of tilling the ground was
wholly revolutionized in 1870, when the first ploughing-machine was
offered for sale to the American farmer. Since then improvements have
been made continually, until to-day every farmer rides on his machines;
and the steam-plough, which sows and harrows at the same time, has
reduced the amount of time spent on these processes to one-fifteenth of
what it formerly was, and the cost of every sheaf of wheat to
one-quarter. The machines of to-day sow and fertilize at the same time,
and place the seeds at just the desired depth beneath the surface. There
are other machines which take the corn from the cob, at the same time
cutting up the cobs, and turn out a bushel of corn in a minute, for
which a good labourer used to take two hours.
The threshing-flail was abandoned long ago, and the combined mowing and
threshing machine is perhaps the most clever invention of all. It cuts
the kernels from the stalk, threshes and winnows them, and packs them in
bags; and all this as quickly as the horses are able to travel down the
field. The machines which separate the cotton from the cotton seed are
the only thing that makes it possible to gather a harvest of ten million
bales. In former times it took a person about ten hours to remove the
seeds from a pound and a half of cotton. The machine cleans 7,000 pounds
in the same time.
In just the same way the inventive genius of the American has everywhere
increased the output of his factories. His chief aim is to save labour,
and hence to devise automatic processes wherever they are possible, so
that turning a crank or touching a lever shall accomplish as much as
hard work once accomplished. This continual process of invention and
improvement, and the fertile resourcefulness of every workman and
capitalist, their readiness to introduce every improvement without delay
and without regard to expense, have contributed more to the enormous
economic progress than all the protective tariff or even than the
natural resources of the soil itself.
Extreme jingoes see in this huge growth only the beginning of something
yet to come, and in their dreams imagine a day when America shall rule
the markets of the world. But no one should be deceived by such ideas.
The thoughtful American knows very well that, for instance, the great
increase of his export trade has by no means overcome all obstacles. He
knows that American wages are high, and that prosperity makes them more
so, because the American workman is better able than the European to
demand his share of all profits. Also the thoughtful American does not
expect to gain the European market by “dumping” his wares. In the
apprehension of dull times he may snatch an expedient for getting rid of
accumulations which the home market will not take off his hands. In
ordinary times industry will not do this, because it knows the
demoralizing effect produced on the home country when it is known that
the manufacturer is selling more cheaply abroad than at home. The
American is afraid of demoralizing the domestic market more than
anything else; since, owing to the strong tendency toward industrial
imitation, any economic depression spreads rapidly, and can easily cause
a general collapse of prices. Even the elaborate pains taken to replace
human labour in the American labour-saving machines are often quite made
up for by the thoughtless waste of by-products and by the general
high-handedness of conducting business.
While America has a tremendous advantage in the fact that coal can be
readily brought to the industrial centres, and that the products can be
delivered cheaply throughout the country, it stands under the
disadvantage that most of its exports are shipped in foreign bottoms, so
that the freight charges go to foreigners; for the American
merchant-marine is wholly inadequate to the needs of American trade. If
America is strong by reason of protective tariff, England intends,
perhaps, to remind her daughter country that the American game can be
played by two. Protection is no monopoly. While the natural wealth of
this country is inexhaustible, the American knows that the largest
profits will go to the country which manufactures them; and while the
American is energetic and intelligent in getting a foothold in foreign
markets, he finds that other nations also have some counterbalancing
virtues which he neither has nor can get. First of these is the patience
to study foreign requirements, and then the ways of guarding against
wastefulness. He has one incomparable advantage, as we have seen—his
economic idealism, his belief in the intrinsic value of economic
progress, his striving to be economically creative in order to satisfy
the restlessness which is in him. The economic drawback of this point of
view is not far to seek. The spirit of individual initiative awakens in
the workman the demand for equal rights, and intensifies the fight
between capital and labour more than in any other country, and puts such
chains on industry as are spared to America’s competitors in the markets
of the world. In short, the thoughtful American knows very well that the
markets of the world are to be won for his products only one by one, and
that he will meet competitors who are his equals; that there will be
difficulties on difficulties, and that the home market from time to time
will make heavy imports necessary. He knows that he cannot hope simply
to overthrow the industry of all Europe, nor to make the industrial
captains of the New World dictators of the earth.
That which he does expect, however, is sure to happen; namely, that the
progress of America will be in the future as steady as it has been in
the past. The harvests of all the states will not always prosper, nor
speculators be always contented with their profits, but the business
life of the nation as a whole, unless all signs fail, need fear no
setbacks or serious panics.
The United States have gone through six severe crises—in 1814, 1819,
1837, 1857, 1873, and 1893. There is much to indicate that the trite
idea of the rhythmical recurrence of crises will be given up henceforth.
And although just now, after years of great expansion, contraction is
setting in, still the times are not to be compared with preceding
crises, and particularly not with the bitter days of 1893. Let us
examine what happened in that year. The unhappy experiences of the early
nineties resulted naturally from an abnormal expansion of credit. Five
or six years of prosperity had gone before, and therewith every industry
which contributed to personal gratification was stimulated to excess. An
unreasonable craze for building went over the country, and real estate
rose constantly. But the country had not developed economically in other
directions to a corresponding degree. Too many superfluous undertakings
had been started, and houses and lands were everywhere heavily
mortgaged. As early as 1890 things began to tremble, and three years
later the final crash came. More than 15,000 bankruptcies followed one
another during that year, of which the total obligations were
$350,000,000; and in the three following years matters were hardly any
better. Everything was paralyzed. The farmer was in debt, the artisan
out of employment, the miner had to be fed by charity, and since the
purchasing power of millions of people was destroyed, there was no one
to support industry and trade. It was a veritable economic collapse,
with all the symptoms of danger; but the organism recovered without the
aid of a physician, by its own healthy reaction, and in such wise that a
relapse will hardly take place in the future.
The catastrophe prepared for the return to strength by destroying many
business concerns which were not fit to survive, and leaving only the
strongest in the field. But this result is, of course, not a lasting
one, because in prosperous years all sorts of poor businesses start up
again; good years stimulate superfluous production. The permanent result
was the lesson which industry learned, in prudence and economy. There is
very much in this direction still to be learned, yet the last crisis
accomplished a great deal. For instance, in the stock-yards a single
company had formerly thrown away annually portions of the animals which
would have yielded six million pounds of lime, 30 million pounds of fat,
and 105 million pounds of fertilizer, and a few years later the total
dividends of that company were paid by the by-products which had been
thrown away a short time before. The same thing has happened in the
mines and oil-wells, in the fields and in the forests.
Owing to the special gift which the American has for invention, this
period brought out a great number of devices looking toward economy. In
iron factories and coal mines, and in a thousand places where industry
was busy, expenses were cut down and profits were increased, more
labour-saving devices were invented, and all sorts of processes were
accomplished by ingenious machines. American industry derived advantages
from this period in which the nation had to be economical, which it will
never outlive.
Although such great economy helps out in bad times, it does not in
itself revive trade. It is difficult to say where and how the revival
set in, since the most diverse factors must have been at work. But the
formation of the great trusts was not a cause of such revival, but
merely a symptom of it. The real commencement seems to have been the
great harvest which the country enjoyed in the fall of 1897. When wheat
was scarce in Russia and India, and therefore throughout the world,
America reaped the largest harvest in years, and despite the enormous
quantity the European demand carried prices up from week to week. The
farmer who in 1894 had received forty-nine cents for each bushel of
wheat, now received eighty-one cents, and at the same time had his bins
full. Of course there could be only one result. The farmers who had been
economizing and almost impoverished for several years became very
prosperous, and called for all sorts of things which they had had to go
without—better wagons and farming implements, better clothing, and
better food. In a country where agriculture is so important, this means
prosperity for all industries.
The shops in every village were busy once more, and the large industries
again started up one by one. The effect on the railroads was still more
important. The good times had stimulated the building of many competing
lines of railroad, which were very good for the country, but less
profitable to their owners. The lean years just passed had brought great
demoralization to these lines. One railroad after another had gone into
a receiver’s hands, and the service was crippled. Every possible cent
was saved and coaches and road-beds were sparingly renewed. Now came an
enormous freight demand to carry the great harvest to market, and to
serve the newly revived industries. The railroads rapidly recovered;
their service was restored. The railroads brought prosperity once more
to the iron and steel industries; new rails and ties were absolutely
necessary, and the steel industry started forward and set everything
else in motion with it. Artisans became prosperous again and further
stimulated the industries which they patronized; coal was wanted
everywhere, and so the mines awakened to new life.
Then the Spanish War was begun and brought to the nation an unexpected
amount of self-confidence, which quickened once more its industrial
activity. Such were the internal conditions which made for growth, and
the external conditions were equally favourable. In 1898 America
harvested 675 million bushels of wheat, and the enormous quantity of 11
million bales of cotton. By chance, moreover, the production of gold
increased to $64,000,000; and this, with the enormous sums which foreign
countries paid for American grain, considerably increased the money in
circulation. This was the time for the stock market to enjoy a similar
boom. During the crisis it had nervously withheld from activity and
looked with distrust on the West and South, which were now being
prospered by great harvests. Everything had formerly been mortgaged in
those regions, and from the despair of the Western farmer the
ill-advised silver schemes had arisen to fill the eastern part of the
country with anxiety. But now the election of McKinley had assured the
safety of the currency; the silver issue was laid low; the debts of the
Western farmer had been paid within a few years by magnificent crops,
and the Western States had come into a healthy state of prosperity. Now
the stock markets could pluck up courage. In the stock market of New
York in the year 1894 only 49,000,000 shares were bought and sold. In
1897 the market began to recover, and 77,000,000 shares were exchanged;
in 1898 there were 112,000,000, and in 1899, 175,000,000 shares.
In the winter of 1898–99 the formation of trusts commenced in good
earnest, and this was a glad day for the stock markets. Large amounts of
capital which had been only cautiously offered now sought investment,
and since the market quotations could rise more quickly than industries
could grow, it was a favourable time for reorganizing industry and
making great combinations with a capital proportioned to the happy
industrial outlook. In the State of New Jersey alone, a state which
specially invited all such organizations by means of its very lenient
laws of incorporation, hundreds of such combinations were incorporated
with a total nominal capital of over $4,000,000,000. To be sure, in just
this connection there was very soon a recoil. In December of 1899, a
great many of these watered-stock issues collapsed, although the
industries themselves went on unharmed. But this activity of the stock
market, in spite of its fluctuating quotations, was of benefit to
industrial life.
Meanwhile wealth in town and country increased, owing to the general
activity of all factors. In a few years the number of savings-banks
accounts was doubled, and railroads had only the one complaint—that they
could not get enough cars to carry all the wheat, corn, wood, iron,
cattle, coal, cotton, and manufactures offered for transportation. In
two years the number of money-orders sent through the post-offices
increased by 7 millions, and the number of letters and packages by 361
millions. Now, too, came a time of magnificent philanthropy; private
endowments for education and art increased in one year more than
$50,000,000.
Along with all this came an increase in foreign trade; here, too, bad
times had prepared the way. When the home market was prostrate, industry
had sought with great energy to get a footing in foreign markets; and by
low prices, assiduous study of foreign demands, and good workmanship, it
had slowly conquered one field after another, so that when good times
came there was a splendid foundation built for a foreign commerce.
America sold bicycles and agricultural machinery, boots, cotton cloth,
paper, and watches, and eventually rails, bridges, and locomotives in
quantities which would never have been thought of before the panic. And
the country became at the same time more than ever independent of
European industry. In 1890 America bought $357,000,000 of foreign
manufactures and sold of her own only $151,000,000. In 1899 its
purchases were $100,000,000 less and its exports nearly $200,000,000
more.
And at the same time, owing to the tremendous crops, the total export of
native products reached the sum of $1,233,000,000, and therewith the
United States had for the first time reached the highest place among the
exporting countries of the world—a position which had formerly belonged
to Great Britain. The trade balance of the United States, even in the
first year of prosperity, 1898, brought $615,000,000 into the country.
The year in which the American Navy, by a rapid succession of victories,
demonstrated that the nation was politically a world power, brought the
assurance that it was no less a world power commercially. Already the
Russian trans-Siberian Railway was using American rails, American
companies were building bridges in India, American cotton goods driving
out British competition in China, and the movement was still going on.
One large harvest followed another.
The wheat harvest in 1901 reached the unprecedented figure of 736
million bushels, and in 1902 of 987 millions. In the same year there
were 670 million bushels of barley, and as many as 2,523 million bushels
of corn. A corn harvest is almost always profitable, because it keeps
and can easily be stored until the right time comes to sell it; and
then, too, the farmers are always ready to use it for feed, which
further helps its price. Corn has done more than any other harvest to
bring wealth into the West. The cotton crop stayed at its ten-million
mark, and nearly 70 million barrels of petroleum flowed every year. The
demands made on the railroads increased month by month, until finally
last year there were weeks in which no freight could be received,
because the freight yards were full of unloaded cars. And at the head of
everything moved the iron and steel industries. The larger the harvests
the more lively was the industry of the country, and the more busy the
factories and railroads became the more the iron industry prospered. The
manufacture of iron and steel increased steadily, and in 1898 amounted
to 11.9 million meter-tons of pig-iron, and 9 million of steel; in 1900,
to 14 of pig-iron and 10 of steel; in 1902, to 18 and 15: while the
production of the entire earth was only 44 and 36 respectively.
But in spite of this tremendous growth, the prices also rose. Railroads
which in the spring had made contracts for new rails were able a few
months later to sell their old rails at prices which were 25 per cent.
higher than the former price of new rails, because meanwhile the price
of steel had risen enormously. If it is true that the iron industry can
be taken as an index of national prosperity, there is no doubt at all
that prosperity was here. No city in the country experienced such a
growth in its banking as Pittsburg, where the banking transactions in
1899 amounted to $1,500,000,000.
This tempestuous expansion in every direction, which lasted from 1897 to
1903, is no longer going on. A counter-movement has set in again. So
many factors are at work that it is hard to say where the reaction
commenced, although undoubtedly the great coal strikes were the first
important indication. The feverish building activity of the country is
very largely over, and this decrease has considerably affected the steel
industry. Perhaps the refusal of bankers further to countenance the
financial operations of the railroads has been an even more important
matter. During the years of prosperity the railroads had obtained credit
so easily that the scale of expenditure on most railroads had become too
lavish, and in particular large sums had been spent in converting
railroad shares into bonds. Now the financial world began to react and
refused to furnish any more funds, whereon the railroads, which were
among the best patrons of the steel industry, had to retrench. And this
depressed the state of business, and the otherwise somewhat diminished
industry cut down the freight traffic. Other industries had to suffer
when the building and iron industries declined. The purchasing power of
the working-man has decreased somewhat, and general industry is a trifle
dull. This has affected stock quotations, and nervousness in financial
circles has been increased by the mishaps and miscalculations of
well-known operators. This has worked back in various directions, and so
it is natural that pessimists at home and the dear friends of the
country abroad have predicted a panic.
But it will not come. The situation has been too largely corrected, and
the country has learned a lasting lesson from previous years. When a
collapse came in the early nineties, after a time of prosperity and
over-expenditure in every sort of undertaking, the national situation
was in every way different. There was a great deal of real weakness, and
there were many unnecessary and unconservative business ventures on
foot. All this is different to-day. The credit which the railroads at
that time had overdrawn on had been used to lay thousands of miles of
tracks where as yet there was no population. During the recent years of
prosperity, on the contrary, the railroads have been extended relatively
little, and the expenditures have been mainly for improved equipment and
service. The railroads have been made more efficient and substantial,
their indebtedness is less, and the considerable contraction of business
cannot do them serious harm. Indeed, many persons believe that the great
strain which the boom of the last few years has put on the railroads has
been a decided disadvantage to them. The excessive traffic has disturbed
regular business, increased the danger from accidents, and considerably
raised the charges for maintenance. In general, the railroads would
prefer a normal to an abnormal traffic demand.
The same is true of industry. Such tremendous pressure as the last few
years have brought cannot be borne without loss. The factories were
obliged to hire working-men much below the average grade of
intelligence, and the slight decline of industrial demand has made it
possible to dismiss the inferior men and to keep only the more
efficient. Industry itself is to-day like the railroads, thoroughly
sound and prosperous, and the small fluctuations in profits are not
nearly so great as the declines in market quotations.