AMIT AI ETZI0 NI
Historical Illustration In nineteenth-century America, the national financial system developed with
great difficulty due to the low level of nation building. Without a nationwide, easily mobilized flow of capital, large-scale development is severely set back. Until savings were no longer dispersed in thousands of banks, inaccessible to
large borrowers, specialists such as J. Pierpont Morgan, Edward Harriman, and Jacob Schiff were required to improvise ad hoc the linkages to secure enough capital for large projects.
For twenty years prior to the Civil War, the paper currency consisted largely
of bank notes issued by local banks-in
1862, some 1,600 of them--operating
under diverse statelaws. After 1863, asthe nation soughtto resolve the divisions accompanying the war and the economic crises following it, a greaterdegree of uniformity and national collaboration gradually evolved. In 1913 Congress es- tablished the Federal Reserve System, which provided a basis for national coordination of banking activities.
Practically all economic historians of the United States stress the supportive
role of toward
the nineteenth century, primarily state governments-
general and economic
development in particular.
aid, direct and indirect, was common. Governments invested in railroads other transportation facilities; they favored the banks, and the banks in
industries were introduced. the construction of bridges,
Lotteries were conducted and their proceedsused for roads, and papermills. Government franchises were
used to against
spurthe building of bridges, aqueducts,and dams, andto protect builders damage claims resulting from consequentfloods or diversions of water.
While the majority of the financial/legal developments betweenthe 1860sand the 1920swere basically favorable to industrialization, not all pointed in this di- rection. Public opposition to "combinations of capital" was so strong that the Sherman Antitrust Act was passed unanimously by the House in 1890; in the Senate, there was only one dissenting vote. Many statespassed their own anti- trust laws. While those laws were ineffectually enforced, and most corporations worked their way around them, they had a nuisancevalue and illustrate populist misgivings about the new industrial world. They did not stop or significantly slow down industrialization, but they sniped at it.
II. THE SEVEN ELEMENTS: REVISITED
The accumulationof thesesevenelementsbetwee the 1820sandthe 1920s,at an acceleratedpace after the Civil War, providedthe foundationfor a strong economy.Partof its capacitywasidle duringthe Depression,andcommittedto thewar during the post-Depressioyears.Only in thelate 1950s,andespecially in the following decades,did massproductionof consumegoodsandservices