Capitalism-and-Its-Critics-A-History-From-the

While these studies provide some support for Marx’s claim that rates of profit tend to decline over the long term, they also show numerous violations of the supposed “law.” Taken overall, the historical record suggests that Marx underestimated the ability of capitalist economies to head off a falling profit rate with technological innovations, corporate consolidation, and assaults on the labor movement. During the decades after 1870, these counteracting factors would become more and more prevalent, particularly in a country that had always presented something of problem for his theories: the United States of America.

“We must make land common property”

Henry George’s Moral Crusade

From Promontory Summit, Utah, about seventy miles northwest of Salt Lake City, the vast expanses of the American West stretch in every direction. Here, on May 10, 1869, Leland Stanford, a cofounder of the Central Pacific Railroad, tapped a symbolic golden spike into a final piece of track that linked his firm’s line running east from Sacramento to the Union Pacific Railroad’s line running west from Omaha. After Stanford, who was also a former governor of California, completed his allotted task, a crowd of railroad workers and dignitaries cheered. Then a four-character telegraph message was sent to New York and San Francisco: “D-O-N-E.”1

The completion of the transcontinental rail link marked another victory over geography and topography for the rapidly expanding American republic. It also signaled a fresh triumph for American industrial capitalism, which just four years earlier had prevailed over Southern plantation capitalism in the Civil War. From distant London, Karl Marx saw this clearly. As long as slavery survived in North America, Marx believed, it would restrict industrial development and slowed the rise of a revolutionary class of wage workers. “Labour in a white skin cannot emancipate itself where it is branded in a black skin,” Marx wrote in the first volume of Capital.2 But “a new life immediately arose from the death of slavery. The first fruit of the American Civil War was the eight hours’ agitation, which ran from the Atlantic to the Pacific, from New England to California, with the seven-league boots of the locomotive.”3 In August 1866, labor activists meeting in Baltimore had announced the creation of the National Labor

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Union and demanded an eight-hour workday. The new organization didn’t get very far and folded in 1873, but Marx’s point was a broader one about the transformation of the United States from a republic of farmers and small businessmen into a class-ridden industrial economy.

For decades, he had struggled to fit the United States into his materialist theory of history. Here was a young country with a fast-growing capitalist economy, modern technology, and a highly advanced political system that guaranteed the sanctity of private property. But it lacked the rigid class divisions of Europe. Marx identified the primary reason for American exceptionalism as the open frontier, the ready availability of cheap land, and the scarcity of free labor. He believed that as these factors were eliminated, the United States would increasingly become subject to industrial capitalism’s normal laws of motion, and he was convinced that the Civil War had accelerated this process. The issuance of colossal war debts helped to create a “finance aristocracy of the vilest type,” he noted, and the granting of immense tracts of public land to railroads and speculators had “brought a very rapid centralization of capital. The great republic has therefore ceased to be the promised land for emigrating workers.”4

The extent to which slavery hindered or promoted the rise of industrial capitalism remains a subject of intense debate among historians. Members of the New History of Capitalism school emphasize that the Southern plantation economy was, in some ways, intensely capitalistic even as it didn’t meet Marx’s definition of capitalism. In her 2018 book Accounting for Slavery: Masters and Management, Caitlin Rosenthal, a historian at the University of California, Berkeley, pointed out that plantation owners used modern management techniques, such as maintaining detailed ledgers recording their captive workers’ output and moving individuals around to maximize overall productivity.5 They also used enslaved workers as collateral for bank loans, and in some cases, they took out life insurance contracts on them to protect themselves against loss.6

But even as this new research has deepened our understanding of the plantation economy, Marx and others were surely correct to identify its demise as a transformative moment in US history. After the Southern aristocracy was defeated, the Republican Party—the party of Lincoln— championed the interests of Northern industrialists, and the financial and physical capital that these interests wielded had a transformative impact on the country. “The age of the pony express, overland coach, and wagon train had closed,” the historians Charles and Mary Beard commented in their classic two-volume The Rise of American Civilization. “Steam and steel were to master a continent.”7

Issued in 1927, this assessment stands. Within a few decades of the end of the Civil War and the ceremony at Promontory Summit, much of the territory west of the Mississippi had been occupied and developed by European settlers. Part federally sponsored homesteading program, part ethnic cleansing, and part real estate play, this pell-mell rush to the Pacific had by 1900 driven the remaining Indigenous peoples from all but slivers of the land they had lived on. It had added to the Union nine new states: Colorado, Idaho, Montana, Nebraska, North Dakota, South Dakota, Utah, Washington, and Wyoming. In fulfilling its “manifest destiny”—a phrase coined in the 1840s—to expand from coast to coast, the United States created a market economy of continental proportions that supported a rapidly rising number of Americans. In 1870 the US population was nearly 40 million and had already surpassed the population of the United Kingdom. By 1915, it would reach 100 million.8

As the Beards noted, industry thrived. Between 1865 and 1900, US industrial production rose more than sixfold on a volume basis, according to an index developed by the economist Joseph H. Davis.9 Steel production shot up from 380,000 tons in 1870 to 28.4 million tons in 1913.10 By the eve of World War I, the United States produced about a third of global industrial output, eclipsing Britain’s share at its nineteenth-century peak.11 Rapid industrialization turned cities like Chicago and New York into teeming metropolises that demanded more and more farm goods. The development of labor-saving agricultural technology, such as threshing machines, raised productivity, and the completion of the rail network greatly reduced the cost of transporting grains and other foodstuffs, which enabled farmers in the Great Plains and Midwest to supply markets on both coasts and as far afield as Europe. Between 1860 and 1880, US exports of wheat and flour rose from 16 million bushels to 175 million.12 Even in the South, agricultural output increased sharply, as the rise of sharecropping, small owneroccupied farms, and plantations that employed wage workers demonstrated that staples like cotton could be grown and harvested without slave labor.

By 1890, US cotton production had nearly doubled from its antebellum peak.13

Everywhere, it seemed, history was speeding up. In 1870, of the 12.2 million employed Americans ages sixteen and over, 6.3 million of them—a majority—still worked in agriculture, with 5.9 million in other professions. By 1880, the number of non-agricultural workers had tripled, and people working on the land—farmers, sharecroppers, farm laborers—were in the minority.14 The post–Civil War decades saw the emergence of the consumer society, corporate America, and the modern banking system. Aaron Montgomery Ward, the founder of the eponymous mail-order catalogue, opened his business in 1872. Heinz, the food-processing company, was founded in 1869. The following year John D. Rockefeller founded Standard Oil of Ohio. In 1872 Andrew Carnegie began building his first steel mill, in Braddock, Pennsylvania. In 1876, Alexander Graham Bell, a Scottish-Canadian scientist who taught at Boston University, patented the telephone; the following year he created the Bell Telephone Company, which would later become AT&T. In 1876, Thomas Edison opened an industrial research laboratory in Menlo Park, New Jersey, using the proceeds from the sale of his quadruplex telegraph. During the Civil War, Congress had passed legislation that created a national currency and a system of nationally chartered banks. National City Bank of New York, the precursor to Citibank, received a charter in 1865. Chase National Bank, a precursor to JPMorgan Chase, was established in 1877.

With rapid industrialization came many of the challenges that Marx and other critics had pointed to in Britain and other European countries: financial instability, urban poverty, rising inequality, and class conflicts. In September 1873, Jay Cooke and Company—a Philadelphia finance house that had speculated heavily in railroad bonds—collapsed, setting off a wave of bank failures that prompted the New York Stock Exchange to close for ten days. Dozens of railroads also went bankrupt, and the broader US economy entered a period of deflation that didn’t relent until 1879, prompting some scholars to refer to the period as “the long depression.” In 1882–1885, 1887–1888, and 1890–1891, there were further economic downturns.15 Regardless of the state of the business cycle, in places like New York and Chicago many people lived and worked in conditions reminiscent of those in 1840s Manchester: poverty and disease were rampant. Simultaneously, there emerged a class of industrial and financial magnates whose unimaginable riches and ostentatious style of living seemed more suited to a European aristocracy than a hardscrabble republic. Glaring economic divisions brought rising social tensions. In the middle of the 1870s, miners in Pennsylvania went on strike to protest wage cuts. In 1877, railroad workers across the eastern half of the United States halted rail traffic in disputes about wages and working conditions. The strikes led to violence and harsh crackdowns by the authorities. Throughout the South, meanwhile, rich and poor whites did all they could to negate the impact of the Thirteenth Amendment.

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New economic conditions demanded new methods of analysis, but the American economics profession hadn’t moved much beyond Adam Smith. In his widely used textbook, Elements of Political Economy, which first appeared in 1865, Arthur Latham Perry, an economist at Williams College, expounded the traditional virtues of competition, free trade, and the division of labor. Like many American economists of his era, Perry had a religious background; his father was a pastor. He infused his presentation of economic “science” with moral certitude and uplifting bromides. In a competitive economic system, he wrote, every individual “is naturally able to become a capitalist; economical laws present no obstacles to all men becoming rich.”16 Conscious efforts to improve the position of workers were usually counterproductive, Perry said. Laws to limit the workday represented an infringement on freedom of commerce. Strikes were “false in theory” because they violated the norms of free exchange, and they were “pernicious in practice” because they depleted the revenues from which labor and capital drew their recompense.17 “Political economy is able to show that there is no natural opposition of interests between capitalists and laborers,” Perry wrote, “that capital is just as dependent on labor as labor is dependent on capital; that each is equally interested in the prosperity of the other, and that thus a deep and admirable harmony subsists in this part, as in every other part, of the social organism.”18

A more penetrating analysis was badly needed, and it emerged, in the first instance, from an unlikely source: an obscure Californian newspaper journalist who had dropped out of high school. Henry George was born in Philadelphia on September 2, 1839. His father, Richard George, was a devout evangelical Episcopalian who published religious books and sent his son to the local Episcopalian academy. In February 1853, George started at Philadelphia High School, but he was more interested in adventure books than in his lessons. A few months short of his fourteenth birthday, he quit school and got a job as a trainee clerk. He didn’t like that, either. At fifteen, he went to sea and spent fifteen months as a “foremast boy” on a cargo ship whose captain was a member of his father’s church. In 1857, the year he turned eighteen, he left home again, enrolling in the Lighthouse Bureau, the precursor agency to the US Coast Guard. He was supposed to be based in San Francisco, but shortly after reaching northern California, he resigned his government post and headed up to British Columbia, where a gold rush was under way. The idea was to open a store for miners with a cousin who lived in San Francisco, but it didn’t work out. A few months later George returned south and eventually got a job as a printer at the California Home Journal, a weekly newspaper focused on the arts.19

In 1861 George married a young woman named Annie Corsina Fox. The couple’s first child, Henry George Jr., was born the following year. George stayed in northern California and worked a series of jobs as a printer. By 1864, his wife was pregnant with their second child. At this stage, there was no indication that his life would amount to much. The family was often short of money, and George wasn’t content as a printer. In his spare time, he wrote long entries in his diary and submitted short stories and nonfiction articles to newspaper editors. In April 1865, following the assassination of Lincoln, Alta California, San Francisco’s oldest paper, published two tributes to the dead president that he had written. “Let us thank God for him … Let us place him in the Pantheon which no statue of a tyrant ever sullied—the hearts of a free people,” one of the pieces said.20 The following year George landed a job writing editorials for the Daily Times, a new newspaper founded by James McClatchy, a radical Republican who had previously edited the Sacramento Bee in California’s capital. Within a year, he had been promoted to managing editor, overseeing the paper’s editorials.

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As an opinion editor, George was obliged to write about economics. The Times’s editorial line was pro-enterprise but anti-monopoly, which meant being anti-railroad and anti-land speculation. In the western states, the disposal and management of land was a highly charged political issue. Under the Homestead Act of 1862, any American citizen (or applicant for American citizenship) of twenty-one years or older who hadn’t taken up arms against the Union could theoretically apply for a plot of land—160 acres, usually—to settle on and farm. Hundreds of thousands of people availed themselves of this opportunity, but, as Marx noted, individuals weren’t the only ones who were given land. In a series of Pacific Railway Acts passed in the 1860s, Congress gifted vast tracts to the Union Pacific and the Central Pacific. Many Californians, George included, believed the railroads were colluding with rich land speculators to abuse these programs and enrich themselves at the expense of ordinary citizens. The freshman editorial writer wrote numerous articles criticizing the corrupt wealthy interests. In a piece published on July 4, 1868, under the headline “To What Are We Drifting,” he wrote: “Capital is piled on capital, to the exclusion of men of lesser means, and the utter prostration of personal independence and enterprise on the part of the less successful masses.”21

Later in 1868, George left the Daily Times and started writing again under his own byline. The article that first brought him widespread attention was titled “What the Railroad Will Bring Us.” Appearing in a new journal, The Overland Monthly, it posited that San Francisco was about to become a big and prosperous city like New York, with its own Astors and Vanderbilts but also large numbers of impoverished residents. “The truth is, that the completion of the railroad and the consequent great increase of business and population, will not be a benefit to all of us, but only to a portion,” the piece said. As California becomes rich, “let us not forget that the character of a people counts for more than their numbers; that the distribution of wealth is even a more important matter than its production.”22

Some historians have traced George’s populist politics to the low church evangelicalism of his upbringing. George himself would attribute his radicalism, and his focus on land, to his own experience. Later in life, he often spoke of an incident that took place one day when he was riding a horse in the foothills of Oakland, which was then a small settlement across the bay from San Francisco. Stopping for a rest, he encountered a passerby, who informed him that someone was selling nearby plots for the princely sum of a thousand dollars per acre. “Like a flash it came upon me that there was the reason of advancing poverty with advancing wealth,” George recalled. “With the growth of population land grows in value, and the men who work it must pay for the privilege. I turned back amidst quiet thought, to the perception that then came to me and has been with me ever since.”23

In 1871 George published his first lengthy piece of economic analysis, a pamphlet titled Our Land and Land Policy, which analyzed the history of land regulation at the federal and state levels. In “all the new States of the Union land monopolisation has gone on at an alarming rate,” he stated, “but in none of them so fast as in California, and in none of them perhaps, are its evil effects so manifest.”24 In a country as vast as the United States, the danger wasn’t that land would run out but that its price would rise so high “that the poor man cannot buy it.”25 The ongoing land grab by speculators and corporate interests wasn’t merely wrong, the essay concluded, it was anti-American: “To say that the land of a country shall be owned by a small class is to say that that class shall rule it; to say—which is the same thing— that the people of a country shall consist of the very rich and the very poor, is to say that republicanism is impossible.”26

Opposing the monopolization of land wasn’t George’s only cause. He also wrote articles criticizing the inflow to California of Chinese migrants, who worked on the railroads, mines, and other construction projects. Echoing a popular sentiment among working-class Californians, George claimed the Chinese arrivals were undercutting the wages of American workers. He also made some unsavory claims about the “Chinamen” having an alien culture and being unable to assimilate. In 1869, he published a lengthy letter in the New-York Tribune about Chinese immigration, in which he made these arguments, and called for an end to Chinese immigration.27 He even wrote to J. S. Mill, the prominent English economist, eliciting a reply in which Mill agreed that “Chinese immigration, if it attains great dimensions, must be economically injurious to the mass of the present population.” But Mill also noted that California had ample space to share with immigrants, and he said that at least some Chinese who came of their own volition should be admitted on the grounds that it would be beneficial to them.28

In December 1871, George, together with some business partners, launched a new evening newspaper, the San Francisco Daily Evening Post, which was aimed at the city’s working classes and was priced at just a penny. It was a big hit, and its success encouraged George and his partners to overexpand. In early 1875 they launched a weekly edition—which quickly became the bestselling paper in California—then a new morning paper, the Morning Ledger. When the economic slump that had begun with the collapse of Jay Cooke’s Philadelphia bank reached the West Coast, the Daily Post suffered big losses. Eventually it was forced to close down.29

George looked around for other work. Through the political connections he had established in Sacramento, he obtained a comfortable and well-paid state post as inspector of gas meters. With more time on his hands, he read more economics but was put off by what he regarded as the neglect of the moral dimension. Eventually he decided to write a book of his own that would remedy this failure and address the land question in depth. Working mainly at his family home in the Rincon Hill neighborhood of San Francisco, he wrote and rewrote. By early 1879 he had completed a manuscript that ran to more than five hundred pages. After originally trying out the clunky title Political Economy of the Social Problem, he settled on something more reader-friendly: Progress and Poverty. Three New York publishers rejected the manuscript, but George refused to accept failure. Drawing on his background in publishing, he decided to pay for an “Author’s Edition,” with a run of five hundred copies.30

In the summer of 1879, George’s book was printed, and he sent copies to some famous people, including the British politician W. E. Gladstone. His display of initiative paid off. On learning of the self-published version, one of the New York publishers who had initially rejected the book, William H. Appleton, changed his mind. “It appears to me that it will create some sort of sensation anyway, and I don’t think we shall lose anything by publishing it,” he told a friend of George.31 In January 1880, Appleton and Co. put out the first commercial edition of Progress and Poverty. The book went on to become one of the bestselling nonfiction books of the nineteenth century and was translated into many foreign languages.32 Its astonishing success made George famous and inspired a new political movement, the Single Tax campaign, which has adherents to this day.