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BHU SRINIVASAN'S new book, 'Americana', is a delightful tour through the businesses and industries that turned America into the biggest economy in the world. Not only is the book written in a light and informative style, it is cleverly constructed. Each chapter has a theme - tobacco, cotton, steam, oil, bootlegging, mobile telephones and so on—and these themes are organised to lead the reader through a chronological history of the American economy.
Along the way, there is plenty of surprising detail. Until the first world war, for example, the Busch family (who produced Budweiser beer) held a big annual celebration for the Kaiser's birthday. Bill Levitt, the builder who pioneered the post-1945 shift to suburban living, was one of many who refused to sell homes to African-Americans. To finance their new company, Apple Computer, Steve Jobs and Steve Wozniak respectively sold a VW minibus and a Hewlett-Packard calculator.
But Mr Srinivasan, himself an immigrant who became an entrepreneur, never lets the detail interfere with the bigger picture. As he notes, European settlement in America was originally driven by commercial imperative. In 1606 the British chartered the Virginia Company of London as a profit-seeking operation; an early version of venture capital. The pilgrims on the Mayflower (pictured) were backed by English financiers.
Commerce played a decisive part in setting the course of American history. The first settlers struggled but eventually a lucrative business was found; growing and exporting tobacco in the southern states. But the early planters developed a taste for luxuries, placing them in debt to English creditors. That proved to be one source of resentment towards the colonial power; another irritation was British efforts to earn some revenue after the expense of the Seven Years’ War (1756-63), which ended French attempts to control the continent. The result, inevitably perhaps, was the American war of independence.
The plantation economy developed in the southern states, and the initial political dominance of Virginia (which provided four of America’s first five presidents) ensured the continued survival of slavery in the newly independent country. By 1860 auction prices suggested that the collective value of American slaves was $4bn at a time when the federal government’s annual budget was around $69m. That explains both why southern slaveowners, many of whom had borrowed against their slaves as collateral, would never give up the practice, and why a financial settlement of the issue was out of the question.
The resulting civil war hastened the industrialisation of the northern states, which owed their victory, in part, to their greater economic strength. In the late 19th century American companies were able to exploit the economies of scale that came from trading over a continent-wide country. This allowed them to overtake their British and German rivals.
In time, the growth of these industrial giants, or trusts as they were known, led to another political spat, as a Republican president, Theodore Roosevelt, tried to challenge monopoly power. It was under the first Roosevelt that America pulled decisively away from a laissez-faire approach, setting up the Pure Food and Drug Act and the Federal Meat Inspection Act to protect consumers. A much bigger shift occurred under his relative, Franklin Roosevelt, who pursued aggressive policy intervention and established a welfare system in the course of the Great Depression.
As Mr Srinivasan observes, American capitalism has always had a strong input from the state: the tariffs that shielded industry in the 19th century; the military expenditure that helped develop radio, satellites and the internet; farm subsidies; the federal guarantees for bank deposits and home loans; and so on. "It was an endlessly calibrated balance between state subsidies, social programmes, government contracts, regulation, free will, entrepreneurship and free markets," he writes. In short, American economic history is more complex than some ideologues seek to portray it; this excellent book gives readers a fully rounded picture.
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