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Bhu Srinivasan

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Financial story behing the Mayflower Pilgrims journey to New World. They originally fled religious persecution in England in 1608. But could only get manual work in Holland, and so couldn't attract any other emigrants, and they could see their community gradually disintegrating. At the same time, the British Virginia colony was foundering through lack of settlers. Eventually the Pilgrims agreed to go, acknowledging obedience to the British King.

More than half the emigrants on Mayflower were not church memebers but other settlers added to the journey by the investors in the Virginia Company.

Virginia paid Lord Mayor of London £3 for every orphan child they sent. Adults came as indentured servants - after seven years given freedom and some land. Several factors why servants not slaves. Very high mortality rate - better to lose a servant than a slave that you'd invested money in. Also high demand from sugar plantations of Barbados, which was a shorter journey from Africa (so lower costs and less mortality).

Birth of modern corporate structures in the Elizabethan privateers syndicates. Obvious that one person could fund only a small and comparatively weak ship too small to make anybig captures. But if you joined in several larger expeditions, even if some were a total failure you could reap a handsome profit from the rest.

Cornelius Vanderbilt owned many of the ferries that plied NY harbour. When financial panic of 1837 he was debt free and solvent, and able to drive rivals out of business by charging very low fares on competitve routes. He applied same tactics to new railroads. Sold three ferries and used money to large interest in the Long Island Railroad, then undercut competing RR companies. As their share collapsed, he bought them up on the cheap.

Within a dozen years, without laying a single mile of track, Vanderbilt had control of most of NY RRs. His tactics of collusion, price-fixing, secret rebates and share market manipulation were all legal bc no laws against them.

Wave of German immigrants after 1848 revolutions and counter revns. 1852-4 half a million Germans emigrated to US. They, along with the Irish, provide the labour that built the new RRs. But the Germans only worked long enough to buy some land, whereas for the Irish, traumatised by the famine due to being dependant on the land, it was the last thing they wanted.

In 1843 Samuel Morse finally got funding to build a telegraph line to connect Baltimore and Washington. His first plan was to lay cables underground. Hired Ezra Cornell to do job but cable was unreliable, so went for telegraph poles.

The first demonstration caused a sensation. Telegraphed results of Whig presidential convention in Baltimore to audience in Washington. Met with disbelief until stories confirmed by train messages hours later. Many people thought of it as teleportation, bc until then, a message was like any other good - it had to be physically carried to its destination.

It was Ezra Cornell who made most money out of it all. He'd negotiated a substantial patent licence from Morse, and used that to extract royalties from the many telegraph companies which sprang up. He partnered with people like Henry Wells, founder of both American Epress and Wells Fargo. One of his largest stakes was in the company which became Western Union. At 49 he sold up and retired. And gave half a million dollars to found a college bearing his name in Ithaca NY.

Typists 1880 earning $15 to $20 a week - more than many blue collar jobs or women schooltaechers. Brought thousands of women into offices.

William Jennings Bryan: " There are two ideas of govt. There are those who believe that if you just leislate to make the well-to-do prosperous, that their prosperity will leak through to those below. The Democratic idea is that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it."

Govt regs on meat manufacturers to protect consumers. In contrast, the automobile brought regulations on the consumers rather than the manufacturers. In theory, left to their own devices, all the operators of different types of transport might have come to some arrangement that allowed traffic to flow smoothly and safely. In practice, unwilling to take the chance, so laws on speed etc. And, clear need for central planning on new roads and stop lights etc.

Similar thing in radio. Titanic disaster showed perils of many amateur wireless operators flooding the channels. Recognition that if anyone was allowed to broadcast any time or any thing they wanted, there wd be no way for viable commercial operations to develop. So the govt had to assert complete ownership of this new property.

Duality of franchising, as epitomised by Kroc's McDonalds. An entrepreneur needed to take the risk to get a franchise going, but then had to submit to rigid rules of what and how food prepared and sold.


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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