The Coming of the American Behemoth. Michael Joseph Roberto
Harding as their president. Harding received 60.2 percent of the vote, an unprecedented landslide that stood until Lyndon Baines Johnson achieved a greater victory in 1964.1 Almost from the start of his campaign, Harding promised a return to “normalcy.” But what did that mean? What could be normal for a nation so utterly transformed by its role in a world war and now on its way to becoming the preeminent leader of the postwar global order?
The Great War, as it was then called, had catapulted the United States into a rising global hegemon. But this would not have surprised those who had observed its rise decades earlier, especially Karl Marx and Frederick Engels, the founders of scientific socialism. In Capital (1867), Marx wrote that the Civil War had established conditions that put the United States on a path toward world economic and political leadership. British investment had been central to construction of the Transcontinental Railroad, connecting east and west, between 1863 and 1873. Its completion spurred the growth of the mining and steel industries that became the basis of the modern American industrial economy, most of it financed by U.S., not British, capital. It was Marx who recognized the U.S. economy as “a new, dynamic model of capital accumulation.”2 By the early 1880s, he and Engels had determined that America’s untapped natural resources and vast internal market would become the basis for its eventual leadership of the world capitalist economy. The combination of its “gigantic agricultural production” and simultaneous exploitation of “its tremendous industrial resources,” would soon bring an end to “the monopoly of Western Europe, and especially of England.” These were seminal developments not only for the United States but for the rest of the world. As small landowners lost ground to the “competition of giant farms,” Marx and Engels wrote, “a numerous proletariat and a fabulous concentration of capital” were “developing for the first time in the industrial regions.”3 Though economic expansion within “the protected home market” also carried the possibility of a crisis of overproduction, the latter would “serve to hasten the time when America becomes capable of exporting and of entering the world market as England’s most dangerous competitor.”4
The pace of these developments quickened dramatically in the 1880s and 1890s as the rise of industrial monopolies established a platform for the emergence of finance capital and U.S. imperialism. In 1936, the Marxist economist and historian Anna Rochester described how the foundation for finance capital in the 1890s had been established twenty years earlier when bankers took advantage of “the whole top-heavy structure of public debt” by financing government and municipal bonds. As the economy expanded in the 1880s, so did the need for a wider range of banking operations in both commerce and investment. While routine business operations relied increasingly on the need for short-term credit, corporations with large aggregations of capital turned to investment bankers to underwrite additional stock and issue bonds. The latter played major roles in the reproduction of capital by underwriting new securities. No one was more successful at this than J. P. Morgan, whose stealth in the art of the deal became evident when he decided to buy new stock for the New York Central Railroad in 1879. Establishing even greater control over much of the nation’s railroads following the crisis of 1893, Morgan had also turned to financing and organizing the great industrial trusts of the General Electric Company in 1892, the U.S. Steel Corporation in 1901, and the International Harvester Company in 1902.5
A year before he led the Bolsheviks to revolution in 1917, Lenin cited statistics to argue that the United States had become the world’s leader in the concentration of production and its ownership. By 1909, 3,060 industrial enterprises out of 268,491—1.1 percent of the total—employed 2 million of the 6.6 million workers who made up the total workforce and produced an output valued at $9 billion, almost half of the $20.7 billion in total output. Moreover, these giant enterprises covered 258 branches of industry. Industrial cartels and trusts were now determining the course of U.S. industry. By 1909, U.S. corporations constituted 25.9 percent of the total number of business enterprises but employed 75.6 percent of the total wage earners in America. These corporations generated enormous profits, much of it going to dividends for shareholders. Increasing monopolization led to mergers with banking, giving rise to the hegemonic power of finance capital in the hands of a small financial oligarchy. This in turn contributed to further concentration and hierarchical ownership in the form of holding companies. The latter, among other things, pioneered a corrupt system of balance-sheet jugglery between the mother company and its “daughter companies” that could have concealed “doubtful undertakings from the ordinary shareholder,” while enriching those who controlled the accounting. Lenin also noted that these fraudulent and corrupt methods bred a business ethics forged principally by American capitalists. He saw the pernicious reach of concentrated wealth and power. “A monopoly,” Lenin wrote, “once it is formed and controls the thousands of millions, inevitably penetrates into every sphere of public life, regardless of the form of government.”6
As Anna Rochester argued, the emergence of these great trusts marked the beginning of America’s industrial leadership in the world economy. Industrial production soared, displacing raw materials and agricultural products as America’s chief exports in 1894; four years later, the United States was exporting more of these goods than importing. The United States no longer depended on foreign investment for further growth. Flush from huge profits, U.S. capitalists sought new outlets for productive investment abroad while opening a market for the sale of foreign government bonds at home. Once again, J. P. Morgan led the way by funding Mexican debt in 1899 and financing Great Britain’s South African War in 1900–1901.
All told, these developments had put the country on the road to empire. With the closing of its own frontier and monopoly-finance capital in ascendance, American political leaders pursued the same expansionist policies as their European counterparts, and with greater might. As Rochester concluded, the United States looked to colonize non-capitalist areas and expand its general influence abroad. Victory over Spain in 1900 had delivered the Philippines to permanent U.S. occupation, cementing America’s imperial presence across the Pacific and strengthening its grip over the Caribbean and Central America. By then, the architects of a global empire with nascent powers in the Atlantic and Pacific were guided by a vision of unprecedented global power. To that end, the United States began building naval bases wherever it could and started work on the Panama Canal. The canal was finished in 1914, the year the First World War broke out in Europe.7
AMERICA IN THE GREAT WAR: ECONOMIC SUPREMACY AND POLITICAL REPRESSION
The European war had raged for three years before the United States finally joined the Allies (Great Britain, France, Italy, and Russia) as a combatant in April 1917, against the Central Powers (Germany, Austro-Hungary, and the Ottoman Empire). American troops were slow to arrive in Europe, and only half of the million men of the American Expeditionary Force actually fought on the Western Front. But their presence alone marked new challenges and responsibilities for the United States as soon as the Armistice was signed in November 1918. Though it had risen quickly on the world stage, U.S. leadership stumbled into the postwar world, now in shambles. The socialist revolution in Russia shocked and frightened the architects of the world capitalist order in Europe and the United States. American diplomacy under an ailing president, Woodrow Wilson, had reached a crossroads. Despite an immediate isolationist impulse to avoid future European entanglements, there was no avoiding the imperatives that came with being the world’s industrial leader and new banker. From the latter standpoint, America’s leading capitalists agreed that European recovery was vital to U.S. economic interests at home and abroad.
World war had catapulted the United States into the world’s mightiest economic powerhouse. Even before it entered the conflict, America’s support for the Allied war effort had accelerated the concentration of wealth and the supremacy of monopoly-finance capital over the U.S. economy. Indeed, the war had been good for America’s industrial giants and its biggest banks. Capital loaned to the Allies to buy U.S. goods had pumped at least $5 billion of purchasing power, a substantial part of the total national income, into the domestic economy.8 Returns on investment, especially in munitions, were stunning. Corporate profits soared. Wealthy owners and managers got richer. Better yet, there was enough to go around. Workers made more money and lived better. Farmers reaping the rewards of booming agricultural prices borrowed from local banks to buy new machinery and cultivate