CHAPTER TWELVE

_The Economic Rise_

_Introite, nam et hic dii sunt_—here, too, the gods are on their throne. The exploiting of the country, the opening of the mines, the building of factories and railroads, trade and barter, are not in question here as the mere means of livelihood, but as a spontaneous and creative labour, which is undertaken specifically in the interests of progress. In this confession of faith we have found the significance of American industrial life, in the spirit of self-initiative its greatest strength. Only such men as desire to take part in the economic era of creation, to meet their neighbours openly and trustingly and to rely on their spoken word, in short, to believe in the intrinsic worth of industry—only such men can weave the wonderful fabric of New World industry. A race of men carrying on commerce merely in order to live, feeling no idealism impelling them to industry, would never, even in this richly-endowed America, have produced such tangible results or gained such power.

Nevertheless, the country itself must not be forgotten by reason of its inhabitants. It was the original inducement to the inhabitants to turn so industriously to the spade and plough. Where the spade has dug, it has brought up silver and gold, coal and iron; and where the plough has turned, it has evoked a mammoth growth of wheat and corn. Seas and rivers, bays and mountains have produced a happy configuration of the land and pointed out the routes for traffic; oil-wells have flown freely, and the waterpower is inexhaustible; the supply of fish and fowl, the harvests of tropical fruits and of cotton have been sufficient to supply the world. And all this was commenced by nature, before the first American set his foot on the continent.

And while it was the lavish hand of nature which first brought prosperity to the inhabitants, this prosperity became, in its turn, a new stimulus to the economic exploitation of further natural resources. It provided the capital for new undertakings; it also helped on the extraordinary growth of economic demand, it made the farmer and the artisan the best patrons of thriving industries, and made the economic circulatory system pulsate with increasing strength through the national organization.

There are, besides the purely economic conditions, certain political and administrative ones. American history has developed in a free atmosphere such as cannot be had in countries with ancient traditions, and which, even in the New World, at least in the eastern part of it, is disappearing day by day. Of course, such elbow-room has not been an unqualified blessing. It has been attended by evils and has made sacrifices necessary. But these have always touched the individual. The community has gained by the freedom of economic conditions. For instance, railroads, such as were built through the whole West during the pioneer years of America, would not be permitted for a moment by a German government. Such flimsy bridges, such rough-and-ready road-beds, such inadequate precautions on crossings were everywhere a serious menace; but those who were injured were soon forgotten, while the economic blessings of the new railroads which transported hundreds of thousands of people into uninhabited regions, and left them to gather the treasure of the soil, continued. They could never have been built if people had waited until they were able to construct by approved methods. After the great pioneer railroads had accomplished their mission, the time came when they were replaced by better structures. And they have been built over many times, until to-day the traffic is sufficiently safe. It still belongs, in a way, to the confession of faith of this religion of self-initiative that each man shall be free to risk not only his property, but also his own life, for the sake of enterprise. No board of commissioners may interfere to tell an American not to skirt a precipice.

Such instances of complete freedom, where life and limb are unsafe, disappear day by day. Guide-posts are put at every railroad crossing, and civil authorities take more and more interest in safety appliances for factories and in the security of city buildings; in fact, hygienic regulations in some Eastern cities to-day go even further than they go in Germany. Nevertheless, in such matters as involve not dangers, but merely traditions or preferences, a large amount of democratic freedom can still be had in the New World. Over the broad prairies there are no signs lawfully warning persons to turn to the right and not to walk on the grass. The American himself not only regards this country as the land of “unlimited possibilities,” but more specially he regards the European Continent as the country of impossible limitations. Bureaucracy is to his mind the worst enemy of industrial life, because it everywhere provides the most trivial obstacles to that spirit of adventure and daring which seeks to press on into the future; and in the end it is sure to bring all enterprise to a standstill. It is important for this freedom that the whole economic legislation is regulated, first of all, not by the Union, but by the several states, and that thus every variety of industrial life going on in any state shall be so well represented that every attempt to bring up artificial restraints shall be nipped in the bud.

To this negative factor is to be added a positive one. Every one knows that the mighty growth of the American industry and of its whole commercial life would not have been possible without the carefully adapted protective tariff of recent years. The Dingley and the McKinley tariff laws have not, of course, produced that great advance, but they have powerfully aided it. And at the same time enormous sums have been derived therefrom and expended by the government in improving the water-ways and harbours. The government has spent vast sums in helping agriculture, and done much to irrigate the arid portions of the country. Economic problems in general receive great consideration in Washington and in every state capital. Besides such general political activities, there are more special ones. The nation’s agriculture, for instance, is tremendously assisted by scientific researches, which are carried on by the Department of Agriculture. The army of American consuls is incomparably alert in seeking out favourable openings for American trade with other nations, and the consular reports are distributed promptly and free of charge from Washington to all parts of the country.

The political attitude of the nation works in still another way to favour general prosperity. The country has a unified organization which favours all economic enterprises. Although seventeen times as large as Germany, the country is nevertheless one splendid unit without internal customs barriers, under one law, and free from sectional distrusts. For, wherever commercial intercourse goes on between different states, the common federal law is in force.

Perhaps even more important than the national unity is the democratic equality throughout the population. However diverse these eighty million people may be, they form a homogeneous purchasing public. Every new style or fashion spreads like wild-fire from New York to San Francisco, and in spite of their differences, the day-labourer and the millionaire both have a certain similarity of tastes and requirements, so that the industrial producer and the distributor find it easy to make and keep in stock all articles which are called for. Instead of the freakish and fanciful demand which makes the European industrial life so difficult, everybody in America wants the same pattern as his neighbour, perhaps a little finer and better, but still the same general thing. And this brings it about that producers can manufacture in large quantities, and wholesale production and the ease of placing wares on the market encourage again the uniformity of taste and requirement, and help on the popular tendency toward mutual imitation throughout the country.

But now, instead of recounting the conditions which have helped to make the story, we must narrate the story itself. The German can listen to it with pleasure, since it is about one of Germany’s best patrons—a nation which always buys from Germany in proportion to its own prosperity, and one whose adversity would bring misfortune to Germany. The story can be most quickly told in figures, as is the favourite American way; for, if the American has a special mania, it is to heap up all sorts of statistics.

We shall best study the statistical variations through long intervals of time, in order not to be led astray by temporary fluctuations. When, a few years ago, an industrial and financial relapse had set in in Germany, and England was suffering from the war in the Transvaal, while America was undertaking a gigantic work of organization which promised to have marvellous results, the United States suddenly appeared as the economic mistress of the world, to the astonishment and apprehension of all other countries. Soon after that German trade and industry began to revive and England recovered itself, while in America industrial extravagance and financial inflation were bringing about their necessary evil consequences. Then the public opinion of other countries swung at once to the other extreme, as if America’s success had been entirely spurious. People suddenly turned about and believed that the time of American prosperity was over, rejoiced with ghoulish glee over the weakness of the enemy, despised his foolhardiness, and gossiped about his industrial leaders. But it was only in other countries that men like Schwab, the president of the Steel Trust, had been looked on as a Napoleon of industry; and when he was not able to retain his position, European papers were as pleased as if a Napoleonic army had been wiped out. Such insignificant events of the day are able to distort the judgment of great movements; picturesque mishaps strike the attention, and are taken to indicate great movements.

The actual advance in economic life of the United States was not such a sudden thing as it seemed to nervous Europe, nor was there any reverse such as Europe delighted to record. To be sure, America has passed through several great crises; but her history is nevertheless one of steady, even and healthy development in economic organization. The American himself is inclined to believe that severe crises are not to be feared any more; but however that may be, the long-predicted downfall has not come to-day, and is not even in sight. The general progress persists, and the decline in stock-market securities, which has been here and there abroad the signal for alarm, is itself a part of the sound development. When one looks at the whole rise one realizes that the young nation’s development has been great and powerful, and such as was never before known in the history of civilization. Figures will show this better than adjectives. What now do the United States produce? The wheat of the country amounted, in the year 1850, to only 100 million bushels; in 1870 to 235 millions; 522 millions in 1900; 637 in 1903. The corn harvest was 592 millions in 1850; 1,094 in 1870; 2,105 in 1900; 2,244 in 1903. There were 52 million pounds of wool in 1850; 162 in 1870; 288 in 1900; 316 in 1902. But cotton is “king.” In 1850 the cotton harvest amounted to 2.3 million bales; 3.1 millions in 1870; 9.4 in 1900 and 10.7 in 1903; 110,000 tons of sugar were produced in 1850 and last year 310,000 tons. The dreaded American petroleum was not flowing in 1850. It appears in the statistical tables of 1859 in the modest quantity of 8,400 gallons; in 1870 there were 220 million gallons; in 1900, 2,661 million, and in 1903 there were 3,707 million gallons. The coal output of the country began in 1820 with 365 tons and amounted in 1850 to 3 million tons; in 1870 to 33 million; in 1900 to 240 million; in 1902 to 269 million tons. In the middle of the last century 563,000 tons of iron ore were mined; 1.6 million tons in 1870; 13.7 in 1900, and 18 million in 1903. The manufacture of steel began in 1867 with 19,000 tons and in 1870 amounted to 68,000 tons, to 10.1 million tons in 1900; 14.9 millions in 1902. Of copper, 650 tons were mined in 1850; 12,000 tons in 1870; 270,000 tons in 1900; and 294,000 tons in 1902. The silver production in the middle of the century was estimated at $50,000; in 1870 at $16,000,000, and in 1900 at $74,000,000; in the last three years it has gone back to $71,000,000. The highest point was reached in 1892, with $82,000,000. On the other hand, the production of gold has grown steadily in the last twenty years, although it had reached its first high point back in the fifties. In the year 1853, $65,000,000 worth of gold was produced. The amount decreased slowly but steadily to $30,000,000 in the year 1883, and has since risen almost steadily until in 1903 it amounted to $74,000,000. The total output of minerals was valued at $218,000,000 in 1870, and $1,063,000,000 in 1900.

This steady growth of natural products is repeated in the agricultural and industrial spheres. The number of farms was given at 1.4 million in the middle of the last century, with the total value of $3,967,000,000; in 1870 there were 2.6 million farms valued at $8,944,000,000; and in 1900 there were 5.7 million, valued at $20,514,000,000. In 1870, 5.9 million people engaged in agriculture; 10.4 million in 1900. The total value of agricultural products amounted, in 1870, to $1,958,000,000, and in 1900 to $3,764,000,000. All domestic animals—cattle, horses, mules, sheep and pigs—amounted in 1850 to $544,000,000; in 1870 to $1,822,000,000; in 1900 to $2,228,000,000, and in 1903 to $3,102,000,000.

The greatest growth, however, is shown in industry. In 1850 there were 123,000 industrial plants with 957,000 employees, paying wages of $236,000,000, and with an output worth $1,019,000,000. In 1870 there were 252,000 factories, with 2 million workmen, paying $775,000,000 in wages, and with an output worth $4,232,000,000; in 1890 there were 3,550,000 factories, 4.7 million workmen, a salary list of $2,283,000,000, and a product worth $9,372,000,000. In 1900 there were 512,000 factories, with 5.7 million workmen, a pay-roll of $273,500,000, and an output worth $13,039,000,000. Statistics here cannot be brought up to the present time, since a careful industrial census is made only every ten years; but this glance over the half century shows at once that there has been a very steady increase, and that it is no mushroom growth due to the recently enacted protective tariffs.

The economic rise of the nation is well reflected in its foreign commerce. If we disregard the imports and exports of precious metals, the international commerce of the United States shows a total import in the year 1903 of $1,025,719,237, and a total export of $1,420,141,679. We must analyze these two figures in several ways, and compare them with similar figures in the past. In one way they show a decrease, since in the year 1903 the exports exceeded the imports by over 394 millions, but in the preceding year by 477 millions. This unfavourable change is not from any decrease in exports, but from a remarkable increase in imports; in fact, the exports were 38 millions more than during the previous year, while the imports were 122 millions more.

Thus, in the year 1903, the total foreign trade of the United States exceeded that of all previous years, and reached the astonishing figure of $2,445,000,000. Although before the year 1900 the total trade was less than two billions, it reached the sum of one billion as early as the year 1872; exports and imports together amounted in 1830 to 134 millions; in 1850 to 317 millions; in 1860 to 687 millions; in 1870 to 828 millions; in 1880 to 1,503 millions; in 1890 to 1,647 millions, and in 1900 to 2,244 millions. During this period the balance of trade shifted frequently. In 1800, for instance, there was an import balance of 21 millions, and similarly in the decades ending in 1810, 1820, and 1830. In the decade which ended in 1840 there was an average export balance of 29 millions. The tables turned in the next decade ending in the year 1850, when there was an average import balance of 29 millions; in the decade ending 1860, of 20 millions, and in the following decade, of 43 millions. But then the exports suddenly increased, and have exceeded the imports for the last twenty-five years. In 1880 the imports were 667 millions, and the exports 835 millions; in 1890 the imports were 789 millions, and the exports 857 millions; in 1900 the imports were 849 millions, and the exports 1,394 millions; in 1901 the imports were 823, and the exports 1,487; in 1902 the imports were 903, and the exports 1,381; and in 1903, as given above, the imports were 1,025, and the exports 1,420 millions.

Let us now look at the American imports more closely. Letting all our figures represent million dollars, we learn that during the last year imports of breadstuffs and live animals were 212; of raw materials 383; of half-finished products 97; of manufactured products 169, and of articles of luxury in general 145. The food products imported, which comprise to-day 21 per cent. of all imports, comprised 31 per cent. in 1880; and at that time the necessary manufactured articles were also a larger proportion of the whole, being then 20 per cent. against 16 per cent. to-day. On the other hand, raw materials, which were then 25 per cent., are to-day 38 per cent., and articles of luxury have increased from 10 to 14 per cent. of the total imports. Of the half-manufactured products imported, the most important were the chemicals, valued at 38 millions; then come wooden wares worth 11, oil worth 10, iron worth 8, skins and leather worth 5 millions. Of raw materials the most valuable were skins and furs, which amounted last year to 58 millions; raw silk was next, with 50; vegetable fibres, such as hemp, 34; rubber 32, iron and steel 30. This last figure is an exceptional one, and is due to the fact that during the year the American steel industries were taxed to their utmost by consumers’ demands. In the year 1902 the iron and steel imports were only 9, and in 1901 only 3 millions. The imports of raw chemicals amounted to 23 millions, and tin the same; wool 21, copper 20; wood 11, and cotton 11.

The exports, arranged according to the sources of production, amounted, last year, to 873 million dollars’ worth of agricultural products, 407 of factory products, 57 of products of the forest, 39 of mines, and 7 from fisheries. Of the remainder, 6 millions were from other domestic sources, and 27 had come from other countries. The agricultural exports reached their highest point in 1901, when they amounted to 943, and also the export of manufactured articles is now 3.4 less than in 1901 and 26 less than in 1900. But the statistics of manufactures show sufficiently that there has been no decrease in output, but merely that the home consumption has increased. Apart from these accidental fluctuations of the past three years, the exports have steadily increased. In 1800 the agricultural exports were 25 millions; the industrial 2; in 1850 the former were 108, the latter 17; in 1880 they were 685 and 102 respectively, and in 1900 they were 835 and 433.

If we look at the foreign trade with regard to the countries traded with, we shall find Europe first in both exports and imports. In the year 1903 the imports from Europe to the United States were 547, the exports to Europe 1,029; the imports from Canada and Mexico were 189, and the exports thereto 215. From South America the imports were 107, the exports 41; from Asia the imports were 147, the exports 58; from Australia they were 21 and 37, and from Africa 12 and 38.

The trade balances with individual countries in Europe were as follows: England bought from the United States 523 million dollars’ worth, and sold the value of 180; then comes Germany, which bought 174 and sold 111; France bought only 70 and sold 87; Austria bought 6 and sold 10; Russia bought 7 and sold the same amount. After England and Germany the best purchaser was Canada, which imported from the United States 123 and exported thereto 54. Germany imports more from the United States than from any other country. Germany imports very much less from Russia, and still less from Austria and Great Britain. Among the countries to which Germany exports her wares the United States has third place, England and Austria having the first and second. America imports from Germany firstly drugs and dye-stuffs, then manufactured cotton, silk, and iron goods, books, pictures, and works of art, clay ware, china, lithographs, toys, etc. No other class amounts to more than 10 million marks. There is a steady increase in almost every class, and the total imports from Germany were 17 per cent. larger last year than during the year previous; 71 per cent. more than in 1898; 138 per cent. more than in 1880; 198 per cent. more than in 1875, and 343 per cent. more than in 1870.

The principal export of the United States to Germany is cotton. Ten years ago the amount exported was 34 million dollars’ worth; in 1901, it was 76; in the following year only 70, but in the year 1903, 84, the amount exported in that year being 957,000,000 pounds. The exports of wheat to Germany amounted in 1896 to only 0.608 million dollars; in the following year to 1.9; in the next year to 3.1; in 1899 to 7.6; and in 1902 to 14.9; but in 1903 to only 11.1. The exports of corn fluctuate still more widely. In the year 1901 Germany bought 17 millions, in 1903 only 6.6. The exportation of petroleum reached its largest figure in 1900, with 8 millions, and in 1893 was 6.3.

Enough of these dry figures. They would look still more striking if compared with the statistics of other countries. More wheat grows in the United States than in any other country, and more corn than in all the other countries put together; more cattle and hogs are slaughtered than in any other country, and three-fourths of the world’s cotton harvest is grown in the United States. No other country mines so much coal, petroleum, iron, copper, and lead, or produces so much leather or charcoal. In short, the most important articles entering into manufactures are more plentiful than in any other country of the world. But even on looking over these figures of international trade, one does not get so adequate an impression of the immense economic activity as by actually seeing the wheels of this great machine in motion. One must see the power stations at Niagara, the steel works of Pittsburg, the slaughter-houses of Chicago, the textile factories of New England, the printing-presses of New York, the watch factories of Massachusetts and Illinois, the grain-elevators of Buffalo, the mills of Minneapolis, the locomotive and ship works near Philadelphia, and the water front of New York City, in order to understand the tremendous forces which are constantly at work.

A single factory turns out 1,500 locomotives every year. A Chicago factory which makes harvesting machinery covers 140 acres, employs 24,000 men, and has made two million machines which are now in use. It has fifty ships to bring its wood and iron, and every day loads a hundred freight cars with its finished products. And enterprise on this large scale is found not merely in staple articles, but in more trivial wares. It is a familiar fact that in Germany the large department stores make very slow progress against small shops, while in America the great shops meet at once with popular favour. Their huge advertisements in newspapers and magazines vie with their shop windows in attracting trade. It is nothing uncommon for the manufacturer of a breakfast food or some chemical preparation to spend over a million dollars a year for humorous advertisements. In the _Ladies’ Home Journal_ one insertion on the advertising pages costs six dollars per line, and the lines are short. A short time ago a soap concern leased the back outside cover of a magazine for a period of time and paid $150,000 therefor.

More impressive, however, than anything that the traveller is able to see to-day is the comparison with what existed yesterday. Our figures have very well shown that the speed of development has been rapid everywhere and sometimes almost explosive. A typical example of this is found in agricultural machinery. The manner of tilling the ground was wholly revolutionized in 1870, when the first ploughing-machine was offered for sale to the American farmer. Since then improvements have been made continually, until to-day every farmer rides on his machines; and the steam-plough, which sows and harrows at the same time, has reduced the amount of time spent on these processes to one-fifteenth of what it formerly was, and the cost of every sheaf of wheat to one-quarter. The machines of to-day sow and fertilize at the same time, and place the seeds at just the desired depth beneath the surface. There are other machines which take the corn from the cob, at the same time cutting up the cobs, and turn out a bushel of corn in a minute, for which a good labourer used to take two hours.

The threshing-flail was abandoned long ago, and the combined mowing and threshing machine is perhaps the most clever invention of all. It cuts the kernels from the stalk, threshes and winnows them, and packs them in bags; and all this as quickly as the horses are able to travel down the field. The machines which separate the cotton from the cotton seed are the only thing that makes it possible to gather a harvest of ten million bales. In former times it took a person about ten hours to remove the seeds from a pound and a half of cotton. The machine cleans 7,000 pounds in the same time.

In just the same way the inventive genius of the American has everywhere increased the output of his factories. His chief aim is to save labour, and hence to devise automatic processes wherever they are possible, so that turning a crank or touching a lever shall accomplish as much as hard work once accomplished. This continual process of invention and improvement, and the fertile resourcefulness of every workman and capitalist, their readiness to introduce every improvement without delay and without regard to expense, have contributed more to the enormous economic progress than all the protective tariff or even than the natural resources of the soil itself.

Extreme jingoes see in this huge growth only the beginning of something yet to come, and in their dreams imagine a day when America shall rule the markets of the world. But no one should be deceived by such ideas. The thoughtful American knows very well that, for instance, the great increase of his export trade has by no means overcome all obstacles. He knows that American wages are high, and that prosperity makes them more so, because the American workman is better able than the European to demand his share of all profits. Also the thoughtful American does not expect to gain the European market by “dumping” his wares. In the apprehension of dull times he may snatch an expedient for getting rid of accumulations which the home market will not take off his hands. In ordinary times industry will not do this, because it knows the demoralizing effect produced on the home country when it is known that the manufacturer is selling more cheaply abroad than at home. The American is afraid of demoralizing the domestic market more than anything else; since, owing to the strong tendency toward industrial imitation, any economic depression spreads rapidly, and can easily cause a general collapse of prices. Even the elaborate pains taken to replace human labour in the American labour-saving machines are often quite made up for by the thoughtless waste of by-products and by the general high-handedness of conducting business.

While America has a tremendous advantage in the fact that coal can be readily brought to the industrial centres, and that the products can be delivered cheaply throughout the country, it stands under the disadvantage that most of its exports are shipped in foreign bottoms, so that the freight charges go to foreigners; for the American merchant-marine is wholly inadequate to the needs of American trade. If America is strong by reason of protective tariff, England intends, perhaps, to remind her daughter country that the American game can be played by two. Protection is no monopoly. While the natural wealth of this country is inexhaustible, the American knows that the largest profits will go to the country which manufactures them; and while the American is energetic and intelligent in getting a foothold in foreign markets, he finds that other nations also have some counterbalancing virtues which he neither has nor can get. First of these is the patience to study foreign requirements, and then the ways of guarding against wastefulness. He has one incomparable advantage, as we have seen—his economic idealism, his belief in the intrinsic value of economic progress, his striving to be economically creative in order to satisfy the restlessness which is in him. The economic drawback of this point of view is not far to seek. The spirit of individual initiative awakens in the workman the demand for equal rights, and intensifies the fight between capital and labour more than in any other country, and puts such chains on industry as are spared to America’s competitors in the markets of the world. In short, the thoughtful American knows very well that the markets of the world are to be won for his products only one by one, and that he will meet competitors who are his equals; that there will be difficulties on difficulties, and that the home market from time to time will make heavy imports necessary. He knows that he cannot hope simply to overthrow the industry of all Europe, nor to make the industrial captains of the New World dictators of the earth.

That which he does expect, however, is sure to happen; namely, that the progress of America will be in the future as steady as it has been in the past. The harvests of all the states will not always prosper, nor speculators be always contented with their profits, but the business life of the nation as a whole, unless all signs fail, need fear no setbacks or serious panics.

The United States have gone through six severe crises—in 1814, 1819, 1837, 1857, 1873, and 1893. There is much to indicate that the trite idea of the rhythmical recurrence of crises will be given up henceforth. And although just now, after years of great expansion, contraction is setting in, still the times are not to be compared with preceding crises, and particularly not with the bitter days of 1893. Let us examine what happened in that year. The unhappy experiences of the early nineties resulted naturally from an abnormal expansion of credit. Five or six years of prosperity had gone before, and therewith every industry which contributed to personal gratification was stimulated to excess. An unreasonable craze for building went over the country, and real estate rose constantly. But the country had not developed economically in other directions to a corresponding degree. Too many superfluous undertakings had been started, and houses and lands were everywhere heavily mortgaged. As early as 1890 things began to tremble, and three years later the final crash came. More than 15,000 bankruptcies followed one another during that year, of which the total obligations were $350,000,000; and in the three following years matters were hardly any better. Everything was paralyzed. The farmer was in debt, the artisan out of employment, the miner had to be fed by charity, and since the purchasing power of millions of people was destroyed, there was no one to support industry and trade. It was a veritable economic collapse, with all the symptoms of danger; but the organism recovered without the aid of a physician, by its own healthy reaction, and in such wise that a relapse will hardly take place in the future.

The catastrophe prepared for the return to strength by destroying many business concerns which were not fit to survive, and leaving only the strongest in the field. But this result is, of course, not a lasting one, because in prosperous years all sorts of poor businesses start up again; good years stimulate superfluous production. The permanent result was the lesson which industry learned, in prudence and economy. There is very much in this direction still to be learned, yet the last crisis accomplished a great deal. For instance, in the stock-yards a single company had formerly thrown away annually portions of the animals which would have yielded six million pounds of lime, 30 million pounds of fat, and 105 million pounds of fertilizer, and a few years later the total dividends of that company were paid by the by-products which had been thrown away a short time before. The same thing has happened in the mines and oil-wells, in the fields and in the forests.

Owing to the special gift which the American has for invention, this period brought out a great number of devices looking toward economy. In iron factories and coal mines, and in a thousand places where industry was busy, expenses were cut down and profits were increased, more labour-saving devices were invented, and all sorts of processes were accomplished by ingenious machines. American industry derived advantages from this period in which the nation had to be economical, which it will never outlive.

Although such great economy helps out in bad times, it does not in itself revive trade. It is difficult to say where and how the revival set in, since the most diverse factors must have been at work. But the formation of the great trusts was not a cause of such revival, but merely a symptom of it. The real commencement seems to have been the great harvest which the country enjoyed in the fall of 1897. When wheat was scarce in Russia and India, and therefore throughout the world, America reaped the largest harvest in years, and despite the enormous quantity the European demand carried prices up from week to week. The farmer who in 1894 had received forty-nine cents for each bushel of wheat, now received eighty-one cents, and at the same time had his bins full. Of course there could be only one result. The farmers who had been economizing and almost impoverished for several years became very prosperous, and called for all sorts of things which they had had to go without—better wagons and farming implements, better clothing, and better food. In a country where agriculture is so important, this means prosperity for all industries.

The shops in every village were busy once more, and the large industries again started up one by one. The effect on the railroads was still more important. The good times had stimulated the building of many competing lines of railroad, which were very good for the country, but less profitable to their owners. The lean years just passed had brought great demoralization to these lines. One railroad after another had gone into a receiver’s hands, and the service was crippled. Every possible cent was saved and coaches and road-beds were sparingly renewed. Now came an enormous freight demand to carry the great harvest to market, and to serve the newly revived industries. The railroads rapidly recovered; their service was restored. The railroads brought prosperity once more to the iron and steel industries; new rails and ties were absolutely necessary, and the steel industry started forward and set everything else in motion with it. Artisans became prosperous again and further stimulated the industries which they patronized; coal was wanted everywhere, and so the mines awakened to new life.

Then the Spanish War was begun and brought to the nation an unexpected amount of self-confidence, which quickened once more its industrial activity. Such were the internal conditions which made for growth, and the external conditions were equally favourable. In 1898 America harvested 675 million bushels of wheat, and the enormous quantity of 11 million bales of cotton. By chance, moreover, the production of gold increased to $64,000,000; and this, with the enormous sums which foreign countries paid for American grain, considerably increased the money in circulation. This was the time for the stock market to enjoy a similar boom. During the crisis it had nervously withheld from activity and looked with distrust on the West and South, which were now being prospered by great harvests. Everything had formerly been mortgaged in those regions, and from the despair of the Western farmer the ill-advised silver schemes had arisen to fill the eastern part of the country with anxiety. But now the election of McKinley had assured the safety of the currency; the silver issue was laid low; the debts of the Western farmer had been paid within a few years by magnificent crops, and the Western States had come into a healthy state of prosperity. Now the stock markets could pluck up courage. In the stock market of New York in the year 1894 only 49,000,000 shares were bought and sold. In 1897 the market began to recover, and 77,000,000 shares were exchanged; in 1898 there were 112,000,000, and in 1899, 175,000,000 shares.

In the winter of 1898–99 the formation of trusts commenced in good earnest, and this was a glad day for the stock markets. Large amounts of capital which had been only cautiously offered now sought investment, and since the market quotations could rise more quickly than industries could grow, it was a favourable time for reorganizing industry and making great combinations with a capital proportioned to the happy industrial outlook. In the State of New Jersey alone, a state which specially invited all such organizations by means of its very lenient laws of incorporation, hundreds of such combinations were incorporated with a total nominal capital of over $4,000,000,000. To be sure, in just this connection there was very soon a recoil. In December of 1899, a great many of these watered-stock issues collapsed, although the industries themselves went on unharmed. But this activity of the stock market, in spite of its fluctuating quotations, was of benefit to industrial life.

Meanwhile wealth in town and country increased, owing to the general activity of all factors. In a few years the number of savings-banks accounts was doubled, and railroads had only the one complaint—that they could not get enough cars to carry all the wheat, corn, wood, iron, cattle, coal, cotton, and manufactures offered for transportation. In two years the number of money-orders sent through the post-offices increased by 7 millions, and the number of letters and packages by 361 millions. Now, too, came a time of magnificent philanthropy; private endowments for education and art increased in one year more than $50,000,000.

Along with all this came an increase in foreign trade; here, too, bad times had prepared the way. When the home market was prostrate, industry had sought with great energy to get a footing in foreign markets; and by low prices, assiduous study of foreign demands, and good workmanship, it had slowly conquered one field after another, so that when good times came there was a splendid foundation built for a foreign commerce. America sold bicycles and agricultural machinery, boots, cotton cloth, paper, and watches, and eventually rails, bridges, and locomotives in quantities which would never have been thought of before the panic. And the country became at the same time more than ever independent of European industry. In 1890 America bought $357,000,000 of foreign manufactures and sold of her own only $151,000,000. In 1899 its purchases were $100,000,000 less and its exports nearly $200,000,000 more.

And at the same time, owing to the tremendous crops, the total export of native products reached the sum of $1,233,000,000, and therewith the United States had for the first time reached the highest place among the exporting countries of the world—a position which had formerly belonged to Great Britain. The trade balance of the United States, even in the first year of prosperity, 1898, brought $615,000,000 into the country. The year in which the American Navy, by a rapid succession of victories, demonstrated that the nation was politically a world power, brought the assurance that it was no less a world power commercially. Already the Russian trans-Siberian Railway was using American rails, American companies were building bridges in India, American cotton goods driving out British competition in China, and the movement was still going on. One large harvest followed another.

The wheat harvest in 1901 reached the unprecedented figure of 736 million bushels, and in 1902 of 987 millions. In the same year there were 670 million bushels of barley, and as many as 2,523 million bushels of corn. A corn harvest is almost always profitable, because it keeps and can easily be stored until the right time comes to sell it; and then, too, the farmers are always ready to use it for feed, which further helps its price. Corn has done more than any other harvest to bring wealth into the West. The cotton crop stayed at its ten-million mark, and nearly 70 million barrels of petroleum flowed every year. The demands made on the railroads increased month by month, until finally last year there were weeks in which no freight could be received, because the freight yards were full of unloaded cars. And at the head of everything moved the iron and steel industries. The larger the harvests the more lively was the industry of the country, and the more busy the factories and railroads became the more the iron industry prospered. The manufacture of iron and steel increased steadily, and in 1898 amounted to 11.9 million meter-tons of pig-iron, and 9 million of steel; in 1900, to 14 of pig-iron and 10 of steel; in 1902, to 18 and 15: while the production of the entire earth was only 44 and 36 respectively.

But in spite of this tremendous growth, the prices also rose. Railroads which in the spring had made contracts for new rails were able a few months later to sell their old rails at prices which were 25 per cent. higher than the former price of new rails, because meanwhile the price of steel had risen enormously. If it is true that the iron industry can be taken as an index of national prosperity, there is no doubt at all that prosperity was here. No city in the country experienced such a growth in its banking as Pittsburg, where the banking transactions in 1899 amounted to $1,500,000,000.

This tempestuous expansion in every direction, which lasted from 1897 to 1903, is no longer going on. A counter-movement has set in again. So many factors are at work that it is hard to say where the reaction commenced, although undoubtedly the great coal strikes were the first important indication. The feverish building activity of the country is very largely over, and this decrease has considerably affected the steel industry. Perhaps the refusal of bankers further to countenance the financial operations of the railroads has been an even more important matter. During the years of prosperity the railroads had obtained credit so easily that the scale of expenditure on most railroads had become too lavish, and in particular large sums had been spent in converting railroad shares into bonds. Now the financial world began to react and refused to furnish any more funds, whereon the railroads, which were among the best patrons of the steel industry, had to retrench. And this depressed the state of business, and the otherwise somewhat diminished industry cut down the freight traffic. Other industries had to suffer when the building and iron industries declined. The purchasing power of the working-man has decreased somewhat, and general industry is a trifle dull. This has affected stock quotations, and nervousness in financial circles has been increased by the mishaps and miscalculations of well-known operators. This has worked back in various directions, and so it is natural that pessimists at home and the dear friends of the country abroad have predicted a panic.

But it will not come. The situation has been too largely corrected, and the country has learned a lasting lesson from previous years. When a collapse came in the early nineties, after a time of prosperity and over-expenditure in every sort of undertaking, the national situation was in every way different. There was a great deal of real weakness, and there were many unnecessary and unconservative business ventures on foot. All this is different to-day. The credit which the railroads at that time had overdrawn on had been used to lay thousands of miles of tracks where as yet there was no population. During the recent years of prosperity, on the contrary, the railroads have been extended relatively little, and the expenditures have been mainly for improved equipment and service. The railroads have been made more efficient and substantial, their indebtedness is less, and the considerable contraction of business cannot do them serious harm. Indeed, many persons believe that the great strain which the boom of the last few years has put on the railroads has been a decided disadvantage to them. The excessive traffic has disturbed regular business, increased the danger from accidents, and considerably raised the charges for maintenance. In general, the railroads would prefer a normal to an abnormal traffic demand.

The same is true of industry. Such tremendous pressure as the last few years have brought cannot be borne without loss. The factories were obliged to hire working-men much below the average grade of intelligence, and the slight decline of industrial demand has made it possible to dismiss the inferior men and to keep only the more efficient. Industry itself is to-day like the railroads, thoroughly sound and prosperous, and the small fluctuations in profits are not nearly so great as the declines in market quotations.

Financial operations and labour are largely independent of each other. The output can be undisturbed when the value of shares is being wiped out in the market. American stocks do not represent the actual value of the industrial plants which have been combined to form a trust, but represent in part certain advantages which it is calculated will accrue from the consolidation of business—economies of administration and obviation of competition. The real economic life will not be damaged if such shares, which for the most part have remained in the strongboxes of the very rich, decline from their fictitious values. Such fluctuations have always happened, and may happen in the very height of prosperity, without doing any harm to industry itself. Thus, for instance, in 1898 an enormous over-speculation commenced in copper shares. Their price was artificially raised and raised, and in the summer of 1899 this house built of share certificates collapsed, and great was the fall thereof; but the price of copper itself was uninfluenced. A pound of copper in the year 1897 brought only the average price of 11 cents; in 1899 its average price was 17 cents, although the copper securities were going down steadily. Not only is industry itself on a sound basis, and the improvements which it introduced in the last panic are not only still in force, but also certain needs have now been met at home which formerly were met only by foreign countries; and at the same time commerce has been so energetically carried into other countries, that there is now a readier outlet than ever in case the domestic purchasing power should again be suspended.

But there are still more important factors. The first of these is the recent and complete independence of this country from European capital. Since year after year the exports of the United States to Europe have exceeded the imports by hundreds of millions of dollars, the debt which Europe so contracted has been paid for the most part by returning the industrial and other bonds which Europe owned against America. It was this which had greatly contributed to the crisis in the early nineties; Europe withdrew her capital. In 1892 the United States paid back $500,000,000 of European capital, and to-day very little is left to pay. In 1893 the United States exported $108,000,000 in gold, but imported only $22,000,000. In the year 1898 the imports of gold to the United States were $105,000,000 more than the exports. Last year the balance was still in favour of the United States; and it would be impossible to-day, in case of any stringency in the money market of the country, for the withdrawal of European capital to precipitate a panic.

Another factor is that the political situation is now certain, as it was not at the time of the last panic. The silver schemes of the West then filled the country with apprehension, whereas to-day there are no such political fears. However the Presidential election may turn out, there will be no dangerous experiments tried with the currency; and even if both parties should mildly oppose the trusts, the nation nevertheless knows that just the formation of these trusts has contributed to the steadiness and security of economic prosperity, that it has done away with unnecessary competition, has brought about an orderly and uniform production, and that although the purchasers of watered stocks may have been bitten, the purchasers of the finished products have suffered little inconvenience.

Then there are two other factors whose significance for economic solidity cannot be overestimated. The first of these is the increasing independence of the agricultural West, and the second is the industrial revival of the South. The financial condition of the New York Stock Exchange to-day no more represents the industrial life of the whole nation, as it did ten years ago. The West, which before the panic of 1893 was up to its ears in debts owned by the East, is now, by reason of six tremendous harvests, prosperous and independent, and its purchasing power and business enterprise are no longer affected by the fluctuations of Wall Street. Even if the shares of all New Jersey corporations should collapse, the nation could continue to buy and sell, produce, manufacture, and transport, because the Western agricultural states would suffer no relapse of prosperity. They have paid off their mortgages and laid money by; the farmer has bought his daughter a parlour organ, sent his sons to college, and bent all his energies to making his West into an economic paradise. Migration has once more set in from the Eastern to the Western States, while during the poor years it had almost stopped; and Western economic influence is asserting itself more and more in the political field.

The same is more or less true of the South. In former times, whenever a cotton harvest brought prosperity, the South still did not take the trouble to utilize its ample resources outside of the plantations. It did not try to mine its coal and iron deposits, nor exploit its forests, nor grow wheat and corn, nor manufacture cotton into cloth, nor the cottonseed into oil. It left all this to the North. But during hard times the South has learned its lesson, and at the time of the last great revival the whole South developed an almost undreamed-of economic activity. The exploitation of forests and coal and iron deposits made great strides, and the factories turned out articles to the value of $2,000,000,000. Cotton is still the staple article of the South, but the bales no longer have to be sent to the North to be made into cloth. As early as 1899 there were 5 million spindles in operation, and the manufacture of cotton has made the South more independent than any number of bales produced for export could have made it.

This economic independence of one another of large sections of the country, and at the same time of European capital, combined with the large increase of commerce with the whole world, the improvement in economic appliances, and a surprising growth in technical science and technical instruction, has created a national economic situation which is so different from that which prevailed in the beginning of the nineties, that there is no analogy to justify the pessimist in predicting another such panic. It had to come at that time. Industrial forces had suffered a serious disaster and had to go back to camp in order to recuperate. Since then they have been striding forward, swerving a little now and then, it may be, to avoid some obstacle, but they are still marching on as they have marched for seven years with firm and steady step, and keeping time with the world-power tune which the national government is playing.