Capitalism American-style: A financial history of the United States

Many readers will doubtless be daunted by the prospect of reading a history of the United States economy that is almost 1,000 pages long. But it’s well worth the time and effort.

“Ages of American Capitalism: A History of the United States” is a stunning accomplishment from history professor Jonathan Levy. It’s a history and analysis of the various economic systems from the Colonial period to the 2016 election. And it’s relatively free of jargon and written in lively, accessible prose.

Some of the material covered will be familiar, including the role played by joint-stock corporations in the establishment of several of the 13 Colonies, for example, or the decline of American manufacturing in the late 20th century. In the process of telling the story of the U.S. economy, Levy debunks myths and misconceptions. For example, Adam Smith, the supposed patron saint of unfettered capitalism, was not a critic of government intervention in the economy. Smith “made no categorical separation between the political and the economic, or state and market,” writes Levy. “The wealth of nations could be the result only of good policy making.” Levy’s analysis of the economy of the 13 original Colonies is a rebuttal of some of the economic grievances cited as causes of the American Revolution. For example, rather than stifling Colonial commerce, British trade regulations actually provided American merchants a guaranteed market for their goods: the British public. 

Levy also explains the basics of economic history with details that make the reader understand them more profoundly. For example, the labor of enslaved people was foundational to the nation’s wealth, but it’s difficult to envision the degree to which that was true until Levy points out that by the mid-18th century 80% of all American commodities exported to Britain were produced by enslaved people’s labor.

He’s also adept at demonstrating that the past isn’t very different from the present. Levy points out that anyone troubled by the outsize power of business in contemporary American politics may find vindication in the 1650 book “Leviathan” by the philosopher Thomas Hobbes, in which corporations appear in a chapter titled “Those things that Weaken, or tend to the Dissolution of a Common-wealth.” (This was a concern, Levy points out, that did not prevent Hobbes from buying shares in the joint-stock company that founded Virginia.) 

Even mortgage-backed securities – the investment vehicles that helped cause the Great Recession in 2008 – were around in some form during the 1880s, when banks were bundling and selling mortgages. And the supposedly new-fangled notion of a universal basic income was proposed by Huey Long in 1934.

I can honestly say I’ve never before read a work of economic history that’s actually quotable. Discussing the frenzied stock speculation that preceded the Great Depression, Levy cites the economist John Maynard Keynes’ quip, “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.” About the economy 60 years later, Levy notes the weakness of private and public long-term investment, “outside military investments in such things as an interstellar missile system that did not work to fight a Cold War enemy that was collapsing anyway.”

Levy clearly thinks the government should play a bigger part in the economy than has ever been politically possible. He considers the first decade of the 21st century, when the government had access to seemingly unlimited credit, as a “wasted opportunity to make broad-based investments in economic life” in projects like “a new energy system to capture and reduce carbon emissions.”

Since economic activity doesn’t happen in a void (however much many economic theorists might wish it did), Levy also writes about literary and artistic responses to the ever-increasing commercialization of American life. This isn’t just a book about Alexander Hamilton, Henry Ford, and the Federal Reserve; it’s also a book about Herman Melville, Arthur Miller, and Andy Warhol.

But Levy’s gifts as a historian are most evident in his clear explanations of key economic concepts, some of them so fundamental to our world we might not realize they need explaining, such as credit. The early modern economy suffered from the scarcity of hard currency. But when English bankers realized they could issue certificates of credit to merchants in excess of the amount of gold coin in their vaults, for all practical purposes the amount of money in circulation increased “as if by some process of alchemy.”

And while this book’s strongest chapters are on history before 1950, Levy’s assessment of the late-20th and early-21st century  economy is astute and troubling. He notes that the financial sector has shifted away from investing in companies that actually produce goods that are in demand, and towards investing in foreign currencies, derivatives, and debt – a process Levy calls “the decoupling between finance and other parts of the economy.” Levy also chronicles the rise of the “gig economy” (i.e., the decline in secure employment) and the shifting of the path to financial security from wage-earning and saving to acquiring assets that appreciated in value. 

“Ages of American Capitalism” is an indispensable guide to understanding American history – and what’s happening in today’s economy.