Published by EH.Net (September 2019)

Lindsay Schakenbach Regele, Manufacturing Advantage: War, the State, and the Origins of American Industry, 1776–1848. Baltimore: Johns Hopkins University Press, 2019. xi + 263 pp. $60 (hardcover). ISBN: 978-1-4214-2525-2.

Reviewed for EH.Net by B. Zorina Khan, Department of Economics, Bowdoin College.
Lindsay Schakenbach Regele, Assistant Professor of History at Miami University, has employed her well-honed research skills to produce an original and fascinating book that rewards the reader with discerning insights into the genesis of American industry. Economists who examine manufacturing in the nineteenth century address such specialized issues as factor inputs, productivity growth, commercial policy, comparative advantage, and incentives for technological innovation. This book offers a valuable complementary — and often provocative — perspective on these questions.

The central argument of Manufacturing Advantage is that U.S. industrial policy was derived from a model of “national security capitalism,” designed to foil internal and external threats. The primary objective of the federal government was to ensure national security in the early republic, and the manifest military need to protect the new nation dictated the commercial need for import substitution and industrial protectionism. This was especially true in the area of two products, guns and textiles, that were both deemed essential for national security. The author’s thesis is reflected in a contemporary quote (cited on p. 3) that “The best mode of warfare for our country [is] the artillery of carding and spinning machinery and the musketry of shuttle and sledge.” As a result, the military-industrial complex and close linkages between the state, business, and warfare are not a phenomenon of the twentieth century, but have continuously characterized the American system of manufactures since the Revolutionary era.

This geopolitical perspective motivates the conclusion that the federal government’s management of business was central to the development of manufacturing in the United States. Market competition and private enterprise were ultimately subsidiary and subservient to the macropolitical requirements of the emerging nation. The overarching political initiatives were enabled by the deft machinations of government officials, whose “policies lurk behind the rise and fall of American factories” (p. 4). As such, the most significant actors in this historical drama were not the great inventors or founders of grand enterprises whose names survive to the present day. Rather, the stars on the national and global stage were members of the executive branch such as the President and Secretaries of State and War, consular employees, pettifogging diplomats, trade and treaty negotiators, and other political representatives. The degree of government intervention varied somewhat over time, but the creation of a “perpetual warring machine” necessitated a certain and continuing role for federal oversight and financing of industry.

The six chapters of the book elaborate on these arguments, spanning 167 pages of text and some 80 pages of endnotes, along with several illustrative maps. The first chapter focuses on the immediate post-Revolutionary era. George Washington notably decreed that the survival of the new nation depended on military self-sufficiency, which required both adequate weaponry and materials to outfit the troops through “civilian and martial manufacturing” (p. 17). The Constitution undoubtedly provided the prerequisites for a free market economy, including provisions for interstate commerce, and secure property rights in real and intangible assets. However, for the author, the most important clauses of this document were its directions regarding the staffing of departments within the executive branch, granting them the authority to enforce unilateral directives that affected industrialization.

The implications of such authorization for manufacturing are spelled out in subsequent chapters. The firearms industry, in particular, was subsidized and supported by a War Department that was determined to be in perpetual readiness for military conflict. Even though formal wars were intermittent, “the United States was never truly at peace,” so the War Department and its military policies had a continued influence on the course of industrialization. The objectives of the State were achieved indirectly in the case of the textile industry, which was decentralized, with large networks of loosely-connected suppliers and producers. In contrast, the success of the centralized weapons manufacturers was directly related to actions of the federal government. For instance, the 1808 Congressional Act for Arming the Militia approved $200,000 per annum for guns, which provided an impetus for the expansion of key establishments in the firearms industry. Federal government officials required interchangeable parts, which significantly influenced production processes for weaponry and beyond. Territorial expansion in the nation served the dual purpose of benefiting military industry and adding to the markets for other types of manufactured output.

In an intriguing turn, the narrative pivots in Chapter 4, to propose that “the road to economic development in fact traveled through Florida” (p. 87). The acquisition of Florida territory provided valuable venture capital to underwrite nascent industrialization in New England in the 1820s at just the time when funding was scarce. The 1819 treaty with Spain allowed for the federal government to assume outstanding claims of American business, and this subsidy provided a large stimulus for Northern manufacturing enterprises. Influential investors such as the Boston Associates were able to shape political decisions and divert federal financial resources to benefit their own interests. Flush with government reimbursements and payouts, these privileged firms engaged in widespread predatory behavior that ranged from “patent trolling” to aggressive “vulture capitalist” strategies to acquire competitors. According to the author, for both textile and arms manufacturers, infusions of cash from the federal government provided more effective stimuli for growth and innovation than the private market.

Moreover, “if we are to understand the early success of the Waltham-Lowell System we must do so in the context of diplomacy” (p. 126). The U.S. diplomatic corps and allied federal officials ensured that American manufacturing interests were effectively represented overseas. Their commercial diplomacy was especially evident in Latin America, which soon provided an expanding and profitable market for guns and textiles from the U.S. Rather than economic comparative advantage, exports from New England to these foreign markets were being leveraged by canny deals brokered by political agents. Consular agents of the United States did not just obtain favorable terms in bilateral treaties, they also adeptly funneled inside business information, negotiated preferential tariffs and regulation, and even intermediated and executed contracts in Latin America, all on behalf of private American firms. Polities that depended on American arms were especially susceptible to further maneuvering on behalf of American textile producers. These displays of “soft power” and “economic coercion” enabled the United States to achieve a rapid transition from undistinguished colony to a country with international influence.

The final chapter elaborates on this “industrial manifest destiny.” By the middle of the nineteenth century, the United States had extended its reach through Oregon and California to the Pacific Ocean. This political expansionism opened for northeastern industrialists the gateway to markets in Asia and Latin America; and even the once-dominant imperial power of Britain was forced to acknowledge the industrial supremacy of its former colony. The relationship between the federal government and private enterprise that was vested in national security capitalism would further ensure the success of the Union Army over the South during the Civil War. The conclusions drawn from textiles and arms in the antebellum period would later apply to such key enterprises as the railroad industry, where government demand compensated for the absence of private demand (p. 166). In short, a strong State and its agenda of national security capitalism was responsible in large part for observed industrial outcomes, from the founding of the republic through the era of big business and modern economic growth.

An economic analysis of such issues would, of course, be somewhat different. One would hesitate to attribute industrialization in the United States so definitively to any one specific factor, especially given the sparse attention to conflicting interests, tradeoffs, opportunity costs and the potential for crowding out. The American economy was characterized by balanced growth, with productivity gains in all industries, not just in textiles and guns, and it is not clear how well this thesis can be extended to other areas such as the production of beer or boots. And, even while acknowledging the presence of diplomacy and government intervention, one might wonder about the extent to which these factors are significant for explaining American competitiveness, especially relative to its British and European rivals who indulged in such policies on a far more pervasive scale.

Nevertheless, it is a compliment to note that the monograph under review could not have been written by an economist. The author writes with verve and a captivating command of nuance, insight, breadth and in-depth analysis. She has read the secondary literature extensively, and draws on an impressive array of primary sources, including consular letters, diplomatic papers, and other previously-unexploited sources. This archival research is especially compelling when it documents the exertions of U.S. political representatives to shift negotiations and outcomes to privilege New England manufacturing interests. The discussion is extremely informative regarding the complexities and impact on far-away New England of complex treaties and initiatives and military conflicts. On every page one encounters thoughtful and persuasive claims, such as the argument that foreign demand for access to innovative American-made firearms was a potent bargaining lever in diplomatic negotiations, which created a symbiosis between the interests of military enterprises and textile producers who wished to penetrate overseas markets. In sum, both historians and economists would benefit from closely engaging with the arguments in this fine addition to the bookshelf on the early sources of American industrial supremacy.
B. Zorina Khan is Professor of Economics, Bowdoin College and Research Associate, National Bureau of Economic Research. Her new book is Inventing Ideas: Patents and Innovation Prizes in the Knowledge Economy (Oxford University Press, forthcoming 2020).

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