American business history is a history of business, entrepreneurship, and corporations, together with responses by consumers, critics, and government, in the United States from colonial times to the present. In broader context, it is a major part of the Economic history of the United States, but focuses on specific business enterprises.
New England
The New England region's economy grew steadily over the entire colonial era, despite the lack of a staple crop that could be exported. All the provinces and many towns as well, tried to foster economic growth by subsidizing projects that improved the infrastructure, such as roads, bridges, inns and ferries. They gave bounties and subsidies or monopolies to sawmills, grist mills, iron mills, pulling mills (which treated cloth), salt works and glassworks. Most important, colonial legislatures set up a legal system that was conducive to business enterprise by resolving disputes, enforcing contracts, and protecting property rights. Hard work and entrepreneurship characterized the region, as the Puritans and Yankees endorsed the "Protestant Ethic", which enjoined men to work hard as part of their divine calling.Margaret Alan Newell, "The Birth of New England in the Atlantic Economy: From its Beginning to 1770," in Peter Temin, ed., Engines of Enterprise: An Economic History of New England (Harvard UP, 2000), pp. 11–68, esp. p. 41
Early national
Government policy The federal government under President George Washington and Treasury Secretary Alexander Hamilton strongly promoted business enterprise in the 1790s. He had a vision of an industrial nation, based on the strength of urban America.John R. Nelson, "Alexander Hamilton and American Manufacturing: A Reexamination." Journal of American History 65.4 (1979): 971-995. in JSTORAndrew Shankman, "'A New Thing on Earth': Alexander Hamilton, Pro-Manufacturing Republicans, and the Democratization of American Political Economy." Journal of the Early Republic 23.3 (2003): 323-352. in JSTOR
Washington himself was business-oriented, and was involved in numerous projects to develop transportation and access to Western lands.Edward G. Lengel, First Entrepreneur: How George Washington Built His—and the Nation's—Prosperity (Da Capo, 2016)
Banking
Organized banking began on a small scale after the American Revolution, with a few private banks in Boston and New York, such as the Bank of North America.
At Hamilton's initiative, and over the opposition of Thomas Jefferson, Congress set up the privately owned First Bank of the United States (BUS) to provide a uniform financial system for the 13 states.Sylla, Richard. "US securities markets and the banking system, 1790-1840." Review-Federal Reserve Bank of Saint Louis 80 (1998): 83-98. online
The BUS handled national finances, tax receipts and government expenditures, and funded the national debt. Increasingly became involved in lending to business, and especially assisting new local banks in unifying the national monetary and financial system.David Cowen, 'The origins and economic impact of the First Bank of the United States, 1791-1797' (Garland Pub., 2000). Jefferson supporters never stop complaining of the dangers provided by the special interests behind a private national Bank, and block the renewal of its charter in 1811. The bank closed, and the government had enormous difficulty in financing the War of 1812. President James Madison, despite his Jeffersonian heritage of anti-banking rhetoric, realized the need for a replacement, and the Second Bank of the United States was opened in 1816. It flourished, promoting a strong financial system across the country, until it was challenged and destroyed by President Andrew Jackson, Jefferson's successor, in the Bank War of 1832.Bray Hammond, Bank and Politics in America: From the Revolution to the Civil War (1957).Robert V. Remini, Andrew Jackson and the bank war (1967). During the Civil War, the Lincoln administration strongly supported banking, making it attractive for local banks to invest in federal bonds, which could then be used to set up a local national bank.Bray Hammond, Sovereignty and an Empty Purse: Banks and Politics in the Civil War (1970). The nation operated without any supervising national bank until 1913, when the Federal Reserve System was created.James Livingston, Origins of the Federal Reserve System: Money, class, and corporate capitalism, 1890-1913 (1989).
Business centers Boston Boston remained the dominant business center in New England, and its entrepreneurs pushed west to Chicago and San Francisco.Conrad Edick Wright and Katheryn P. Viens, eds., Entrepreneurs: The Boston Business Community, 1700-1850 (Massachusetts Historical Society, 2005) With 14 essays by scholars. The Boston Associates were merchants who took their fortunes made in world trade, and concentrated on building factory towns near Boston, most famously Lowell. By 1845, there were 31 textile companies—located in Massachusetts, New Hampshire, and southern Maine—produced one-fifth of all cotton and wool textiles in the United States. With the capital earned through these mills, they invested in railroads, especially the Boston and Lowell. These railroads helped transport the cotton from warehouses to factories. These Boston-based investors established banks—such as the Suffolk Bank—and invested in others. In time, they controlled 40% of banking capital in Boston, 40% of all insurance capital in Massachusetts, and 30% of Massachusetts' railroads. Tens of thousands of New Englanders received employment from these investors, working in any one of the hundreds of their mills.Robert F. Dalzell, Enterprising elite: The Boston Associates and the world they made (1987).Francois Weil, "Capitalism and industrialization in New England, 1815-1845." Journal of American History 84#4 (1998): 1334-1354. in JSTOR
Baltimore In the South, by far the major business center was Baltimore, Maryland. It had a large port to handle imports and exports, and a large hinterland that included the tobacco regions of Maryland and Virginia. It dominated the flour trade. Alexander Brown (1764–1834) arrived in 1800 and set up a linen business and his firm Alex. Brown & Sons expanded into cotton and shipping, with branches in Liverpool, England, Philadelphia, and New York. The firm Helped finance the Baltimore and Ohio Railroad to tap its own hinterland as far as Pennsylvania and Ohio. Brown was a business innovator after 1819 when cash and short credits became the norms of business relations. By concentrating his capital in small-risk ventures and acquiring ships and stock in the Second Bank of the United States he came to monopolize Baltimore's shipping trade with Liverpool by 1822. Brown next expanded into packet ships, extended his lines to Philadelphia, and began financing Baltimore importers, specializing in merchant banking from the late 1820s to his death in 1834. The emergence of a money economy and the growth of the Anglo-American cotton trade allowed him to escape Baltimore's declining position in trans-Atlantic trade. His most important innovation was the drawing up of his own bills of exchange. By 1830 his company rivaled the Bank of the United States in the American foreign exchange markets, and the transition from the "traditional" to the "modern" merchant was nearly complete. It became the nation's first investment banking.Gary L. Browne, "Business Innovation and Social Change: the Career of Alexander Brown after the War of 1812," Maryland Historical Magazine (1974) 69#3 pp: 243-255.Stuart Bruchey, Robert Oliver, Merchant of Baltimore, 1783-1819 (1956).
Baltimore and Ohio Railroad Baltimore faced economic stagnation unless it opened routes to the western states, as New York had done with the Erie Canal in 1820. In 1827, twenty-five merchants and bankers studied the best means of restoring "that portion of the Western trade which has recently been diverted from it by the introduction of steam navigation." Their answer was to build a railroad—one of the first commercial lines in the world. The Baltimore and Ohio Railroad (B&O) became the first important American railroad. Some 20,000 investors purchased $5 million in stock to import the rolling stock and build the line. It was a commercial and financial success, and invented many new managerial methods that became standard practice in railroading and modern business. The B&O became the first company to operate a locomotive built in America, with the Tom Thumb in 1829. It built the first passenger and freight station (Mount Clare in 1829) and was the first railroad that earned passenger revenues (December 1829), and published a timetable (May 23, 1830). On December 24, 1852, it became the first rail line to reach the Ohio River from the eastern seaboard. The B&O railroad was merged into CSX in 1987.
Big business: the impact of the railroads Railroads had a dramatic large-scale impact on American business in five dimensions.
Shipping freight and passengers First they provided a highly efficient network for shipping freight and passengers across a large national market. The result was a transforming impact on most sectors of the economy including manufacturing, retail and wholesale, agriculture and finance. Supplemented with the telegraph that added rapid communications, the United States now had an integrated national market practically the size of Europe, with no internal barriers or tariffs, all supported by a common language, and financial system and a common legal system. The railroads at first supplemented, then largely replaced the previous transportation modes of turnpikes and canals, rivers and intracoastal ocean traffic. The late 19th century pipelines were added, and in the 20th century trucking and aviation.Leland H. Jenks, "Railroads as an economic force in American development." Journal of Economic History 4#1 (1944): 1-20. in JSTOR
Basis of the private financial system Railroads financing provided the basis of the private (non-governmental) financial system. Construction of railroads was far more expensive than factories or canals. The famous Erie canal, 300 miles long in upstate New York, cost $7 million of state money, which was about what private investors spent on one short railroad in Western Massachusetts. A new steamboat on the Hudson, Mississippi, Missouri, or Ohio rivers cost about the same as one mile of track.
In 1860, the combined total of railroad stocks and bonds was $1.8 billion; 1897 it reached $10.6 billion (compared to a total national debt of $1.2 billion).Edward C. Kirkland, Industry comes of age: Business, labor, and public policy, 1860-1897 (1961) p 52, 68-74.