George Novack

US Capitalism: National or International?

A Critique of Lewis Corey’s The Decline of American Capitalism

(October 1935)

Source: The New International, New York, Vol. 2 No. 6, October 1935, pp. 191–197.
Transcription/Editing: Daniel Gaido.
HTML Markup: David Walters.
Proofreading: Einde O’Callaghan (February 2018).
Public Domain: George Novack Internet Archive 2005. This work is completely free to copy and distribute.

[For another Trotskyist review of Lewis Corey [Louis Fraina], The Decline of American Capitalism (New York: Covici, Friede, 1934) see Felix Morrow, Declining America, The New International, Vol. 1 No. 4, November 1934, pp. 128–29.]

In the course of its development every class creates a view of the historical process corresponding to its own fundamental interests, a world outlook which does not remain constant but changes in accordance with the development of the class itself. This can be clearly seen in the careers of the two great classes of modern society, the capitalist and the working classes.

As soon as the bourgeoisie has attained a consciousness of its aims and begins to struggle for political power, historians spring up within the nation and take the field in its behalf. These historians are important agents in awakening bourgeois class consciousness and stimulating national pride in the lower classes who follow the lead of the bourgeoisie and share its prejudices. Wherever the bourgeoisie has consolidated its power, this school of nationalist historians became the celebrators of its achievements and official spokesmen for its regime. Thus the most popular of contemporary American historians, James Truslow Adams, author of The Epic of America, voices in every essential respect the viewpoint of the capitalist masters of the United States.

Consciously or unconsciously, the bourgeois historians limit their horizon to the classic framework of bourgeois rule, the national state. They adopt an internationalist point of view only incidentally and occasionally, in the same abstract fashion and with the same obscuring of the real state of affairs, as a bourgeois politician advocates entry into the League of Nations. This school of historians seeks an understanding of their national history, not in its development as an integral and subordinate part of a world-wide social system, which is governed by its own general laws of development, but somewhere within the sacred body of the nation itself, in its political institutions, laws, racial composition, material resources, or in an ensemble of these elements called “the national spirit”. They regard the national state not as a transient form of social organization, the product of a particular social order, but as the inevitable and final form of human society. In their investigations these scholars treat the nation as an independent organism, bearing within itself the forces of its own development and having only casual relations with the outside world.

In the eyes of these historians their own nation has not only an exceptional character but a special destiny or mission, which fundamentally distinguishes it from all other nations. Whatever the particular character of this mission, which has ranged from the conversion of the infidels to Christianity in the early days of capitalism to the bringing of “civilization” to backward colonial peoples in the imperialist fashion of Mussolini, it will be found to coincide in content with the material interests of some section of the ruling class.

Frederick Jackson Turner, the author of The Significance of the Frontier in American History, was the father of the present school of nationalist historians in the United States, a school which includes among its ideological precursors Hegel and Lamprecht in Germany, Taine in France, and Macaulay in England. Although Turner himself had the mind of a petty bourgeois of the period of capitalist expansion, his ideas have been taken over and are used today as protective coloration by the big bourgeoisie. Today the Turner school reigns in the universities, the schools and the popular press. Its ideas have seeped into the minds of the American people through a thousand different channels. Our two historian presidents shared Turner’s ideas. Woodrow Wilson was Turner’s close friend and avowed disciple; Theodore Roosevelt’s Winning of the West was a contribution to the Turneresque history of the frontier. So pervasive has Turner’s influence been upon the present generation of historians that Benjamin Stolberg has denominated the American Historical Society a “Turnerverein”.

To Turner the United States is originally and essentially a nation of pioneers; and a pioneer among nations, the standard-bearer of progress in Western civilization. His philosophy of American history rests upon two main conceptions, the frontier and the section. These two categories account for all the peculiarities of American life from the character of its people to the character of its conflicts. Although the frontier is a cause of the distinctive character of American development only until its disappearance at the end of the nineteenth century, while the section continues to shape our national life thereafter, the frontier remains the key concept of the Turnerites.

The frontier is an extremely vague and confused category, which Turner himself never clearly defined. Theoretically, it covers a diversity of economic relations; historically, it included numerous different forms of civilization. In the main, when the Turnerites speak of the frontier, they have in mind a society of independent and democratic freehold farmers, such as existed in many Middle-Western states during the last century.

The Turnerites, however, fail to analyze or to understand the economic character of this pioneer agricultural society, or the economic causes of the westward movement of the frontier. In the first place, the frontier was not simply the expanding edge of American capitalism; it was one of the primary factors in the expansion of world capitalism. In the second place, more than any other agriculture the world has ever seen, American agriculture has been a commercial capitalist agriculture.

When the frontier “moved forward,” that meant that agriculture was expanding in response to the pressure of the world market. From the days of the first tobacco plantations in Virginia and Maryland until the present century commercial agriculture has played the leading role in the development of American economy and has been the principal source of its peculiar social, political and economic traits. It is impossible to explain the development of American society without a correct appraisal of the economic character and function of American agriculture on both a national and international scale.

The Turner school is materialistic in so far as it recognizes that the unique qualities of American civilization have a material origin and basis in the conditions along the frontier. But they do not understand the economic character of these conditions, since their materialism is not historical-economic but territorial. Even this half-hearted materialism is discarded for an idealistic standpoint when they come to consider latter-day America. Turner quite correctly holds that (bourgeois) democracy in the United States had its economic basis in cheap land and its social support in the small farming class. But what becomes of such democracy when the free land is gone and the farmers fall under the domination of industrial and financial capital? Turner’s only answer was to exhort his countrymen to remain true to the democratic ideals of their pioneer forbears in the same futile manner as the earlier school of New England historians begged their contemporaries to adhere to the faith of the Puritan fathers.

At the opposite pole to the bourgeois historians are the Marxists, who place themselves at the standpoint of the international working class. They realize that American history and world history are inseparable in actuality, although they may be considered separately in thought. American society is the offspring of European society, economically, politically, and culturally; it has never been isolated or independent from Europe.

This does not mean that the Marxists deny or ignore the peculiarities of American development. These indubitably exist and it is the task of the historian to explain them. But how? Bourgeois historians seek their explanations in the nation alone and its unique character. Marxists on the other hand locate them in the world historical process of which American history is a component part.

Between the bourgeois nationalists and the Marxist historians stands a third grouping which we may call the liberal school. This school, which reflects the ideas of the middle classes, attempts to combine eclectically the viewpoints of the two chief historical tendencies. As might be expected from the variegated nature of the middle classes, the representative productions of this school exhibit the most diverse qualities. On many questions it is difficult to distinguish any differences between them and their bourgeois nationalist brethren. On the other hand, the best of the liberal historians frequently approximate the Marxian position in their historical analyses.

Charles Beard is the acknowledged leader of the liberal school, and his book, The Rise of American Civilization is the greatest American historical work of our time. These liberal historians often adopt a materialist point of view. The chapters on the Civil War in The Rise of American Civilization, which are the high water mark of American historiography, constitute almost a complete Marxian analysis. But these liberal historians recognize the reality of class antagonisms only in the past, over their shoulders. Even James Truslow Adams had a keen eye for the workings of the class struggle in his excellent earlier books on revolutionary New England. But their vision dims as they approach the present, and, like the other bourgeois historians, they ultimately take refuge in an idealistic point of view. Thus Beard puts individual ideas on the same plane as class interests, and has recently, quite logically, written two big books, embodying his ideas of what “the national interest” should be and recommending his program to the political representatives of the ruling class. Since his ideas flagrantly contradict the interests of that class, we may rest assured that, although President Roosevelt has read them with interest, they will not be put into practice.

Out of the Left wing of the liberal school there has recently emerged a new group of young historians, who are endeavoring to pass beyond the limitations of the bourgeois historians and to assimilate the Marxian method. They inaugurated their theoretical work by attacking and criticizing the prevailing ideas of the Turner and Beard schools, but they have not yet had time to rid themselves completely of the preconceptions inherited from their old teachers. When this necessary stage of mental molting is over, there should be many full-fledged Marxists among them. The ablest of these younger historians is Louis Hacker and his remarkable pamphlet, The Farmer Is Doomed, is its finest production to date.

Unfortunately, the United States has not yet given birth to a school of Marxian scholars and historians whose work is at all comparable to that of the bourgeois historians. We have only the scanty, isolated productions of an A.M. Simons, De Leon, Schlüter, etc. The backwardness of the American labor movement (one of the most important of its peculiarities from the standpoint of revolutionary strategy!) is reflected in the ideological, as well as the political, sphere.

Recently, however, under the influence of the same general social causes that are removing the backwardness of the American working class and educating it politically, Marxian works are beginning to appear which herald the approach of a renaissance of Marxian scholarship in the New World. Such a work is Lewis Corey’s The Decline of American Capitalism. It is an interesting commentary on the theoretical backwardness of the American labor movement, that, whereas Lenin’s work on The Development of Capitalism in Russia appeared in the youth of Russian capitalism, the first extended survey of the evolution of American capitalism was not written until the colossus of capitalism had already passed its prime. The very title suggests its belated appearance.

Corey’s book is an important addition to the treasury of Marxian literature and merits the closest critical study from every thinking revolutionist. It is the first comprehensive treatment of the development of American capitalism, particularly in its later stages. In scope, it towers above the other productions of American Marxists like a giant sequoia. It is especially valuable for its graphic and statistical demonstrations of the general laws of Marxian political economy as they have actually worked themselves out in the course of American capitalism.

We do not propose to discuss the many merits of Corey’s book in this article. These have already been pointed out in the November 1934 issue of The New International and the reader will discover them for himself in its pages. We wish rather to consider some serious errors in Corey’s theory of the development of capitalism, and of American capitalism in particular, and to show how Corey’s mistaken conceptions lead him into error and confusion when he comes to deal with the most important problem in the development of American capitalism, the question of imperialism.

These errors spring from two different but closely related sources. In the first place, Corey takes a wrong methodological approach to the subject, abandoning the international standpoint of Marxism for a “nationalist” point of view. In the second place, his mind retains residues of some incomplete and erroneous notions popularized by Turner. While Corey recognizes the inadequacy of these ideas, he inclines to return to them, whenever he is confronted by a particular difficulty in the development of American capitalism. This can be seen in his reliance upon “the frontier”, that philosopher’s stone of the Turner school, in order to explain the specific peculiarities of nineteenth century American capitalism.

Corey’s Theory of Capitalist Development

Corey’s theory of capitalist development is weakened in essentials by a false dichotomy between the “inner” and “outer” forces of capitalist expansion. This distinction is untenable. It is theoretically impermissible to take the boundaries of the national state as the limits of the productive forces of capitalist economy. The national state is the political instrument of bourgeois rule, not its exclusive economic basis. According to Marx, “the expansion of foreign trade, which is the basis of the capitalist mode of production in its stages of infancy, has become its own product in the further progress of capitalist development through its innate necessities, through its need of an ever-expanding market”. (Capital, Vol. III, p. 278.) In other words, capitalism had an international foundation from its very beginning. From their first appearance and in all the subsequent stages of their development, the economic forces of capitalism transcend local and national boundary lines.

This is apparent the moment we consider the history of English capitalism, not to speak of the other continental countries whose economy assumed an international cast in proportion as capitalism made inroads upon feudal society. English commercial capitalism rested upon the colonial system, which was not only world-wide in extent but was established only as the result of a long series of commercial wars with other European powers, fought all over the globe. The dependence of English industrial capitalism upon the world market is too obvious to dwell on.

It is too often forgotten that commercial and industrial capitalism were, no less than the present monopoly capitalism, international in scope. Monopoly capitalism, of course, binds the world together more tightly in imperialist chains. One of the great differences between the earlier forms of capitalism and monopoly capitalism lies in the superior mechanisms of exploitation developed by the latter. Although this difference is of extreme importance, it should not obscure the fact that capitalism, from its very beginnings, is an international form of economy. The transition from feudalism to capitalism was made possible only through the development of commercial capitalism: i.e., the creation of the world market.

The distinction between the “inner” and the “outer” forces of expansion has an important function to perform in Corey’s account of American capitalist development. It opens the door to a theory of American exceptionalism. While the European nations were compelled to turn early in their history to “the outer long-time factors of expansion”, American capitalism, according to Corey, pursued a different course and developed on a different basis. Thanks to its rich natural resources and vast continental areas, American capitalism had a relatively autonomous and self-contained character in the early stages of its development, and did not have to acquire an international foundation and join the main stream of capitalist development, until it had reached the stage of monopoly capitalism.

As a matter of historical fact, the truth lies in the opposite direction. From its origins American economy has either been capitalist in character, or an outlying part of capitalist economy. American capitalism, no less than European capitalism, had an international foundation throughout all the stages of its evolution. It is fundamentally wrong to regard it as economically independent or self-sustaining.

Let us take a look at colonial economy. “From the huge agricultural area already occupied in 1765 flowed annually an immense stream of produce. All the sections save New England raised more provisions than they could consume. The middle colonies sent to port towns for shipment mountains of corn, flour, salt pork, flax, hemp, furs and peas, as well as live stock, lumber, shingles, barrel staves, and houses all shaped for immediate erection. Maryland and Virginia furnished the great staple, tobacco, the mainstay of their economic life—an article for which the planters had a steady demand unhampered by competition.... North Carolina offered farm produce and some tobacco in the market, but paid its London bills mainly in tar, pitch, and turpentine. South Carolina and Georgia furnished rice, shingles, bacon, and salt beef to the Atlantic and Mediterranean trade, and later added indigo to their profitable staples.” (Charles and Mary Beard, The Rise of American Civilization, pp. 89–90.) New England ships carried fish and lumber to England, Spain, and Italy; went whaling through the seven seas to get oil and candles for Europe; sailed to Africa and the West Indies in the slave, rum, and molasses trade; and competed with French and English bottoms for the lion’s share of the carrying trade in all the principal ports of the western world. One single fact will illumine the colonial scene. As early as 1740, taxes in the colonies were no longer paid in kind (produce) but in money, i.e., there existed a money economy based on production for the international market.

Let us view the matter from another angle. While it is true that America possessed richer natural resources than Europe, it lacked the most important of all productive forces-and the indispensable element of capitalist production—a supply of living labor power. Labor had to be imported from Europe by immigration or indenture, or from Africa through the slave trade, before this natural wealth could be exploited. This fact alone disproves any theory, like Corey’s, which makes the early development of American economy depend primarily on its internal natural resources.

The dependence of American economy upon the world market increased, rather than diminished, after the colonies had achieved political independence from England (incidentally, only by means of the decisive intervention of French money and French arms). The whole development of American economy from the War of 1812 to the Civil War was largely a product of European large-scale industry, and of English industry in particular. That agriculture was the predominant part of American economy during this period should blind no one to the fact that this agricultural industry was not the subsistence farming of isolated pioneers, but was in the main a capitalist cash-crop production. The principal crops, cotton in the South and foodstuffs from the West, were shipped not only to the North but to Europe to provide raw materials for its textile mills and food for its laboring population.

The main features of American economy during this period were shaped, not simply by the richness and diversity of the resources to be found upon the continent, but by the demands imposed upon these internal economic factors by the world market, and above all by the more highly developed countries across the Atlantic. Europe was the sun, America the earth, of the capitalist system. The orbit of American economy was fundamentally determined by the attraction exerted upon it by the economic mass of Europe. American agriculture and industry grew, not only because of the richness of the earth, but according to the amount of energy radiated from the solar center of the capitalist system. The direction and the degree of development of the productive forces within America were determined by the economic needs of the parent body.

The fountainhead of Corey’s errors is his habit of treating the development of American capitalism, not as an integral part of the evolution of world capitalism, but separate and apart from it. He first abstracts American economy and its main attributes from world economy and then views it as an isolated, self-contained entity, evolving according to a preconceived pattern, for the most part out of its inner forces alone, until these inner forces were exhausted. For Corey, world economic forces play a decisive role in American economy only in its imperialist stage.

This “nationalist” point of view is maintained throughout the work and is the underlying tendency of its thought. The organic connections between American and world economy are touched upon as an afterthought and in the most eclectic and abstract fashion. In Corey’s survey of the major aspects of capitalist development in the United States from the Civil War to the World War (Chap. II), for example, he hardly casts a glance at world economic conditions. The national and international processes of capitalist development are considered separately and apart from each other, as though they were parallel and not interpenetrating processes.

One of his few extended references to the part played by foreign trade in the expansion of American economy (contained, significantly enough, merely in a footnote on p. 278) confirms this judgment.

“It must not be assumed that foreign trade was not an important factor in American economic development. It was. The United States, in spite of its peculiarities [italics ours], was inseparably bound up with the world market. Agriculture exported its surplus to Europe, without which its expansion would have been 1imited. Capital, raw materials, and manufactures were imported, accelerating industrial development. After the 1870’s, the American scale of production was enlarged by an increasing cultivation of export markets, particularly for textiles, meats, boots and shoes, petroleum, and metal products, including agriculture machinery.”

In the first place, it must be observed that foreign trade was far more than “an important factor” in American economic development. It was the decisive factor. In the second place, although Corey abstractly recognizes the inseparable connection between American economy and the world market, he does not grasp the effects of this on America’s concrete peculiarities. For him these evidently originated and existed apart from the world market.

In reality, the special peculiarities of American capitalism were a product of the given constellation of economic forces constituting the world market, in which the economic forces of the United States were throughout this period a subordinate factor. American capitalism has always been an organic part of world capitalism. The peculiarities of its economic development were not spontaneously generated from within itself alone, but were the outcome of the interactions between the intra-national and the international productive forces and relations. This we hope to make clear when we consider the peculiarities of American imperialism.

Corey’s Theory of the Development of American Imperialism

We shall not linger over Corey’s general theory of imperialism, except to observe, in passing, that it shares the same defects, since it is based upon the same false antitheses, as his general theory of capitalist development. Instead, we shall pass on directly to the concrete application of his theory in the case of American imperialism, where he is led astray by his false methodological approach.

According to Corey, there have been two distinct phases in the evolution of American imperialism, an earlier and a later, an inner and an outer. The first or “inner imperialist” stage was concentrated within the borders of the United States. The economic relations between the more highly developed Northeastern section and the inner continental areas reproduced within the United States the relations of exploitation that existed between the European nations and the colonial countries. The industrial and financial region (!) exported goods and capital to the frontier in the same way and with the same results as the highly industrial nations exported goods and capital to the colonial regions. “The inner continental areas were the American equivalent of Europe’s overseas markets.” (p. 278) Corey develops the parallel to the point of identifying the relative economic decline of New England agriculture and textile industry with similar phenomena in imperialist England.

Upon examination, Corey’s evidences for the existence of an “inner imperialism“ in the United States turn out either to be unfounded, or to be nothing else than the “normal” conditions and consequences of capitalist development under assumed names. In both cases, the peculiar characteristics of imperialism are conspicuously absent.

Just as there have been two stages of “imperialism”, so, Corey informs us, there have been two stages of “colonialism” within the United States, an earlier phase from 1820 to 1850 and a later phase from 1860 to 1890. In the first colonial period the “East” exploited the “West” commercially by exporting settlers and manufactures in exchange for foodstuffs and raw materials. But where are the specific characteristics of imperialism in such normal capitalist relations? If Corey is looking for “imperialists” before the Civil War, he will find them, not in the Northeast, but among the slaveowners of the South, who instigated the war of 1812 with England and the war of 1845 with Mexico against the violent protests of the Northern capitalists.

Corey is hopelessly at sea by the time he reaches the second stage of “colonialism”. Here he also finds that the major colonial relation was the exploitation of the agricultural West by the capitalist East. Betrayed again by his fatal theory, he speaks of the struggle between the Western farmers and the Eastern capitalists as a sectional struggle, or as a struggle between agriculture and industry, instead of as a class struggle. Yet, elsewhere in his book, he specifically states that the so-called struggles between the East and West, and the North and South, were fundamentally class struggles.

As additional proof of the “inner” imperialist character of American capitalism after the Civil War, Corey cites the exploitation of immigrant and Negro labor by monopoly capital. But surely, the exploitation of the proletariat by industrial capital, no less than the exploitation of the lower orders of the bourgeoisie by their capitalist superiors, is a general characteristic of capitalism, and cannot be considered the distinctive mark of its imperialist stage.

The whole fabric of Corey’s theories of “inner colonialism” and “inner imperialism” is woven from such superficial and misleading analogies, which serve only to conceal the genuine differences between disparate phenomena and different stages of capitalist development. The common traits which Corey discerns, for example, in the economic decline of New England and old England are the results of the same general processes of capitalist development. But there their resemblances end and their all-important differences begin. They cannot be considered identical in kind, as the results of two forms of “imperialism”, without causing the greatest confusion. The lion and the mouse are both products of biological evolution and members of the animal kingdom. But what would we say of a biologist who contended that the mouse belonged to the same species as the lion?

Nothing is gained by quarreling over words. No one can deny Corey his right to use the word “imperialism” to denote two different kinds of phenomena. But Marxism also has its rights, in this particular case the right of priority. When a specific term is stretched to include its opposite within its own meaning, it is useless for scientific purposes. The terms “colonialism” and “imperialism” have precise and scientifically restricted meanings in the vocabulary of scientific socialism. Instead of limiting himself to those single clear concrete meanings, Corey uses them in a double sense. This abuse of the established terminology introduces the utmost confusion into the subject under investigation.

It is not difficult to understand why Corey violates the customary terminology of Marxism and invents a new species of “inner imperialism”. He is genuinely puzzled by an important peculiarity of American imperialism. Monopolies took possession of American economy more rapidly and to a greater extent than in any other capitalist country. Nevertheless, the United States did not pursue an aggressively imperialist policy until the end of the nineteenth century, and did not join the front rank of imperialist nations until the World War. How shall we explain this apparent contradiction between the domestic development of American capitalism and its foreign policy? Why did the United States enter the imperialist arena so much later than the European powers?

Corey answers the problem in the following manner. “American imperialism still lagged behind the European ... [because of] an inner imperialism, or in other words to conditions whose economics resembled that of the export of capital.” (p. 421) The great opportunities for exploitation and the high rate of profit obtainable within the United States absorbed surplus American capital and made its export unnecessary. As soon as “the short-time internal factors” began to be exhausted, American capitalists were compelled to turn, like their European rivals, to “the long-time outer factors” beyond their borders. At this point, the sham phase of American imperialism dissolved and the real era of American imperialism began. “The real outer imperialism was only emergent at a time, when, from the 1880’s to 1910, it was being consolidated in the economy of the highly industrial nations of Europe.” (p. 422)

What has Corey done here? Troubled by the fact that the United States, despite the predominance of monopoly capitalism, trailed far behind the European nations in its imperialist policy, he attempts to cover up the contradiction by giving the United States an imperialist uniform, too. Unable, however, to outfit it in full imperialist regalia, he clothes it in a juvenile imitation, made of homespun, which it soon outgrew and discarded. Corey, himself, should discard it along with his other analogies. It is both false and unnecessary, and serves only to obscure the real processes of the economic and political development of American imperialism.

Although Corey’s answer is unsatisfactory, the problem is a real one and demands an answer. The answer can be obtained in only one way. Not by relying upon analogies derived from some general scheme of imperialist development, but by a concrete analysis of the peculiar conditions of American capitalist development.

The Delayed Development of American Imperialism

The United States entered upon its imperialist career later than the European powers because industrial capitalism held the center of the stage much longer here than in England, France or Germany. Although the concentration of industry began relatively earlier and proceeded at a more rapid rate in the United States than in Europe, and trustification was more highly developed, finance capital did not begin to shoulder aside industrial capital in the sphere of monopolized industry until the close of the century, and did not completely control the strategic centers of national economy and the state until the World War. Since imperialist policies are an outgrowth of the domination of finance capital, the key to the relatively slow development of American imperialism is to be found in the late blooming of finance capital.

We need hardly go outside the pages of Corey’s book to collect the evidence for this thesis. Corey himself informs us that:

“In the United States, before 1898, trustification was primarily industrial concentration, under control of industrial capitalists; after 1898, trustification was primarily financial combination under control of financial capitalists, promoters, and bankers.” (p. 374)

“The 1860’s-1890’s was the epoch of the industrial capitalist, who participated directly in production ... By 1900, the industrial capitalist was swiftly receding into the limbo of small-scale industry, or was becoming a financial capitalist, with interests in a multitude of enterprises, promoting, speculating, financing, not engaged directly in production.” (pp. 360–361)

Industry, then, was trustified after the Civil War under the supervision of industrial, rather than financial, capital. The giant monopolies of the period, Standard Oil, Carnegie Steel, Armour & Co., the American Sugar Refining Co., were organized and controlled by industrial capitalists like Rockefeller, Carnegie, Armour and Havemeyer, and the new capital poured into them came from reinvested profits or from foreign capital directly invested in the industry, rather than from the flotation of bond and stock issues by banks and investment houses. The outstanding exception to this rule was the railroads, because of their greater capital requirements.

Finance capital began to supersede industrial capital and take the initiative in forming monopolies about the beginning of the century. The organization of the Steel Trust in 1900 by the House of Morgan was the first large-scale operation in this field by finance capital. When Carnegie, the ironmaster, sold his steel companies to the banking syndicate headed by Morgan and retired to his philanthropies, he symbolized the retreat of the industrial capitalist before the invasion of the financier. It is equally significant that Carnegie was, politically, an outspoken anti-imperialist and one of the chief financial backers of the Anti-Imperialist League, which organized the opposition to the Republican imperialist policies—until the Morgan partners forced him to withdraw by pointing out that such propaganda was jeopardizing McKinley’s reelection and the tariff essential to the Steel Trust.

While Morgan and Company were preparing to launch the Steel Trust in 1899, they floated the first important foreign loan issued in this country, the bonds of the Mexican Republic. This was followed two years later by a fifty-million dollar loan to Great Britain to help pay the costs of the Boer War, the father of the Morgan war-loans to England that helped suck the United States into the World War.

But although financial capital began to get a foothold before the World War, it did not become the absolute governor of American economic and political life until the war. The transformation of American capitalism from the commercial-industrial (colonial) stage to the industrial-financial (imperialist) stage was accomplished in two separate steps. The period from the Civil War to the turn of the century completed the transfer of American economy from a predominantly agricultural to an industrial basis. The period preceding the World War marked the beginning of its transformation from an industrial capitalist into a financial capitalist, imperialist nation.

Economically speaking, the United States did not shed all its colonial characteristics until the World War. It was a debtor nation and imported tremendous quantities of capital from Europe. Throughout the nineteenth century foreign capital poured in an unending stream into the United States and was one of the most potent factors in its rapid economic development. Canals and railroads, extractive and manufacturing industries, Southern plantations and Western ranches as big as baronial domains sprang into being at the touch of the magic wand of foreign capital, and English capital in particular. The New York money market was but a satellite of the London and continental money markets.

Before the World War the United States was an industrial rather than a financial competitor of the European powers. This can be seen in the comparatively small part played by American capital in the transformation of Japan from a tiny feudal island empire into a world power, although the guns of the United States navy first battered down the gates of Japan and opened them to foreign trade. The United States remained in the ranks of the second-rate powers until it appeared on the scene of military operations in Europe to save the Allies—and its own investments.

The diplomatic policies of the United States before the World War had a provincial stamp and limited objectives, corresponding to the degree of its internal economic development. The ambitions of American imperialists did not extend beyond the domination of the Western hemisphere and free trade with the Far East. The Monroe Doctrine and the Open Door in China were its guiding lights; “America for the Americans” its slogan, Hawaii furnished the typical example of imperialist penetration by American capital during this period; “the bully little war” against the decrepit Spanish empire the extreme limit of its military operations; the islands of Cuba, Porto Rico, Hawaii, the Philippines, and Guam the petty extent of its colonial acquisitions. Although Theodore Roosevelt was the most conscious and aggressive imperialist among the American Presidents, his private schemes were limited by the objective development of American capitalism. He could seize the Panama Canal and wave “the big stick” at England and Germany over Venezuela, but remained nothing more than the watchdog of the Western hemisphere for American interests.

The decisive qualitative change in the character of American capitalism occurred during the [first world] war, which reversed the political and financial relationships between America and Europe, and transformed the United States from a provincial parvenu in the society of the Great Powers into the colossus of the capitalist world. Today, when American capital has taken the whole world for its province, the tasks of Roosevelt II are correspondingly greater.

The relatively meager development of finance capitalism in the United States compared to European finance capitalism before the war, and its gigantic strides forward after the war, is shown by the following statistics of the export of capital, taken from Corey’s book. By 1900 only $500 millions of American capital were invested abroad, including government loans (p. 424), compared to England’s $20,000 million, France’s $10,000 million and Germany’s $5,000 million (p. 419). The export of capital from 1900 to 1910 was “almost negligible” (p. 425), although “by 1913 American foreign investments amounted to $2,500 million, mainly the direct investments of dominant combinations” (p. 427). By 1932, however, America foreign investments had mounted to $17,967 millions (excluding the extremely important inter-governmental loans), of which more than one-half represented direct investments of monopolist combinations (p. 428). What a tremendous leap forward!

The Delayed Development of Finance Capitalism

American imperialism lagged behind European imperialism, therefore, owing to the delayed development of finance capitalism. But what retarded the growth of finance capital and the export of large quantities of surplus capital, which paves the way for imperialist politics? Obviously, the high rate of profit obtainable within the United States. But why did capital, and especially monopoly capital, continue to command a high rate of profit during this period?

In his discussion of “the law of the falling tendency of the rate of profit” in Capital, Marx singles out six causes which counteract the effects of this general law of capitalist development. These are: 1. Raising the intensity of exploitation; 2. depression of wages below their values; 3. cheapening the elements of constant capital; 4. relative overproduction; 5. foreign trade; 6. the increase of stock capital. All of these agencies were at work to a greater or lesser degree in the United States after the Civil War, checking the falling tendency in the rate of profit. Corey systematically ignores one of the most important factors precisely because it is not “internal”, that is, foreign trade.

According to Corey, the cause of the progress of American capitalism and the source of its peculiarities lie, not in the organic connections between American economy and the world market, but in Turner’s universal solvent; “the frontier”.

“While it existed, the frontier was one of the major peculiarities of American capitalism. Its conditions of life renewed economic opportunity and progress. It provided almost unlimited possibilities for industrialization and the accumulation of capital and created constantly larger mass markets. The industrial Eastern states exported manufactures to the newly settled regions and imported raw materials and foodstuffs. This permitted an enlargement of the scale of production and an increasing realization of profit and accumulation of capital ... The expansion of the frontier was a perpetual rebirth of capitalism, energizing its upward movement, strengthening capitalism economically and ideologically; and its continental area and resources performed, up to the World War, the same economic function that colonialism and imperialism did for the industrial nations of Europe.” (p .51)

But what is the economic character of this bountiful frontier, from which all blessings flow? “The expansion of the frontier depended upon the development of agriculture (mining), which in turn depended upon the markets of the industrial Eastern states and Europe.” (p. 50.) We have already pointed out that Corey fails to understand the important function of foreign trade in the development of American capitalism. Here he fails in a test case. By putting the markets of the industrial East on a parity with the European, that is, the world market, he completely misses the significance of “the frontier”, that is, American agriculture, in the expansion of American capitalism.

Again, there is not simply one, “there are really two frontiers. The older frontier, before the 1850’s, built up an essentially self-sufficing agricultural economy ... the newer frontier, after the 1850’s, was increasingly dependent upon the market and price” (p.518).

The existence of two different kinds of frontier is as imaginary as Corey’s two different stages of imperialism. There has always been a peripheral class of self-sufficient farmers in the United States. But by their very nature this class could have little or no effect upon the expansion of American economy, since they bought and sold almost nothing on the market. But, unlike the isolated farmers in the Kentucky and Tennessee hills, even the self-sufficing farmers on the very fringe of the frontier performed important economic functions in the expansion of commercial agriculture. They were the advance scouts of the agricultural army, clearing the forest lands and preparing the soil for the oncoming wave of permanent settlers, the producers for the market. As the main army advanced, the frontier farmer often sold his improvements to them and moved to new lands, where he repeated the operation. It must be remembered, however, that the center of American agriculture before the Civil War was in the Cotton Kingdom of the South. The Wheat Kingdom of the West was just beginning to arise.

Even so, was it true, as Corey claims, that the Western frontier agriculture was essentially a self-sufficing agriculture before 1850? Let us turn to Turner himself for information on this particular period.

“The surplus of the West was feeding the industrial Northeast and finding an urgent demand in Europe. In 1830, breadstuffs to the value of only $7,000,000 were exported; but, in 1847, they had risen to over $50,000,000. This was exceptional due to the European crop failures and the opening of English ports, and the figures dropped in 1848 and 1849 to $22,000,000. But the capacity to supply such a relatively large surplus of breadstuffs indicated the new resources of the West, and its need of a market. Even the lower figures represent threefold the export of 1830.”

And Turner goes on:

“Cotton had risen from a production of less than Soo,ooo bales, around 1830, to over 2,000,000 bales, in 1850. As over two-thirds of the crops was exported, this furnished the most important single factor in our foreign exchange and an essential basis for the use of bank credit in domestic business. The value of the cotton exports was, by the close of the period, over three times the value of the exports of foodstuffs. In short, during these two decades an enormous and transforming increase took place in the agricultural production of the interior of the United States, due to the opening of virgin soils in regions equal in size to European countries, and furnished new exports, new markets, new supplies to the manufacturing cities, and new fields for investment to the capitalists of the coast.” (The United States, 1830–1850, by F.J. Turner, pp. 586–587. My italics. G.N.)

So much for the period before 1850 on the Western frontier.

If we analyze the movement of American economy from 1850 to the World War, we see that commercial agriculture remained the mainspring of the movement. American capitalism expanded and contracted in response to the impulses of American agriculture, which expanded and contracted according to the demands made upon it by industrialized Europe. American industry was able to keep operating and expanding itself behind high tariff walls and American capital to enjoy a high rate of profit, thanks, above all, to the position occupied by American agriculture in the world market. Cotton from the South and foodstuffs from the Middle West were the principal American exports during this period. American manufacture and American capital did not displace agricultural commodities from this position until the World War.

The leading role of American agriculture is demonstrated by the fact that American capitalism was enabled to emerge from its periodical crises mainly by virtue of the restoration of the European market to agriculture. In one such specific case, Corey himself informs us that “in 1879 the large exports of wheat, the result of a serious grain shortage in Europe which created an increased demand for American wheat, played an important part in the renewal of the upward movement of prosperity”. The extraordinary burst of prosperity that followed the Spanish-American War was caused by the failure of the wheat crop in Russia and Australia, resulting in heavy exportations of wheat and a rise in price. With wheat at a dollar a bushel, the farmer could pay his debts and spend money to start the wheels of industry and finance whirling again. This is only one side of the picture.

Until the World War a three-cornered relationship existed between the advanced industrial countries of Europe and the United States, whereby the European countries exported capital to finance American railroads and industries (and labor to operate and build them), while American financiers loaned money and American industrialists sold manufactures and services to the farmers, who shipped their products abroad to pay off the debt charges on the capital borrowed from Europe. As usual, the middlemen in this chain of transactions, the strategically located financial and industrial capitalists, harvested the major share of the profits. Thus the two decisive factors in the period which really saw the development of American capitalism to its present estate-import of capital from Europe and export of agricultural commodities to Europe depended upon European capitalism and its needs.

This triangular exchange relationship produced an economic balance between agriculture and industry within the United States, and between the United States and Europe. The relatively proportionate development of American capitalism was but the reverse side of the uneven development of European, and, in particular, English capitalism. English capitalism had been forced to sacrifice its agriculture to the Moloch of the falling rate of profit with the repeal of the Corn Laws in 1846. Free trade with England, on the other hand, opened up an extensive foreign market to American agriculture, enabling it to march forward at the head of American economy until it was overtaken by American industry, and, later, by American capital. The equilibrium between American industry and agriculture was maintained until the international post-war agricultural crisis ruptured it beyond repair.

The basis of American prosperity, that is, the high rate of profit obtainable by American capital, therefore, lay in the continual expansion of American agriculture, which was a product of the world market. The internal relations of American capitalism, out of which its peculiarities arose, were fundamentally shaped by international economic conditions.

Theoretical errors take their revenge all along the line. It is a cardinal principle of Marxism that national peculiarities are “a unique combination of the basic features of the world process.” Corey, however, forsakes the Marxian position for a “nationalist” standpoint. Instead of regarding American economy as a component part of world economy, he views it as a microcosm, mirroring within itself all the economic relations of the world outside. Except in the imperialist stage of its development, this self-enclosed organism has for him only external and incidental contacts and connections with the rest of the world and its internal relations are self-determined. Consequently, Corey is prevented from seeing the primary cause of the expansion of American capitalism, since it lies outside his field of vision in the world market. He can explain the peculiarities of American capitalism only by resorting to a theory of American exceptionalism, which discovers in Turner’s unique frontier the solution of all its problems. If Corey had purged his mind of such limited conceptions, which conceal more problems than they explain, and consistently adhered to an international standpoint, his work, valuable as it is, would have been considerably more valuable and penetrating.


Last updated on: 6 February 2018