The depression of the nineties, including the Panic of 1893, has been a subject of great interest for economic historians, as well as for analysts of the business cycle. Coming at the climax of the bitter struggle over the gold standard, this crisis has usually been explained in polemical or oversimplified terms. Despite its significance, there is no published work dealing exclusively with the depression other than W. J. Lauck's The Causes of the Panic of 1893, which treats only the early phases of the crisis. Most explanations of the depression continue to reflect strongly those advanced as plausible during die period itself, with a few qualifications added as the result of the availability of some quantitative data and furdier reflection. Recent construction of additional quantitative series makes possible a more systematic analysis of the economic factors which interacted to precipitate a depression of major proportions.

The subject I should like to discuss grows directly out of the theme of the meetings as a whole. They have been concerned with the American West as an Underdeveloped Region, and the title was intended to suggest the analogy between the United States of an earlier period and the so-called underdeveloped nations of the present day. To many it would suggest a contrast in policy. These other nations are now in many cases striving to achieve economic development by national planning and deliberate measures of governmental policy. On the other hand the United States achieved its massive economic development without over-all economic planning, without five-year plans or explicit national targets of input and output, and—it is sometimes believed—without the adoption of policies deliberately intended to promote development.

The topic of “Capitalism and the Historians” is a subject far exceeding the limitations normally imposed by historical discipline. In fact, in a still wider context, this subject has much to do with the great ideological division of the modern world into the two vast camps of capitalist and communist countries, a most somber spectacle facing us today. The aim here is not to trace the steps by which we have reached the tragic facts of contemporary affairs, but rather to show how our beliefs concerning these matters (such as the view taken of capitalism) are influenced largely by our impression of the past.

Germany in the 1830's gave few if any indications of its great industrial potentialities. The population was overwhelmingly rural and agrarian; Berlin was the only city containing more than 100,000 inhabitants, and the great majority of “cities” (in the legal sense) numbered less than 10,000. Nonagricultural production was carried on for the most part in the home or in small shops employing the old handicraft techniques. The pattern of foreign trade was that which has since come to be associated with “underdeveloped” agrarian nations: exports of agricultural products (grain, wool) and the output of artisanal industries, imports of manufactured goods and exotic wares. In those industries that were to lead the way in Germany's industrialization there were as yet no signs of growth. The few spinning factories that were set up in the 1820's and 1830's employed mainly English and Alsatian machinery, and sometimes foreign capital as well. Coal production lagged behind that of tiny Belgium, and was no greater than that of mineral-poor France. The small, dispersed iron industry was still almost universally conducted with the ancient charcoal technique, and the famed chemical industry was still to be born. The Zollverein was just beginning its great work of economic unification; the effective realization of its promise had to await more adequate means of transportation and financial institutions to provide capital; but by 1840 there were only a few short, isolated lines of railway and no modern credit facilities.

Most students of Jacksonian America are familiar with the Locofocos of New York through the interesting and informative history of the party which its secretary, Fitzwilliam Byrdsall, published in 1842. But Byrdsall himself was primarily interested in the antimonopoly features of his party's program, and therefore his history all but ignores the even more significant monetary policy of the Locofocos. At the present time in historical writing, it is fashionable to emphasize the role played by the Jacksonian movement as a whole in liberating the expanding American economy from the fetters of a dying mercantilistic approach to business enterprise. There is much to be said for such an interpretation. But the Jacksonians faced toward many meccas, and one of the most articulate and widely known groups which rallied around the Jackson standard—the Locofocos—cannot be trimmed to this pattern.

The general theme of these discussions calls for a reinterpretation of the West as an underdeveloped region. This lends credence to a hypothesis occasionally encountered that history is comprised of the examination of a succession of conceptual anachronisms devised in each case by the historian's generation for the solution of contemporary problems and applied as an afterthought to the reconstruction of the past. The adoption of the concept of underdevelopment in die present circumstance is in line with this hypothesis and is, in this regard, in good company with well-worn frames of reference utilized by earlier generations of North American economic historians. Turner advanced the frontier thesis as a tool of analysis of the past at a time when major concern was arising over the frontier's disappearance. Innis fashioned the staple-trade approach to Canadian economic development in the interwar years when for a time it appeared that Canadian prosperity and material advance had vanished coincidentally with the mortal illness of the last great Canadian staple, wheat.

In the beginning of the nineteenth century, the Continental Blockade momentarily ruined the maritime commerce of Western Europe and, by the same token, increased the importance of the land routes of this area. More dian other regions, the valley of the Saone and the Rhône, squeezed between the Alps and the Massif Central on the isthmus separating the Mediterranean from the North Sea, profited from the dislocation and came to know an intense activity. For some 105 leagues from Marseilles to Chalon, the products of Provence and Languedoc, as well as colonial goods brought in along the Mediterranean, took this road leading to Paris and the countries of the Northwest on the one hand, to Strasbourg, Alsace, and Germany on the other. Superbly situated in an obligatory point of passage, Lyons enjoyed at that time an exceptional prosperity; placed as she was at the terminus of the new Cenis road, she added to the Rhone traffic proper the free importation of silk from Lombardy and the Piedmont and the trade in Illyrian and Levantine cotton which had crossed the plains of northern Italy. Thus was realized little by little that “Lyonnaise conquest of the peninsular market of the Empire” described by Marcel Blanchard. Coming ahead of even the traditional silk industry, transport constituted the primary source of wealth of a city where nearly two hundred truckers and shipping agents built up solid fortunes, all the while hoping that nothing would come to halt the process.

There is impressive evidence that wealthy peasants contributed significantly to the success of the Meiji Restoration, the political revolution that launched Japan on her career of modernization. These rural capitalists, for such they were, helped to give the revolution direction as well as power. How otherwise is one to account for a government dominated by samurai, the elite carriers of tradition, following policies that did great violence to Japan's past and destroyed the privileged status of the warrior class? But if the influence of the representatives of rural wealth was so strong, why did they consent to a clique of warriors holding political power almost as a private prerogative for a generation after the Restoration? Despite the demand for a share in power in the eighties, they did consent and weakly accepted the Meiji constitution which sanctified authoritarian government.

If problems of historical study are to be chosen on the basis of their importance in affecting the course of human affairs through time, no phase of life in Western culture during the century and a half after 1800 is more worthy of study than that of economic development. During these one hundred and fifty years there was an increment of total production within western Europe of an estimated 1,500 per cent and an increase of output per capita of some 500 per cent. At no time in history had an equal advance been made at such a rapid pace.

The thesis that long-term price movements in medieval and early modern periods were the results of changes in the supply of precious metals has been questioned by a number of historians who believe that fluctuations in population provide a more fundamental explanation. These men point out that if changes in the supply of money were primarily responsible, the secular rise and fall of prices would have been approximately the same for all commodities. Actually, agricultural prices rose and fell faster and more sharply than did the prices of industrial goods. It is claimed that these price changes and the lack of synchronization between them can be satisfactorily explained by changes in the size of population:

Professor Fowke ably demonstrates the merit of a comparative approach to American and Canadian economic history. His penetrating analysis reveals how relevant the understanding of economic development in Canada is to the study of that in the United States. Of the two, the Canadian national period has been shorter, the essential lines of economic growth simpler, and the role of government clearer and more pronounced. Canadian experience thereby provides a fruitful comparative basis for analyzing the longer, more complex development of the American economy and the more varied, often puzzling, part taken by government.

The period between 1860 and the death of Queen Victoria in 1901 saw the pound sterling moving into even the most isolated corners of the world, seeking, amoeba-like, to reproduce itself with a minimum of effort. Among other areas to feel its impact and to reap its benefits was the American West, particularly the mineral frontier. Records of the Board of Trade indicate that during these forty-one years at least 518 British joint-stock companies were incorporated, with a total nominal capitalization of not less than £77,705,751, to engage in mining and milling activities in the intermountain West, exclusive of the Pacific Coast.

When the Chairman asked me to undertake this paper he reminded me that the general theme was the West as an underdeveloped area and suggested that some comparison be made with underdeveloped areas today. However, it should be made clear at the outset that the problems of the development of the American West in the nineteenth century are very different from the problems of achieving sustained growth in the underdeveloped areas today. The underdeveloped areas today are most typically characterized by a factor combination of abundant labor with scarce capital and land (and resources), usually complicated by a social and political structure not geared to economic advance. America in the nineteenth century, in contrast, was characterized by scarce labor and capital combined with seemingly endless land (and natural resources) set in a framework of social and political institutions that was highly favorable to economic growth.