Die Machtübergabe: Die Logik der Vereinigten Staaten hinter der Überholung des britischen Weltreichs

In 1925, the US dollar took the top spot in the global foreign exchange reserves, which meant that the status of the US dollar had substantially surpassed that of the British pound. However, the financial community at that time was not surprised because as early as 1913, the market value of the New York Stock Exchange had ranked first, and London had ceded its position as the global financial center. The bells on Wall Street had quietly sounded the prelude to a new financial order.

Wall Street in the United States in the 1920s

Earlier than the decline of its financial status, Britain's industrial output and economic aggregate had already started to fall. Before the outbreak of World War I, not only the United States but also Germany had exceeded Britain in terms of economic volume. For this reason, Leslie Hannah, a British historian and professor at the London School of Economics, once sighed regretfully:

"In 1914, the three largest manufacturing companies in Britain were all foreign - owned enterprises: the first - ranked British Westinghouse Electric was a subsidiary of the US Westinghouse; the second - ranked Thomson - Houston Company was a subsidiary of the US GE; and the third - ranked Siemens Brothers was a branch of the German Siemens."

Looking back at the United States before 1925, in 1894, the US industrial output exceeded that of Britain. In 1906, the US GDP surpassed that of the British Empire including its overseas colonies. By 1913, the United States had surpassed its former mother country, Britain, in the three dimensions of industry, economy, and finance, laying a solid foundation for its later becoming the global hegemon.

This article will focus on the historical process of how the United States, after the end of the Civil War, surpassed the "Empire on which the sun never sets" in 60 years from 1865 to 1925. This inevitably involves three crucial questions:

First, what was the situation of the US industrial foundation before the Civil War?

Second, how did the United States catch up with Britain after the Civil War?

Third, why did the United States experience an innovation explosion in the 20th century?

01 Before the Civil War: Industry Built on "Technology Smuggling"

In 1787, representatives from 13 states successfully formulated the constitution in Philadelphia, and the United States of America was finally established. To prevent the rise of the United States, as early as 1785, Britain, which had taken the lead in the Industrial Revolution, after losing the American War of Independence, chose to ban the export of textile machines, patterns, and models to the United States through legislation and prohibited skilled technical workers from immigrating to the United States.

Today's Chinese people are quite familiar with this phenomenon. More than two centuries later, the United States adopted almost the same approach against China's high - tech industries such as chips and AI. However, once technology and business achieve a two - way interaction, the spread of technology cannot be stopped, because this is one of the laws in the long river of human history.

In 1789, Samuel Slater, known as the "Father of American Manufacturing," successfully brought advanced British textile technology to the United States. Samuel was born in Derbyshire, Britain, in 1768. He started learning textile at the age of 14. At the age of 21, he boarded a passenger ship to New York in disguise as a farm laborer at the risk of being arrested.

In 1793, when Samuel Slater replicated the Arkwright spinning machine, he probably never thought that his "technology smuggling" would become the starting point of American industrialization. In 1830, the number of cotton mill workers in Massachusetts had reached 25,000, while in Britain, it was only about 18,000 during the same period.

Alexis de Tocqueville marveled in "Democracy in America": "The factories here are not just machines but organs of society." Samuel, who died in 1836, owned 13 textile mills across the United States before his death and was a real millionaire.

The Arkwright spinning machine in the 18th century

If Samuel was the founder of American industrial development, then Alexander Hamilton, the first Secretary of the Treasury of the Federal Government, could be regarded as the main promoter behind the early industrial development of the United States.

In 1790, Hamilton, who had just taken office as the Secretary of the Treasury, promoted the Federal Government to pass the first "Patent Act." The act stipulated that "any new and useful art, manufacture, engine, machine, or device, or any improvement not before known or used" should be recognized as a patent.

Different from the views of another "Founding Father," Thomas Jefferson, Hamilton firmly believed that "only through large - scale industrialization can the United States get rid of its heavy economic dependence on Britain. Only economic independence can completely achieve political independence, and to achieve economic independence, the United States needs to become a country with advanced industrial technology like Britain."

In 1791, the famous "Report on Manufactures" was passed under the escort of the "industrial party" led by Hamilton. This report was like a shot in the arm, giving birth to the earliest industrial policy in the United States. He put forward the theory of "protecting infant industries" and even advocated "encouraging the theft of foreign technology." This strategy bore bitter fruit in the early 19th century - in 1840, the US steel output was only 1/40 of that of Britain, but the number of patent applications had already exceeded that of the UK.

The "Report on Manufactures" was passed in 1917, becoming the "industrial declaration" of the United States

The report argued that industries in the early stage of a country's development often do not have the economies of scale that other earlier - developed foreign companies have. Therefore, they need to be protected until these industries in the early stage of development acquire similar economies of scale.

For example, in terms of patent protection, the United States advocated encouraging its people to steal advanced foreign technologies and granting them patents, while prohibiting foreign inventors from obtaining such patents. This seemingly "robber - like" practice today constitutes a slice of the early stage of American industrial development: doing everything possible to absorb advanced technologies and encourage technology diffusion.

Throughout the first half of the 19th century, the US population was growing rapidly. From only 3.9 million in 1790, it increased to 31.5 million before the Civil War in 1860. The territorial area was also expanding rapidly. The Federal Government successively bought Louisiana from France and Florida from Spain and annexed Texas and other areas of more than one million square kilometers through war. At the same time, the US industry was developing crazily. In 1860, when the Civil War broke out, the US industrial output had actually exceeded that of France and was second only to Britain.

However, in 1860, the United States was at most an industrial power, not an industrial powerhouse. There were two reasons: First, in terms of core indicators such as steel output, Britain accounted for about half of the world's total, while the United States only had 12,000 tons, which was negligible compared with Britain. Second, in terms of core mechanical equipment, the United States mainly relied on imports and lacked the ability of independent innovation.

For the United States, the fundamental challenge was the extreme imbalance between the northern and southern economies and industrial structures. Before the Civil War, the northern industrial output accounted for 70% of the country's total, and bank assets accounted for 80%. The South relied on cotton exports and slavery, and its industry was almost non - existent, with only 10,000 textile workers, less than 1/6 of that in the North. Due to the lack of unified transportation, tariffs, and markets, the North and the South were at risk of splitting, let alone catching up with the booming Britain economically.

Map of the American Civil War from 1861 - 1865

In this situation, the Civil War was almost an inevitable war. The four - year war cost the United States more than $7 billion in war expenses and caused the death of 600,000 young men. However, it eliminated slavery in the southern plantation economy, greatly increasing the scale of the free labor force and strengthening the power of the Federal Government, preparing the United States for subsequent policy innovation and technology diffusion.

During the Civil War, in 1862, Lincoln signed the "Homestead Act" and the "Pacific Railway Act." These acts not only liberated the labor force but also advanced the completion of the trans - continental railway by 15 years, making the total length of US railway tracks exceed that of Britain. These acts, either encouraging development or supporting construction, could all be summarized into one goal: Focusing whole - heartedly on construction and concentrating on development.

Therefore, when the war ended in 1865, the Americans who emerged from the ruins did not indulge in the grief of losing their loved ones for too long. Instead, they quickly plunged into the 19th - century American version of "Mass innovation and entrepreneurship for all" and promoted the diffusion of new European inventions and technologies in the United States at an amazing speed.

02 After the Civil War: The United States Became a "New Technology Digestor"

After the end of the Civil War, the United States could be called a "new technology digestor." When Edison lit the electric light in the Menlo Park Laboratory, the patent for Siemens' DC generator had been gathering dust in Europe for a decade; Carnegie's Bessemer converter steel - making method actually originated from the invention of the British engineer Henry Bessemer. However, unlike in the early days of the founding of the country, Britain could no longer stop the cross - ocean spread of new European technologies.

Behind the United States' "technology appropriationism," there was actually unique institutional innovation. For example, the revised "Patent Act" in 1870 allowed foreigners to apply for patents immediately after their technologies were introduced, provided that they must produce in the United States.

The rapid absorption of new technologies enabled the US steel output to exceed that of Britain in 1880, reaching 2.5 million tons, while Britain only had 2 million tons during the same period. By 1900, the total length of US railway tracks exceeded 300,000 kilometers, three times that of Britain, which meant that every 5 Americans had 1 kilometer of railway.

Interestingly, although the relationship between the United States and Britain was good at that time, after the US industrial explosion, trade frictions between the United States and Britain became inevitable. In 1900, the British Iron and Steel Institute complained about "US dumping." At that time, the US steel output had jumped to the first in the world, reaching 10 million tons.

"Steel King" Andrew Carnegie wrote in his autobiography: "I destroyed the British steel myth because they refused to believe in the power of machines." The steel company led by Carnegie already accounted for 30% of the US steel output in 1890. His business secret was to adopt the "vertical integration" model, completely subverting the industry rules.

Andrew Carnegie, the "Steel King" of the United States

In today's terms, it was to integrate the supply chain. By acquiring iron mines, coke plants, and railway lines, Carnegie reduced the steel cost by 40%. At this time, the British steel tycoons still adhered to the "aristocratic monopoly" and refused to invest in new technologies.

The US company with more influence than Carnegie was the Standard Oil Company founded by John D. Rockefeller. He used the "trust" model to monopolize 90% of the US oil market. His "railroad rebate" strategy made the transportation cost of Standard Oil 30% lower than that of its British counterparts. The rapid iteration of oil refining technology (such as the cracking process) increased the US gasoline output by 50 times between 1880 and 1900.

In the same era, the electric power revolution promoted by Thomas Edison and George Westinghouse also opened a new era of electricity. From 1882 when Edison lit the world's first commercial power grid on Pearl Street in New York, it only took the United States 18 years to exceed Britain in power generation and increased the production efficiency of factories several times through electric power.

The product advertisement of Standard Oil Company

Although not the original creators of technology, the technology diffusion of US enterprises was not simply copying and pasting, but embedded with localized systematic innovation: The patent pool model of Bell Labs, the R & D system of DuPont, and IBM's punched - card machine all demonstrated the United States' ability to transform foreign technologies into "mass - producible systems."

By 1906, the US GDP had exceeded that of the British Empire including its colonies, becoming the undisputed world factory. Frankly speaking, after 1865, Britain was responsible for guarding the glory of the old world, while the United States used institutional innovation and scale advantages to transform the technological revolution into a leap in productivity.

03 Ushering in an Innovation Explosion: From Management, Finance to the Nobel Prize

In 1908, when Henry Ford launched the Model T, the US automobile market was still dominated by European brands. However, Ford's "assembly - line revolution" quickly changed this situation. He transformed the factory in Detroit into a continuously operating production line, where workers no longer needed to move around and only needed to repeat a single action at a fixed workstation.

This "scientific management" model shortened the assembly time of a single car from 12 hours to 90 minutes and reduced the cost by 60%. The selling price dropped from $850 to $300 or even lower. By 1914, the annual output of Ford cars had exceeded 300,000, accounting for nearly 50% of the total US automobile output.