On Cat’s Paws: Teaching the Emergence of Capitalism in American History

John Lauritz Larson

Modern capitalism has been extraordinarily successful in persuading Americans that the free enterprise system is a natural, timeless, and immutable phenomenon without origin or history. Like modern medicine, the history of capitalism often is treated as a journey away from error and toward enlightenment in which the present enterprise system emerges triumphant from centuries of misguided foolishness. From that triumph came the astonishing “progress” and prosperity that marked the eighteenth through twentieth centuries.

When I teach the emergence of capitalism in American history I start with this alternative proposition: Classical economics describes not a law of nature but a time-bound framework for asserting values and calculating outcomes that was born of an eighteenth-century campaign to disable mercantilism. Thanks to gifts from the state (money, law, contract, and military cover), capitalism profoundly empowered acquisitive individuals and gradually established itself in England and America as the “correct” and “efficient” perspective from which to measure economic performance. [1]

I stress that entrepreneurial capitalism looked extremely attractive to the newly liberated Americans in the early nineteenth century precisely because of their historical goals and objectives. Freedom defined the American experiment, and freedom from the arbitrary, ill-gotten privileges prevailing in British mercantilism (which informed Adam Smith’s analysis) perfectly aligned with similar desires for freedom from class prerogative, hereditary privilege, and (over time) sectarian thought control. Free markets promised unfettered “pursuit of happiness” to all citizens of the infant republic. What could be more exciting? [2]

Fog Crept over the City Like a Cat,” by Anna Larson Nolan, in fourth grade. Courtesy of the author.

I say that capitalism came “on cat’s paws” because the system as a system crept into American life, almost silently, through the window of freedom. In their excitement to exercise new freedoms, after 1783 Americans saw a release of energy and a burst of innovation that quickly transformed farms, workshops, local markets, and even the landscape itself. To illustrate this claim I talk about how roads, turnpikes, bridges, steam boats, and canals profoundly reshaped the economic playing field. Natural advantages—closeness to a town, waterway, or ford in the river; geographical protection from competition—melted away. New opportunities on the periphery profoundly injured producers and vendors once favored by earlier, unimproved conditions. The doctrine of “creative destruction,” Schumpeter’s concept anticipated by Roger Taney in Charles River Bridge, placed tradition and prior rights on notice that social utility and economic growth would justify invasions of the standing order. [3]

Having introduced the transportation network, I turn to production and distribution. Access to distant consumers rewarded innovations such as cotton-spinning mills that ramped up production until no local market could absorb the output. The rapid growth of domestic commerce fed consumer demand for houses, clothing, furniture, hardware, and housewares, which in turn rewarded changes in the process of production. Master craftsmen experimented with division of labor, specialization, simple mechanization, and the progressive de-skilling of common work, resulting by the 1820s in a “bastard workshop” where journeymen-for-life slowly realized they never would own a shop, a competence, a living. Freedom for innovative masters surprisingly yielded widespread dependency for those in their employ. [4]

The rise of dependency within a free enterprise system seems to have caught our ancestors by surprise. (Why is a puzzle well worth discussing with students.) I suggest it was because experience had taught them that oppression and corruption arose from power in the hands of the governors. For an entire generation, whenever negative forces rocked the economy (as in the crises of 1819, 1837, and 1839), people looked for the culprit in relics of government privilege—in money, banking, chartered corporations, the impact of tariffs, or public works. Schooled by the rhetoric of Jefferson to doubt the possibility of beneficial government, Americans repeatedly sought relief in more liberty. This tended to accelerate a modernizing process, anchoring the capitalist system firmly in the national experience. [5]

By this point my audience has doubts about my faith in the “American Way.” I press on, explaining that after 1830 political economists naturalized the claims of Smith and Ricardo, insisting that the laws of trade were forces of nature, like gravity. Free-labor ideology promised meritocratic outcomes for all who eschewed indulgence and kept their shoulders to the wheel. In the southern variant, new land in the West for slavery promised (however improbably) future access to the master class. Of course, rising dependency, shocking as it was, appeared in isolated pockets to working men and women, recent immigrants, and African Americans, while the great majority of free white citizens imagined a perpetual happiness on the farms and plantations that spread across the middle of the continent. For this reason, I suggest, most Americans pledged their allegiance to freedom and markets right through the Civil War era. [6]

Capitalism came on cat’s paws, through the window of freedom, and it made itself at home before anybody quite understood how it all would work out. Preoccupied with blocking slavery—the ancient system of dependency clearly at odds with freedom and republicanism—mid-century Americans failed to notice the implications of shifting from bondage to contract until the tremendous consolidations of Gilded Age industrialization had turned a great segment of the population into dependents in an economic system few of them understand and none could control. [7] Three decades of teaching in Indiana have taught me to present the evidence for this and other disappointments in our national story with minimal interpretive spin. My students will not be told that capitalism is not liberating and wonderful—but they might incidentally come to that conclusion if left to puzzle it out. Or, they might not.


[1] For background see the first chapter of Drew R. McCoy, The Elusive Republic: Political Economy in Jeffersonian America (Williamsburg, VA, 1980); Jerry Z. Muller, Adam Smith in His Time and Ours (Princeton, NJ, 1993); Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (New York, 1944). Sven Beckert highlights the contributions of the state in his notion of “war capitalism” in Empire of Cotton: A Global History (New York, 2014).

[2] In addition to McCoy, see J. Willard Hurst, Law and Conditions of Freedom in the Nineteenth Century United States (Madison, WI, 1956); John R. Nelson, Jr., Liberty and Property: Political Economy and Policymaking in the New Nation, 1789‒1812 (Baltimore, 1987); and my own The Market Revolution in America: Liberty, Ambition, and the Eclipse of the Common Good (Cambridge, UK, 2010), 12‒37.

[3] See my Internal Improvement (2001); Stanley I. Kutler, Privilege and Creative Destruction: The Charles River Bridge Case (Baltimore, 1990); Morton J. Horwitz, Transformation of American Law, 1780‒1860 (Cambridge, MA, 1977); Martin Bruegel, Farm, Shop, Landing: The Rise of a Market Society in the Hudson Valley, 1780‒1860 (Durham, NC, 2002).

[4] Among the many excellent studies of artisan republicanism, see Sean Wilentz,Chants Democratic: New York City and the Rise of the American Working Class, 1788‒1850 (Oxford, UK, 1984); Paul A. Gilje and Howard Rock, eds., Keepers of the Revolution : New Yorkers at Work in the Early Republic(Ithaca, NY, 1992); Ronald Schultz, The Republic of Labor: Philadelphia Artisans and the Politics of Class, 1720‒1830 (Oxford, UK, 1993). For a fine example of the process in context see chapter one of Paul Johnson, A Shopkeeper’s Millennium : Society and Revivals in Rochester, New York, 1815‒1837 (New York, 1978).

[5] See the interludes in my Market Revolution; also Jessica Lepler, The Many Panics of 1837: People, Politics, and the Creation of a Transatlantic Financial Crisis (Cambridge, UK, 2013).

[6] See Eric Foner, Free Soil, Free Labor, Free Men: The Ideology of the Republican Party before the Civil War

 (Oxford, UK, 1970); Michael A. Morrison, Slavery and the American West: The Eclipse of Manifest Destiny (Chapel Hill, NC, 1997); Jonathan Glickstein, Concepts of Free Labor in Antebellum America (New Haven, CT, 1991); James L. Huston, Securing the Fruits of Labor: The American Concept of Wealth Distribution, 1765‒1900  (Baton Rouge, LA, 1998).

[7] See Amy Dru Stanley, From Bondage to Contract: Wage Labor, Marriage, and the Market in the Age of Slave Emancipation (Cambridge, UK, 1998).

9 January 2017

About the Author

John Lauritz Larson is Assistant Department Head and Professor of History at Purdue University.

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  1. Stephen Campbell
    Stephen Campbell says:

    I am glad you wrote about this, John. In graduate school, when I was studying for my qualifying exams, my primary field focused on the debates over the market revolution and “transition to capitalism.” Allan Kulikoff had a helpful 1989 article in the WMQ where he, accurately in my mind, characterized the difference between Marxian scholars (at the time a bit more in vogue) who saw capitalism arriving late and defined it as a system of production, in contrast to the more Smithian-oriented scholars who defined capitalism as a system of exchange and saw its roots arriving early, stretching back to the revolutionary period when the British bond markets began to take off. It sure must have been fun and invigorating to be involved in these debates in the 1980s and 90s, which, unfortunately, was way before my time. The introduction to one of Winifred Barr Rothenberg’s books was certainly an amusing and bold shot across the bow to those who emphasized the “moral economy.” I once got a chance to teach a specialized, upper-division course on the United States in the early republic and antebellum eras where your Market Revolution in America was one of the course’s core readings, though I have yet to have the opportunity to teach a course on the history of capitalism that have become much more common since the 2008 financial crisis. I hope to do so one day. Your article here covers a lot of ground that readers can take in multiple directions, but so as my response does not devolve into a disorganized and excessively prolix missive, I’ll try to focus on a few thoughts…1) you mention that you do not overly emphasize the negative aspects of capitalism to your students, but I would imagine that even in a state as politically conservative as Indiana, college students have already come across this perspective, especially if they have taken courses in philosophy, sociology, ethnic and gender studies, other humanities courses, and political science. It is all the more important that college students continue to take these courses even though the history major continues to decline nationwide out of the erroneous assumption, propagated by parents, teachers, employers, and others, that it is not “useful.” Students seem to enjoy it when professors in multiple classes cover the same broad themes, providing students with major take-aways from their college experience. I know I certainly did as an undergrad; 2) In reading your own work and that of Jessica Lepler and others, it seems that the panic of 1837 was a major turning point in how political economists on both sides of the Atlantic began to argue for a more “laissez-faire,” “free market” position, and I put these terms in quotes because most scholars know that even in the heyday of “laissez-faire,” government aid to Big Business was always present (see Novak, Richard White, and others). Post-1837, political economists identified the corruption implicit in government spending on transportation projects as a major pitfall and those advocating more private funding of projects gained the upper hand; 3) for the past few years I have taught both the first half and second half of the US survey course. On the last day of class I always like to wrap up with some general themes. It occurs to me that the Jeffersonian vision of “liberty,” which we might call “negative liberty,” has a long lineage that even continues to this day. It doesn’t take much effort to connect the dots and draw a fairly straight line from Jefferson’s free trade and classical liberalism to Taney’s assertion, drawn from Calhoun’s interpretation of the Fifth Amendment, that slave owners could take their “property” into the western territories, regardless of what democratic majorities had to say; to Stephen Johnson Field’s manufactured creation of “substantive due process” and corporate personhood in the Gilded Age; to those who argued that unions, not trusts, were in restraint of trade; to those who emphasized the so-called “liberty of contract” to strike down child labor laws; to those who believed that it was the “liberty” of business owners to refuse to serve African American customers at Woolworth’s lunch counters; and finally, to today’s rapacious and self-serving perspective that “liberty” somehow means refusing to bake a cake for a gay wedding or overturning the sensible regulations to fight climate science, the regulations to separate commercial and investment banking, and the regulations implicit in social insurance. The more compelling “positive liberty” (see TR, FDR, and Truman’s commission on civil rights) in which government can provide for the common good by protecting the environment, collective bargaining, civil rights, and social insurance is, sadly, not the default position for way too many Americans. And yet, those who are familiar with the “commonwealth” school of historians *know* that government support for the “common good” also goes back to the nation’s founding and is just as important as Jefferson’s view. I wonder if those today who think “liberty” is the right of businesses to skirt important regulations realize that the intellectual foundations of their position lie in slaveholders who wanted to keep government small (in most circumstances) to protect their “property.”


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