were far more durable than the wrought iron ones they replaced, and in less than 20 years the manufacture of wrought iron rails ceased, the last being produced in this country in 1884, a year that witnessed the forging of 1,145,000 tons of steel rails. By then, those steel rails cost only one-third what the iron rails had in the 186Os. Cheap, high-quality steel track fueled the boom that would by 1900 give us the largest rail network in the world.

Steel also made tall buildings possible. The first human structure to rise higher than the Great Pyramid of Egypt, built about 2800 B.C. , was the Eiffel Tower, built in 1889—of iron. And then American cities soared into the sky thanks to steel frameworks (and the electric elevator), with buildings less iconic, perhaps, than the Eiffel Tower but considerably more economically productive.

Steel became the engine driving American industrialization in the late nineteenth century. In 1860 the country produced only 13,000 tons. Ten years later output had risen to 77,000 tons, and, just a decade after that, to 1,397,000 tons. By the end of the century, the United States was turning out 11,227,000 tons, more than Britain and Germany combined.

This astonishing growth was possible only because of the vast size of the American market and the fact that it was entirely a common market. The Constitution gave control of interstate commerce to the federal government, and the U.S. Supreme Court case of Gibbons v. Ogden (1824) had ensured that that control was total. Thus, although American industry was protected from foreign competition by the high tariff, it still had to compete internally in a market that, thanks to the railroads, now spanned a continent and encompassed 76 million people.

Another reason for the success of the American steel industry were men like Andrew Carnegie. Born in Scotland in 1835, Carnegie arrived in this country with his impoverished parents as a boy of 13. After the Civil War, he saw opportunity in the burgeoning steel business in Pittsburgh. Within two decades, the Carnegie Steel Company was the largest in the world. Carnegie’s basic business principles were simple: In good times, plow profits back into the company to acquire the latest technology and to be the low-cost producer in order to remain profitable during downswings; in bad times, use the cash surplus to buy up less efficient competitors and expand market share. Many other American businessmen in other industries would emulate Carnegie’s techniques.

At this time too, Thomas Edison, not usually thought of as a businessman at all, invented one thing that has proved of singular importance to maintaining and extending American economic leadership, the research laboratory. His laboratory in West Orange, New Jersey, was the first in the world to be devoted to developing new technology in a systematic way. The idea was soon copied by corporations, notably General Electric (Edison was among its forefathers),

AT&T (which set up Bell Laboratories), and DuPont. These laboratories would produce an endless stream of technology in the twentieth century that has remade the world.

Another rising industry in post-Civil War America was petroleum. Although petroleum had been known of since ancient times in areas where it came to the surface naturally, it was only in 1859 that Edwin Drake successfully drilled for it, in northwest Pennsylvania. The business grew as kerosene, the main petroleum byproduct in the nineteenth century, rapidly replaced the ever more expensive whale oil as the major illuminant in areas not served by gaslight, which is to say outside of cities. Petroleum production was only 2,000 barrels in 1859 but a decade later reached 4,215,000 barrels. By the turn of the century, American oil production was 63,621,000 barrels.

At first the petroleum business, centered in Cleveland, near the Pennsylvania oil field, was chaotic. There were more than 30 oil refiners in Cleveland alone in the 186Os, and prices fluctuated wildly, from a high of $13.75 a barrel to as low as ten cents. These huge swings made it very difficult for businesses to plan for the future and to control costs, and one of the Cleveland refiners set out to bring order to the industry. In 1870 John D. Rockefeller and his partners, notably Henry Plagier, formed a corporation, Standard Oil. That year, it controlled about 10 percent of the American oil-refinery business. Ten years later it had about 80 percent of a much larger industry, having bought up many of its competitors and driven others into bankruptcy.

Standard Oil always paid a fair price for its acquisitions, but if a firm declined to accept the deal offered, the company did not hesitate to use its power to ruin the competitor. And it employed other tactics, such as secret deals with railroads to ship Standard Oil products at low rates while charging its rivals high ones until they had no choice but to sell out. Learning how to regulate these new economic giants effectively, without destroying their economic utility in the process, occupied much of American politics in the twentieth century.

The new corporate empires would not have been possible without capital. The United States had always been a capital importer, selling corporate bonds and stock to European investors. But after the Civil War, Wall Street increasingly was able to supply the needed capital. The New York Stock Exchange, which had often traded less than 5,000 shares a day in the 185Os, had its first million-share day in 1886. Along with the rise of the stock exchange, Wall Street’s banks were becoming major forces in the American economy. As the new industrial corporations grew and combined into continentwide concerns, they had no choice but to come to Wall Street to get the needed capital. This gave the

Street the opportunity to impose standards. Before the Industrial Revolution, most businesses had been family-owned, so the managers were also the owners. But as corporations grew larger and larger, the distance between the people who ran the companies and those who owned them increased, and their interests diverged. Owners wanted to know how well the managers were doing. The managers wanted to present their efforts in the best possible light.

But like the old family firms, the earliest of these publicly traded corporations did not issue reports of their affairs, even to their stockholders. And there was no general agreement about how the bookkeeping should be done.

Although there had been accountants for centuries, it was only in the 188Os that the profession began to organize formally. In that decade, Wall Street banks increasingly required companics that sought financing to have their books certified by independent accountants, and the New York Stock Exchange required that listed companies publish annual reports.

The most prestigious bank on Wall Street by the early 1890s was J. P. Morgan and Company, whose headquarters had been at 23 Wall Street, at the corner of Wall and Broad Streets, since the 1860s. It had become known simply as the “Corner.” By the turn of the century, J. P. Morgan was the most powerful banker not only on Wall Street but in the entire world. The absence of a central bank compelled the government in Washington in times of financial crisis to turn to Wall Street and, more and more, that meant turning to J. P. Morgan. In 1895, when a severe depression nearly forced the United States off the gold standard, it was Morgan who arranged a specie loan to prevent that outcome. In the banking crisis of 1907, again it was J. P. Morgan who summoned the other New York bankers and devised a means to prevent the closing of sound banks, aborting the crisis and averting another depression.

However, the recurring need to rely on a private individual in times of crisis slowly eroded the longstanding political opposition to a central bank. The Federal Reserve came into existence in 1913, the same year that J. P. Morgan died. Unfortunately, the Fed as it was originally designed was so hobbled by restrictions on its freedom of action that it proved unable to perform effectively in the great financial crisis of 1929–1933.

The United States, which had long been a major exporter of agricultural products and raw materials, remained so (cotton would be the country’s biggest export until the 1930s). But it increasingly became an exporter of manufactured goods as well. In 1865 only 22.78 percent of American exports were manufactured goods. By 1900 the proportion had risen to 31.65 percent. While the country exported only $6 million worth of iron and steel products in the year before the Civil War, in 1900 the United States exported $122 million worth of locomotives, stationary engines, rails, electrical

machinery, wire, pipes, metal-working machinery, boilers, and other goods.

Europe suddenly woke up to the economic colossus that was building across the Atlantic and competing ever more effectively with European manufacturers, and there was an alarmed flurry of books with titles like The American Invaders , The Americanization of the World , and The American “Commercial Invasion ” of Europe . With the country exporting more and more, the high tariff that industry had backed since Civil War days became a liability, as it tended to generate retaliatory tariffs in other countries. In 1913, with the traditionally anti-tariff Democrats in power in both the White House and Congress for the first time in a generation, the tariff was significantly reduced. That year also saw the reintroduction of a then very modest federal income tax to help make up for the lost revenues.