The mid-nineteenth century was indeed “the age of steam and steel,” and that was as true on land as it was at sea. On the land it was steam-powered railroads; on the sea it was steam-powered ships. At the same time, new printing technologies and telegraph revolutionized information flows. Together, the transportation and communications revolutions of the late nineteenth century changed interpersonal relations, international relations, and everything in between. It brought into being the first era of modern liberalism.
In 1800 the fastest way to go anywhere on land was to ride a horse. Local rail systems had been around for several decades, but they were primarily used to support existing canal systems. However, by the mid to late nineteenth century, steam-powered rail coaches had displaced both horse-drawn wagons and stagecoaches worldwide.
In the United States, up through the 1840s passenger rail travel was extremely limited. Indeed, the US Secretary of Interstate Commerce mused in 1895 that “As late as 1850 there seems to have been little conception of the influence which the railways were to wield in the development of the interstate traffic of this great country, and of the country itself.”1 An important milestone was the completion of the transcontinental rail line in 1869. The dream of a rail route connecting the Atlantic to the Pacific was not new, yet the costs were prohibitive and the political had been limited. The impetus for the transcontinental railroad was the American Civil War. Abraham Lincoln understood that a railroad connecting the coasts would support communities and military outposts on the frontier, make valuable resources in the west easier to access, and unite the new territories in Oregon and California to the heart of the Union. On July 1, 1862, Lincoln signed the Pacific Railway Act. The act chartered a new railway company, the Union Pacific Railroad, that was to connect the already existing Central Pacific Railroad with the rail systems in the east to create a cross-continental railroad. Seven years later, the two rail lines were ceremoniously joined, physically linking the West to the East Coast. To commemorate the achievement, on May 10, 1869, a final golden spike was theatrically hammered into the line where the two great rail systems met at the dusty outpost of Promontory, Utah, in front of a large crowd that had been assembled to witness the historic moment.
But these changes were in no way unique to the United States. A parallel development was occurring across the developed world. In fact, the first country to expand railroad usage was Britain. As early as 1844, Britain had a fully developed rail system serving just under twenty-eight million passengers. It would take the rest of Europe thirty years to catch up. It was not till the 1870s that “main lines were completed everywhere, even in countries where the start had been late.”2 The new European rail systems linked the west of Europe to its most easterly points, Constantinople, Salonica, and Vladivostok. The rapidity of the change must have been astonishing. Switzerland in 1850 had a meager thirty-four rail engines in the whole country and Austria had only 671 in 1852. By 1870 Switzerland had almost one thousand rail engines and Austria had 9,160 by 1875.3 France, Germany, and Italy more than doubled their mileage between 1870 and 1890. Perhaps even more astoundingly, over the same period, Britain’s passenger rail travel increased one hundredfold, with approximately 288 million people were using the railroads in the 1870s, half of whom were traveling third-class.4 Rail transit was, thus, particularly important for British of lesser means5 (see Figure 5.1). Even in Latin America, a railway network had begun in Argentina as early as 1855.6
Nonetheless, the largest rail expansion was in the United States where rail lines increased by a whopping 76 percent, “from 52,900 miles in 1870 to 93,200 miles in 1880”7 (see Figure 5.2). Railroad development was so central to the growing United States economy that in the early 1880s the Pennsylvania railway was the nation’s largest corporation, carrying over two million tons of industrial and consumer goods every year. An early account of what it was like to travel by passenger rail was recorded in the New York Times in 1869. In the article entitled “ACROSS THE CONTINENT: From the Missouri to the Pacific Ocean by Rail. The Plains, the Great American Desert, the Rocky Mountains. One Hundred Hours from Omaha to San Francisco,” the correspondent marveled at the wondrous change railroads had brought:
What a contrast between then and now! The slow, toilsome, tedious jogging of the mule-drawn trains over the vast, dreary waste—a dozen or fifteen miles made at the end of the day—then the night bivouac, with defensive preparations against the Indians; now, whirling along at the rate of thirty miles an hour, with sumptuous repasts during the day and luxurious couches during the night! What a contrast even with the comparative rapidity of the overland mail coaches, for [one passenger] informs me that three years ago he was ten days and nights in making this distance we have just traversed in two!8
Figure 5.1 Railroad Development in Britain, Passenger Miles/Journeyed (Millions) 1830–2010
Source: https://publications.parliament.uk/pa/cm200809/cmselect/cmtran/233/233we02.htm, Contains Parliamentary information licensed under the Open Parliament Licence v3.0.
Figure 5.2 Railroad Development USA
As railroads were forever altering transcontinental travel, steamships were transforming transoceanic travel. Steam-powered vessels had already been in use for some time and played a critical part of the First Industrial Revolution. However, steamboat conveyance was restricted to canals and rivers and its use was primarily limited to cargo carriage. From the early 1800s, steam vessels were the primary means of transporting materials, like rubber, copper, and palm oil, needed to fuel Europe’s and America’s growing manufacturing industries. European colonizers used steam-powered gunboats to access inland waterways in China, the Middle East, and Africa. In the United States, steamboats transported trade goods and slaves up and down the Ohio, Mississippi, and Hudson Rivers. It was not until the 1860s that steamships capable of long sea voyages were developed.
Although a number of improvements played a part in making steamships seaworthy, the most important was switching from wood to coal as the primary fuel. Coal not only took up much less space than wood, it also burned much more efficiently.9 The critical change came in 1867 with the invention of the convection boiler, a sophisticated marine boiler that could safely and efficiently burn coal. Before this, marine boilers functioned more like kettles; water was turned into steam by simply boiling it above a wood-burning fire contained in a box. The convection boiler added a flue to the boiler through which gas from the burning coal entered and then was transformed from heat to steam. This was an exponential change that enabled ships to carry enough fuel to travel across the Atlantic Ocean. A sense of the enormity of the change is captured by the fact that in Germany alone, between 1871 and 1887, “Steamship capacity rose by about 454 percent and steamship crew-men about 226 percent.”10
Oceanic travel advanced further with the completion of the Suez Canal in 1869. Cutting across the Suez Isthmus in Egypt at the top of the African continent, the canal connected the Mediterranean Sea to the Red Sea. Before its construction, even the new steamships with their sophisticated coal-burning boilers could not carry enough coal to circumnavigate beyond Africa. But, having a direct channel between the two seas meant that ships traveling from the North Atlantic to the Indian Ocean no longer had to traverse the length of the African coast. This reduced the distance traveled between Britain and India by some 4,500 miles. Now, for the first time in history, “steamships became a viable means of transporting goods from Europe to Asia.”11 Indeed, the Suez Canal was a monumental feat on the order of the ancient pyramids. The excavation took ten years and used state-of-the-art dredgers. It also took the lives of one hundred thousand men and boys, most of whom were peasants forced to toil in unhealthy conditions and live in dilapidated tents where cholera, smallpox, and all manner of diseases were spread.12
These profound changes to travel brought international trade to new heights. It is true that the First Industrial Revolution had made mass production possible, but it was only after railroads and steamships reduced distribution costs that trade became thoroughly internationalized. The new means of transportation allowed for an unprecedented volume of goods to be conveyed, at unprecedented speeds, and with greater efficiency.13 Transatlantic trade costs fell roughly 60 percent from 1870 to 1900.14 As a consequence, “world exports expanded by an average of 3.4 per cent annually, substantially above the 2.1 per cent annual increase in world GDP,” and “the share of trade in output (or openness) rose steadily, reaching a high point in 1913, just before the First World War, which was not surpassed until the 1960s.”15
Steamships and railroads not only transported goods; they also carried people, information, and ideas. It is estimated that in 1820 only one in every five thousand US citizens traveled abroad. A century later, an average of one in every 324 Americans was making international excursions annually. The impact on immigration was even greater. Before the nineteenth century, travel was formidable, slow, and costly, particularly across oceans. Not many people chose to emigrate to new continents. The largest transfer of peoples from one continent to another had occurred by means of brutal force, through the Atlantic slave trade. Those who willingly embarked on such an arduous journey were few, primarily merchants and “a relatively small trickle of settlers, agriculturalists, and miners to frontiers throughout the world.”16 The new transportation technologies changed all of that. By the 1880s, “intensive emigration spread south and east as far as Portugal, Russia, and Syria.”17 In fact, 1820 to 1913 witnessed one of the largest self-directed movements of people the world had ever seen: “26 million people migrated from Europe to the United States, Canada, Australia, New Zealand, Argentina and Brazil . . . An even larger number of Chinese migrated to countries around the Pacific Rim and beyond.”18
While transportation was transforming the world, communications were revolutionizing society at as rapid of a pace. Change began with new innovations in printing. At the beginning of the nineteenth century, printing was an artisan’s practice. It involved multiple steps all performed by hand, from inking the plate to stacking the sheets. Changes that revolutionized the industry began in the 1860s.
In 1863, the first automatic rotary-fed printing press was developed. The automatic press consisted of a cylinder around which text and images were curved and then rotated by a drum to spin out printed sheets. Whereas before the rotary press, two men manually operating a wooden screw press might complete a maximum of 3,500 sheets in a day, with the rotary press it was possible to produce 8,000 sheets per hour.19 Other innovations came soon after, including monotype and linotype setting, which allowed printers to set an entire line of type at once.20 Simultaneous developments were being made in paper production. Before the 1860s, paper was made from cotton, literally from cotton rags, a very labor-intensive process. The introduction of paper pulp dramatically cut manufacturing costs. Because wood could be pulped in a mill in large quantities, the commercial production of paper was now possible on a scale never before achieved.21 Combined, these various innovations made the quick and easy production of bulk print products feasible. With the reduction in printing costs not only inexpensive books, “pulp fiction,” but also large batches of newspapers, whether broadsheets or journals or small dailies, could be produced cheaply. It was the birth of mass media.
The new rail systems contributed to the rapid sharing of information among private individuals as well. Prior to the 1860s, the post was extremely slow and so costly it was used almost exclusively for commercial purposes. An attempt to improve the speed of mail carriage was made in the United States with the introduction of the Pony Express in 1860. But the Pony Express was not much more affordable and remained in operation for a little over a year. Once railroads became viable, it was quickly eclipsed. The expansion of rail systems reduced inland transport costs “by over 90 per cent between 1800 and 1910.”22 These changes had an enormous impact on personal communications. For example, in 1850 Americans received five letters a year on average. By 1900, that number had increased to approximately ninety-four pieces of mail per person.23 As a measure of this rapid growth, the number of United States post offices almost tripled from around 28,500 in 1860 to just short of 77,000 in 1901.24
Low-cost printing and rapid rail distribution also meant companies could now sell their wares directly to people living in small towns and remote rural areas. A new commercial industry came into being—the mail-order catalog. The famous Parisian department store, Au Bon Marché, introduced its mail-order service in 1871. One year later, in August 1872, Montgomery Ward published the world’s first general merchandise mail-order catalog. Several other enterprising retailers followed suit, including Rowland Macy in 1874, John Wanamaker in 1876, Hammacher Schlemmer in 1881, Richard Sears in 1886, and Alvah C. Roebuck in 1896. Sears was one of the most stunning success stories of the mail-order business. His first small mailer for watches in 1886 ballooned into a 786-page catalog in only one-year’s time! In fact, so profitable was the mail-order business that Montgomery Ward and Sears eventually had two of the largest business enterprises in the United States.25
Even more significant to the revolution in communications was the astonishing development of telegraphy. As Lew and Carter observe, “The telegraph was the first mode of communication to virtually eliminate the effect of distance, allowing for near instantaneous communication.”26 The first intercontinental telegraph wire was laid in 1858, connecting North America to Europe. Before the cable was laid, news from Europe had typically taken over six weeks to reach the United States.27 After the transcontinental cable, “information flowed across the Atlantic at the speed of an electrical impulse.”28 The change was dizzying. Soon, “New cables were being laid all over the world . . . Malta had been linked to Alexandria in 1868, and a direct cable was laid from France to Newfoundland in 1869. Cables reached India, Hong Kong, China and Japan in 1870; Australia was connected in 1871, and South America in 1874.”29
Telegraphy transformed business almost overnight. Prior to the telegraph, New York merchants trading with England typically received updates from their foreign associates once or twice a month and the information received was usually several weeks old by the time it arrived. But, with the telegraph, “traders in virtually every major center gained more and better access to vital information about harvest prospects and about prices in both the grain exporting and importing regions.”30 “Suddenly the price of goods and the speed with which they could be delivered became more important than their geographic location.”31 To stay competitive, businesses had to adopt to the new technology. “The result was an irreversible acceleration in the pace of business life.”32
Telegraphy impacted commercial trade in other ways as well. The telegraph “allowed shipping companies to redirect ships in response to changing opportunities,” and enabled railroads to lower costs by helping them better “utilise their track and avoid double-tracking.”33 Everything from the military to corporate organizations to newsgathering came to rely on the telegraph for communication and coordination.34 Indeed, the telegraph changed businesses large and small, whether “the processing of tobacco, grains, whiskey, sugar, vegetable oil and other foods . . . [or] the refining of oil and the making of metals and materials . . . glass, abrasives, and other materials.”35 One of the most critical changes was that trade in commodities became global as prices for everything from cotton to corn could be reliably communicated instantaneously. Diverse industries became global businesses, such as “Metal markets, ship brokering, and insurance.”36
With the miraculous innovations in transportation and communications, finance capital was able to take flight. This was in part because accompanying the telegraph was another noteworthy innovation, the ticker tape. Ticker tape “provided brokers across the country with a printed transcript of trades on exchange floors almost immediately after they had happened.” This meant that, for the first time, traders had access to “up-to-the-minute stock, gold, grain, cotton, and oil quotations as well as general financial and political news.”37 Together, telegraphy and ticker stock provided the foundation for new forms of finance. They opened up futures trading, and greatly facilitated “arbitraging differences in securities prices across markets.”38 By the 1880s, several thousand bankers and brokers across the United States subscribed to Western Union’s ticker service.39
Of course, new forms of capital finance also developed at this time. Schumpeter rightly recognized that the great national banking institutions of the mid-nineteenth century were developed largely in response to investment opportunities presented by railroads. Arguably, the globalization of haute finance itself can be dated to 1852 with the establishment of Credit Mobilier. The new form of investment banking is deemed by some to be as profound a financial innovation as the creation of the joint-stock companies in the Middle Ages. Credit Mobilier was founded in Paris by the Péreire brothers to compete with the Rothschild Banks’ lucrative monopoly in industrial finance. However, the Rothschild Banks had a weakness: they only offered short-term capital loans. The innovation introduced by the Péreire brothers was to provide financing for long-run investment needs. Credit Mobilier was, thus, the first bank to issue long-term bonds; and they did so primarily for the construction and acquisition of railroads across Europe and the United States. Credit Mobilier did not solely fund railroads, but it was their bread and butter. Even the initial capital for Credit Mobilier had come from railroads. The Péreire brothers had been the central bankers for the French rail industry before branching in this new direction. With Credit Mobilier, the brothers extended their ventures abroad, widening the scope of their investments.
The United States was where the largest rail projects were attracting capital investments, but the brothers funded rail systems in Austria, France, Spain, and beyond.40 So great was the change made to industrial banking that Credit Mobilier sparked a “financial revolution that rapidly diffused throughout the continent.”41 “The difference between banks of the credit-mobilier type and commercial banks in the advanced industrial country of the time (England) was absolute . . . there was a complete gulf.”42 As Gerschenkron explains:
The number of banks in various countries shaped upon the image of the Péreire bank was considerable. But more important than their slavish imitations was the creative adaptation of the basic idea of the Péreires and its incorporation in the new type of bank, the universal bank, which . . . successfully combined the basic idea of the credit mobilier with the short-term activities of commercial banks.43
In response, “A network of affiliated investment banks was set up in England (International Financial Society Limited), Spain (Credito Mobiliario Espanol), Germany (Darmstadter Bank), Italy (Credito Mobiliaire Italiano), and Holland (Credit Neerlandais).”44 “All these new institutes were big joint-stock banks, with huge amounts of share capital, whose charters tended to very much resemble those of the Crédit Mobilier.”45 Thus, finance actually began to globalize before the wide adoption of the gold standard in 1870, as Polanyi dated it, and, moreover, it developed largely in response to the investment opportunities opened up by the mid-century explosion of railroad construction.
The coalescence of all these technological innovations brought into being international liberal trade.46 Between 1870 and 1911, “a truly global economy was forged for the first time, extending from the core of Western European industrializers to late-comers in Eastern Europe to raw material suppliers on the periphery.”47 Many scholars date the beginning of the new globalized trade regime to 1860, the year that Britain and France came to a comprehensive trade agreement. The “Cobden-Chevalier agreement,” so named after the two principal negotiators, was historic because it included the world’s first “Most-Favored-Nations” clause. The clause guaranteed any tariff concessions granted by either of the signatory states would be extended to a third trading partner. The Most-Favored-Nations clause, hence, created a powerful incentive for other nations to follow suit and was quickly picked up across Europe. After the “Cobden-Chevalier agreement,” “France concluded a treaty with Belgium in 1861, followed in quick succession by agreements with the German Zollverein in 1862, Italy in 1863, Switzerland in 1864, Sweden, Norway and the Netherlands in 1865, and Austria in 1866.”48 Thus, the new treaty helped expand trading opportunity among states, making the spread of free trade much easier49 (see Chapter 12).
The growth of liberal trade required more than most-favored-nations treaties. Indeed, several international organizations were established to support the international character of the miraculous technological changes that were developed during the Second Industrial Revolution. One of the first international institutions established was the International Union for Weights and Measures (1857). Everything from ohms to volts to amperes to watts, and joules were standardized across nations. This was followed by a series of other organizations, including the International Telegraphic Union (1865), the Universal Postal Union (1874), and the International Union of Custom Tariffs (1890). In 1884, a Prime Meridian Conference was held in Washington, which achieved the standardization of time across the globe for the first time in history.50 Other forms of standardization were also introduced, such as standardized settings for railway gauges.
Perhaps most important of all the forms of standardization developed during this period, as Polanyi contends, was the adoption of the world’s first international monetary system, initially based on gold and silver, and then only on gold. Gold had, of course, been a medium of exchange for eons. But the international gold standard was something entirely new. For the first time in history, each country agreed to exchange a unit of its domestic currency for a fixed quantity of gold. This meant that any currency could be freely convertible, whether at home or abroad, because exchange rates between countries were fixed. In other words, by establishing the value of a unit of currency in almost every state to a predetermined quantity of gold, there now existed a uniform and regulated medium of international payments.
Remarkably, by the 1880s, “International gold and silver standards became nearly universal . . . [having been embraced in] North and South America, Europe, Russia, Japan, China, as well as other European colonies and independent countries. By 1908 roughly 89 percent of the world’s population lived in countries with convertible currencies under the gold or silver standard.”51 The momentousness of this change is perhaps better grasped when one considers that into the early decades of the nineteenth century, the various states in the USA had different currencies and banking regimes. It took approximately half a century to create a standardized national US currency—and that was within only one country. The immensity of creating a fixed exchange rate across the globe was thus considerable and is widely held to have facilitated a dramatic increase in trade volume. One measure of how much the gold standard impacted trade is that, under the gold regime, the ratio of GDP to international trade in Europe “increased from 29.9% to 36.9.”52
The internationalization of foreign trade and investment after the 1870s was made possible not only because of the gold standard but also through imperial conquest. With colonization, European powers were able to plunder resources from the lands they had colonized to meet their industrial needs. They were also able to expand their industrial production because they now had new captive markets. These intentions were made unabashedly transparent in an astonishingly honest remark attributed to the British imperialist and founder of the former territory of Rhodesia, Cecil Rhodes. In this frequently referred to quote, Rhodes reputedly stated:
We must find new lands from which we can easily obtain raw materials and at the same time exploit the cheap slave labor that is available from the natives of the colonies. The colonies would also provide a dumping ground for the surplus goods produced in our factories.
In fact, both haute finance and railroads were central to the success of these colonial enterprises. Polanyi describes how the “tentacles of haute finance” were used for “The epic of the building of railways in the Balkans, in Anatolia, Syria, Persia, Egypt, Morocco, and China.”53 Railroads were built across Africa, the Middle East, and Asia to more cost effectively transport tons of raw material to the colonial ports. Gains from these new rail systems were enormous. In the 1930s, one investigator in Britain’s overseas territories estimated that “human porters could carry a maximum of 1,450 ton-miles of freight per annum; heavy animals, 3,600; ‘horsed wagons,’ 118,800; [and] tractor trains, 1,000,000”; in contrast, broad-gauge railways could carry 3,613,50 ton-miles of freight per annum, a dramatic increase.54 In a similar fashion, the United Fruit Company first gained a foothold in Central America by financing railroads in Costa Rica and Honduras at the turn of the century. The company later became a central instrument of US imperialism in Latin America.
But it was not only trade, finance, and control over the world’s resources that was internationalized at this time. The telegraph also helped create a modern sense of global interconnectivity. Many people became “fervent believers in the peacemaking potential of the telegraph.”55 One commenter expressed how, “In a very remarkable degree, the telegraph confederated human sympathies and elevated the connection of human brotherhood. By it the peoples of the world were made to stand closer together.”56 In fact, the term du jour was “Internationalism.”
Though attributed to Jeremy Bentham in the previous century, by the nineteenth century “internationalism” had come to describe a new mode of being in the world.57 Internationalism was used to express people’s enormous sense of optimism about the modern era. J. A. Hobson famously described the sense of the miraculous transformation to society that this one word encapsulated, in an address to the Society for Ethical Culture of Philadelphia entitled “The Ethics of Internationalism”:
It is through the facilitation of news, through the press and the telegraph service, that we are brought to-day into ever closer, more immediate and sympathetic contact with the whole world. Everyone, to-day, as we say familiarly, lives at the end of a telegraph line, which means not merely that all the great and significant happenings in the world are brought to his attention in a way which was impossible a generation or two ago, but that they are brought at once and simultaneously to the attention of great masses of people, so that anything happening in the most remote part of the world makes its immediate impression upon the society of nations. The whole world is made cognizant of it, and the immediate and simultaneous sympathy it arouses brings a new element of sociality into the world. In this sense we may say that the world has been recently discovered for the mass of civilized mankind.58
Perhaps the best known expression of this is John Maynard Keynes’s oft-quoted passage, depicting how quotidian this new mode of being had become:
The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep . . . he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any content that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality . . . and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference.59
In step with this optimism, a multitude of international nongovernmental organizations came into being. Indeed, nonprofit international organizations increased by an average of ten organizations a year during the 1890s, reaching a peak in 1910 with fifty-one organizations operating in multiple countries.60 Among the international nonprofits founded at this time, many remain till this day hallmarks of the positive side of the international sphere, including the Red Cross (1863), the First International Congress of Women’s Rights (1878), the modern Olympics (1896), the Nobel Prize (1901), and the Salvation Army. In fact, the Salvation Army had been founded as a modest organization in Britain, but by 1910 it was represented in more than thirty states.61 One of the most self-conscious expressions of the new internationalism was the advent of World Fairs. Each fair served as a platform for states to showcase themselves. Over twenty countries participated, presenting exhibits of their industrial and scientific achievements, or cultural uniqueness. The precursor to these World’s Fair was “the Great Exhibition of the Works of Industry of All Nations” organized by Prince Albert and held at London’s the Crystal Palace (for which occasion the breathtaking glass and metal structure was built in 1851). It was such a success that it was followed by the world expositions in New York in 1853, London in 1862, Philadelphia in 1876, Paris in 1889, Chicago in 1893, Brussels in 1897, Paris in 1900, Buffalo in 1901, St. Louis in 1904, San Francisco in 1915, and Chicago in 1933–34. Indeed, the period from the late 1800s to the early 1900s is regarded as “the golden age” of World’s Fairs.
Altogether, the novel forms of transportation and communications of the mid-nineteenth century linked people in ways inconceivable a decade earlier. The modern turn-of-the-century world was one in which people, goods, and ideas could be carried at a previously unimaginable speeds, across large expanses of space—even oceans. Every part of social life was transformed, from media, to shopping, to trade and finance. Railroads, steamships, printing technologies, and the telegraph represented the triumphal spirit of the new age. Through them a new cult had taken shape, whose sacred pillars were modernization, progress, and expansionary growth.