China's Economic Ascendancy (Part 1)

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by: James Quinn

Do you ever get the feeling that we are being pursued by someone who wants to kill us? No matter what we do, they are still in pursuit. They never let up. We’ve tried deception, trickery, and frantic escapes. Now we have climbed a steep mountain and are cornered in a canyon with our pursuers above and a river below. We don’t have many choices. We could give up, we can fight and die, or jump and hope to live another day. Our pursuers are not going to surrender. They are going to keep pursuing us until we’re caught or dead.

The United States once had a Western frontier spirit. No challenge was too daunting. We were the pursuers, Great Britain was the pursued. We were a young nation with a rural population anxious to move to the big city and make their fortune. With fertility rates exceeding 6 births per woman for the 1st half of the 1800’s, a population explosion took place in the U.S. Fertility rates declined steadily, but still stayed above 4 for most of the 1800’s. The youthful nation created the Industrial Revolution, built thousands of miles of railroad tracks, created a financial banking system, became a manufacturing powerhouse, and adapted to an urban society. It wasn’t smooth progress, but it was relentless progress.

Year Fertility Rate
1800 7.04
1810 6.92
1820 6.73
1830 6.55
1840 6.14
1850 5.42
1860 5.21
1870 4.55
1880 4.24
1890 3.87
1900 3.56
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Source: US Census

A creative entrepreneurial spirit was unleashed with all its fury during the 1800’s in America. No problem was too big to solve. Mountains, rivers, oceans, wilderness, and darkness were just obstacles to a better tomorrow. Capitalism and the possibility of wealth and success drove many to create and innovate. The invention of the Cotton Gin revolutionized farming. The invention of the Steamboat revolutionized river travel. The creation of the steam locomotive and railways revolutionized land travel. The sewing machine revolutionized the textile industry. The telegraph and telephone revolutionized communication. The light bulb, electric motors, and diesel engine changed the world.

Person Invention Date
James Watt First reliable Steam Engine 1775
Eli Whitney Cotton Gin, Interchangeable parts for muskets 1793, 1798
Robert Fulton Regular Steamboat service on the Hudson River 1807
Samuel F. B. Morse Telegraph 1836
Elias Howe Sewing Machine 1844
Isaac Singer Improves and markets Howe's Sewing Machine 1851
Cyrus Field Transatlantic Cable 1866
Alexander Graham Bell Telephone 1876
Thomas Edison Phonograph, Incandescant Light Bulb 1877, 1879
Nikola Tesla Induction Electric Motor 1888
Rudolf Diesel Diesel Engine 1892
Orville and Wilbur Wright First Airplane 1903
Henry Ford Model T Ford, Assembly Line 1908, 1913
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The period from 1865 to 1901 is referred to as The Gilded Age, coined by Mark Twain in 1873. This period witnessed the establishment of a modern industrial economy. A national transportation and communication network was created, the corporation became the foremost form of business organization, and a managerial revolution transformed business operations. By the beginning of the twentieth century, per capita income and industrial production in the United States exceeded that of any other country except Britain. Long hours and hazardous working conditions led many workers to attempt to form labor unions despite strong opposition from industrialists and the courts. The businessmen created industrial towns and cities in the Northeastern U.S. with new factories, and contributed to the creation of an ethnically diverse industrial working class which produced the wealth owned by rising super-rich industrialists and financiers such as Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, and J.P. Morgan. Their critics called them robber barons, referring to their use of overpowering and sometimes unethical financial manipulations.

A confluence of demographic factors, the industrial revolution, and urbanization led the United States to become the greatest financial and manufacturing powerhouse in world history, eventually overtaking Great Britain in the early years of the 20th Century. We have retained this position into the 21st Century. Based on the current confluence of demographic trends, bad decisions by U.S. policymakers, the urbanization of the developing world, and the overreach that global empires always succumb to, the United States will not be the dominant world power at the end of the 21st Century. The likely successor will be China.


The population of the United States literally exploded during the mid 1800’s. From 17 million inhabitants (2.5 million which were slaves) in 1840, the United States experienced a fivefold increase to 76 million citizens by 1900. This enormous increase occurred despite the loss of 600,000 men in the prime of life during the Civil War. Great Britain’s population doubled over this same time frame. With fertility rates between 4 and 7 children (versus 2 today) during the 1800’s, much of the growth was home grown. More than 80% of the population lived on farms in the early 1800’s as it was essential to have many children to work the farm. The fertility rates steadily declined as the country shifted from a rural society to an urban society.

During the Gilded Age approximately 10 million immigrants came to the United States, many in search of religious freedom and greater prosperity. This mammoth immigration from Europe and Asia sparked tension and anger among many in the U.S. The new immigrants came to urban America, where disease, overcrowding and crime festered. As a result, relations became openly hostile, with many Americans becoming anti-immigrant, fearing the customs, religion, and poverty of the new immigrants, considering them less desirable than old immigrants. In reality, these new immigrants were essential to the growth of the country. Between 1870 and 1880, 140,000 Chinese immigrants arrived in the U.S. with many working on the Transcontinental Railway project. Labor unions such as the American Federation of Labor strongly opposed the presence of Chinese labor, by reason of both economic competition and race. Congress banned further Chinese immigration through the Chinese Exclusion Act in 1882, which prohibited Chinese laborers from entering the United States. This racism is why every major city in the U.S. has a Chinatown.


The other huge demographic benefit that the U.S. had over Great Britain and Germany was its youth. In 1860, the median age of the U.S. population was 19.4 years old. The median age in England was 27 years old. With 50% of the U.S. population under the age of 20 from 1860 through 1880, there was an unlimited supply of labor to supercharge the engine of growth. The youthfulness of America led to a tremendous sense of vitality and optimism about the future. The percentage decrease in the 20 to 39 age group between 1860 and 1880 is a reflection of the youth wiped out by the Civil War. Despite this setback, the young Americans changed the world. The benefit of a youthful society is that failure and obstacles are brushed off. The reckless adventure of youth leads to discoveries, inventions and new ideas. The older a society gets the more cautious and set in their ways. The following chart paints a disturbing picture for America. In 1860 over 50% of the population was under 20 years old. By 2040 less than 26% of the population will be under 20 years old. With 20% of the population expected to be over 64 years old, the passion, reckless adventurism, and vitality will be in limited supply. Just the cost to support 80 million old folks will be crushing. Developing countries with young populations will be gaining on us.

Age 1860 % 1880 % 1900 % 2000 % 2040F %
under 20 13.7 50.6% 25.5 49.4% 33.8 44.4% 80.4 28.6% 101.6 25.9%
20 to 39 8.5 31.4% 15.6 30.2% 24.6 32.3% 81.6 29.0% 120.3 30.7%
40 to 64 4.1 15.1% 8.8 17.1% 14.6 19.2% 84.4 30.0% 90.2 23.0%
over 64 0.8 3.0% 1.7 3.3% 3.2 4.2% 35 12.4% 79.8 20.4%
Totals 27.1 100.0% 51.6 100.0% 76.2 100.0% 281.4 100.0% 391.9 100.0%
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Source: US Census

Urbanization & Industrialization

The 2nd Industrial Revolution from 1850 until 1900 changed the face of America. In 1850, more than 80% of Americans lived on farms. By 1920, only 50% lived on farms. Today, only 20% of Americans live in rural areas. This shift resulted from technological progress. A six-fold increase in real wages made children more expensive in terms of forgone opportunities to work and increases in agricultural productivity reduced rural demand for labor, a substantial portion of which traditionally had been performed by children in farm families. The US rural population plummeted, as farmers were displaced by mechanization and forced to migrate to urban factory jobs. America’s westward expansion allowed over 400 million acres of new land to be put under cultivation between 1870 and 1910 while the number of Americans involved in farming dropped by one third.

New farming techniques and agricultural mechanization facilitated both processes. The reaper allowed farmers to quadruple their harvesting efficiency by replacing hand labor with a mechanical device. Manufacturing became the dominant industry after the Civil War. The world was taken by storm as the United States exited the Civil War with a 5% share of worldwide manufacturing output and expanded it to almost 20% by 1900. The market share was stolen from the United Kingdom and France.

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The period between 1850 and 1900 was marked by the increasing concentration of people, political power, and economic activity in urban areas. In 1860, there were nine cities with populations over 100,000 and by 1910 there were fifty. These new large cities were laid inland along new railroad routes such as Denver, Chicago, and Cleveland. Industrialization and urbanization reinforced each other and urban areas became increasingly congested. As a result of unsanitary living conditions, diseases like cholera, dysentery, and typhoid fever struck urban areas with increasing frequency. Cities responded by paving streets, digging sewers, sanitizing water, constructing housing, and creating public transportation systems.

The completion of the Transcontinental Railroad in 1869 had the effect of stimulating a period of consolidation and technological standardization. It was during this time that railroad magnates such as Jay Gould and Cornelius Vanderbilt amassed vast power and fortunes from consolidation of smaller rail lines into national corporations. Between 1850 and 1890, over 120,000 miles of railroad were laid. This was a huge undertaking that required vision, brute strength, and the promise of potential riches if accomplished. Capitalism is not pretty, but has proven to generate wealth and progress better than any other system.

1850 1860 1870 1880 1890
New England 2,507 3,660 4,494 5,982 6,831
Middle States 3,202 6,705 10,964 15,872 21,536
Southern States 2,036 8,838 11,192 14,778 29,209
Western States and Territories 1,276 11,400 24,587 52,589 62,394
Pacific States and Territories 23 1,677 4,080 9,804
TOTAL USA 9,021 30,626 52,914 93,301 129,774
SOURCE: Chauncey M. Depew (ed.), One Hundred Years of American Commerce 1795–1895 p 111
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Thomas Edison and Alexander Graham Bell transformed the country with the invention of the light bulb and the telephone between 1876 and 1880. Between 1882 and 1920 the number of generating plants in the US increased from one in downtown Manhattan to nearly 4,000. While the earliest generating plants were constructed in the immediate vicinity of consumers, plants generating electricity for long-distance transmissions were in place by 1900. Between 1877 and 1893 (the term of Bell's patent coverage) the number of phones leased by Bell's company increased from 3,000 to 260,000, although these were largely limited to businesses and government offices that could afford the relatively high rates. After the Bell patents expired, thousands of independent operators became incorporated and their competition for services to middle and low-class households as well as rural farmers drove prices down significantly. By 1920, there were 13 million phones in the United States providing service to 39 percent of all farm households and 34 percent of non-farm households.

The discovery of oil in western Pennsylvania in 1859 changed the course of America for the next century. Between 1880 and 1920, the amount of oil refined annually jumped from 26 million barrels to 442 million. The discovery of large oil fields in Texas, Oklahoma, Louisiana, and California in the early 20th century contributed greatly to these states' rapid industrialization. America became addicted and dependent on oil for heating, lighting, lubricating, and running cars, trucks, and machinery. This dependence on oil could ultimately contribute to the downfall of the U.S. economy.

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