January 2026 Economic Theory Part IV. The Move to the New World. By David Kowalski

Disclaimer: These words are the author’s personal views and do not reflect the Labor Guild’s opinion.

This new economic model of corporate charters, sanctioned by the crown, produced vast amounts of money and with it, the ability to influence, buy and control markets, legislation, and most of all power. I said the East India Company was only one of like- minded Charters the Crown had approved. There were others and if you should research this, check out the South Sea Trading Company and the “Virginia Company’s” Charter for the Jamestown disaster. It is also the time when I begin to divert what is traditionally taught and what I developed for my Labor History curriculum. The rest of this subject will be different from what you would be taught about traditional mainstream labor history and economic history classes.

I begin with the influence of the capitalist model in early America. This model brought here from England, how it operates and what we did and did not like about it. The period posts the Revolutionary War, roughly the 1780’s and – pre–Civil War, is identified as the Antebellum Period. I call it, “America’s adolescence”. America began the process of figuring out what kind of country they wanted to be. The Country was preparing the Constitution and in the way they want the Nation to be directed. The rough draft of the Constitution was called the Federalist Papers. Of the 85 Articles of that document, Alexander Hamilton wrote 51, James Madison wrote 29 and John Jay wrote 5. This is where the factions of Conservative and Liberal in this country began. You see, by 1791 the United States, owed France $75 million for the payment of the Revolution. During the War and after, there was no collaborative currency. Each Colony had its own money supply. We needed to develop a singular currency and figure out a way to pay back France.

In order to accomplish this, our first Secretary of the Treasury, Alexander Hamilton, helped to establish the Bank of the United States located in Philadelphia in 1791. He also needed to create a form of national taxation to raise money to pay back our War debt to France. It was the idea of George Washington to invoke a tax on domestic whiskey to contribute to that cause. Farmers were use to distilling their surplus rye, barley, wheat, and corn to make whiskey. Then when Farmers of Western Pennsylvania revolted, Federal Troops were sent to put down the rebellion.

Hamilton had another plan and that was tariffs. A tax was placed on all goods coming into the United States. It was a way of getting citizens to pay more for products and that added revenue went to the government. He set up Custom Houses in all the major seaports in the U.S. and collecting taxes from those importing foreign goods at the docks as the products came into port. This method by the way was the major source of funding for the United States in its first 100 years of existence.  

Understand, the Constitution was signed on September 17, 1787, and ratified on June 21,1788 and through all of this time and beyond, well into the 1790’s, bitter fissions developed within the government. Mostly, among the people who wrote the Federal Papers, James Madison and Alexander Hamilton. Thus, this is where the split between Liberal and Conservative begins in this country. I like to use the word dichotomy as a metaphor for the economy, and you will see why. Mariam Webster defines dichotomy this way:

“a division into two especially mutually exclusive or contradictory groups or entities”

I love this because as I will describe they are two contradictory equal partners trapped within the same body. In this case the Constitution, yet both sides still possess the common similar goals of self-determination and the success of the nation.

On one side of the dichotomy, you have mostly Alexander Hamilton as the major spokesperson for his ideas on currency, taxation and centralized banking. He was criticized for making rules in favor of the elite and causing a rift between “the haves and have nots”. As well as his relationship with England and favored a friendly relationship, while they were at war with our allies France to whom we still owed debt. The people who advocated this policy eventually were called” Federalist”.

On the other piece of this dichotomy was James Madison and Thomas Jefferson. Who opposed the growth and scope of a centralized bank. The idea of a central bank was seen by opponents as having too much growth too quickly and power that could easily be centralized. These opponents, mostly large landowners and farmers, could see themselves swallowed up by such a rule, moving America away from an agrarian economy to an economy run by elites. They also advocated support for the states and a decentralized government. Federalists proposed the United State assume the war debt to France, which was vigorously opposed by States like Virginia who had already paid off its debt to France. This group eventually became the “Democratic-Republican Party”. The Democratic-Republican Party wanted their alliances with France to be honored and wanted to maintain good relations with them. Meanwhile the Federalist were wooing England, and both England and France wanted the U.S. to support them in their war efforts. George Washington intervened and declared a neutrality in order to keep us out of a war.

So now you witnessed the birth of the American economy. I am going to bet that no one explained it to you like this. Now you know that we have been fighting over the best way to serve our citizenry. Or should I say we had been because today, I don’t see much being done to help the average working stiff like me and people like me.

Okay, on with it. By now our founding fathers recognized the power and danger of pooled capital and joint stock corporations and refused to add it into our Constitution.  

Although attempts were made and amendments to include corporations were tried; in the final analysis the founding fathers wanted nothing to do with giving federal legitimacy to such an entity. Thus, corporations were intentionally excluded from the Constitution. So don’t believe that corporations are people too. That’s just baloney. They simply did not want it and left it to the States to decide.

The corporate structure that did survive after the Constitutional Convention was the reverse of the English structure. It would not be the monarchy granting charters, equivalent to monopolies to the rich, but rather placed that responsibility on the individual state legislatures; thereby placing more restrictions upon them and making them more accountable. Charters for public service projects lasted for between twenty and thirty years before renewing. Once the project was completed, stockholders were paid off and the charter then dissolved. Banking was under even more restrictions, having to renew charters between three and ten years. Including the Bank of the United States. These entities could not purchase stock in one another and were very closely watched to ensure they did not develop monopolistic traits. Most importantly, corporations were forbidden to influence elections, public policy, and other civic society decisions.

What! So how did we get from here to Citizens United and all that dark money into our politics?

Well, in the United States it began with a taste of espionage. Samuel Slater worked for Arkwright and Strutt, one of the leading British companies of invention and intellectual capital. As a boy he apprenticed with the company until he rose to the position of overseer; all the time taking careful study of the quipment. Although, the British protected this kind of knowledge from leaving the country, he did manage to immigrate to Rhode Island where the first mills were developed along the Pawtucket River in Rhode Island and later in Waltham, Mass. And just 4 years after he left England for New York (in 1793). He eventually opened 13 mills. Note: Mills were popping up all over the country…

Another person that had a great impact on the Industrial Revolution in this country was Francis Cabot Lowell, a wealthy Boston merchant. Upon a visit to Manchester, England, in 1810 he viewed a mill town and was inspired by the technological development which he wanted to mimic in America. Lowell made detailed drawings of the manufacturing equipment during his stay and hid them in the lining of his luggage and smuggled them back to the United States where he duplicated them into the Lowell Mills.

Funding for this project came from primarily three partners that eventually became “Boston Associates” one of the first limited liability corporations. Agreements later for proprietary rights gave Boston Manufacturing right to operate the project. Lowell’s vision was to have a similar grand mill town but rather than the likes of Manchester, England, viewed it as building a shining city upon the hill. With its initial $600,000 investment and two years of work, the Merrimack Company’s first water wheel was set in motion in Sept. of 1823. Many companies were spun off of the Boston Associate model. Each spin-off would charge for leasing water and building boarding houses, mills and machinery as the money flowed through different pockets of the same owners.

By the 1840’s, America had adopted many of England’s laws, including their interpretation of “property rights” law. This will be the turning point between what our forefathers intended (to have corporations on a very short leash with strict oversight) and what developed. It is interesting to see how these laws had built in it an assumption and interpretation that favored capital.

This is where things changed. Where the Boston Associates were given limited liability protections. One being the ability of obtaining the water rights of the Merrimack River, as well as upstream sights as far north as lakes, Newfound, Winnipesaukee and Squam, which ensured enough waterpower during the drier summer months. In doing so dams were constructed at several critical points in the waters path to the mills to ensure for the smooth operation of canals and dams that ran and supported the mills. Unfortunately, this also meant that the farmers’ land became flooded in the Spring for the critical planting stages for a fruitful harvest. Rebellions and sabotage of the dams were not uncommon. Lawsuits which regularly favored the corporation were ruled by Massachusetts Courts.

In 1842 Chief Justice Lemuel Shaw was the first to codify the existence of Labor Unions in this country by contradicting a Philadelphia Court that Labor Unions are not necessarily “conspiring” to do evil. That “conspiring” can be beneficial to do good. Thereby giving unions, the right to organize in this country. Yet in 1851 he affirmed “corporate riparian rights”. Meaning the need for the mills for the public good was more important than the rights of the farmers and citizens dependent on those farms. Basically, the precursor of “eminent domain” we hear courts use today.

This is exactly the dichotomy example I was trying to convey. In the main body you have a nation to which each side is committed to its success yet battles each other to ensure neither side gains total control. Which brings us back to the theories of Adam Smith (1723-1790), Karl Marx (1813-1883) and Fredrik Engels (1823-1895) who actually lived to witness their beliefs come true in real time. The point is: They were all right. Modern day production, centralized banking, property rights law that ensured no restriction, provided the capital to buy their way through regulation. Adam Smith’s idea of the invisible hand was certainly at work with commerce moving, and money passing through the economy like an “invisible hand “that produced huge amounts of wealth for the already elite.  

Marx/Engels beliefs that capitalism created surplus labor, first the mill girls and then they competed with the incoming immigrant population which forced the cost of labor down. And of course, the subject of what a product costs to produce and what it is sold for. The profit, and how it is shared between the owners and the workers. So true because, it is what we still fight about today regarding the distribution of our nation’s wealth. In fact, it is the catalyst for every class conflict and struggle since its inception as well as; as Marx believed, the catalyst that will bring down capitalism. Remember, this is what he called “Dialectic Materialism”.

Next month, I will talk about the second part of the Industrial Revolution, steam and the production of steel and how the corporations got hooked on steroids.