Hundreds of thousands of people moved from farms to factories. In 1870, fewer than 8 percent of America's adult population worked in a mill and only one in five lived in a place with 8,000 or more inhabitants; a half century later, almost a third were in factories and almost a half lived in cities. During this tumultuous span of time, New York City's population swelled fourfold; Chicago became ten times its former size. In the 1870s, 280,000 immigrants entered the United States each year. In the 1880s, 5.5 million came; in the 1890s, another 4 million. By the first decade of the twentieth century, the flow of immigrants, most of them destitute when they arrived, rose to a million a year. According to a 1908 government study, almost three-fifths of the wage earners in principal branches of American industry had been born abroad. Immigrants then constituted a higher percentage of the total American workforce than they would a hundred years hence.

As America and every other manufacturing nation began scouring more backward regions of the globe for potential markets, the term "imperialism" entered common speech. Teddy Roosevelt asserted America's imperial destiny in Latin America. "Territorial expansion," explained an official of the United States State Department in 1900, "is but the by-product of the expansion of commerce." Britain and Germany equated their economic prowess with their nations' global spheres of influence. The British economist J. A. Hobson dourly predicted the logical end-point of such competition: Businessmen, he warned, opt for war when they have exhausted their home markets. Like John Maynard Keynes three decades later, Hobson urged instead that advanced nations increase their domestic markets by making more of their citizens rich enough to buy domestically produced goods. "If apportionment of incomes were such as to evoke no excessive saving, full constant employment for capital and labor would be furnished at home." But the world war Hobson feared would occur before enough citizens had the wherewithal to buy a substantial portion of what they produced.

In the first decades of the twentieth century, productivity again surged. Sweatshops and mills were replaced by large manufacturing plants, inspired by Frederick Winslow Taylor's new theories of "scientific management," which broke down every factory job into highly specialized and repetitive steps. Henry Ford's assembly line became the model. Not only could workers positioned along the line produce more cars in a shorter time but production could be concentrated in a few giant factories and materials could be bought in bulk at great savings. In 1909, Ford produced 10,607 cars; in 1913, 168,000; the following year, 248,000. By the beginning of World War I, much of American industry had consolidated into giant firms whose names became almost synonymous with America-Ford Motor, U.S. Steel, American Telephone & Telegraph, United States Rubber, National Biscuit, American Can, the Aluminum Company of America, General Electric, General Motors, and Rockefeller's Standard Oil.

The size of such enterprises became an almost impregnable barrier to entry. They dominated the American, and much of the world's, economy for most of the twentieth century. Of the Fortune 500 largest corporations in 1994, more than half were founded between 1880 and 1930. A far smaller portion was founded during the long stable period between 1945 and 1975, an important fact to bear in mind as the story unfolds.

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Excerpted from Supercapitalism by Robert B. Reich Copyright © 2007 by Robert B. Reich. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.