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Things in the Depths
The Origins of American Resource Abundance
Geology is destiny.
Thirty years on from Gavin Wright’s seminal paper on “The Origins of American Industrial Success” (1990), the inextricable link between resource abundance and industrialization in the United States is fairly obvious. Coal, petroleum, and iron ore were all increasingly available in vast quantities and at low prices by the early twentieth century, a cornucopia that left its stamp on the character and trajectory of American growth. Alfred Chandler, for example, has documented how the high-throughput mass production system that laid the basis for big business and “managerial capitalism” was built on the availability of natural resources: fuel for the machines, trains, and production lines and minerals for the furnaces and forges. Even high agricultural productivity proved useful as an input for some of the refining and distilling industries, and the resulting Dutch Disease effect on high wages combined with cheap coal to incentivize the adoption of labor-saving technologies. George Otis Smith, director of the US Geological Survey, wrote in 1919 that “the United States is more richly endowed with mineral wealth than any other country” and W. N. Parker (1972) reveled in the “sheer luckiness of the American economy.”
While the United States was a great producer of mineral wealth at the turn of the twentieth century, she did not hold a monopoly in mortmain. Her staggering shares world of petroleum, copper, and iron ore had fallen from 65, 56, and 36 percent respectively to 3, 16.4, and 10 percent from 1913 to 1989. Most of the decline was purely relative—the result not of depletion but of foreign sources coming online, especially the emergence of the Middle Eastern oil bloc. “Between 1850 and 1950,” as David and Wright (1997) argue, “the USA exploited its resource potential to a far greater extent than other comparable countries.” In all major mineral sectors besides coal, US production shares vastly outstripped those prescribed by endowments alone. She combined a plentiful natural base with a penchant for aggressive, European-style exploration and extraction to assume an unprecedented leadership position in mining and fuel by the turn of the twentieth century.
How did the United States achieve this precocious exploitation? After all, it wasn’t always this way. Writers on the colonial period observed that the British North American possessions were singularly lacking in mineral resources, especially by comparison with the Spanish domains. “It was more than a hundred years after the first settlement of the Brazils, before any silver, gold, or diamond mines were discovered there,” wrote Adam Smith. “In the English, French, Dutch, and Danish colonies, none have ever yet been discovered; at least none that are at present supposed to be worth the working.” Benjamin Franklin similarly added in 1790 that “[g]old and silver are not the produce of North America, which has no mines.” Exploration of other minerals was even less successful (and enthusiastically pursued), leading some historians to suggest that, up to 1800, most would have regarded the United States as land-rich, but resource-poor. All metals except a limited flow of iron were imported.
The first mining booms occurred only in the 1820s, when the search for gold intensified in Appalachia and lead extraction took off in Missouri and the Galena district of the Upper Mississippi. Three decades after its discovery in the Lehigh region of eastern Pennsylvania, anthracite coal began to be shipped in quantity to Philadelphia. The initial impetus came from price spikes for Virginia bituminous during the War of 1812, but serious mining awaited the development of adequate transport links and the recognition that this valuable resource was useful for thermal energy, not just as paving material. Owners of coal lands drove canals into the anthracite regions, and with the advent of the Schuylkill, the Lehigh Valley, and the Delaware and Hudson, output rose from nil prior to 1825 to 91,100 tons in 1828, 290,600 in 1830, and 1,039,000 in 1837. Coasting ships carried coal from Boston and Philadelphia, and the price fell from $10 to less than $5 a ton by the mid-1830s. By the end of the decade, the anthracite-heated reverberatory blast furnace was in commission, their numbers rising to 60 in 1849 and 121 in 1853. The following year, 45 percent of American iron was made with anthracite coal. For Alfred Chandler, this. expansion was crucial in the establishment of factory industry in the United States. “The opening of the anthracite coal fields in eastern Pennsylvania lifted” the “most significant” constraint on the spread of mechanized production.
The full breakthrough into mineral dominance awaited the end of the Civil War. In the astonishing five decades separating the peace of Appomattox from the assassination of Franz Ferdinand, the United States rose to world leadership in the production of iron ore, coal, lead, zinc, silver, copper, antimony, magnesite, mercury, and nickel. Some of this was due to the geographical extension of the country into the West, but much of the growth in output occurred in older, established regions: copper in Michigan, coal in Pennsylvania and Illinois, oil in Pennsylvania and later Indiana. As David and Wright note, the British Empire and Russia were both extensive domains, yet neither achieved the same intensity of resource extraction. Prior to World War II, the United States spent the equivalent of £1 million annually on their geological survey; the British spent £70,000, and in 1947 employed a staff of just 58 in the very-much-intact empire. The industrialist G. N. Tata, seeking to set up an Indian steel plant in the 1890s, consulted an American survey team, which promptly discovered one of the world’s richest hematite deposits at Gurumaishi Hill, where it had been ignored by the British. Russia heavily under-produced her resource endowments in 1913, putting out 5.7 percent of the world’s iron ore supply when her share of global reserves totaled 39.1 percent in 1989.
What drove American success in mining? There were a plethora of contributory factors. Some authors cited the security of property rights in American mining, including the primacy of free prospecting, but the prevalent system was neither unique nor always especially effective. The petroleum industry, for example, arose under the “manifestly deficient” principle called the “rule of capture” under which the owner of a well had the right to any oil drawn from the ground on his property, regardless of the source. This was a catastrophic way to manage a common-pool resource problem: excessive drilling and extraction costs were widespread, as was destructive industry cyclicality as drillers rushed to pump out every last drop from each fresh pool. The “rule of capture” and analogous systems in hard-rock mining ensured maximum extraction rates for recently-discovered resources, but as David and Wright point out, one could as easily rationalize the end of exploitation. They suggest that the United States in some respects is a “gigantic illustration of excessive resource depletion in a common-property setting, augmented by the urgency of a race to drain a non-renewable common pool.”
Another important factor was the precocious development of geological science. Geologists were the most prominent privately-funded scientists in the antebellum United States, with the popular perception that they effectively held maps to “buried treasure” helping to secure them patronage in the business world. This in turn led to pressure for government aid. Geological surveys were the primary channel of state support for science before the Civil War; by 1860, 29 of 33 states had sponsored at least one mission. An early example was the discovery of copper in Michigan. In 1840, Douglas Houghton—the state’s official geologist—reported rich deposits in the Keweenaw Peninsula region, leading Congress to purchase the land from the Chippewa Indians the following year. Mining companies and prospectors surged into Michigan, as did a federal survey team, whose mission (ending in 1850) produced the first accurate maps of the area for the purposes of “rational” exploitation. Surveyors like Josiah Whitney and J. P. Lesley made large salaries as industry consultants and published popular manuals.
Western expansion after the Civil War proved an accelerant. In 1867, Clarence King approached the US Army Corps of Engineers with a proposal for the Geological Exploration of the Fortieth Parallel, for which funding was quickly secured. King’s reputation soared—he charged $5000 for a mine visit—and the academic-instutional nexus led to the formation in 1879 of the United States Geological Survey, of which he was the first director. The organization was the most productive state scientific branch of the nineteenth century and, under King’s successor, secured the funding to publish a geological survey map of the entire United States. Employees frequently went on to work in the private sector and contributed to the success of groundbreaking mining enterprises. The USGS also helped to forge links between industry practitioners and applied science, forcing oil operators—many of whom were poorly educated ex-drill hands—to recognize the value of geology through the publication of reliable field data. The popularization of the anticlinal theory, which suggested that anticlines (downward sloping rock strata) were good places to find oil, after 1914 led to fifteen years of new discoveries.
With booms underway in Michigan and California, demand for mining education expanded rapidly during the 1840s. Abbott Lawrence endowed Harvard with a $50,000 grant for professorships in geology and engineering, writing that “[t]he three great practical branches to which a scientific education is to be applied are: first, engineering; second, mining in its extended sense, including metallurgy; third, the inventions and manufacturing of machinery.” In 1864, Columbia College set up America’s first school of mines; MIT, founded the following year, had a mining course from its inception; Michigan had a degree in Mining Engineering, Yale a professor of mining, and Harvard a chair in geology—twenty schools in all granted degrees in mining from 1860 to 1890. In 1903, the University of California boasted the world’s largest mining school, with over 300 students registered (11 percent of enrolled). These students often ended up as executives in large firms, which rebounded in a curricular focus on combining managerial and technical functions (a la Chandler). The Scientific Press reported in 1915 “that nearly every successful mining operation of consequence, old or new, is today in the hands of experienced technically trained men.” Like British mechanics during the Industrial Revolution, American mining engineers were imported en masse by developing countries seeking to upgrade indigenous industry.
Finally, David and Wright argue that an “ethos of exploration” sustained the US quest for precious metals in the face of persistent suggestions that supplies were soon to be depleted. In Australia, for example, an embargo on iron ore shipments was instituted in 1938 to conserve the remaining stock; when the policy was changed to favor exploration during he 1960s, fresh discoveries were made, along with a host of copper, nickel, bauxite, uranium, phosphate rock and petroleum finds. Stores of iron ore in 1967 were 10 times the estimate of a decade before. American local, state, and national governments persistently aided in mineral development, exempting mine shafts and buildings from taxes, lightly taxing mine incomes, judging claim disputes, and using eminent domain on behalf of mining companies. Optimism and state backing led to discoveries of natural resource pools far in excess of rational scientific estimates would have suggested.
Of course, technological and organizational progress was critically important, too. The copper deposits of the Great Lakes region required massive capital investments to exploit, leading to the formation of large, integrated industrial enterprises on the scale of the railroads. Drilling and blasting techniques were improved through the 1870s and 1880s, including nitroglycerine dynamite and compressed-air rock-drilling machines. Steam engines were employed to hoist ore from the deepest mines. The next two decades saw a “revolution in metallurgy,” led by the application of the Bessemer process to copper and electrolysis to refining. The Jackling method of “non-selective”mining—removing all ores from a mineralized areas—catalyzed a further production surge. In coal, traditional blasting methods began to be replaced by electric cutting machines, finally loosening the grip of labor-intensive pick-and-shovel extraction. Pumping, hoist, and ventilation systems drove mines deep below the water line. Capital-intensive firms were aided by USGS- and university-trained mining engineers for exploration and technical innovation.
These enterprises were often integrated within industrial giants in railroads and manufacturing. The Pennsylvania Railroad Company, for example, was compelled “to follow the example of the other railroad companies by securing, in the vicinity of its lines, the control of coal lands that would continue to supply transportation for them.” Machine-makers like McCormick integrated backward into mining and timberland and forward into mass distribution. The famous exploitation of the Mesabi range, which lowered the cost of iron ore by 50 percent during the 1890s (the equivalent of a decade’s worth of productivity improvement), is a case in point. The region—where ore was located close to the surface, permitting strip mining—produced half the nation’s output by 1905, and came into the hands of the US Steel Corporation after John D. Rockefeller sold his interests to J. P. Morgan, who merged them with the properties of Andrew Carnegie. Rockefeller and Carnegie both invested millions in developing the transportation infrastructure to link the Minnesota mines with the Great Lake ports, and then with the Pennsylvania and Ohio refineries. Despite the company’s monopoly holdings (and pricing behavior), the combined mining, railroad, and refining facilities constructed around the Mesabi complex helped (as Douglas Irwin has argued) to fuel America’s steel export boom at the turn of the twentieth century. From 1895 to 1899, the price of US iron and steel exports fell by 30 percent relative to Britain’s.
American resource superiority was overdetermined. Natural abundance combined with an aggressive development strategy to create an accelerating, cost-lowering feedback loop between extraction, state, and industry in the last decades of the twentieth century. American capitalism was resource-hungry, and the immense returns on offer from mining and refining in turn created the investment funds, scientific knowledge, and technical resources for exploitation. The variety of mineral deposits contributed to the range and quality of complex industrial products in which the United States had cost advantages by the early twentieth century. And without cheap coal, the Chandlerian capitalism would have been all but impossible—whether big business produced sugar, steel, or shirts, coal was in one way or another a critical input. Imitation is the sincerest form of flattery; no better evidence exists of the centrality of resource abundance to American economic growth than the fact that developing countries immediately tried to replicate it. A diaspora of US-trained mining engineers swept Australia, China, and Siberia from the late nineteenth century on, exporting on-the-job experience and technical knowledge. In so doing, they helped to undermine—no pun intended—the geological basis of American exceptionalism. The US monopoly on key resources collapsed during the later twentieth century, and with it fell the low-cost production structure that propelled domestic growth up to the World Wars.