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The Reign of Cotton

Eric White

After completing the assigned reading of American Economic History and watching the

video made by the history channel, I can definitely say that I never realized the impact that

cotton has had on the economy of not only the US, but all major parts of the world. It is a

product that is part of everyday items, and we have found ways to use each of the parts of the

plant. Though that wasnt always the case.

Similar to cotton production, economies have ups and downs, good years and bad

years. The biggest thing about the United States is that after a string of bad years the

government and people have always continued to get back up and try it again. The most

obvious example of this would of course be the Great Depression. Going back further than that

gives even more examples.

I have worked in the banking industry for the last 8 years, at a large national bank. In a

new industry of online and mobile payments, we actually dont have a traditional brick and

mortar branch. Much to my surprise when I learned that the first banks in the United States

were not full of savings accounts, but were the investment clubs seemingly for the elite and

wealthy at the time.

Alexander Hamilton had a vision for a Federal Bank, similar to what was seen in Europe.

A lot of early America was modeled after Europe. I think the early Americans had a lot of pride

in their heritage, and brought a lot of their knowledge from their homelands, especially with the

huge migration patterns in the early 1800s. While the first bank proved somewhat successful, it

ultimately failed when its charter was not renewed. Why it only had a 20 year charter I will

never know.

The next thing I know about young America is that while there was pride in our heritage,

this was the opportunity to make something new. Make it our own, and do it differently than
everyone had done it before. I think that statement is misconstrued most of the time. When you

hear that term different, people think that means that we are doing something in a completely off

the wall way that hasnt been tried before. Sometimes we are. For the most part, I believe that

we are better at stepping back and taking a look at a problem, and rather than sticking with the

status quo, asking ourselves how we can tweak it to work for what we need. Anyone remember

the Articles of Confederation? Well sure, a lot of historians do, but ask anyone on the street and

they can all tell you that the Constitution is the one that has made it through all the growing

pains since 1789.

Back to the banking system, the first and second banks failed. The Federal Reserve

System was eventually developed and tweaked and twisted until it was finally a successful way

for the government to handle peoples money. Finally it was figured out that it was not going to

work if the Fed was competitive with interest rates and other banks. Finally it was determined

that we shouldnt have to recharter the darn thing every 20 years, when a whole slew of new

politicians are in office and trying to make a name for themselves and their mark on America

with a brand new fancy bill or act.

The banking economy has continued to grow and evolve. Not many people know that

prior to the September 11th attacks on the world trade center, that checks were physically

moved from one bank to the next to be cashed. Meaning that you could write a check today,

and it may not even be presented for payment at your bank or credit union for something in the

area of 3 weeks. With all the planes grounded that day, the delay was so much more. A

combination of that event and with the need of instant satisfaction of todays internet population

led to changes made in the PATRIOT Act. Now checks are transacted as electronic

transactions, through the Automated Clearing House, which is ran through, you guessed it, the

Federal Reserve. Pretty sure that was not the original plan for the Fed upon its creation.

Another recent example has been the housing recession that hit us about 10 years ago.

TARP funds were given to banks to help them make it through the crisis. Some did, some didnt.
The act of having funds in reserve dates back to the early banks of New York and their Reserve

System formed in 1829. Though short lived, it showed the importance of having a back up plan

in case things go south. History is a good indicator that it will eventually always go south.

Speaking of the south, I actually had the privilege of travelling to the southern parts of

the United States while attending this class. It wasnt a economics trip, but while traveling from

the airport to my brothers home, he took the time to point out some interesting features in North

Carolina. Right off the freeway, in fact between the freeway and the off ramp was a small batch

of plants, all with some white fluffy dots at the top: cotton. It couldnt have been a patch more

than 100 feet long, and about 20 feet wide, yet there it was. From the video, they said that

cotton growers didnt look to grow other crops but instead expanded west. Apparently they also

took the time to plan on every free patch of earth in their growing cities.

I also noticed that there were large farming machines that were used for other basic

maintenance tasks. Specifically, large tractors were used to mow the lawn on the side of the

roads. Each tractor was slightly different, some with clear logos of the farms that they

represented. Rather than spend the money to operate and maintain the machinery themselves,

the government had contracted the farmers to use their equipment for that task. Definitely an

opportunity cost there.

This class had a very large focus on the civil war era, which has always been a black

spot in American History. Most Americans would probably tell you that the war was fought over

slavery, and while that is part of the reason, the main reason was the economy. Southern

states didnt want the Federal government telling them how to run their businesses. The south

also had the belief that they could handle things on their own, and didnt need the more

industrialized North for them to be successful. In fact, as the book pointed out, the South was

the real money maker.

One of their biggest flaws was their belief that a foreign nation would come to their

support. Specifically Britain. As we now know, Britain was going to have nothing to do with
another American War, and bolted their cotton trade to other nations like India. The South was

left without a major way to finance their side of the war, and that ultimately led to their downfall.

Another example of a far not properly being financed by the losing side was World War

II. Obviously, Adolf Hitler was able to do a lot of damage to Europe and parts of Africa. His

biggest downfall was attempting to wage a war with Russia. In Siberia. In the winter. Not sure if

he read a weather report, but it tends to get cold there. He spent way too many resources trying

to gain any inch he could, at the cost of hundreds of thousands of German and Russian lives.

America gets involved after the Pearl Harbor attacks, but doesnt dive into Europe right away.

Realizing that they would be fighting on two different fronts, Europe and the Pacific, America

actually took the time to build up their resources so they were prepared when heading into the

fight. War bonds were sold and manufacturing began prior to the attacks at Normandy. By that

time, Germany was running low on things like fuel, and didnt have a way to get more. The

Americans were surprised by the Battle of the Bulge, but it was a last ditch effort and used up

the last of the resources that Hitlers armies had.

From that war, we exited as a world power. Yes we had the nuclear bomb, but the

economy was as solid as ever, and there were jobs and development aplenty. Technological

advances that happened during the Depression were able to take off in the factories once used

for war machines, and America began a period of financing household items that make all of our

lives easier.

In conclusion, it is my belief that the American Economic system is one that is

continually growing and learning from itself. Through all the ups and downs, it has always had

one goal: to make the lives of its citizens the best it can be.