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Chapter 2 - Background

2.1 Preconditions

In 1787, just six years after the United States won its independence, fifty-five men of property convened and rewrote the nation’s constitutional rules. In doing so, they jump started a struggling economy down the path to industrial capitalism. It would take nearly one hundred years. But by the 1870’s, state-based economies of small, private, owner-managed corporations, or competitive capitalism, prevailed. No sooner had competitive capitalism emerged, then it became mired in crisis. The United States was not alone. From 1873 to 1896, the Great Depression engulfed the world economy. Then, in the incredibly brief span of five years, 1898 to 1903, a revolution transformed the industrial economy of the United States, and corporate capitalism emerged to overwhelm competitive capitalism. By World War I, large, public corporations competing as members of oligopolies dominated industrial America – competition becoming oligopolies, the same pattern as observed in the history of computers.

Following is a brief look at these three historical phases of American industrial capitalism – competitive capitalism, crisis, and corporate capitalism. They in turn constitute the larger background to the innovation of the telephone (1873 - 1877), and the formation of American Telephone & Telegraph, the corporation that will come to dominate telecommunications as a regulated monopoly until 1984. That story follows.