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  While manufacturing played a leading role in both the Midwest and Northeast, in the Northeast the financial industry rivaled it in economic and political importance. From the earliest days of European settlement, Atlantic coast cities, especially Boston, Philadelphia, and New York, had served as trade and finance centers for the North American, transatlantic, and even transpacific economies. Substantial regional finance centers eventually sprung up farther west, in Chicago, San Francisco, and elsewhere, but the Northeast, and above all New York City, remained the financial capital of the country. In the mental maps of midcentury Americans, Main Street lay someplace in the middle of the country, as an abstraction, without defined coordinates, but Wall Street could be found someplace very specific, on Wall Street.

  Part of the economic power of the Northeast came from its control of money itself. The region housed most of the nation’s largest banks, especially the commercial giants, like Chase National Bank, with 1945 assets exceeding $6 billion ($75 billion in 2011 dollars). During the decade after World War II, banks in metropolitan New York accounted for roughly a third of the value of all commercial bank loans issued in the country. Chase and its rivals made the bulk of their money by lending to large domestic corporations, with which they had long-standing relationships. They also lent to corresponding banks elsewhere in the country and abroad and financed much of the nation’s foreign trade. The Federal Reserve System recognized the unique role of the New York banks by running its open market operations—which determined interest rates and the supply of money—out of its New York branch.

  The nation’s two largest stock exchanges lay cheek by jowl with the large commercial banks. In the immediate postwar decades, they handled nearly 90 percent of all exchange-traded securities. The Depression and the New Deal greatly diminished the economic centrality and national visibility of the stock market. During the two decades after World War II, corporate use of equity financing fell to a historic low, with just 2 percent of corporate funds raised through stock. Still, the stock exchanges, the brokerage houses that ran them, a half-dozen commodity exchanges, the commercial banks, and various clearinghouses and foreign currency exchanges formed a financial complex in lower Manhattan unrivaled in the country or the world in assets, reach, and power.

  The capital and specialized financial and business services available in New York (and to a lesser extent Philadelphia and Boston) attracted a disproportionate number of corporate headquarters to the Northeast. In 1955, of the nation’s five hundred largest industrial firms, two hundred eighteen had their headquarters in the Middle Atlantic states and another twenty-two in New England, including many companies whose production facilities lay almost entirely outside the region. The men who ran the investment and commercial banks of the region, the corporations they served and sometimes controlled, and the associated corporate and Wall Street law firms formed as close to a ruling class as the nation had.

  During the first half of the twentieth century, the business and financial leaders of the Northeast displayed greater social unity than would be the case in later decades among what would become a farther-flung economic elite. Exclusively white and male, most came from comfortable Protestant families, were educated at private schools and top universities, lived near each other in a handful of city neighborhoods and suburbs, and belonged to the same clubs and organizations. In a 1967 memoir, writer Norman Podhoretz recalled, “When I was in college, the term WASP had not yet come into currency—which is to say that the realization had not yet become widespread that white Americans of Anglo-Saxon Protestant background are an ethnic group like any other, that their characteristic qualities are by no means self-evidently superior to those of other groups, and that neither their earlier arrival nor their majority status entitles them to exclusive possession of the national identity.”

  Protestants made up a majority of the population in every region of the country except the Northeast, where roughly a quarter of Americans lived. A 1957 survey found 45 percent of northeasterners to be Catholic and over 8 percent Jewish. (Nationally, Catholics made up just over a quarter of the population, Jews 3 percent.) But large parts of the Northeast’s economy and many of its social institutions remained closed or restricted to non-Protestants (and nonwhites), from suburban neighborhoods and Park Avenue co-ops to elite universities and white-shoe law firms (which John Gunther called the “last frigid citadel of Anglo-Saxon Protestantism”). There were exceptions to the Protestant domination of big business—Jewish-run investment banks, like Lehman Brothers and Goldman Sachs, and Catholic financiers and businessmen, like Joseph P. Kennedy and J. Peter Grace—but even the wealthiest non-Protestants faced bars of one sort or another. During the middle of World War II, the federal Fair Employment Practices Committee received many more complaints from New Yorkers about religious discrimination (mostly anti-Semitism) than racial discrimination. Many of the Catholics and Jews who swelled the cities of the Northeast, especially the young, were determined to break down the barriers they faced and escape their parochial worlds, an impulse quickened by the experience of serving in the armed services or working in war industry. For critic Alfred Kazin, who like Podhoretz grew up in Brownsville, a poor Brooklyn Jewish neighborhood, the great yearning was to go “Beyond! Beyond! Beyond.”

  The Northeast’s population density and long history of trade, industrialization, and urbanization left it with a more fully developed infrastructure than the rest of the country. Its ports handled over a third of the country’s foreign trade, far more than any other region. Passenger and freight railroad lines threaded throughout. Subways and trolleys ran beneath the streets of Boston, New York, Newark, and Philadelphia. Most of the nation’s leading private universities lay in the region.

  Compared to the rest of the country, the Northeast seemed completed. Pulitzer Prize–winning historian Bernard DeVoto declared New England “the first American section . . . to achieve stability in its conditions of life.” The Middle Atlantic states, too, had an aggregation of social and physical development that made drastic change hard to imagine and denied them the aura of mutability and infinite possibility so often associated with America.

  By national standards, the Northeast was crowded. In 1950, Rhode Island topped the country with 749 residents per square mile, compared to the emptiest state, Nevada, with but one and a half. The Northeast as a whole had 241 people per square mile, compared to 43 nationally. Only the eastern half of the Midwest came anywhere near its population density. Yet it was a measure of the country’s enormous size and relatively thin settlement that, compared to parts of Europe, Asia, and the Caribbean, the Northeast was downright empty.

  The concentration of northeastern population in metropolitan centers left much of the region free for agriculture or to revert back to forest after farmers moved on to more fertile land. Pennsylvania, with its coal, steel, textile, and electrical manufacturing industries, constituted an industrial powerhouse, but forests covered half the state. The abandonment of not only farmland but of worked-out mines and depleted oil fields (and not just in the Northeast) reflected the natural and social wealth of the nation. As George Stewart noted after finishing his drive along U.S. 40, “Only a supremely prosperous people could afford to waste so much—to let land revert to unproductiveness, to be careless of erosion, not even to practice forestry.”

  Moving on, rather than renewing, characterized American culture. By the end of World War II, much of the Northeast’s infrastructure, industry, and residential stock showed its age. Half of Philadelphia’s housing had been built in the nineteenth century. John Gunther noted the decay of large sections of the city, which he attributed in part to the suburbanization of the upper class. The shabbiness observers noted in Philadelphia could be found in many other cities in the region, too, and in the countryside. Gunther thought half the farmhouses in New York State badly needed painting.

  Wealthy and powerful beyond compare, the Northeast nonetheless faced
uncertainty about its future position in the nation when World War II came to an end, as other regions underwent more rapid growth and development. Some scions of its ruling elite saw brighter futures elsewhere. Peter H. Dominick, the son of a partner at a Wall Street brokerage firm and nephew of a senator from New Jersey, began his career as a New York lawyer, after graduating from St. Mark’s School and Yale. But following wartime service as an Army pilot, he moved to Denver, starting a legal practice and entering politics, eventually becoming one of the most conservative Republicans in the Senate. George H. W. Bush came from a similar background. His father, Prescott, was a New York investment banker and businessman before becoming a senator from Connecticut. Upon graduating Phillips Academy, Bush too served as a military pilot. After the war, he followed his father’s footsteps, attending Yale and joining the elite Skull and Bones secret society (a path his son George W. Bush also would follow). But then, like Dominick, he did the unexpected, moving to West Texas to enter the oil business. Though by no means typical, Dominick and Bush were not alone in seeing greater opportunities outside the Northeast, as the growth and success of the rest of the nation challenged its dominance.

  The South

  In many respects, the South constituted the polar opposite of the Northeast. Though more populous, it had far less wealth and power. With just two cities of more than a half million people, Houston and New Orleans, southern society remained rooted in the countryside. The South’s main product, cotton, traded on international markets, generating great wealth for the nation, but the region itself remained far poorer and less cosmopolitan than the North.

  Many soldiers sent to the South for basic training during World War II were shocked by the sheer poverty of the region. One New York recruit, traveling by train to Mississippi, noted the “primitive farmhouses” in backwoods Kentucky, including a “ramshackle clapboard hut with a series of additions, each one about a generation older than the previous.” Small, uninsulated wooden shacks housed much of the southern population, whether in the countryside, mining camps, mill villages, or beside unpaved city streets. On the eve of the war, just a quarter of the farms in Kentucky had electricity, and only three out of a hundred had indoor toilets. In 1950, the per capita income in the southeastern states equaled only 70 percent of the national average. Mississippi had the lowest per capita annual income of any state, $775, compared to $2,132 in Delaware, which topped the nation.

  The reasons for the chronic poverty of the South, which Franklin Delano Roosevelt called “the Nation’s No.1 economic problem,” lay deep in the history of the region and the nation. The Roosevelt administration and many southerners put the main blame on the region’s disadvantageous economic relationship to the rest of the country. They argued that the South had a quasi-colonial relationship to the North, supplying raw materials while importing manufactured goods, with little control over its transportation or credit systems. Others highlighted the legacy of slavery and the failure of Reconstruction, which left the South dominated by rural merchants and planters, crop lien credit, and a system of racial caste, which enriched some individuals but retarded overall economic development.

  The prosperity of the Midwest and Northeast stemmed in part from their balanced economies, strong in agriculture, manufacturing, trade, and finance. The South, by contrast, depended heavily on extractive industries: mining, lumbering, oil production, and above all farming. Over a third of the southern workforce, on the eve of World War II, tilled the land.

  From the early nineteenth century on, cotton dominated the economy of the South, and it continued to do so into the early post–World War II years. For a century, cotton ranked first among the nation’s exports. On the eve of the Second World War, it remained king in a ten-state area from North Carolina to Texas, accounting for roughly a third of the farm income of the South (down from a half before the Great Depression). Both on small farms and huge plantations, southerners grew cotton much as they had a century earlier, in a highly labor-intensive round of planting, cultivating, and harvesting using mule and horse power as the main supplement to human energy.

  The ravages of the boll weevil had led some farmers to abandon cotton even before the disastrous drop in commodity prices during the Depression. New Deal agricultural policy hastened the movement away from cotton; the crop allotment system diminished the acreage put under cotton, while cash payments from various federal programs enabled farmers to invest in tractors and fertilizer, which they deployed to grow a broader range of crops. Some turned to raising livestock. Labor shortages during World War II further eroded the cotton economy. Still, when the war ended, these changes had made only modest inroads toward transforming the way of life that had arisen around cotton cultivation. On the rich flatlands that flanked the Mississippi River between Memphis and Vicksburg, vast plantations, some approaching ten thousand acres and employing over a thousand sharecroppers and tenant farmers, provided their owners with wealth and power nearly feudal in character.

  Pervasive authority over the lives of workers and their families, on and off the job, characterized southern agriculture, except in the upland regions. Tenants and sharecroppers lived in homes owned by their employers, and depended on them and local merchants for advances of money, domestic goods, and agricultural supplies to plant their crops and survive until harvesttime. At any time, for cause or whim, they could suffer eviction or withdrawal of credit.

  The Southeast had a substantial manufacturing sector, employing one out of five workers in 1950. Southern industry, though, tended to be technically unsophisticated and tightly integrated into rural life. The South’s largest industry, textile manufacturing, had close links to the cotton economy. Many southern factories sat in the countryside or in small cities. Their owners and managers intermingled socially with large landowners and often shared their views. Many adopted paternal strategies of social control, much like those in agriculture. In both coal mining towns and textile mill villages, employers generally owned the housing and exerted extensive control over community life. During the mid-1940s, some 60 percent of the workers in southern cotton mills lived in company-owned houses.

  Deficient physical and social infrastructure and a paucity of trained workers inhibited industrial development. Poor roads plagued the region. Mississippi had just 36 telephones for every thousand residents, compared to 253 per thousand in California. Low spending on public health facilities contributed to higher levels of infant mortality and maternal death in childbirth than elsewhere in the country. Spending on education lagged way behind other regions. In 1942, Alabama had the lowest value of school property per pupil in the country, less than a sixth the value in New York, the national leader. Georgia did not drop textbook fees and tuition charges for public high schools until the 1930s, and only during World War II did high school attendance for children of white millworkers become the state norm. Rural schools for black children sometimes stayed open only three months a year. The South also trailed the rest of the nation in spending on and use of public libraries.

  A pervasive system of racial oppression interwove southern society and contributed to its low level of economic advancement. Slavery in the South—more central and longer-lasting than elsewhere in the country—had ended but a long lifetime before World War II. The economic exploitation of descendants of slaves through a system of racial domination remained fundamental to southern life well into the atomic age.

  In the South, more than elsewhere in the country, the past lived on in the present. During the 1940s, elderly African Americans, born into slavery, resided throughout the region, while Virginia still paid pensions to widows of Confederate soldiers. In 1948, Charles S. Reid, a Georgia businessman and writer, in discussing a campaign then under way to allow African Americans to vote, recounted his memories of the Red Shirts bringing Reconstruction to an end in South Carolina. In black families and white, literate and illiterate, stories of slave days and their aftermath were passed on fr
om generation to generation. In Granville County, North Carolina, Novella Allen grew up hearing from her slave-born grandfather about how her great-grandfather had chopped off his hand to keep from being sold away from his family.

  The southern system of racial caste survived not as a relic but because it provided a way for landowners and industrialists to maintain tight control over their workers while limiting the impact of the national labor market on wages and working conditions. Allowing only whites to hold many categories of jobs—including most skilled industrial work, virtually all textile jobs, all work involving authority over whites, most clerical and sales jobs, and all but the most menial government positions—forced African Americans to take low-wage jobs in the limited areas open to them. (Vagrancy laws made sure they did not shun work altogether.) For most black men, this meant raising cotton and other crops, generally on land they did not own, or unskilled manual labor and service jobs in the cities. For black women, domestic and farm labor provided virtually the only earning opportunities. The racial caste system put downward pressure on the wages of white workers, too, by holding out the threat of replacing them with blacks if they got too expensive and making interracial organizing extraordinarily difficult.

  Of course, racism was by no means strictly an economic system, nor was it strictly a southern one. In the mid-twentieth-century United States, wherever people of non-European background lived they suffered some degree of discrimination, from the full-blown system of racial domination in the South to informal systems of racial inequality in the most liberal sections of the North. Racism existed as a national way of life, sustained by national as well as local laws and practices.