Posted by Marc Hodak on February 6, 2009 under History, Invisible trade-offs | 
…I offer this little commentary:
There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.
But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.
This wisdom was offered in 1946. Which reminds me of this wisdom.
Posted by Marc Hodak on January 19, 2009 under History |
to 
This is a fine couple of days to reflect on the transformation that has happened in my own lifetime from “Whites Only” signs to a black president. Today we praise the contribution of Martin Luther King, Jr. in the transformation that today makes old pictures of those signs seem as if they belonged to an alien civilization. Tomorrow we inaugurate a man who was judged by his fellow citizens on the content of his character.
Posted by Marc Hodak on September 18, 2008 under History |
The Panic of 1873 Begins
On Thursday, September 18, 1873, the Panic of 1873 reached crisis proportions at 11:00am on Wall Street, when H.C. Fahnstock, the New York partner of Jay Cooke (one of the leading gold market participants), announced that Cooke’s office was closed. Cooke, in his Philadelphia office, admitted it was true, and the most prominent banker in the country was suddenly bankrupt.
Robert Sobel, writing like Stephen King in Panic on Wall Street, said the “coal-black steed named Panic” quickly “thundered riderless down Wall Street,” where “a monstrous yell went up and seemed to literally shake the building in which all these mad brokers were for the moment confined.” Along with Jay Cooke, 37 other banks and two brokerage houses closed their doors on this date alone. In the ensuing days, the losses increased and the NYSE was forced to close down for over a week. With the situation growing dire, the secretary of the Treasury decided to infuse the economy with $26 million in paper money and the market eventually re-opened.
Jay Cooke failed over trying to construct a second Transcontinental Railroad, but demand could not support a second line. He was merely a symbol of gross over-speculation in land and securities, followed by the issuance of too much paper money, resulting in higher inflation. (Sound familiar?) The Panic of 1873 started with a bang, as over 5000 businesses failed in the last quarter of 1873, but the Panic lingered long, as another 5,000 failed over the next five years.
Panics hit America every 17 years, on average, for about a century, from 1819 to 1920 (in 1819, 1837, 1857, 1873, 1894, 1907 and 1920). The word “panic” aroused such a negative reaction (in 1894 and 1907) that Herbert Hoover invented a less threatening word for the 1929 event–connoting a small pothole in the road. Hoover called the 1929 panic “merely a depression.”
via: Crossing Wall Street
Posted by Marc Hodak on July 3, 2008 under History |
I have to take the day off tomorrow, so here are my early best wishes for a Happy 4th.
Having recently read 1776, I’m reminded how remote the situation of our Founding Fathers must seem to Americans today. The Declaration ends with the famous pledge by the signers of “our Lives, our Fortunes, and our Sacred Honor.” Today that sounds like the kind of campaign hyperbole spouted by presidential candidates when they’re concluding a stem winder.
Here is a trick question: which presidential candidate do you think would stand for freedom if they knew that losing the election meant the distinct possibility of death by public hanging? Which would do so if they knew that they had something like a ten percent chance of winning?
Answer: Neither. Not necessarily for lack of courage, but because neither candidate stands for freedom.
Up until July of 1776, members of the Continental Congress could hold out some hope for a negotiated settlement with the Crown, whereby they might get the King to see the errors of his ministers in provoking the colonies. The colonies had been in a state of rebellion for over a year by then. By June 1776, they were facing long odds behind an army that was barely being held together.
This was the point when the Founding Fathers decided to attack the King personally, publicly calling him a “tyrant.” This was the moment they chose to completely sever their bonds to England, and challenge the most powerful military on Earth. To every practical person alive that day, each signer of the Declaration had basically signed his death warrant.
And they weren’t doing it for better health care or teachers unions.
Posted by Marc Hodak on June 16, 2008 under History |
In 1776, McCullough creates an interesting portrait–snapshot, really– of George Washington, drawn largely by the way he was viewed by his contemporaries. The book also illustrates was how remarkably difficult it is to judge leadership by any single measure, or even a collection of them.
In McCullough’s story, Washington reveals a glaring weakness in military strategy, a weakness revealed both in the qualitative views of men who could observe him, as well as in poor results on the battlefield. Washington’s main strength appears to be his luck, and the fact that he superbly, consciously, looked and acted the part of a leader. Today, few would put someone like Washington at the head of an army, and fewer yet would keep him there after the string of losses he suffered after Boston. Yet, Washington was the right man to lead the Revolution.
What McCullough left out (explained well in Flexner’s book) was how tenuous was the faith in Washington held by the Continental Congress by the end of 1776. Washington, in fact, barely survived a political conspiracy to oust him. (He was extremely lucky that way, too.) Washington was thus able to keep his job, and generals like Nathanial Greene who shared Washington’s dismal record on the battlefield. Greene would eventually prove instrumental in driving Cornwallis to his last stand at Yorktown, and Washington, of course, would lead that final siege to victory. Nobody could have predicted it.
Read more of this article »
Posted by Marc Hodak on June 13, 2008 under History |
I’m finally onto McCullough’s 1776. One of the great things about this book is that it looks at the Revolution from both sides, quoting liberally both British and American soldiers who left a record. This gives the reader a bit more complete sense of what was driving the events.
Of course, a historical book can’t win a Pulitzer if it doesn’t tell a story, and this one is no exception. Having just read about the Battle of Brooklyn as a story, with intent leading to action, even with unpredictable outcomes, simply reminded me of how chaotically history can actually unfold.
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Posted by Marc Hodak on June 4, 2008 under History |
That headline contradicts most people’s view of the history of Social Security, the most visible, surviving legacy of the New Deal. But it’s true.
Roosevelt, of course, promoted and signed into law the original Social Security Act of 1935. But that law set up a forced savings/redistribution program for limited portion of the population (* details below the fold). It used the contributions from the participants to set up reserves, and it paid beneficiaries from those reserves. The plan was more or less self-contained. In 1943, President Roosevelt vetoed legislation that would turn Social Security from the forced savings/redistribution program it was set up to be into the pay-as-you-go program that, once his veto was overriden, we know today.
The 1943 debate on this law centered on governance. For Roosevelt, good governance meant continuing the Social Security program as it was originally envisioned–actuarially self-financing. To Arthur Vandenberg and other Republicans, it was clear that Congress was simply using the “reserve fund” as a cover to squander money on pet projects. In their minds, shutting down the “reserve” was just a way of restoring fiscal discipline.
Read more of this article »
Posted by Marc Hodak on March 30, 2008 under History |
I just hope she isn’t in some gulag after this:
More here.
HT: an uncredited reasonoid
Posted by Marc Hodak on January 26, 2008 under History |
John Steele Gordon, eminent historian and popular guest speaker in my “History of Scandal” course, just wrote a terrific article in Commentary entitled Look Whose Afraid of Free Trade.
The short answer: the Democrats! Gordon writes that, historically speaking, this is a surprising turn-around. For most of its existence, the Democratic party has been the party of free trade, generally at odds with protectionist Republicans. (Yea, Smoot and Hawley were Republicans.) Well, things have clearly (or maybe not so clearly) turned around. As always, Gordon weaves a tight thread in his depiction of fascinating ideas through time. Great read.
Posted by Marc Hodak on January 18, 2008 under History |
This day in 1943, the Secretary of Agriculture banned sliced bread in the U.S. That may sound like a dumbass thing to do. It was, but at the time it was accepted as just one more sacrifice to be made for the war.
While most people in America had gotten used to the convenience of pre-sliced bread, nobody complained about this ban any more than the innumerable other rationing and similar inconveniences borne by “home front.” Most Americans, filled with patriotic fervor and more than a little fear–the war wasn’t going well for us at that point–felt that these hardships were minor compared to the sacrifices of the citizens of our war-torn allies, or by our sons, husbands, and brothers fighting overseas. Freedom isn’t free, as they say.
But did the ban on bread slicing really help? Could it? Collectivist reasoning in self-defense makes a lot of sense. We need to work together in a coordinated, non-market way to thwart a determined enemy. But collectivist reasoning in allocating scarce resources in a large economy is rarely sensible at any time, even in war. One might say that it would be ungracious to look at the ban on sliced bread in economic terms, but World War II was certainly an economic as well as military struggle. Our economic might contributed every bit as much as the bravery of our soldiers in the Allied victory over the Axis powers.
The point of the ban was that the metal that might otherwise go into making or repairing bread slicers was needed for the war effort. The problem was that none of the bread slicers already out in bakeries would be turned into munitions or jeeps. That wasn’t the point. The point was that no more slicers or parts would be made in order to reduce demand for metal being purchased by the government for armaments. Existing slicers would just stopped being used.
So, all of our hard-working citizens, mostly women, were now having to toil away in the fields and factories, then come home to take care of their children and keep their homes in order, including working through ration books to prepare for the next week or month, as well as contributing to the needs of neighbors undergoing particular hardships because their men were gone, as well as do whatever else was necessary in their communities…and now slice their own bread, too. It’s difficult for us today to understand what was really so great about sliced bread, but there was a reason it took off at that point in our history. It saved precious labor at a time when labor was our scarcest resource.
The government did not likely end up with an ounce more metal than it was already going to get–they were buying it all up, and all the factories that could be used to supply bread slicer parts had already been turned to the war effort. This ban would, predictably, simply idle a lot of labor-saving capital.
Even if the public was economically literate enough to understand that banning bread slicing was as silly as it sounds, they bore the ban graciously and without complaint. In fact, the ban played to the guilt of most people in America, acutely aware of the sacrifices going on beyond the home front, and not being able to do enough for the war. The government telling them that being denied sliced bread helped our boys in arms actually made many people feel better, even if the claim was bogus.
If our Secretary of Agriculture’s economic literacy matched his taste for economic command and control, he might have dictated that bread slicing continue as much as possible. The government could have said, “Sliced bread is patriotic. It gives our hardworking women in our factories who are building our Victory ships and planes a few moments of rest when they get back home.” Instead, our government chose to go beyond the necessary privations suffered at home into unnecessary ones. And, in a coup of collectivist ideology in which that wartime administration excelled, it probably even made the sufferers feel a little better about themselves.
