Book Review: Capitalism in America

Capitalism in America: A History
Alan Greenspan, Adrian Wooldridge
Economics, history

Capitalism: Alan Greenspan is for it!

No, that's not the whole review. For the first half of Capitalism in America I thought that it might be, though. That's the half that's purely descriptive. It's stuffed full of statistics, sure enough, and not badly written, but it's a fairly standard economic history of the U.S. into the early 20th century. I already knew that railroads were important, that slavery was bad, that Standard Oil was big; Capitalism in America added only some numbers to my knowledge, which I have since largely forgotten.

The book gets more interesting when the authors finally start constructing an argument, instead of a play-by-play. Thank the reformers, such as Theodore Roosevelt, who put the brakes on the laissez-faire free-for-all. Greenspan and Wooldridge have to come to grips with what they did, which forces them to assess the system's successes and failures. The result is a pretty good argument for capitalism, broadly speaking, as an engine for innovation and as a proven way of lifting people out of poverty.

That's not to say that I think their analysis is a complete success. On the contrary, I think it's open to some fairly serious criticism. For example, Capitalism in America rightly contains some ringing denunciations of the slave economy. Good for you, gentlemen! But nowhere--literally nowhere--does it acknowledge that this country's 19th-century prosperity was based on spending down a metaphorical trust fund, consisting of land that had been looted from its native inhabitants. It's easy to make one group (white settlers) prosperous by making another group (Native Americans) poor. How much should we credit that to the success of capitalism vs. the profits of theft? Greenspan and Wooldridge are silent.

Similarly, G&W are decidedly . . . let's say "myopic" . . . when it comes to their critique of the New Deal. They make a fuss, several times over, about the fact that the New Deal recovery under FDR was interrupted by a second downturn in 1937. They do not see fit to mention that many other economists blame that downturn on FDR's premature decision to end a lot of New Deal spending in favor of balancing the budget. They also fall into the classic trap of saying that "It wasn't government spending that ended the Depression; it was World War II." Okay, and World War II did this how? Hint: who paid for all of those tanks, airplanes, salaries, jeeps, Liberty Ships, prophylactics, bullets, cans of Spam, uniforms, etc.? Could it have been the U.S. government? Why, I believe it could!

Perhaps the most telling small indicator of this myopia comes near the very end of Capitalism in America. "There were good reasons for complaining" about the effects of industrial capitalism, the authors concede. . "Deaths from industrial accidents in Pittsburgh per 100,000 residents almost doubled . . . between 1870 and 1900." Then, in the very next sentence, "Politicians such as Teddy Roosevelt and Woodrow Wilson whipped up all this discontent into successful political movements" (emphasis added). Note that verb phrase. Now, "whipped up" is a dismissive phrase. The strong implication is that those people who were complaining about the doubling of the death rate were a bunch of slow-witted hoi polloi malcontents, who--instead of being property grateful for the beneficence of their betters--were so crass as to actually agitate for a larger share of the fruits of their labor. The nerve! What right did they have to interfere with the process of accumulating wealth, by questioning the purposes for which the wealth was accumulated?

What's particularly ironic is that it's a version of an argument that southern slaveholders used. Chattel slavery (they avowed) made the country richer as a whole. If some people were the losers in that process, well, too bad for them. Greenspan and Wooldridge would surely have no truck with that version of history; but when it comes to more recent developments they are blind to the parallel.

In the end, Capitalism in America is what I'd call tactically convincing. Its final argument--in favor of "creative destruction" (a cliche that the book rather overuses), and against the growth in entitlements and regulation--is well put, and well-supported by facts. I'm not unsympathetic. It's easy to close the book thinking, "well, that makes sense." But I've read other books that take the same facts, put a different slant on them, and evoke the same reaction towards a quite different set of policies. It's worth reading, but not worth accepting uncritically.

---

One of the best books on finance out there is Liaquat Ahamed's The Lords of Finance, focusing specifically on the role of central bankers and the gold standard in bringing on the Great Depression. Broader, and also excellent, is Nicholas Wapshott's Keynes/Hayek: The Clash That Defined Modern Economics.

Also, G&W refer several times to Richard White's The Republic for Which It Stands. I didn't like the latter book much, but I have to say that future historians could be pardoned for thinking that it was describing a completely different country than the one in Capitalism in America. 

Book Review: Empire of Things

Empire of Things: How We Became a World of Consumers, from the Fifteenth Century to the Twenty-First
Frank Trentmann
Sociology, economics

At the end of Empire of Things you'll find 107 pages of densely-packed, small-print end notes. You'll also find an apologetic note from the author:

. . . these are only the tip of the research iceberg on which this book rests. Readers who wish to delve deeper . . .can browse my 260-page working bibliography at: http://www.bbk.ac.uk/frank-trentmann/empire-of-things/.

This, mind you, after 692 pages of text. These aren't light, fluffy pages, either. It's like you're walking into Dr. Trentmann's Famous Museum of Consumer Facts. Imagine a long room, lined with glass cases, each of which is crammed with exhibits, and where each exhibit has an explanatory plaque which you're expected to read. A semi-random trawl through the book's first half furnishes some examples. Page 175:

In 1800, Paris and London made do with a few thousand oil lamps . . . By 1867 . . . Paris was lit by around 20,0000 gas lamps. By 1907, it had 54,000; London had as many as 77,000 lights . . . each burnt 140 litres of gas a night. When the First World War broke out in 1914, Paris was seventy times brighter than during the 1848 revolution.

Page 212:

A typical local Varieté cinema in 1904 showed moving pictures to around 70,000 viewers a week . . . Lexington, Kentucky had two cinemas for its 25,000 inhabitants . . . By 1914, Britain had 3,800 cinemas. London alone had almost five hundred, with seating for 400,000, more than five times that in music halls . . . 250,000 Londoners went to the cinema, every day. In New York City, the weekly attendance was closer to a million . . .

Page 239:

. . . a factory worker typically earned $590 in 1890 . . . almost a million new homes were constructed in 1925 alone . . . In New York and Philadelphia, 87 per cent and 61 per cent were renting in 1920. In 1930, this was down to 80 per cent and 42 per cent.

Page 326-327:

. . . in the early 1960s, public expenditure was 36 per cent of GDP in France (33 per cent in the UK; 35 per cent in West Germany); by the late 1970s it had reached 46 per cent in all three . . . In the USSR, consumer durables grew at a rate of 8 per cent a year . . . the Hungarian government promised its people 610,000 TVs, 600,000 washing machines and 128,000 fridges within the next three years . . .

It's not that the facts aren't interesting; they are. It's not that Empire of Things is badly written, either, although someone should let Frank Trentmann know that it's no longer a flogging offense to use a contraction now and then. It's just that there's so . . . damn . . . much of it. Even the most dedicated reader isn't going to retain more than a tiny fraction of this information. Empire of Things would have been so much more memorable if it had only concentrated on telling a story. (The second half, which is organized by concept rather than chronologically, is a bit better than the first.) But if there's a theme running through the book, it's one that only really becomes clear in the final 20 pages or so. The book is intriguing in spots, and enlightening in spots, but as a whole it's something of a blur.

Book Review: Go Figure

Go Figure: Things You Didn't Know You Didn't Know
Tom Standage (editor)
Economics

I dote upon useless information. Go Figure is a lovely compendium of . . . not trivia, exactly . . . oddments from the magazine The Economist. Many of these follow a standard four-paragraph format: setup, background, explanation, implications. Deep it is not; intriguing, however, it is. Perhaps you've never asked yourself "Why are there so few road deaths in Sweden, anyway?" or "How did India Pale Ale get so popular all of a sudden?" or "What's with the big cadaver shortage I keep hearing about?" or "Why does everyone in Korea seem to be from the Kim family?" Well, you should have. If you're not curious about stuff like this, you're reading the wrong blog.

Book Review: Digital Gold

Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money
Nathaniel Popper
Economics, computers

Some people have a stereotypical idea of what constitutes a Bitcoin zealot in their minds. Some people, indeed, probably imagine:

• Technical brilliance combined with Asperger's syndrome or the like
• Thin, worryingly intense men with beady eyes
• Parents' basements
• Orthodox Libertarians waving their copies of Mao's Little Red Book Atlas Shrugged in quasi-religious fervor
• Scammers, fast-talkers, Machiavellians, suck-ups, and narcissists generally

Some people are, broadly speaking, correct. No one person in Digital Gold incorporates all of the stereotype, but even so a certain ... composite portrait ... emerges. (Two other facts are worth noting: 100% of the actors are male, and 98% of them seem to be jerks. One of the few exceptions lives in my home town, for what that's worth.)

Also, there are a lot of them. That's one of Digital Gold's main weaknesses. There are just too many characters, and they tend to drift into and out of the story, making it hard to remember who's who. A cast of characters, right up-front, would have been helpful; a timeline would not have come amiss. As it is, the book is a bit herky-jerky. The pieces are fine, and might stand on their own as newspaper articles, but as a whole it's a bit slice-of-life-ish.

This is, in part, because Nathaniel Popper chose to concentrate on the people rather than on the technology. I understand why.  I imagine that there are relatively few readers who will abandon the book because it's short on eye-watering engineering detail. That doesn't mean I don't miss it, though. There's only a short and shallow technical appendix, which isn't nearly enough.

Still, it's a pretty enjoyable read. The conclusion is a bit of a downer: the idealists go up against the System, and the System wins. But, as with the large and shifting cast, that's real life for you.

Book Review: Coined

Coined: The Rich Life of Money and How Its History Has Shaped Us
Kabir Sehgal
Economics, history

 Kabir Sehgal commits an absolutely unpardonable sin in this book: he conflates Star Wars and Star Trek.

[Pause for gasps of outrage.]


That's a joke, son, but it's only a sort-of joke. Coined is fast-paced and wide-ranging, but there are too many places where Kabir Sehgal skips stuff, or makes arguments that are at best poorly phrased, or just plain makes little blunders. It's a mile wide and an inch deep (and if you think it's hypocritical for me to complain about that, you're right, but I'm doing it anyway).

To put it another way, I could have written this book myself, given enough time and the right Wikipedia articles.

Actually, that's not true. I would not have done what Kabir Sehgal does, which is to accept the conventional assertion that gold and silver represent a mythical something called "hard money".

Digression

The idea that gold has intrinsic value is, prima facie, stupid. Here are some of the many things you can't do with gold:

• Eat it
• Drink it
• Shelter from the rain under it
• Cure your influenza by injecting it
• Enjoy carnal pleasures with it (if I'm wrong about this, please do not tell me)

Imagine that you and I are on a desert island. My side has a pirate treasure chest. Your side has coconuts. I offer you a gold coin in exchange for a coconut. If gold has intrinsic value, this is a good trade. Given the relative value of gold and coconuts, you should always accept.

In reality, whether you should take the offer depends not on the market price of coconuts, but on your beliefs about the future.

1. If you believe we're likely to be rescued soon, sure, take the coin. You can sell it when we get to shore.
2. If you believe we may never be rescued, and that you may need all the coconuts you can get, you'd be an idiot to accept this offer. Coconuts have actual utility; gold doesn't.

The value of my gold coin, in other words, depends on whether you believe that, at some future point, you can trade it to someone else. If you don't believe this, my dubloons have zero value. In which regard they are no different from green pieces of paper with pictures of Benjamin Franklin on them. If people believe in their future exchangeability, they're money. If people disbelieve, they're not.
 
End of Digression 

Coined is an easy read, impressive in breadth, and suitable for someone who's never really thought about the subject. For deep reading, however, I'd recommend instead any of the following:

• Money: The Unauthorized Biography, by Felix Martin (who explicitly rejects the "money as commodity" view)
• The Ascent of Money, by Niall Ferguson (who would disagree with Felix Martin on many points)
• The Pulitzer-winning Lords of Finance, by Liaquat Ahamed (which is narrower in focus, but exceedingly enlightening)