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Robert Samuelson

Republic of Turmoil

By Robert J. Samuelson
Wednesday, November 24, 2004; Page A21

Picture yourself in the mid-1840s. It's an exciting time. Fifteen years earlier, railroads barely existed. In 1830 there were only 23 miles of track. By 1840 there were 2,818; by 1850, 9,021. Steamboats ply major rivers -- another recent development. In 1844 Samuel Morse had introduced the telegraph by sending this message from Washington to Baltimore: "What hath God wrought!" For some, it was all too much. "This world is going too fast," wrote one old-timer, a 64-year-old former mayor of New York named Philip Hone. "Railroads, steamers, packets, race against time. . . . Oh, for the good old days of heavy post coaches and speed at the rate of six miles an hour!"

Hone apparently coined the phrase "good old days" -- and we've been chasing them unsuccessfully ever since. It's not simply that you can't turn back the clock. The larger difficulty is that the "good old days" never were. The supposedly placid past, once probed and explored, usually turns out to have been as jarring as the disruptive present. Something is always assaulting our sense of security and stability. We Americans say we like change, but we want it without troubling side effects. This is a mirage. Anyone who doubts that should read John Steele Gordon's superb, just-published book "An Empire of Wealth."

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The Dangerous Dollar (The Washington Post, Nov 17, 2004)
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Gordon has written the best one-volume economic history of the United States in a long time, and perhaps ever. Highly readable and fact-filled, it's basically optimistic. Gordon argues that America's success is rooted in a society that rewards people for being ambitious, taking risks and trying new ideas. The story has much continuity: from Francis Cabot Lowell, who expanded New England's textile industry in the War of 1812; to Cyrus McCormick, whose mechanical reaper revolutionized American agriculture in the 1840s and 1850s; to Henry Ford, who introduced the Model T in 1908; to Bill Gates and Steve Jobs, who've popularized the personal computer. All aimed to succeed by satisfying demands of the mass market.

"With McCormick's reaper, one man could harvest eight acres a day, not one, and the American Middle West could become the breadbasket of the world," writes Gordon. "In 1839 only eighty bushels of wheat were shipped out of the infant town of Chicago. Ten years later Chicago shipped two million." In 1908 the Model T cost a dirt-cheap $850; by 1916 it was $360, and Ford sold 730,041 of them.

Gordon also shows that the messy past often confounds common myths. One is this: In the 19th century, government wasn't much involved in the economy. Not so. Consider the Erie Canal, which Gordon calls "the most consequential public works project in American history." Connecting Lake Erie and New York City, it engendered much ridicule. "You talk of making a canal three hundred and fifty miles through wilderness!" Thomas Jefferson wrote DeWitt Clinton, the main advocate. "It is a splendid project, and may be executed a century hence. It is little short of madness to think of it at this day." But Clinton, once elected governor, pressed ahead. The digging took from 1817 to 1825. The canal succeeded instantly. In its first year, boats carried 221,000 barrels of flour, 435,000 gallons of whiskey and 562,000 bushels of wheat.

Change has always been the economy's lifeblood -- often with depressing side effects. Nowhere was the contradiction more fateful than with Eli Whitney's invention of the cotton gin in 1793. Before the gin, it took 25 man-days to separate out the seeds for 50 pounds of cotton; after the gin, it took a day. The South's cotton production soared, from 1 percent of the world total in 1793 to almost 70 percent in 1850. This was an economic bonanza -- and a national tragedy. Without the gin, Gordon suggests, slavery was uneconomical and might have died quietly. Other crops were less profitable and couldn't justify the cost of feeding and housing slaves.

America's dazzling post-Civil War industrialization was much the same story. By 1900 the United States had 193,346 miles of railroad track, up more than six times in four decades. Steel production jumped from 1,643 tons in 1867 to 7.2 million tons in 1897, which exceeded the combined total of Britain and Germany. Americans could buy cheap farm implements and more food and consumer goods. But there were large social costs: depressions, city slums and labor strife. In 1877 many railroads cut workers' pay by 10 percent. In retaliation, workers seized freight yards and destroyed railroad property. Only after President Rutherford Hayes dispatched troops was order restored.

Compared with the past, some present upsets (job outsourcing, rising health costs, jeopardized pensions) seem tame. But the dilemma we face is the same. Suppressing change is a formula for economic stagnation or suicide. It kills the sources of growth. On the other hand, accepting all change as unavoidable and ultimately beneficial can be socially undesirable and politically unrealistic. Gordon rightly argues that capitalism provides many benefits but that, without some government oversight and regulation, it's inherently unstable and unfair. The trick is to find the right balance between encouraging change and dealing with the nasty side effects. History suggests this was never easy; it still isn't.

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