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Trade War
This book tells what happened during our last one!

"Understanding the Great Depression
 & Failures of Modern Economic Policy"

 by Dan Blatt - Publisher of FUTURECASTS online magazine.

 Explaining the Great Depression, its Trade War, and failures of "New" Keynesian interest rate suppression policy without ideological clap trap, theory confirmation bias or political spin.

Table of Contents & Introduction

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"Understanding the Economic Basics & Modern Capitalism: Market Mechanisms and Administered Alternatives"
by Dan Blatt
Publisher of FUTURECASTS online magazine.

Smith: Wealth of Nations.   Ricardo: Principles.
Marx: Capital (Das Kapital). 
Keynes: General Theory.
Schumpeter: Capitalism, Socialism and Democracy.

Economics is the miracle science. Even imperfect capitalist markets routinely raise billions out of poverty.

Table of Contents & Introduction

FUTURECASTS JOURNAL

AMERICANA:
A 400-Year History of American Capitalism
by
Bhu Srinivasan

July, 2018
www.futurecasts.com

Homepage

Regulation of American capitalist markets:

 

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  In "Americana: A 400-Year History of American Capitalism," Bhu Srinivasan provides a useful account of primary episodes in the development of the American capitalist market economy. A second important object of the book is to demonstrate the extent to which American economic development has been dependent upon and assisted by government laws, regulations and policies.
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Evaluating each regulatory effort separately on its merits would actually take some effort, so propaganda myths are much in demand and Washington, ideologues and political partisans churn them out in industrial quantity.

  The laissez faire propaganda myth is a primary target of his effort. Srinivasan is clearly intent on demonstrating the fallacy of laissez faire objections to government regulatory efforts and policies. Unfortunately, the  book thus provides a one-sided view that serves to support the anti-laissez faire propaganda myth that denigrates all opposition to government regulations as mere laissez faire propaganda.
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  Both pro and con laissez faire propaganda seek to reduce discourse about the desirability of regulatory efforts to mere competing propaganda assertions. Evaluating each regulatory effort separately on its merits would actually take some effort, so propaganda myths are much in demand and Washington ideologues and political partisans churn them out in industrial quantity.
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  In fact, the laissez faire propaganda myth is a dead horse.
Srinivasan sets it up as a straw man that can be easily knocked down. As FUTURECASTS has explained numerous times, the difference between the town square markets or Middle East bazaars that do little more than facilitate subsistence living and capitalist markets that facilitate the accumulation of wealth is found precisely in the private and government laws, regulations and rules that shape and support capitalist markets. See, Scott, Capitalism, Origins and Evolution,  
 &
Thus:
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They sailed in a chartered English vessel. Financing was arranged under the format of a joint stock company, a legal entity developed in the previous century permitting transferable shares and liability limited to funds invested.

 

Disaster was averted in Plymouth colony by shifting from unproductive collective farming to private enterprise farming. "This had good success," it was observed, "for it made all hands very industrious."

  • The Mayflower: The Pilgrim venture was facilitated by a 1606 charter granted to the Virginia Company of London with oversight  from the Crown through its Council for Virginia. Instead of fleeing from religious persecution, "the Pilgrims voluntarily entered the business of carrying His Majesty's sovereignty overseas." They sailed in a chartered English vessel. Financing was arranged under the format of a joint stock company, a legal entity developed in the previous century permitting transferable shares and liability limited to funds invested, without which financing would have been impossible. NOTE: All of these regulatory policies were devised and implemented to facilitate the pertinent economic markets.

  The Virginia Company had already suffered a series of disasters that had repeatedly emptied its coffers. Its prospectus pamphlets were hardly models of transparency. Legal squabbles delayed the Mayflower's departure, with deadly consequences for the first winter in the New World. The initial return of wood and furs would have provided a good dividend of about 30%, but it was seized by a French privateer. Meanwhile, disaster was averted in Plymouth colony by shifting from unproductive collective farming to private enterprise farming. "This had good success," it was observed, "for it made all hands very industrious." It was not until 1645 that all the legal complications were settled.
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  The first use of the corporate form for overseas adventures was in 1553, for the Russia Company. Sir Francis Drake's privateer operation sailed with 21 ships and 1,932 men with invested capital of 57,000. It ultimately paid a handsome return of 4,700%. The East India Company was formed in 1600.
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Labor was initially supplied to the colonies by the export of homeless children from London and by the system of indentured servitude. 

  • Tobacco and rice: The first substantial supply of tobacco arrived in England aboard one of Sir Francis Drake's ships. Labor was initially supplied to the colonies by the export of homeless children from London and by the system of indentured servitude. Maryland and Virginia added the inducement of 50 acres to freedmen to encourage population growth. NOTE: All of these regulatory policies were devised and implemented to facilitate the pertinent economic markets.

  By 1700, tobacco accounted for about 80% of colonial exports. In 1765, tobacco and rice accounted for about 80% of colonial exports. Initially, about 75% of the white population had arrived as servants.
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The rights of slave holders were ensconced in the Constitution and in the laws, in the 1820 Missouri Compromise covering the status of slavery in new states and in the 1850 Fugitive Slave Act compromise that included statehood for California.

 

By the beginning of the Civil War, "slaves were the single most valuable asset class in America," as demonstrated by a couple of estate auctions that liquidated major slave holdings.

  • Slaves: The Royal African Company of England was chartered in 1672 with a monopoly on the slave trade between West Africa and the English colonies resulting in a dramatic increase in the slave trade. In Carolina, an additional 150 acres was awarded for each slave acquired, encouraging the formation of plantations. The rights of slave holders were ensconced in the Constitution and in the laws, in the 1820 Missouri Compromise covering the status of slavery in new states and in the 1850 Fugitive Slave Act compromise that included statehood for California. NOTE: All of these regulatory policies were devised and implemented to facilitate the pertinent economic markets.

  The slave trade at first was limited in North America and directed primarily to the sugar plantations in Spanish America and Portuguese Brazil. However, by 1720, the Carolina population was mostly people of African descent. "On the eve of liberty, the majority of American exports, decades before cotton entered the equation, was produced by slave labor."
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  By the beginning of the Civil War, "slaves were the single most valuable asset class in America," as demonstrated by a couple of estate auctions that liquidated major slave holdings. At one 1859 auction, the average price was about $700 with some going for more that $1,300, giving an estimated value of $2.8 billion for the nation's approximately 4 million slaves. In 1860, slave values soared, with the average price at a January, 1860 auction exceeding $1,000.
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  North and South, a major portion of the nation's commerce involved cotton and slaves. At the time, the nation's approximately 30,000 miles of railroad track - its most valuable industrial asset - was worth about $1 billion. Federal Government total expenditures in 1859 totaled about $69 million. It was thus impossible for the Federal Government to even contemplate buying freedom for the slaves.
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Commerce among the colonies and with England was governed by English commercial and property law.

  • New Colonies:  A small English fleet facilitated the transfer of the Dutch colony of New Netherlands to form the new English colony of New York. Royal grants and land awards formed the English colonies of New Jersey, Delaware, Pennsylvania, Carolina. Land grant policy was devised by the initial proprietors to attract settlers. With money being more important than religious purity, the legal framework in the new colonies was secular and tolerant. Commerce among the colonies and with England was governed by English commercial and property law. NOTE: All of these regulatory policies were devised and implemented to facilitate the pertinent economic markets.

  New Netherlands failed because the Dutch economy in Europe was too prosperous to encourage migration. Tobacco and rice did not grow well in the North, so land grant policy attracted whole farming families and supported the commerce of small towns and commercial centers like Boston, New York and Philadelphia.
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  • Taxes:  The effort to impose taxes on the Colonies to defray the costs of their protection did not end well. The Stamp Act and the Townshend Act duties imposed costs on colonial commerce that were resented and opposed, leading ultimately to revolution.

  Once the French had been pushed out of North America, the Colonies no longer wanted to pay for England's imperial wars and colonial administration. In addition, developments in English law were favoring restrictions on slaveholder rights. NOTE:  Despite some overlap and fuzziness at the margins, the distinction between governance regulations and policies that facilitated economic markets and those that imposed burdens was already coming into focus.
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Like tobacco and rice, cotton production resulted in the rapid spread of property rights in slaves. The Louisiana Purchase in 1803 brought these crops to the Mississippi Delta

 

Efficiency in the textile industry kept eliminating the jobs of large numbers of workers, but the reduced costs and the resulting dramatic decline in consumer prices broadened the market so much that new jobs and the increased purchasing power of wages kept improving average living standards, something Marx and Marxists and many other Luddite intellectuals were too stupid to understand.

  • Cotton:  Eli Whitney's cotton gin made ordinary American cotton an economically viable crop. Incentive for development of the gin came from the profits offered by America's capitalist markets enhanced by the temporary patent monopoly authorized under the Constitution. Production of the gin was financed by an arrangement covered by contract law. Like tobacco and rice, cotton production resulted in the rapid spread of property rights in slaves. The Louisiana Purchase in 1803 brought these crops to the Mississippi Delta. NOTE: All of these regulatory policies were devised and implemented to facilitate pertinent economic markets.

  "The American Constitution relegated to the federal government functions such as minting money, maintaining a postal service, and declaring and financing war, and the granting of copyrights and patents to protect 'writings and discoveries.' When granted, this formal recognition of the government in effect created property rights out of thin air, based on ideas and abstractions."

  By 1850, cotton constituted about 50% of the nation's exports, and the South was supplying about 70% of the world's raw cotton. One of the notable constitutional compromises that made the Constitution and the formation of the nation possible restricted the import of additional African  slaves after 1808. This enhanced the value of slaves already within the country.
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  Whitney was unable to devise a business model to profit from the gin and unable to enforce his property rights in the patent for the easily copied machine. He finally just sold the licensing rights to Carolina for the benefit of its citizens at barely enough to cover his debts. He also collected small sums from some of the other cotton growing states, but this reliance on state economic agreements was mired in litigation. Whitney ultimately made his fortune in Connecticut with the manufacture of muskets and other weapons for the government and the private market.
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  Efficiency in the textile industry kept eliminating the jobs of large numbers of workers, but the reduced costs and the resulting dramatic decline in consumer prices broadened the market so much that new jobs and the increased purchasing power of wages kept improving average living standards, something Marx and Marxists and many other Luddite intellectuals were too stupid to understand. Today's Luddites continue to be too stupid to understand.
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In Gibbons v. Ogden (1824), litigation in which a young Cornelius Vanderbilt had an interest and in which prominent attorneys Aaron Burr and Daniel Webster played prominent roles, state regulation fell afoul of the Constitution's Interstate Commerce clause, and the way was opened for competition on the nation's waterways and for other means of transportation and communication.

  • Steam:  The steam engine applied to boats towards the end of the 18th century "allowed for on demand propulsion for the first time in human history." John Fitch's experiments quickly found important supporters and investors. New York granted Fitch monopoly rights on New York waterways, but Fitch lost these rights when he failed to sufficiently scale up his invention. New York then offered the monopoly rights to the prominent diplomat, Robert R. Livingston. There were several failures and extensions of the monopoly rights agreement, until he met Robert Fulton in France. Fulton shifted from a propeller to a paddle wheel, and quickly realized that the answer to the engineering problems required increased size - of boat, paddle wheel and engine. In August, 1807, the North River Steamboat made the run to Albany in just 32 hours and came back in just 30 hours. The venture quickly expanded and prospered. However, in Gibbons v. Ogden (1824), litigation in which a young Cornelius Vanderbilt had an interest and in which prominent attorneys Aaron Burr and Daniel Webster played prominent roles, state regulation fell afoul of the Constitution's Interstate Commerce clause, and the way was opened for competition on the nation's waterways and for other means of transportation and communication. NOTE: These regulatory policies were devised and implemented to facilitate the pertinent economic markets.

  Fitch committed suicide in 1798. Livingston died in 1813, after a long and prominent career, and Fulton died at 49 just two years later. Vanderbilt, rugged and proudly uneducated, competed ruthlessly and became the riches man in America.
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After several earlier canal project schemes failed in Virginia and Pennsylvania, it became evident that major "internal improvements" (infrastructure) projects were a government responsibility.

  • Canals:  The Erie Canal was a public project by the State of New York. It was financed through its Canal Commission by what today are called revenue bonds that were sold by Wall Street brokers. Land was acquired by eminent domain. The canal was opened in sections that were each an immediate success. By 1835, it ran 363 miles between Albany on the Hudson and Lake Erie. Note: The major benefits of such infrastructure projects ran to private markets.

  The debt totaled $7.8 million, a huge sum in those days, but was easily exceeded by revenues. After several earlier canal project schemes failed in Virginia and Pennsylvania, it became evident that major "internal improvements" (infrastructure) projects were a government responsibility. Canal projects were soon sprouting across the young nation.
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The Erie Railroad was chartered by New York State in 1832 with eminent domain powers for required land purchases. Land valuation disputes went to the vice chancellor of the local circuit. Financing was primarily by means of sale of stock.

  • Railroads:  The first American made locomotive, the Best Friend," was built in 1830 by the West Point Foundry in New York for the Charleston and Hamburg line in South Carolina, which ultimately covered 136 miles. The Erie Railroad was chartered by New York State in 1832 with eminent domain powers for required land purchases. Land valuation disputes went to the vice chancellor of the local circuit. Financing was primarily by means of sale of stock. Corporations could be chartered for specific purposes such as infrastructure, banking or insurance, and contributed to the development of stock markets. States could and did attach oversight conditions to these charters. 

  Railroad construction in the north was delayed by the absorption of bond financing by canal construction and the desire of state governments to avoid undermining the financial success of their new canals. With the Panic of 1937 (when Pres. Jackson allowed the charter of the Second Bank of the United States to lapse), bond financing for canals dried up shifting emphasis to railroad company stock. Mileage grew from about 5,000 in 1846 to 25,000 in 1857. Millions of immigrants, fleeing famine in Ireland and revolutionary conflict in Germany and elsewhere during this time, were absorbed in the great project of connecting the United States by rail and exploiting the new infrastructure. Labor shortages developed, forcing western railroads to offer increases in wages and benefits. At an estimated cost of $20,000 per mile, $400 million was invested in rails alone.

  "[The industrial revolution in the United States] - enabling man to travel through and over nature in new ways with steamboats, canals, and railroads - began as intricate public/private partnerships. The government activities of setting in place the infrastructure, reconciling federal and state laws, permitting limited liability, and defining and balancing the conflicts of property rights, evolved into the operating system of the economy, upon which was placed the dynamic layer of free-market creativity and the vibrant applications of entrepreneurial activity." Note:  These policy and regulatory actions are devised and implemented to facilitate pertinent economic markets.

  Cornelius Vanderbilt was the most effective industrialist of the early industrial revolution in the United States. "For a man who came from nothing and was largely uneducated . . . to be able to weave through all of the abstractions of this new paper jungle was in many ways an affirmation of the nation's republican values."
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Understanding his entrepreneurial limitations, Morse proceeded by liberally licensing his patent rights.

 

The easy pickings quickly ran out and gave way to major mining operations. The competitive market economy rapidly made the adjustments necessary to finance and supply the goldfields.

  • Telegraph:  Samuel Morse put together the technological pieces previously developed by others, and demonstrated a practical system of  electric telegraphy in 1835. Nevertheless, the brilliant Morse spectacularly failed at first as a private entrepreneur. It was not until 1843 that he finally sold the idea to the U.S. Government. In May of 1844, a telegraph wire strung between Washington and Baltimore brought instant news of the nomination of Henry Clay as the Whig candidate, almost as instantly bringing the forces of the capitalist market behind the development of telegraph systems. Understanding his entrepreneurial limitations, Morse proceeded by liberally licensing his patent rights.

  Men like Ezra Cornell and Henry Wells made fortunes in the new industry. An immigrant boy named Andrew Carnegie got his early education in American commerce and initial commercial connections working for a telegraph office.

  • Gold:  Wars, purchases and treaties completed the formation of the continental United States just in time for the discovery of gold in California. The result was a rapid surge of population westward. The easy pickings quickly ran out and gave way to major mining operations. The competitive market economy rapidly made the adjustments necessary to finance and supply the goldfields. Note: Application of the rule of law and protections for people and their property took some time but was increasingly established and provided the foundation for the rapid development of the California economy.

  The discovery of gold in California was a fitting climax for Pres. Polk's efforts to complete the nation's spread. California was a New World full of commercial opportunities within the United States. But its admission as a new state required the 1850 compromise that included the Fugitive Slave Act.
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One result of the blockade was the rapid expansion of cotton production in Egypt, Asia Minor and India, providing lasting competition for Southern cotton.

 

War is just a competition between governments, it hardly provides a measure as to how well government would compete without subsidies in private competitive markets. Although some individuals benefit, war does not facilitate markets, it destroys them.

 

War needs did not deter enactment of the Pacific Railway Act that authorized land grants and bond guarantees for the construction of a transcontinental railroad.

  • The Civil War:  Much of the economy was organized for war use. The North quickly became the dominant consumer of the goods and services provided by its economy. Paper currency as legal tender and the North's credit were mobilized for the war effort. Gold-rush gold paid for vital imports.

  The North blockaded the South with results by 1863 that strangled the South's war effort. Commerce in strategic commodities such as cotton, saltpeter, iron rails, played a vital roll. One result of the blockade was the rapid expansion of cotton production in Egypt, Asia Minor and India, providing lasting competition for Southern cotton.

    With respect to all of the major wars fought by the U.S., the author emphasizes the effectiveness with which the government displaced the free market economy and organized production for the war effort. However, war is just a competition between governments, it hardly provides a measure as to how well government would compete in private competitive markets. Note: Although some entities and individuals benefit, war does not facilitate markets, it destroys them.

  Andrew Carnegie played a prominent role in organizing the economy for war. Jay Cooke sold bonds. A young John D. Rockefeller accumulated wealth brokering food shipments. Joseph Pulitzer immigrated to fight in the Union Army. War needs did not deter enactment of the Pacific Railway Act that authorized land grants and bond guarantees for the construction of a transcontinental railroad.

  The author assumes that the Civil War ended any pretense of constitutional constraints on Federal Government domestic powers. "Modernity required a government that could operate at scale, one that could bypass provincial interests quickly and forcefully: But even this realization came slowly." This has long been a popular assumption in liberal circles, reinforced during the New Deal.
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   "Slowly," indeed! The arrival of the Trump administration 150 years after the Civil War suddenly restored widespread appreciation for the wisdom of the founding fathers when they realized that not every president would be George Washington. Suddenly, constraints on the domestic powers of the federal government and its administrative agencies are once again in fashion even in liberal intellectual circles. There are many advantages in depending on state and local governments to "get things done" in the domestic sphere.

Despite the growing constraints on competition, much of the efficiencies of technology and size were passed on to the American consumer.

  • Oil: An oil "gold rush" was initiated with the discovery of oil in western Pennsylvania. The first gusher, in the oil regions of Titusville, rewarded the drilling efforts of Edwin Drake in August 1859. The local farmers were soon enriched by oil leases.

  However, developing the oil industry and exploiting its wealth was far from easy. Transporting and refining the oil posed numerous difficulties.
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  By 1865, the 25 year old John D. Rockefeller had the largest refinery in Cleveland. He formed Standard Oil Company in 1870. He realized that profitability was determined by size. To control competition, he joined with other major refiners in 1872 in the South Improvement Company oil cartel. He then rapidly bought out almost all of the smaller Cleveland oil refiners. Those who accepted stock instead of cash ultimately became very wealthy.
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  Even though the cartel soon unraveled, Standard Oil was now large enough to dominate the industry. It kept assembling the components of the supply chain and consolidating the industry. It was a confirmation of the recognition by Adam Smith and Karl Marx of the natural anti-competitive inclinations within capitalist markets. Despite the growing constraints on competition, much of the efficiencies of technology and size were passed on to the American consumer.
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Unlike the refining of iron ore, a natural commodity, steel is a manufactured product involving sophisticated capital intensive manufacturing processes. Steel prices thus move more in line with wholesale prices than with the more volatile prices of such commodities as the iron, limestone and coal used in the steel-making process.

 

In fact, steel prices experienced steady substantial price declines before the age of fiat currency and chronic inflation. Steel prices were always far more "sticky" in the upwards direction.

  • Steel:  Andrew Carnegie began construction of the Thomson Steel Works in 1873 after an ample supply of the high grade iron ore needed for the Bessemer steel manufacturing process was discovered at Iron Mountain in the Upper Peninsula of Michigan. Soon thereafter, Carnegie came close to being wiped out in the depression of 1873, when the markets ruthlessly began liquidating the economic and financial excesses flowing from the Civil War. Government tariffs were imposed to reduce competition from British steel. Note: Duties and tariffs were often calculated more for revenue than for protection. At that time they sometimes provided more than 50% of federal government revenues. The steel tariffs, however, were clearly sufficient to shelter the new steel industry.

  Andrew Carnegie started as an immigrant child laborer, with no capital and no formal education. He was soon a major industrialist with interests in ironworks, railroad rails and bridges. Carnegie decided to concentrate on steel and survived - barely -  the 1873 depression by selling his other holdings. When his steel mill opened in 1875, it was the biggest in America. Railroads needed his long-lasting steel rails.

  Unlike the refining of iron ore, a natural commodity, steel is a manufactured product involving sophisticated capital intensive manufacturing processes. Steel prices thus move more in line with wholesale prices than with the more volatile prices of such commodities as the iron, limestone and coal used in the steel-making process.
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  When steel prices declined in line with wholesale prices during the Great Depression, left wing propaganda compared the rate of its price decline with the more volatile price declines of commodities and belabored the steel industry for pricing that was "sticky in a downwards direction." This anti-market propaganda myth has since been spread far and wide within academic and intellectual circles. In fact, steel prices experienced steady substantial price declines before the age of fiat currency and chronic inflation. Steel prices were always far more "sticky" in the upwards direction.

  • Light:  On September 4, 1882, the Edison Electric Illuminating Co., incorporated in New Jersey, turned on the power at its Pearl Street station in New York City. The illuminated office buildings included those of Drexel, Morgan and Co. and the New York Times. Thomas Alva Edison, originally penniless and relatively unschooled, was a serial inventor who ultimately filed over 1,000 patents. He financed his laboratory at Menlo Park in Raritan, New Jersey with stock interests and telegraphy patent leases. Edison ultimately consolidated all his interests nationwide into Edison General Electric under a recent New Jersey Corporations law that authorized New Jersey corporations to hold shares in out-of-state corporations.

 Edison provided a complicated system with an underground grid and metered use where each small light bulb could be switched on and off individually. It had taken years to develop a light bulb that could last more than a few days. With gas and kerosene retaining significant pricing advantages, it took five decades for a majority of American homes to be electrified.
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  Early practical successes attracted the interest of wealthy investors such as William H. Vanderbilt and J.P. Morgan. The Pearl Street station and its underground grid cost almost half a million dollars.  With financing arranged by Drexel, Morgan & Co., the industry was consolidated into a new corporation called General Electric, with Edison and Morgan as passive shareholders and members of the board.
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  Edison and others, including George Westinghouse, quickly built out competing systems. The Edison system used direct current and the Westinghouse system employed alternating current, which ultimately became the industry standard.
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When he became postmaster general during the Benjamin Harrison administration,
Wanamaker advocated for  Rural Free Delivery which, slowly implemented during succeeding years, served among other things to connect rural households to the commercial world.

 

The author asserts that food and drug regulation was a burden on the markets, but the maintenance and increase of public confidence in market goods clearly facilitates market mechanisms. Many regulations involve both costs and benefits. Arguments about laissez faire are not helpful in determining such balances and tradeoffs.

  • Retail: Alexander Turney Stewart's Cast Iron Palace on 10th Street and Broadway opened in 1862. Built by an Irish immigrant, it was America's first department store.  It was soon followed by such retailers as Macy's, Gimbels, and Lord & Taylor in New York City and John Wanamaker's Grand Depot in Philadelphia. Department store advertising, initially emphasized by Wanamaker, became the financial lifeline of many newspapers. When he became postmaster general during the Benjamin Harrison administration,
    Wanamaker advocated for  Rural Free Delivery which, slowly implemented during succeeding years, served among other things to connect rural households to the commercial world.

  Aaron Montgomery Ward's Montgomery Ward & Co. catalogue brought access to a universe of consumer items into mailboxes across America. Other retailers soon followed with catalogues of their own, but the most successful of the catalogues was that of Sears, Roebuck Co. Richard Sears was not a retailer. He started his catalogue as a railroad freight agent.

  Unfortunately, some of the products being sold through the catalogues and by ordinary retailers were of a kind that could not be evaluated by consumers. This was especially true with food and drugs. It became increasingly apparent that there was an important roll for government in insuring the quality of such goods in the market.
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  The author asserts that this type of regulation was a burden on the markets, but the maintenance and increase of public confidence in market goods clearly facilitates market mechanisms. Many regulations involve both costs and benefits. Arguments about laissez faire are not helpful in determining such balances and tradeoffs.

Just one generation after the Civil War, the United States was suddenly a middle class nation with a migrant and domestic workforce that was well aware of how much better working conditions were than in Europe or elsewhere.

  • Unions:  In the 1880s, expanding labor unions such as the Knights of Labor and the United Metal Workers, began to contest wages, working conditions and hours with the industrial giants. Work stoppages began to proliferate. Anarchists and other ideological groups joined in the contests. The police were called in to protect property. Violence, including a bomb tossed at a police formation, undermined public sympathy for anarchists and the labor unions alike. Guilt by association tied the unions to the now despised radicals and doomed these early efforts. 

  As is inevitable, working conditions were tough in these early stages of the industrial revolution. However, just one generation after the Civil War, the United States was suddenly a middle class nation with a migrant and domestic workforce that was well aware of how much better working conditions were than in Europe or elsewhere.

  In Europe, leading communists like Eduard Bernstein despaired that communist progress in the U.S. was impossible because of the rapid improvements in U.S. working conditions. Indeed, despite obvious imperfections and the burdens of wars and self-interested political interventions, capitalist market mechanisms were observably producing a broad advance in living conditions that were readily observable to knowledgeable commentators as early as Smith and Ricardo.

  As Carnegie observed: "The poor enjoy what the rich could not before afford. The laborer has now more comforts than the farmer had a few generations ago. The farmer has more luxuries than the landlord had. The landlord has books and pictures rarer and appointments more artistic than the king could then obtain." However, the great wealth initially obtained should ultimately be given away, because: "The man who dies thus rich, dies disgraced." Both Rockefeller and Carnegie gave away many billions leaving lasting legacies for the public benefit.
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Tax revenues from the beer industry rivaled that from the tariff. However, the political power of the breweries and the nationwide spread of 3,000 local saloons comprising the nation's fifth largest industry would prove no match for the Women's Christian Temperance League.

  • Towards the end of the 19th century, the growing economy moved rapidly in myriad directions.
  1. The transcontinental railroad was completed in 1869. The U.S. Army ruthlessly moved the Indian tribes out of the way of the rapidly spreading nation. The buffalo herds were replaced by cattle.
  2. A wave of German immigration introduced a new language and culture. Beer breweries were established, competed and flourished, distinguished by patents, trademarks and copyrights. Tax revenues from the beer industry rivaled that from the tariff. However, the political power of the breweries and the nationwide spread of 3,000 local saloons comprising the nation's fifth largest industry would prove no match for the Women's Christian Temperance League.
  3. Singer Manufacturing Co., among others, perfected the sewing machine and E. Remington & Son perfected the typewriter, giving women entries into the commercial world.
  4. Pulitzer and Hearst changed newspaper formats to appeal to broader audiences. They were opposed by Adolph Ochs at the New York Times in the newspaper wars at the end of the century.
  5. In 1892, 8000 troops from the Pennsylvania militia helped break the strike at Carnegie's giant Homestead steel mill. However, labor had more votes and would ultimately make massive gains by democratic political means.

In 1901, Morgan arranged the merger of Carnegie Steel into existing steel combinations to form U.S. Steel Corp., the first $1 billion corporation, making Carnegie the world's richest man.

 

For many modestly successful family firms, trust consolidation was an opportunity to gain liquidity and cash out.

  • Trusts:  Consolidation of industries to gain pricing power was facilitated by the New Jersey corporations law that now authorized New Jersey corporations to hold stock in out-of-state corporations. Other states soon followed.

  Giant trusts like General Electric and Standard Oil of New Jersey were accompanied by American Thread Co., American Sewer Pipe Co., American Ice, American Caramel, National Biscuit Co. Less significant was consolidation efforts in school furniture, grass twine, writing paper. For many modestly successful family firms, it was an opportunity to gain liquidity and cash out.
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  Wall Street was only too willing to finance these consolidations, with J.P. Morgan among the most prominent financiers. In 1901, Morgan arranged the merger of Carnegie Steel into existing steel combinations to form U.S. Steel Corp., the first $1 billion corporation, making Carnegie the world's richest man. This seemed appropriate since the U.S. economy had become the world's biggest.

  "It led the world in the production of food, steel, oil, and automobiles. It had the most miles of railroad track. Of the large nations, it boasted the highest wages. It maintained this position despite absorbing up to one million new immigrants per year."

  Carnegie, good to his word, now got busy distributing his wealth to worthy causes like the famous Carnegie libraries and the Hampton and Tuskegee Institute to "promote the elevation" of former slaves.
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Enforcement generally swings between being too lax and too restrictive. To be fair, the appropriate dividing line between enforcement that is too lax and enforcement that is too confining is hardly easy to draw, but this is the kind of problem that bedevils all administered alternatives to market mechanisms.

  • Antitrust:  The 1890 Sherman Antitrust Act was wielded by Theodore Roosevelt to stop Morgan's effort to consolidate the nation's railroads. But Morgan was consulted on the formation of the presidential commission that resolved the United Mine Workers strike against the anthracite coal mines that provided the nation's vital heating coal. The miners got a pay raise and a 9 hour day.

  Where competition was no longer sufficient, big government would have to prevent the trampling of the public interest during conflicts between big industry and big unions. Roosevelt continued "to shape the role of government as the regulating force balancing the interests of labor, capital, the public, journalists, and his own party's establishment." Muckraking magazines such as Collier's, Harper's, and McClure's found attractive targets in business excesses.

  Antitrust law enforcement is clearly vital to make up for business tendencies that seek relief from the competition that is so vital to the proper functioning of markets. This is an area of government regulation that Adam Smith would undoubtedly have approved albeit with considerable reservations about efficacy. The Wealth of Nations expressed considerable concern with this problem. See, Adam Smith, The Wealth of Nations, (I) capitalism, mercantilism, capitalist markets, and Adam Smith, The Wealth of Nations, (II) government policy, taxes, capitalism, mercantilism
 &
  Government enforcement has achieved much in this area, but exhibits many of the problems that are to be expected with administered alternatives to market mechanisms. Enforcement generally swings between being too lax and too restrictive and is prey to political influence. To be fair, the appropriate dividing line between enforcement that is too lax and enforcement that is too confining is hardly easy to draw, but this is the kind of problem that bedevils all administered alternatives to market mechanisms.
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  At the present time, FUTURECASTS believes that the pendulum has, for several decades, swung too far to the side of enforcement laxity at the cost of considerable diminution of competition in inherently local markets like health care. Even though government may control much of the health care budget, government clearly lacks the competence to protect the public fisc in these complex markets.

  • Food:  Manufactured foods and drink, often promoted with health claims, gave rise to some of the nation's most valuable trademarks. Kellogg's, Post, Coca-Cola, remain valuable brands to this day, despite the abandonment of initial health claims. Indeed, the industrialization of the food industry made meat and a wide variety of food  products more widely available at affordable prices than at any time in history. With passage of the Federal Meat Inspection Act and the Pure Food and Drug Act, however, the federal government became actively engaged in the quality assurance business. Regulation under the Food and Drug Administration soon followed.

  Health claims for proprietary "patent" medicines of dubious value were supported by extensive advertising in the news media. These medicinal claims were energetically attacked in a series of "muckraking" articles in Colliers by Samuel Hopkins Adams. Upton Sinclair's novel, The Jungle, attacked conditions in the meat packing industry. At Sinclair's urging, Roosevelt appointed an investigative commission whose report was if anything far more dire than Sinclair's book.

  These regulatory efforts could be classed among those that facilitate and strengthen the pertinent markets by supporting pubic confidence in the drugs and foods sold. The author here, again, in his one-sided attack on the laissez faire propaganda myth, fails to distinguish between regulations that facilitate capitalist markets and may even be essential to make them possible, and those that burden markets for tangential purposes. Where there are both costs and benefits, his simplistic application of anti-laissez fair propaganda serves to smother any effort at evaluation.

  • Automobiles:  While the development of the automobile was capitalism at work, the consumer had to be regulated for the industry to thrive. Governments were soon heavily involved in enacting traffic rules and building infrastructure, in licensing and registering drivers and vehicles.

  Steam propulsion vied with electric propulsion and gas, but the energy produced by gas proved determinative. Early developers like Eli Ransom Olds and David Buick were sidelined as Wall Street investors pushed them aside to provide competent management. Consolidation proceeded rapidly as the modern automobile industry took shape.
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  However, Henry Ford maintained control of his Ford Motor Co., incorporated in 1903, and introduced the mass production that reduced the costs of his automobiles to levels affordable for the general public. In 1907, the Model N cost just  $600 followed by the considerably improved Model T in 1908 at $850. With advances in mass production, the cost of the Model T touring model in 1914 was only $360. At the $5 per day wage then paid by Ford, the car could be acquired with a mere 72 days of labor. His workers were also his customers.
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  Bill Durant was busy gobbling up a wide variety of automotive shops, most prominently combining his Buick Manufacturing Co. with unprofitable Olds Motor Works and profitable Cadillac, to form General Motors. Ford and General Motors would thereafter dominate the industry. Durant was pushed out in 1910 by his investors, but Ford kept control of his company and became one of the nation's early billionaires.
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The various private wireless interests all sought the government oversight that was needed for a functioning industry. During WW-I, the government took charge of the wireless industry as well as much else. It then promoted the formation of a domestic corporation to assure continued leadership in the field.

 

The government regulation that imposed order on the airwaves and transformed them into property rights to be owned, leased, licensed, or sold was quintessentially of the type that created and facilitated capitalist markets.

  • Radio:  The 1912 sinking of the Titanic dramatically demonstrated the value of radio telegraphy. The value of the Marconi Wireless Telegraphy Co. soared. President William Howard Taft took control to end the anarchy on the airwaves. The various private wireless interests all sought the government oversight that was needed for a functioning industry. During WW-I, the government took charge of the wireless industry as well as much else. It then promoted the formation of a domestic corporation to assure continued leadership in the field. Radio Corporation of America (RCA)  combined the patents of GE and the navy along with the receiving stations of Marconi Wireless and many Marconi employees, including David Sarnoff. Deals with patent holders AT&T, and Westinghouse Electric enabled Sarnoff and RCA to usher in the early days of broadcast communications.

  In 1926, GE, Westinghouse and RCA formed the National Broadcasting Co. Columbia Broadcasting Co. was formed by William Paley with a network of local stations.

  The author presents this dependence on government regulation as "perhaps unprecedented in the annals of American capitalism," but this is pure ignorance. In fact it has always been the case that capitalist markets do not exist without the institutional and government governance that facilitates their operations. See, Scott, Capitalism, Origins and Evolution, Note: The government regulation that imposed order on the airwaves and transformed them into property rights to be owned, leased, licensed, or sold was quintessentially of the type that created and facilitated capitalist markets.

  • The Great War:  World War I had massive economic, social and political  impacts that would shape the rest of the 20th century world. Once again during a major conflict, much of the economy was organized for war. Providing the European Allies with material and financial support, the U.S. was transformed from a debtor nation to the world's premier creditor nation, with responsibilities that it was not ready to assume.

  Heedless of the noxious impacts of its protectionist policies, the U.S. Government played a major roll in the economic tragedies of the next two decades. See, Blatt, "Understanding the Great Depression and Failures of Modern Economic Policy," Table of Contents and Chapter Introductions and Great Depression Chronology articles beginning with The Crash of 1929, See, also, articles referenced in Great Depression links
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The 1922 Fordney-McCumber Tariff and the 1930 Smoot-Hawley Tariff were primary examples of political efforts to substitute administered mechanisms for competitive markets, in these cases by heedless political hacks in the Republican party.

 

FDR's refusal in 1933 to join European efforts to reopen international markets condemned the U.S. to five more years of Depression.  The 1933 National Industrial Recovery Act effort to substitute administered alternatives for competitive markets by gathering all elements of the economy into cartels against the consumer interest was a fiasco.

 

These regulatory policies destroyed markets instead of facilitating them and provide dramatic examples of the dangers of government regulations that burden and even destroy economic markets.

 

Rather than being "scientific" as originally claimed, Keynesians now invariably admit that they lack the competence to provide reliable economic forecasts. They cannot forecast Keynesian policy failure. Thus, validation is not possible.

  • The Great Depression: Coverage of the Great Depression is in accordance with the Keynesian propaganda myth and is thus incompetent. All of the fundamental causes of the Great Depression are omitted or mentioned just in passing  It was all caused by the collapse of an unreasoning speculative bubble in the stock market, a highly leveraged economy, and the rigidity of the gold standard, according to the author. Modern Keynesian policies, he implies, would have prevented it or greatly mitigated it.

  There are no major political parties that can "stand the truth" about the Great Depression. The causes are thus treated as a great mystery and the Depression remains a propaganda foil for use by ideologues.
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  The Republicans controlled the government for the dozen years prior to 1933 and thus could not deflect blame from their policies for the initiation and depth of the Great Depression. The 1922 Fordney-McCumber Tariff and the 1930 Smoot-Hawley Tariff were primary examples of political efforts to substitute administered mechanisms for competitive markets, in these cases by heedless political hacks in the Republican party.
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  However, FDR's refusal in 1933 to join European efforts to reopen international markets condemned the U.S. to five more years of Depression.  The 1933 National Industrial Recovery Act effort to substitute administered alternatives for competitive markets by gathering all elements of the economy into cartels against the consumer interest was a fiasco, also as might be expected.
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  Note: These regulatory policies destroyed markets instead of facilitating them and provide dramatic examples of the dangers of government regulations that burden and even destroy economic markets. Their obvious role in the initiation, depth, and duration of the disaster is routinely denigrated by influential segments of the intellectual and academic community in favor of various propaganda interests. They find favor with the politicians who thus receive a "Get out of Jail Free" card with respect to political guilt for the Great Depression.
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  The New Deal did provide regulatory and social policy successes.  Elegant approaches were devised for banking and securities markets regulation that, while subject to increasing problems over time, serve to strengthen those markets to this day. However, the effort to provide a proper balance between the interests of big labor and big business has been an ongoing problem, as might be expected, and social security remains chronically under-funded. Minimum wages and farm subsidies require repeated attention to keep pace with the inflation that they contribute to.
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  In the event, there were sharp economic reversals during the New Deal at the end of 1933 and 1934 and in 1937. Most of the initial reduction of unemployment during the New Deal and much of the initial increase in economic activity emphasized by the author was a dead-cat bounce simply from reopening the banks. Unemployment was still running almost 18% as late as 1938, and never got as low as 14% during the decade, despite massive increases in government employment. This hardly supports the picture of New Deal economic policy success presented by the author.
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  Keynesian-type policies have been resorted to since well before Keynes published his "General Theory." The broad concepts had long been circulating. Unfortunately, Keynesian-type monetary inflation and budget deficit policies have never had any lasting period of success. Keynesian policies have given us the Keynesian inflationary morass of the 1970s and the booms and busts of the first decade of the 21st century.
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  Keynesian-type  policies failed in 1932, 1933, 1937, 1968, 1971, 1972, 1973, 1980, 2000 and 2007. The author totally fails to understand the connection between the Keynesian policies of the 1960s and the Keynesian inflationary morass of the 1970s. The Keynesian "recovery" economy during the Obama administration persistently lost ground to the established growth trend (the definition of a "growth recession"), and Trump was in the White House at the end instead of Clinton. There are many more examples of failure abroad.
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  Keynesian theory has never been validated - and never will be validated. In fact, it is not valid. The Keynesian forecasting record since Keynesians came to Washington in the 1960s was so bad that Keynesians have been reduced to the ridiculous claim that nobody can forecast the economy. Rather than being "scientific" as originally claimed, Keynesians now invariably admit that they lack the competence to provide reliable economic forecasts. They cannot forecast Keynesian policy failure. Thus, validation is not possible.
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  The publisher of FUTURECASTS has a five decade record of accurate published economic forecasts.  See, links in About the publisher page.
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  Keynesians nevertheless presume expertise and expect the public to accept their expertise as a matter of faith, regardless of the deplorable record of previous failures. The politicians love them and keep hiring them for  prestigious advisory positions in government, since Keynesian theory purports to provide intellectual support for the monetary inflation and budget deficits that politicians love. See, Keynes, The General Theory (I), Keynesian theory, and Keynes, The General Theory (II), Keynesian policy. Keynesians are supremely experienced at providing excuses for failure.
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  The Keynesians are thus a politically authorized clerisy that demands acceptance on faith and excludes heretics from the church.

  • Film:  Gone With The Wind and Snow White were dazzling successes for a film industry that thrived during the Great Depression. The industry advanced from talkies to Technicolor during the decade.

  The vast complexities of film  industry artistic creation, production, and distribution were a testament to the flexibility and entrepreneurial vitality of capitalist economic systems operating under rule-of-law commercial law and property law governance with constitutional protections for copyrights, patents and trademarks.
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In the two years prior to Pearl Harbor, the nation's export markets were reopened not only to provide goods to the combatants but also to serve the export markets that the combatants could no longer accommodate. The Great Depression ended in a flash, with unemployment tumbling about 7 percentage points back to single digits, undoubtedly the fastest nominal decline in unemployment on record.

 

Roosevelt set extraordinary production targets, but it was capitalist management that made it happen. Not mentioned was the approximately 50% wartime price inflation, revealed in the first two years after the removal of price controls. 

 

Having for the first time failed to pay its debts for a previous war, Great Britain's credit immediately crumbled under the strain of financing WW-II. Advice provided by John Maynard Keynes himself proved to no avail.

 

The empowerment of an executive branch during periods of conflict runs back to the times of the Roman Republic, as does their temporary nature. Rather than refuting the Constitution, such authority is clearly within the War Powers provision in the constitutional framework.

  • World War II:  Once again, if belatedly, the U.S. economy was organized for war. 

  Although FDR's economic performance falls well short of  his idolatrous reputation, his performance in the difficult period leading up to Pearl Harbor and during the war itself, marks him as an outstanding wartime Commander In Chief.

  In the two years prior to Pearl Harbor, the nation's export markets were reopened not only to provide goods to the combatants but also to serve the export markets that the combatants could no longer accommodate. The Great Depression ended in a flash, with unemployment tumbling about 7 percentage points back to single digits, undoubtedly the fastest nominal decline in unemployment on record. Wouldst that the reopening of international markets had been a part of the New Deal a half dozen years earlier.
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The author rightly celebrates the economic achievements of the U.S. government in its economic management during the war. It had the wisdom to make use of the accumulated managerial skills of several prominent capitalists. Roosevelt set extraordinary production targets, but it was capitalist management that made it happen.
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  One thing that the government did manufacture was torpedoes - that didn't run straight and often didn't go Bang when they managed to hit something. The government needed a lesson in mass times velocity from Albert Einstein to straighten out one of its problems. The government took almost two years to correct the defects. Our submariners fought with defective torpedoes for almost  two years, and suffered 25% casualties during the war
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  Also not mentioned was the approximately 50% wartime price inflation, revealed in the first two years after the removal of price controls. You don't cure the fever just by breaking the thermometer.
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  The author calls the restoration of U.S. competitive free market capitalism after the war a reversion to "its traditional conceits." Wartime production achievements had been dependent on the government's ability to throw vast amounts of fiat money at the economy. Price controls may hide the loss of purchasing power from statisticians fixated on numbers, but the actual decline of purchasing power was evident throughout the conflict. There is no way this could have continued for any length of time after the end of the war.
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  The war was an economic and financial disaster for Great Britain. Having for the first time failed to pay its debts for a previous war, Great Britain's credit immediately crumbled under the strain of financing WW-II. Advice provided by John Maynard Keynes himself proved to no avail. For the first time in its centuries of imperial warfare, Great Britain was quickly reduced to begging for financial support for a war effort, and quickly lost any chance of maintaining itself as an empire or even as one of the world's great powers.
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  It was not only Keynesian policies that were tried and found wanting, Britain's post-war experiment with socialism proved to be an abysmal failure. The author is clearly in intentional denial of the inherent ineptness of government economic management. ( i x i = i: Intellectuality times Ideology equals Intentional Ignorance.)
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  The author believes that the vast expansion of federal government and presidential powers during the world wars was a refutation of the constitutional constraints on the domestic powers of the executive branch. However, the empowerment of an executive branch during periods of conflict is a legal norm that runs back to the times of the Roman Republic, as does their temporary nature. Rather than refuting the Constitution, such authority is clearly within the constitutional framework. The War Powers provision takes precedence over constitutional constraints during periods of conflict, but only during periods of conflict.
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  The advent of the Trump administration is teaching liberals of the wisdom of the dead white protestant males who imposed constitutional constraints on the domestic powers of the federal government and its executive branch. The founding fathers at least had the wisdom to realize that not all presidents would be George Washington.

  • Housing: Housing became a politically favored industry after the war as millions of soldiers returned home to start families. Major flows of capital were directed into the housing market through the GI Bill, the Home Owners' Loan Corp., the Federal Housing Administration. Bill Levitt and other developers responded by mass producing inexpensive homes by the hundreds and thousands out in the suburbs.

  The nature of life in America was changed in a single generation. Lending standards for mortgages were drastically reduced to increase homeownership levels, a policy that would be drastically abused at the turn of the millennium leading to the spectacular mortgage lending "credit crunch" depression of 2007-2009. See, Morgenson & Rosner, Reckless Endangerment.

  • Television:  The arrival of television as a consumer product was delayed by WW-II, but television quickly made up for lost time. The regulatory apparatus was already largely in place due to the prior advent of radio.

  Television transformed culture, entertainment, sports and politics.

  • Roads: The interstate highway system also transformed the nation. Once again, government infrastructure projects massively facilitated the nation's markets.

  Service stations, motels, and fast food restaurants sprouted like mushrooms around the access ramps, and popular conceptions of local facilities soon extended out over 100 miles. Suburban shopping malls helped hollow out main street. Within 25 years, revenue from long-distance trucking exceeded that of the railroads.
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  • The electronics revolution: Government financed advances in electronics greatly facilitated massive developments in the competitive markets. The government provided the money and academic and private laboratories provided a steady flow of remarkable advances. These advances were seized upon by private entrepreneurs to create new products and whole new industries. Highlights included:
  1. Computing:  The government's constantly expanding administrative needs stimulated accelerating advances in computational mechanisms. The census, political elections, war needs and social  programs all created vast demand for record-keeping and analysis mechanisms. Private developers responded with punch card systems, electrical tape systems and then electronic systems of increasing sophistication and capacity. Vacuum tubes gave way to transistors. The Tabulating Machine Co. was succeeded by Computing-Tabulating-Recording (C-T-R), and then International Business Machines (IBM). By the 1960s, major businesses were procuring mainframe computers and EDS was teaching them how to use them. Twenty years later, the Apple Computer and the IBM PC were bringing personal computers into millions of homes. Microsoft was providing the software to make them widely useful.
  2. Startups:  Silicon Valley startups were a combination of brilliant creativity and the financing to transform creativity into saleable products. In a sense, it was a rebirth of the financial system that brought the Pilgrims to The New World. Fairchild Semiconductor, Intel, Atari, Microsoft, Apple, IBM ultimately transformed computers into consumer items.
  3. Finance:  Big industry and big unions began to crumble as world-wide competition undermined pricing power and dissolved the "rents" they had shared. As the Keynesian inflationary morass of the 1970s was brought under control by Volcker austerity at the beginning of the 1980s, the pieces of the capitalist puzzle were being rapidly reshuffled. The "financialization" of the economy with ever greater leverage ratios facilitated the adjustments, both good and bad. New financial instruments like high yield "junk" bonds and mortgage-backed securities have many good uses but, like all financial instruments, can be subject to great abuse. Financiers like Warren Buffett, Carl Icahn, Michael Milkin played diverse rolls in the drama.
  4. The Internet:  The multiple threads of commerce, information, and industry converged with the advent of the internet, disrupting and transforming one industry after another and fundamentally changing society. America Online, CompuServe, Prodigy connected millions of homes to the internet but soon faced their own disruption and faded away. Development of the World Wide Web of hypertext links (http) made it possible to organize and connect the otherwise anarchic mass of material on the Web. Browsers like Mosaic, Yahoo, Netscape and then GOOGLE provided convenient access to the rapidly expanding virtual universe. Entrepreneurs and businesses rushed to take advantage of the marketing possibilities. eBay and Amazon became online commercial giants. With Facebook and Twitter, people rushed to connect with other people.
  5. Mobile computing:  Computers small enough and light enough to be comfortably held in the hand led to the next generation of computer technology. Apple's iPod with its iTunes service displaced the dominance of the Japan's Sony Walkman. With the subsequent advent of the iPhone, Apple became the most valuable corporation in the world - going toe to toe with Amazon - pending the advent of the next big thing.

  Yet, ideologues playing the envy game assert that the middle class has made no progress during the last quarter century. Who, then, is buying all these electronic products?

  The author winds up emphasizing correctly the roll of governance in the mixed economy of the United States - but without any indication that he recognizes the vital differences in the various economic rolls that governance plays. Government regulation and private rules and regulation can both create capitalist markets and facilitate them, as the author points out. However, they can also burden capitalist markets and destroy them, as he fails to mention. He shows no inclination to intelligently discuss the often complex tradeoffs and cost/benefit balances.
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  As trade disputes threaten to develop into trade wars, we are being given a dramatic reminder of the ways politics can lead governments to pick winners and losers, hobbling and even destroying markets in the process. These are not equivalent to the broadly destructive 1922 Fordney-McCumber tariff and 1930 Smoot-Hawley tariff that played such a determinative role in the beginning, depth and duration of the Great Depression, but they will suffice to demonstrate the dangers of government administered alternatives to economic markets. Hopefully, the adults in the room will succeed in negotiating new and better arrangements.

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