Magazine article Financial History

Capitalism in America: A History

Magazine article Financial History

Capitalism in America: A History

Article excerpt

Capitalism in America: A History By Alan Greenspan and Adrian Wooldridge Penguin Press, 2018 486 pages with notes, bibliography and index $35.00

If you ARE INTERESTED AT ALL in financial history, you are probably doing a lot of head shaking these days. Just 30 years ago, democratic capitalism had triumphed. The USSR was exposed as a rusting old garbage scow. China had awakened to the virtues of wealth. In the United States, a new Wild West opened-cyberspace- and with it the promise of untold riches.

In 2019, Karl Marx wouldn't be uncomfortable with talk of class division in the United States: wealthy rentiers sitting on top as the rest of society faces diminished opportunities and mounting debt. Socialists are in Congress, calling for universal health care and free college. A wealth tax and 70% marginal income tax rates are part of the presidential discussion. Globalization is out; trade conflict is in.

Witness to all of this is Alan Greenspan, whose early training as a jazz saxophonist was apparently a perfect stepping stone to economics and ultimately to the Fed Chairmanship. Greenspan is either a hero for setting monetary policy during the powerful economic expansion of the 1990s, or a goat for doing nothing about reckless credit expansion prior to the 2007 crisis. At 92, he has seen a lot, and together with Economist editor Adrian Wooldridge, he has written Capitalism in America: A History, charting the back and forth of US business and commerce over the past 230+ years.

For the authors, any discussion of American capitalism centers around three recurring themes. First, the race for greater productivity, roughly described as getting more and more output from the same amount of input. Second, creative destruction, the oxymoronic-sounding process whereby new technologies are given leeway to upend existing products or enterprises. And finally, politics, which acts as kind of a backbeat to business activity, sometimes spurring it on, other times adjusting its speed and effect.

The early republic was a place of great promise, but low growth. Thomas Jefferson and Alexander Hamilton set out very different visions of how they saw the United States developing economically. Yeoman farmers free from baleful banks in Jefferson's mind; eager entrepreneurs using finance to expand manufacturing in Hamilton's thinking. Luckily, Jefferson knew a good deal when he saw it, and he embraced debt to finance the doubling of the United States through the Louisiana Purchase. Politics, in this case, provided new areas for expansion. Moving toward the mid-point of the century, productivity gained traction as larger enterprises and wage workers replaced cottage industries. Creative destruction worked through, too, as transportation (sail to steam, canals to railroads) and communication (mail to telegraph) were revolutionized.

The authors paint a tragic picture of the American South at this time. …

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