Financial History Issue 128 (Winter 2019) | Page 40
BOOK REVIEW BY JAMES P. PROUT
Capitalism in America: A History
By Alan Greenspan and
Adrian Wooldridge
Penguin Press, 2018
486 pages with notes,
bibliography and index
$35.00
“The inherent vice of
Capitalism is the unequal
sharing of blessings.
The inherent virtue of
Socialism is the equal
sharing of miseries.”
—Winston Churchill
If you are interested at all in finan-
cial 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 uncom-
fortable 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. Social-
ists 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. Global-
ization is out; trade conflict is in.
Witness to all of this is Alan Greens-
pan, whose early training as a jazz saxo-
phonist was apparently a perfect stepping
stone to economics and ultimately to the
Fed Chairmanship. Greenspan is either
a hero for setting monetary policy dur-
ing 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 Jef-
ferson and Alexander Hamilton set out
very different visions of how they saw the
38 FINANCIAL HISTORY | Winter 2019 | www.MoAF.org
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. The immo-
rality of slavery is clear, they write, but
from an economic viewpoint the “peculiar
institution” acted to prevent economic
progress as investment in land and slaves
crowded out investment in innovation,
transportation and manufacturing. The
plantation culture of the South would be
wrecked in a civil war—creative destruc-
tion at its most savage.
Capitalism unbound characterizes the
period from 1865 to 1914. Here we get
more personalities: Carnegie, Edison,
Rockefeller. Giant companies—dwarfing
the size and scope of the federal gov-
ernment—grew into complex organiza-
tions with career managers. Innovation
just didn’t happen by inspired tinkerers.
Instead, information was widely dissemi-
nated through trade shows, professional
organizations and specialist publications.
Regulation was light, if it existed at all.
The authors select William Jennings
Bryan to highlight how attitudes toward
capitalism started to change toward the
end of the 1800s. The farmer and laborer
were being squeezed by monied interests,
Bryan trumpeted, “crucified upon a Cross
of Gold.” From then on, laissez-faire wealth
creation would have to be tamed—coun-
tered by progressivism, labor organization
and regulation. The relationship between
government and individuals would be