Echoes Dispatches From Economic History

The government has the right to “demand” 99 percent of a man’s property when the nation needs it.

That was the argument made by a Republican congressman in 1862 to introduce a novel idea: the federal income tax.

Any day now, Tesco (TSCO) Plc, the U.K. grocery giant, may announce the closure of the 200 or so Fresh & Easy food stores it has opened in California, Arizona and Nevada since 2007.

When it does, Tesco will join a long list of international grocers that have met their match in the U.S. In every case, these companies wrongly assumed that strategies honed abroad would succeed in America, and they underestimated the resources and management attention required to make headway in a vast and fast-changing market.

A hundred years ago this month, baseball’s first antitrust crisis began with the holdout of Ty Cobb.

Cobb, the Detroit Tigers’ star center fielder, was paid a salary of $10,000 in 1912, when he hit .409 and won his sixth consecutive batting title. Before the 1913 season, Cobb demanded a raise to $15,000. When the team’s owner, Frank Navin, refused, Cobb announced that he was quitting baseball and heading home to Georgia.

Throughout the 19th and 20th centuries floor traders at U.S. stock exchanges engaged in elaborate and often bizarre pranks. The most common were the cutting off the ties of newcomers, and the classic -- if long forgotten -- April Fool’s ritual of attaching a paper cup to a trader’s jacket and surreptitiously filling it with water.

Perhaps the biggest spur to trading-floor mischief was boredom on low volume days. An 1898 New York Times article titled “Stock Market Erratic” noted that “the market slump began at 1 p.m., and the market, which from the opening had been free from violent demonstrations of excitement, became almost dull and listless, and the gallery spectators were treated to an exhibition of floor pranks for an hour.”

Following the National Socialists' rise to power in Germany in January 1933, the Nazis suppressed leftist newspapers, passed an "enabling act" permitting Chancellor Adolf Hitler to govern by decree and began viciously attacking Jews.

Home invasions, street assaults and physical expulsions of Jewish workers multiplied. In late March, storm troopers assembled outside a restaurant on Berlin’s Alexanderplatz public square, then seized and clubbed Jewish businessmen having their lunches there.

Economix on the politics of the 14th Amendment
The World Bank on U.S. politics, the presidency of the World Bank and development policy
CIRJE on a global consensus of corporations in 1910
Brad DeLong on the future of the euro
The Big Picture on dividend yield compared to 10-year bond to 1877

Read more Echoes online.

Early this morning, Commerce Department officials released the latest figures for U.S. gross domestic product, which showed that fourth-quarter growth was somewhat faster than previously estimated.

Such announcements tend to be eagerly awaited. GDP aims to compress an entire economy into a single number, putting a price on the total amount of goods and services a nation produces. Governments, markets, pundits and investors all count on this singular, miraculous figure to offer some indication of whether things are getting better or worse.

Most adults living in urban areas around the world have come in contact with an automated teller machine. For many, it represents their “bank” far more than rows of tellers standing behind tall counters.

The story of the ATM’s rapid rise to ubiquity is also one of a revolution in retail banking.

The Great Depression devastated many economies. But one country arguably suffered more than any other: Canada. By the time its economy reached bottom in 1932, Canada had suffered a staggering decline of 34.8 percent in per- capita gross domestic product. No other developed nation was as hard-hit.

Canada was, and still is, a country dependent on trade. In the 1920s, commodities -- such as wheat -- and lumber products, including newsprint, were particularly important. In 1930, U.S. President Herbert Hoover signed into law the Smoot-Hawley Tariff Act, which raised duties on many imports to historically high levels. This led to retaliatory tariffs and a drastic reduction of trade around the world.

France’s 1932 legislative elections brought a center-left government to power. The centrist Radical Socialists allied with the socialist French section of the Workers’ International Party to select a new prime minister and his Cabinet.

But political turmoil and the continuing economic challenges of the Great Depression made governing difficult.

Over the past decade, China’s voracious demand for commodities has generated a massive export boom in Latin America. Although these policies have added to the popularity of the region’s leaders -- and brought economic benefits for their nations’ inhabitants -- the surge contains the seeds of its own destruction.

The record inflows of foreign currency and direct investment in Latin America -- generated by growing exports and the expansive monetary policies pursued by the U.S. -- have created pressures that forced most countries in the region to revalue vis-a-vis the dollar. Such a move would hurt exporters, who have responded with calls for policies to prevent it.

Smithsonian magazine on the history of headphones
Brain Pickings on the women behind the making of the atomic bomb
History News Network on the U.S. roots of neoliberalism
Free Exchange on the role of the government in solving the U.S.'s innovation crisis
Tyler Cowen on the egalitarian core of economics

Read more Echoes online. 

On March 4, 1933, Franklin D. Roosevelt became president for the first time, promising an “adequate but sound” currency. The next day, a Sunday, he closed the nation’s banks. “We are now off the gold standard,” he privately declared to a group of advisers. Goldbugs in the president’s circle immediately began prophesying doom. One of his aides, Lewis Douglas, proclaimed “the end of Western civilization.”

How Roosevelt took this fateful step has been the subject of debate among historians, many of whom believe that the president flailed his way through his first weeks in office, and only gradually came to the decision to take the country off gold that April. But the evidence suggests that Roosevelt intended to do so from Day One for very specific reasons, although he delayed letting the rest of the country in on his plans.

Friedrich Hayek’s book “The Road to Serfdom” has served as a beacon for American conservatives since its publication in 1944. Today’s Republicans often cite the book in their fight to limit federal power and regulation. Hayek’s views, however, were more complicated than they often assume.

As a shy and scholarly scion of an aristocratic Austrian family, Hayek hadn’t expected to find much of an audience for his wartime tract on political economy. He was shocked when opponents of the New Deal propelled it up the U.S. best-seller lists shortly after its release, and would have been equally astonished at its rise up the Amazon.com sales rankings following an endorsement from the former Fox News host Glenn Beck in 2010.

Writers and academics often show an interesting ambivalence about industrialization. Today, they regard it as a blessing, the single-most-effective way to lift people out of poverty. But in thinking about Britain’s Industrial Revolution, they have tended to reach the opposite conclusion: The rise of the factory, they argue, caused the end of more “natural” working hours, introduced more exploitative employment patterns and dehumanized the experience of labor. It robbed workers of their autonomy and dignity.

Yet if we turn to the writing of laborers themselves, we find that they didn’t share the historians’ gloomy assessment. Starting in the early 19th century, working people in Britain began to write autobiographies and memoirs in ever greater numbers. Men (and occasionally women) who worked in factories and mines, as shoemakers and carpenters, and on the land, penned their stories, and inevitably touched on the large part of their life devoted to labor. In the process, they produced a remarkable account of the Industrial Revolution from the perspective of those who felt its effects firsthand -- one that looks very different from the standard historical narrative.

Facing increasing unemployment, falling wages and terrible returns on investments, consumers of all classes sharply cut spending in the early 1930s. Retailers suffered.

Annual sales at department and specialty stores in 1932 had dropped more than 40 percent since 1929. Chain stores, by contrast, experienced much smaller declines, just more than 10 percent since 1929.

NYU Urbanization Project on the lasting effects of the initial allocation of land
Toulouse School of Economics on the history of the credit-rating industry
Vox on historical lessons for the leaderless global economy
Askblog on the controversy over the 1920s housing cycle
Economix on the rise of part-time work
Lund University Department of Economics on the effects of the container revolution on world trade

Read more Echoes online. 

The U.S.-Mexico border has long been a conduit for undocumented workers. Less appreciated is that the first migrants weren’t Mexican; they were Chinese.

Starting in the 1850s, tens of thousands of Chinese laborers (many of whom left in violation of their country’s emigration laws) were initially sought after in the American West as a source of cheap labor, especially to build the transcontinental railroad. They were never welcomed, however, and couldn’t become citizens. When the demand for labor dried up, an anti-Chinese backlash quickly followed.

In her 1996 autobiography “An Eye for Winners,” the catalog pioneer Lillian Vernon credited Benjamin Franklin with introducing the “American institution” of mail-order retailing.

Undeniably, Franklin is responsible for many innovations (the first successful circulating library, bifocals and the lightning rod, to name a few). But mail order?

For an institution that has been defunct for almost 150 years, the East India Company still evokes powerful reactions across the world.

Last year, when the Indian government debated allowing foreign companies to open supermarkets there, protesters shouted: “This is the return of the East India Company!” In the U.K., the East India Company’s extraordinary rise and fall have uncanny parallels with the stock-market bubbles and government bailouts that have shaken the economy over the past decade.