A WOODEN LEG NAMED SMITH

I recently read that the historian Bernard Lewis was once considering writing an essay on economics, but confessed he couldn't get past his own first paragraph. He had written, “In the history of human thought science has often come out of superstition. Astronomy came out of astrology. Chemistry came out of alchemy. What will come out of economics?” Its such a good joke, Lewis figured saying anything else would just be repeating himself. Luckily, I have no such inhibitions. But then I also have no problem describing the World War One slaughter of Armenians as a holocaust, which Professor Lewis refuses to do. I guess we all tend to underestimate the power of our own psychology to confuse us...much as the ideologues of economics continue to do.

“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”

The Wealth Of Nations

The godfather of capitalism was the fatherless Scotsman, Adam Smith (above). He presented to the world a “large nose, bulging eyes, a protruding lower lip, a nervous twitch, and a speech impediment” He had no love life that we know of, admitting “I am a beau in nothing but my books” And he wrote just two books – which was good because he was a really boring writer. He may be the most quoted lest read author since Moses. He wrote “The Theory of Moral Sentiments”, first published in 1759, and “An Inquiry into the Nature and Causes of the Wealth of Nations”, first published in March of 1776 - a month before the start of the American Revolution.

“If [justice] is removed, the great, the immense fabric of human society... must in a moment crumble into atoms.”

The Theory Of Moral Sentiments

I give the date for the first publications of Smith's books because he never stopped re-writing them. Where the modern author fixes his mistakes by issuing an entirely new manifesto, yearly, Smith reworked his books until he ran out of time. There were four editions to “Moral Sentiments”, and five editions of “Wealth of Nations”. And with each edition they got longer, and more verbose. More than one reviewer has described “Wealth of Nations” as“tedious” and Thomas Jefferson recommend readers consult another author because he “treats the same subject on the same principles, but in a shorter compass and and more lucid manner” than Smith did.

“To widen the market and to narrow the competition, is always the interest of the dealers…who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”

The Wealth Of Nations.

The defining moment in American economics was the great depression. Fundamentalists adhere to the Old Time Religion of Roosevelt's New Deal; in time of business down turn, government should prime the pump, putting money into circulation to fuel a business recovery. Reform Theorists, like the Chicago School, contend the New Deal was actually a total failure. The key to economic stability, in their view, is faith in private enterprise and distrust of government enterprise. Why the generation which actually experienced the depression refused to believe the New Deal was a failure, is never explained in their ethos. And they expend a great deal of energy ignoring the godfather of capitalism when he virtually screams in both of his methodical works, that private enterprise, if left to its own devices, may be relied upon to destroy their own markets.

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities...”

The Wealth Of Nations.

Of course the first thing you notice when reading Adam Smith is that he never uses the word “capitalism ”. It had not been invented yet. And neither had the word psychology. But both were Professor Smith's subject when he wrote: “Every individual... intends only his own security; and...intends only his own gain, and he is in this...led by an invisible hand to promote an end which was no part of his intention.” And thus we meet Smith's magical “invisible hand”, used since to justify the greed, waste and “gluttony of the wealthy”, to quote Adam Smith. But that same invisible hand, says Smith, must also be guiding the tyranny of a socialist majority - for the greater good. It is the balance of the two which Smith promotes in his works, not a domination of one over the other. At times he seems to be channeling thinkers like Karl Marx - from a century in front.

“Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods....They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

The Wealth of Nations..

Dubious legend says that Adam Smith was once awakened from a muse to the sound of church bells. Dressed only in his nightshirt, he had walked, lost in thought, fifteen miles from his home on High Street in Kirkcaldy (below), to the outskirts of Durnfermline (above), Scotland. To have made that journey he would most likely have followed the Invertiel Road southwest to the village of Dalgety, before turning north west to Durnfermline. If he had done so, why did no one from Dalgety stop the lunatic wandering about in his night shirt? The story reads like the old joke about the man with a wooden leg named Smith. The punch line is "What is the other one called?"  But the two towns did play an important role in Smith's thinking.

“The man of system…seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that...every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.”

The Theory Of Moral Sentiments,

Durnfermline had been the ancient seat of Scottish royalty, and had caught the first wave of industrialization, growing rich by mass producing the luxury damask weaves. But the feudal center had been outstripped by the hand looms of the port city of Kirkardy, which had tripled its output of simple linen over ten years (1733 -1743). As a youth Smith had thus seen first hand the power of capitalism to create and to waste, both markets and the lives of the workers. His invisible hand was always ready to pick a pocket, even if it was its own. And the legislature he derided in the above example might be a liberal “socialist” body, or a tea party of the faithful. Neither brand of political theatre impressed him. Adam Smith believed in the bible, and its ancient warning about the love of money being the root of all evil.

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

The Wealth Of Nations

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HORSE SENSE

I know it may be hard to believe, but a mere century ago we lived in an equine- based world. It was as impossible for our great-grandfathers to imagine a world with fewer horses, as it is difficult for us to envision a world with fewer internal combustion engines. It was a slower world, but it was definitely not a safer world. In 1900, with a population of just 3 ½ million people, a pedestrian in New York City was twice as likely to be killed by a horse drawn cart as a 21^st century New York-er is to be killed by an automobile. In Chicago, which in 1900 had more horses than all of Iowa, the fatality rate was seven times what it is today. The reason was simple. Automobiles never panic, while horses often do. And amazingly, it was not a desire for safety that worried the turn-of-the-twentieth century worriers.

The logical doomsday prophets of 1900 saw their world being buried under an avalanche of horse manure and drowning in lakes of equine “lant”- aged urine. The traders in fertilizer could not keep up with the output, and by the 1880's stable owners, who had once seen the glut of horse poo as a profitable by-product, were having to pay to get rid of it. During the summer months the 200,000 horses working in N.Y.C. were daily dropping 4 million pounds of poo and 40,000 gallons of urine on city streets. The ubiquitous street sweepers could only pile the stuff up in vacant lots, occasionally to the height of sixty feet. This deluge of dung produced, by one estimate, 3 billion brand new horse flies every day.

In a heavy rain, city pavement was coated in a slippery foul smelling mud, inspiring the invention of the spat, a cloth covering for the shoe which could be easily removed and washed. In dry weather the desiccated dung became chocking air pollution. In 1894 the “Times of London” predicted that midway through the 20^th century the English capital would be buried under 9 feet of horse manure. In New York the pessimists were even more pessimistic, predicting that come 1930 road roses would be blocking third story windows, and one critic argued that 20,000 residents died every year indirectly because of horse manure.

The growth career in 1900 was teamster, not railroad engineer In fact it was the railroads which owned the largest herds of horses, using them to transport goods from terminals to city shops. The traffic congestion dwarfed our current complaints. A horse and wagon took up half again as much space as a delivery truck, and moved at a fraction of the speed. The wheels of a horse drawn cart had to be as large as possible to minimize friction, and lower torque, but that made the wagons top heavy and prone to tipping over. And according to urban veterinarians, the average 1,300 pound horse fell once every 100 miles of travel on city streets. Most got back up, eventually, but by 1880, the city of New York was removing on average of 41 dead horses every day. Twenty years later, that number was skyrocketing.

The horse accommodation began on the farm. Each urban horse required 5 acres of farmland (6 to 8 times as much land as a human) and 40 to 50 hours of human labor to supply its 1 ½ half tons of oats and 2 ½ tons of hay a year. At its height between the world wars, the equine population of the United States required farmland equal in size to the state of West Virginia. But the world had found a way to not only live with the horse, but to profit from it as well.

Mixing horse urine with compost was a common source of nitrogen and ammonia fertilizer. In fact, after diluting it 1-8 with water, horse urine could be poured directly onto plants. Allowing urine, both horse and human, to “ferment” for several days would render it pure enough to be used directly as a cleaning fluid. This industry had always been so strong that two thousand years ago the Roman emperor Nero instituted the “Vectigal Urinae”, the urine tax, which proved so profitable that his successor, Vespasian, was quoted as saying “Pecunia non olet”, or, “Money doesn't smell” - predecessor and more descriptive than the modern, “Money Never Sleeps”.

And in 1900 industry still saw horses as a source for raw materials. Equine urine was used to soften hides in making leather, and as a fixate in dying cloth. Horse hair was used in plaster. Their fat was used in making soap. Their skin was used in making everything from shoes and clothing and suspension for wagons, to tack and bridles for living horses. Soaking unused scraps of horse leather also produced glue, which could also be made by grinding down horse teeth and bones, and then soaking the resultant powder, or just burning it to produce lime. And then there was horse meat. The familiarity with working horses bred such contempt for the creatures that cruelty was almost universally sanctioned. The average horse pulling an omnibus in N.Y. had a life span of only two years. But the moral indifference to their suffering could not overcome the social disapproval of the animal's protein being included in the diet for the rising middle class humans. Horse meat was still only for the poor.

This was the world in 1900, just as beset by crises and seemingly unsolvable problems as are faced by 21^st century America. And yet the change, when it came, was breathtakingly abrupt. That which had at once seemed impossible to conceive of was suddenly obvious and easily achieved. In 1900 there were only 4,000 automobiles in all of America. Ten years later there were a quarter of a million sold in one year . In 1912, for the first time, more cars were bought than horses. And to everyone's stunned surprise, there were better ways to make glue, and clothing, and fertilizer, and even cheaper ways to soften leather. Inorganic chemistry replaced organic chemistry as the main tool of industry, now essential for growing crops and creating medicines. And few of the 9 million horses in the United States today have to work for a living. (Only China has more horses than America.)

The idea that we continue to incinerate our limited supply of the material we also depend upon to fertilize our food and synthesize our life saving medicines seems increasingly absurd - almost as absurd as the idea of funneling our entire economy through large panicky, toxic waste producing and vulnerable creatures plodding through the crowded unhealthy streets of our cities.

The truth is, human progress has never been about solving problems. It is about those moments when we decided we can not longer live with the problems we have, so we trade them for another set of problems we can live with for awhile. The idea that there has ever been or ever will be a perfect world is as much a fantasy as the idea of doomsday. Things don't get better, they change. And the only time things get worse, is when you start thinking you can stop them from changing. And that, I think, is just simple horse sense.

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GREAT EXPECTATIONS Pt. Three A TRAIN OF THROUGHT

I doubt most Americans remember James Gadsden. In 1840 this ex-army officer became president and primary shareholder in the South Carolina Rail Road Company. He had big dreams of a southern transcontinental railroad, beginning in Charleston and driving across Georgia, Alabama, Mississippi, Louisiana, and Texas, all the way to the Pacific Ocean. There were only three things that stood in his way. First, his railroad was only 135 miles long and stopped at the Georgia border. Second, it was over $3 million in debt (64 million in today's dollars). And third, in 1840 everything west of Texas belonged to Mexico. But Mr. Gadsden was not willing to admit defeat. And because he was not, James Addison Reavis would have a golden opportunity to become one of the richest men in America – call it another unforeseen consequence.

By 1848 there were two routes under consideration for the first transcontinental railroad. The central route, favored by the business interests in New York and Chicago, started in Missouri and followed the trail blazed by wagon trains already heading to the newly discovered California gold fields. The route favored by Mr, Gadsden and most southern politicians, began in the south.  However, the southerners got into arguments over where to start the route, how to finance the work and who should control it. And Gadsden was too arrogant to be able to form a consensus. The only thing southerners could agree upon was that they did not want the central route. So as long as the south had a veto, the transcontinental railroad would remain a dream.

The Mexican War (1846-1848) had given America a vast empire north of the Rio Grande River (California, Arizona and New Mexico). But some how in that empire there was no acceptable route for the southern railroad. And the Compromise of 1850 made things even worse for Gadsden and the south. In that deal,  in exchange for relieving Texas of its huge public debt, California was admitted as a “free” state. After that, no matter who built the transcontinental railroad, the slave states would now be riding into a “free state” future. Desperate to lure the Golden State back to the slave states, or perhaps even cut it in half, in 1851 Gadsden offered to supply 1,200 new settlers, if California would also admit “not less than two thousand of their African domestics” into southern California. The ploy fooled nobody, and the proposal never got out of committee in the California legislature Defeated again, Gadsden decided to salvage what part of the plan he still had some control over.

If he couldn't find a way around the Mexican border beyond Texas, Gadsden decided to move the border. With assistance from Mississippi's Jefferson Davis, who at the time was President Franklin Pierce's Secretary of War, Gadsden was appointed to buy his southern railroad route. Now, again, the one thing James Gadsden did not have were negotiating skills, and the minute he arrived in Mexico City, he offended the entire nation of Mexico. But for once Gadsden was in luck, because at the time (1853), the entire Mexican government consisted of one ego maniac, General Antonio Lopez de la Santa Ana.

This was Santa Anna's sixth go around as President-slash- dictator of Mexico. He is remembered in America for his capture of the Alamo, and killing “Davy” Crockett. But in Mexico he is remembered because he never seemed to learn from his mistakes, which constantly seems to have surprised Mexicans. They kept turning to him in a crises, and he kept looting the country and burning it down to destroy the evidence. Typically, in 1853, he was broke, and unable to pay his soldiers. And no matter how many ways James Gadsden insulted him, Santa Anna could never walk away from the negotiating table because Gadsden was offering cash money.

The Gadsden Purchase acquired 30,000 square miles of fertile farmland and valuable mineral deposits at the bargain basement price of $15 million – about thirty-three cents an acre. From the American point of view it was a great deal. From the Mexican point of view, it was rape. But really, nobody actually involved in the deal got what they wanted. The generals Santa Ana paid off with the cash were so offended by the deal, they overthrew Santa Anna and sent him into retirement for the sixth and final time. James Gadsden had so exhausted him self offending the Mexicans, he died the day after Christmas, 1858, and so missed the start of the Civil War. But when the south went into rebellion in 1861 the north was free to build the transcontinental railroad via the central route (finished in 1869). And when the southern transcontinental would finally be built (1881), it was by the same men who had built the original one, men like Huntington and Charles Crocker.

Crocker was a 49'er from Indiana, who made his first fortune selling shovels to miners in Sacramento. Then he went into banking, and he was one of Big Four who formed the Central Pacific Railroad. And Charles Crocker and Company was the prime contractor on the job. Of course the largest shareholders in Croker and Company were the same Big Four who had hired themselves to build the railroad – this is known as making money on a deal, coming and going. By 1877, the big Hoosier had so much money, he was running out of things to buy. And at that fortuitous moment, who should Croker meet but a slightly sleazy newspaper man named James Addison Reavis.

Reavis told Croker about the Peralta land grant. Crocker and other California investors were willing to fund more research into the claim. Did they believe in the validity of the grant? They would have smiled at that question, and regarded it as unimportant. The only thing that matters in the world of Capitalism, is what you can afford to prove in court.  And James Reavis could now afford to research the heck out of the Peralta land grants. And this old forger figured he stood a pretty good chance of finding every single document he went looking for.

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