January 23, 2009

THE GOOD SORT OF DEFLATION:

Grover Cleveland: A model for President Obama?: Cleveland refused to "act" during an economic downturn and made the United States stronger in the process. (John Robson, , 23 January 2009, Mercator Net)

The latter part of the 19th century was a period of appalling economic crisis in America. 1873-1896 was known as “The Great Depression” long before the 1930s came along. Farmers faced falling prices, workers toiled in massive new factories for low wages and went home to seedy slums if they weren’t killed in industrial accidents; politics was explosive and fears or hopes of revolution were everywhere. It was also the most rapid economic growth the nation ever experienced. Because back then governments knew how not to do dumb stuff.

The statistics on economic growth in the period are extraordinary. Economic output quadrupled; manufacturing output increased six-fold. Railway track in operation rose from 53,000 miles in 1870 to almost 200,000 in 1900 and ton-miles of freight hauled increased ten times just from 1870 to 1890. By 1894 the United States was the world’s leading manufacturing nation, on its way to producing one third of the world’s manufactures by the start of World War I.

A few mores statistics if you’ll indulge me. On the eve of the Civil War total power available in the U.S. was round 13 million horsepower, two-thirds of it more or less literally, that is, produced by animals. By 1880 steam exceeded animal power; by 1900 steam engines accounted for two-thirds of the 65 million horsepower available. And while the 1880 census didn’t even mention electric power, by 1900 it was gaining fast on steam.

It wasn’t just quantity: This was the era of the phonograph, refrigeration, food canning, typewriters, the telegraph and telephone and the motion picture. In short, an era of unparalleled economic progress. [...]

A lot of things went wrong in the late 19th century. A lot of things always go wrong. Agriculture suffered terribly; the growth of industry created slums, dangerous working conditions and alarming new social and economic entities. But cheap food was good for workers if bad for those who produced it and in any case it was the inevitable result of the incredible success of American farmers in opening up new land and increasing yields with superior methods and equipment. And if industrial work was difficult, dirty and dangerous, it was a lot better than the lot that awaited many, especially immigrant workers, if they had not come to America’s cities.

The promise of industrialization was that it would relieve man’s estate by relieving material want, and if the first part was overdone the second, in late 19th century America, was not. Even with substantial population growth, real per capita income at least doubled during this “Great Depression.” And that’s because while many things went wrong, a major thing that went right was that the American government did not engage in wildly expensive attempts to prop up and preserve what was not working at the expense of what was, to freeze capital and labour resources in unproductive uses. The process of adjustment was painful, even brutal at times, but the cost of stagnation would have been far higher.


Interesting how the Left celebrates the "return of Science", but then resists Darwinism in the one place where we know it works--indeed, the field where Darwin found it--economics.



Posted by Orrin Judd at January 23, 2009 9:21 AM
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