Commentary Magazine


Bad Promise

Land of Promise:
An Economic History
of the United States
By Michael Lind
Harper, 592 pages

There are few stories in economic history more astonishing than the rise of the American economy. Four hundred years ago, what is now the United States was a wilderness inhabited by a few million natives living at a neolithic level of technology. Today it is the mightiest engine of wealth creation the world has ever seen. Its GDP is more than twice as large as the next largest economy (which has four times the population). Its people—from the top to the bottom of the socioeconomic scale—live at a level of prosperity undreamed of in any earlier time. 

The tale has been a staple for American historians for a century. Now Michael Lind has tried his hand at the subject with Land of Promise. Lind is the author of several books, perhaps most notably The Next American Nation, published in 1995. He was a staff writer for Harper’s and the New Yorker and in 1995 cofounded the New America Foundation, a nonpartisan think tank headquartered in Washington, D.C. He is far more a political scientist than a historian. And it shows.

Lind is concerned with the three successive technological revolutions that transformed the American economy after independence: first, the steam engine, then electricity, then digital technology. Each of these new technologies had profound consequences for both the social order and the politics of the country. It is these social and political consequences that most interest the author. 

This is what historians call “big history,” concerned with sweeping historical tides rather than the details. And the details often get very short shrift indeed in Land of Promise. Few subjects are discussed for more than a page. The invention of the telegraph, for instance, is covered in less than that, including the laying of the Atlantic cable two decades after Samuel Morse signaled, “What hath God wrought?” 

While he mentions that Morse had a lot of help in developing the telegraph, Lind does not mention that it was Morse’s marvelously efficient code—entirely Morse’s
invention—that caused his system to be the one the world adopted. Nor does Lind discuss how the telegraph revolutionized the news business and assured New York’s dominance as the nation’s financial center by allowing distant traders to trade there, both important aspects of American economic history.

Indeed, the modern news business is not mentioned at all, even though it was an American invention, thanks to James Gordon Bennett and his New York Herald. Its influence on politics was profound. It was only with the development of the inexpensive, general-interest, and politically independent newspaper, after all, that the “fourth estate” really began to deserve the soubriquet given to journalism in 1787 by Edmund Burke. For someone concerned with the political consequences of technology, this is a strange omission indeed. 

Lind’s vignettes give the book an air of having been assembled more than written, and the research is slapdash, at best.

Consider his discussion of early steamboating, which takes up about a page. First he says that Cornelius Vanderbilt, “with his ally Thomas Collins?.?.?.?battled the Fulton-Livingston steamboat monopoly on the Hudson.” Well, the monopoly was for steamboat navigation in “New York waters,” not just the Hudson—a big difference, especially as the New York Legislature had defined “New York waters” as running up to the high-tide mark of neighboring states. The name of Vanderbilt’s “ally” (which he was not—he was Vanderbilt’s employer) was Thomas Gibbons, not Thomas Collins. 

He mentions that the Supreme Court decision Gibbons v. Ogden ended the monopoly but does not mention, perhaps because he is confused about the names, that it was Vanderbilt’s employer (Gibbons)whose suit ended that monopoly. Nor does he mention that this case—which Charles Warren, in his magisterial The Supreme Court in United States History, called “the emancipation proclamation of the American economy”—was one of the most important ever decided by the court, with profound consequences for the American economy to this day.

Lind goes on to say that Vanderbilt and Collins (presumably meaning Gibbons) then flourished in the new competitive steamboat industry. But Gibbons died only two years after the case was decided and Vanderbilt had already left his employ by then, on his way to becoming the greatest steamboat owner in the country. 

It gets worse. In the next paragraph Lind writes, “Transatlantic steamboat travel [he means steamship travel] was also initially organized in Britain as a government-chartered monopoly, by Canadian-born Samuel Cunard.” That would come as news to the great British engineer Isambard Kingdom Brunel, whose Great Western, the first purpose-built transatlantic steam passenger ship, entered regular service in 1838, two years before Cunard. And Cunard did not have a monopoly on transatlantic service, only a very remunerative mail contract from the British government.

Lind goes on: “Vanderbilt’s former partner Collins persuaded Congress to subsidize his American alternative to the Cunard steamship line.” Here he means Edward K. Collins, who had no connection to the by-then-long-dead Thomas Gibbons.

In the next paragraph he says that Vanderbilt “built his own canal through Nicaragua to compete with a projected British-American canal across Panama under the Bulwer Treaty.” He has this exactly backwards. The Bulwer Treaty was drafted in response to Vanderbilt’s deal with Nicaragua to build a canal. And Vanderbilt never built the canal. He only developed a route that went up the San Juan River to Lake Nicaragua, across the lake, and then overland to the Pacific coast. Had he done so, there would have been no need for a Panama Canal a half century later.

If the author can get this much wrong in the course of a single page, one cannot have much faith in the other 591 pages. Nor should one. For instance, Lind ascribes the stock market crash of 1929 to “attempts by the Federal Reserve to prick a dangerous stock bubble by raising the discount rate (the interest rate at which banks borrow from the Fed)?.?.?.?from 3.5 to 4 percent in February to 6 percent in August. The last rate increase was followed by ‘Black Thursday.’?”

Where to start? The Fed did indeed raise the discount rate as stated. But the Federal Reserve, fatally, continued to allow its small number of “member banks” to use its special discount window to lend “call money” to brokers at 12 percent. The member banks, in turn, lent it to speculators at 20 percent. In other words, the Fed allowed banks to make 6 percent on the Fed’s money. So they did.

It was this discount-window spigot of easy money into speculation that fueled the bubble, which collapsed of its own weight, as bubbles always do. The collapse, however, was not on Black Thursday, October 24, when the Dow, after a terrible morning, recovered and closed with only a slight loss for the day. It was five days later, on Black Tuesday, October 29, that the bottom fell out of the market. 

The closer Land of Promise gets to the present, the more political, and less historical, it becomes. Lind dismisses, for instance, the Fed’s terrible missteps in defending the gold standard in the early 1930s. That defense of the gold standard caused a massive deflation (the American money supply in these years fell by a third) and was a major cause of turning an ordinary stock market crash and recession into the calamity of the Great Depression. Lind would rather blame currency and trade imbalances—largely so he can draw a false and charged parallel with the financial crisis of 2008. “Before each crash,” he writes, “there was a dramatic increase in income inequality, with many of the gains to the rich from their disproportionate share of growth being used to engage in speculation that inflated bubbles in stocks, real estate, and other assets.”

Lind seems almost obsessed with the rich getting richer and assumes that this must be pernicious and in need of correction. But it wasn’t the rich speculating in real estate in 2008 that caused the housing bubble. It was Fannie Mae and Freddie Mac (both deeply corrupt government-sponsored enterprises) shoveling mortgage money to people who couldn’t afford to repay it that caused an avalanche of defaults when the government-fueled bubble burst. Yet Fannie and Freddie are barely mentioned in Land of Promise.

Lind is very weak in his historiography. Any number of deeply researched modern sources go unused, while such grotesquely dishonest (if once highly popular) works as Matthew Josephson’s The Robber Barons (published in 1934) are utilized. He even relies on Bouck White’s The Book of Daniel Drew, written a century ago. While wonderfully readable, it is a notorious fraud, a work of fiction masquerading as autobiography.

Land of Promise is badly researched, apparently entirely unedited, and deeply tendentious. Good title, though.

About the Author

John Steele Gordon writes frequently for  COMMENTARY. His own economic history of the United States, An Empire of Wealth, was published in 2004.

 




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