The Story of the Six-Percenters

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The New York Sun

How is it that the United States has risen to such dominance when it has only 6% of the world’s land area and 6% of its people?


This is the question the economic historian John Steele Gordon sets himself in “An Empire of Wealth: The Epic History of American Economic Power” (Harper Collins, 419 pages, $26.95), and he surveys 200 years of history to sustain his trenchant answer: The United States is the first country to dominate the world through the innovative creation of wealth, rather than by fear and subjugation. (And, one might add, amid current alarms and anxieties, by sharing some of the wealth through the creation of visionary international institutions and acts of courage and generosity unparalleled in the history of man.)


Mr. Gordon starts his fast-moving, concise, and always lucid history with the first American boom. This was the cultivation of nicotiana tabacum in Jamestown, Virginia, founded in 1607 not by the English state but a licensed, profit-seeking corporation. He concludes with the 1990s of Microsoft and Wal-Mart, the retail chain whose annual sales equal the gross domestic product of Poland, a country of nearly 40 million people.


It is fashionable to knock the 1990s as the age of hype and excess, but Mr. Gordon sees it as “the greatest period of wealth creation in the history of the world.” We six-percenters now produce close to 30% of the world’s gross domestic product and lead in almost every field of endeavor “from mining to telecommunications” and by almost every measure “from agricultural production per capital to annual number of books published to number of Nobel prizes won.”


Some Americans have become absurdly rich in the process. Forty-four of those currently on the Forbes list have a net worth of more than $1 billion, but Gordon notes that “as always in the American economy, most of the richest were self-made.” Only 19% of the 400 got into the pantheon of the super plutocracy by inheriting their money. This is cheering as far as it goes, but the biggest fortune has its origins in the less wholesome function of monopoly power. Mr. Gordon fairly compares Bill Gates, worth $63 billion, to John D. Rockefeller, the bogeyman of the Gilded Age, “both living symbols of a new and, to some, threatening economic structure.”


Both, too, have been notable philanthropists, but Mr. Gordon correctly pinpoints a salient evil of monopoly. It is not so much that monopolists gouge the public by raising prices. They often cut prices to maximize profit and to re pel raiders but “they also become highly risk averse – and therefore shy away from innovation – and become notably indifferent to their customers’ convenience.” Microsoft’s record shows an appetite to snuff out or absorb challengers – with the same unhappy consequence for maintaining America’s innovative leadership. (Of course private enterprise has no monopoly on monopolies, and government agencies are eager competitors in disdain for the consumer: See the schools in New York, over which an enlightened chancellor is now struggling with an entrenched bureaucracy.)


Mr. Gordon is by no means unkind to Microsoft in his cursory references. In fact, he is a little too admiring in another passage, in which he refers to IBM entering the personal computer market in 1981 on the basis of “an operating system developed by Microsoft.” It would be more accurate to say that MS-DOS was an operating system improperly adapted from the creative genius of the California programmer Gary Kildall of Digital Research, the father of the software industry, who was betrayed by his idealism.


But that is another story. In an age when demonology passes for debate, and sound bites for seminal thought, it is refreshing to read Mr. Gordon’s nonideological assessments and cool liquidation of myth.


Herbert Hoover, for instance, was no FDR. But he was no more the rigid laissez-faire ideologue and unfeeling bureaucrat of Democratic mythology than Roosevelt was an economic revolutionary of the paranoid right’s imagination, or a prisoner of Britain’s John Maynard Keynes. The emperor of empiricism never learned the lesson Keynes tried to teach in their uneasy meeting in May 1934. Like Hoover and the business community, FDR was an apostle of the balanced federal budget come hell or high water; hell came for the people in the form of massive unemployment from 1929 into 1940, which reached its high of 13 million in 1933.


While they waited for the transition from Hoover to Roosevelt in 1932-33, the people endured in Mr. Gordon’s phrase “the most desperate winter the country had known since the Continental Army camped at Valley Forge.” But in 1937, when a fragile recovery had begun with still 8 million out of work, FDR was still deaf to the entreaties of a rather different character than Keynes – the peppery Mormon banker Marriner S. Eccles, new to the chairmanship of the Federal Reserve, who warned him that pursuing the chimera of a balanced budget threatened the fragile recovery. FDR insisted on a budget surplus for 1937-38 and set unemployment back to 10 million with another spectacular stock market crash on October 19, Black Tuesday.


It is a pity Mr. Gordon does not discuss the maverick Eccles, but he is deft in unraveling most of the deflationary blunders that intensified and prolonged the Great Depression. He adequately demonstrates that it was “not like the story of the Titanic with the stock market crash serving as the iceberg, and only a change of captains in the nick of time provided a different ending.” Well said, but historians will probably never shake the popular myth that the stock market crash caused the Great Depression. At the same time, Mr. Gordon does not spare Hoover for the 1930 Smoot-Hawley tariff bill, signed with six gold pens as if in recognition that it signified a higher form of lunacy, and he recognizes that FDR’s rescue was more a matter of trust and leadership than macroeconomic wizardry.


FDR’s true accomplishment was that by his alphabet soup of agencies and his eloquence, he fed the people with hope and thereby maintained the faith of the American people in their democratic institutions. Hoover deserves more credit than he customarily gets for the way, in the darkest of days, he denounced the schemes his conservative friends in the American Liberty League, who wanted to run the country through a national economic council. “An attempt to smuggle fascism by the back door,” was Hoover’s fierce response, but in dealing with a frightened populace, he lacked FDR’s exalted ability to inspire.


“An Empire of Wealth” is must reading for the ideologues and demagogues of our day. Maybe they would absorb a sense of perspective on the historic creators of America’s pre-eminence, but we can’t count on it when there’s talk in Congress of putting the amiable Ronald Reagan on the $10 bill – a nice gesture that would just happen to displace the very founder of American capitalism.



Mr. Evans’s latest book is the illustrated history “They Made America: Two Centuries of Innovators from the Steam Engine to the Search Engine” (Little, Brown). It’s a companion to a documentary series which will be launched by WGBH on November 8.


The New York Sun

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