** Vigorous Self-Congratulation **

  • America has accepted that destruction is the price of creation. * What created American prosperity? Capitalism in America brings a business-centric answer to this question that fits in the no-mans land between history and thesis. As Jin Xu of Empire of Silver would put it, Greenspan has a simple answer to a complex question. America was built on private enterprise and creative destruction. Much of the book is a celebration of economic growth and all the benefits capitalism has brought such a nation of entrepreneurs. Yet the narrative downplays the darker side of American capitalism to an astonishing degree: slavery is described in a jarring economic justification: * Slavery was in some ways a horrific response to a basic climactic fact: you could not get free labor to harvest intensive crops in the heat and humidity. * The suffering of generations from the externalities of capitalism are merely puzzling facts to be pondered by lesser economists.
  • A combination of overcrowding and pollution helps to explain one of the most puzzling facts of the era: despite overall improvement of living standards, the average height of the native born american male declined by 2.5% from 1830 to 1890. *

Perhaps without meaning to, Capitalism in America tells the story of a people and a country built on privilege. Even before independence, America was ahead in the race. Furthermore, since the country was new, the relative power of the business class was far in excess of the European societies which would-be Americans escaped.

  • From 1600 to 1776 the colonies enjoyed the worlds fastest growth rate, growing twice as fast as any other country. By the time they were ready for a divorce, Americans were the world’s richest people with an average output of $4.71 / day in 2017. Americans were 2-3 inches taller than Europeans. *

Comparing American monetary policy to that of China seems to reveal that America had foibles, like almost any other country. Our first attempt at paper currency, like that of the Tang, ended poorly. * The war devastated America’s fragile economy. The continental congress’s attempts to finance the war by firing up printing presses …. eventually led to hyperinflation … After the war there was a 30% decline in American national income as reflected in international trade. * Both countries even ended up with a silver standard, though for opposite reasons. In China, the role of business had too little influence in politics. In America, business had all-too much influence: * The west silver barons hit on a brilliant idea for pushing the price back up: force the federal government to buy their product and use it as currency. … Grover Cleveland halted a run on the treasury’s gold supplies, pressing congress to repeal the silver act in 1893. * America’s saving grace was simply that Hamilton imagined and was empowered to help create the policies of a country where commerce was a cornerstone of prosperity; the equivalent Chinese courts never had the opportunity to empower such a character.

Sidenote: ** Decline and Fall of American Growth **

The book makes the case that schumpeterian creative destruction is the engine of American growth, and that the decrease in creative destruction has caused a concomitant decline in economic growth. This is because of America’s sugar-candy people, to addicted on entitlement programs to innovate. The authors bemoan that entitlements have monotonically grown (10% per year under republicans, 7% per year under democrats) becoming a drag on the economy and the reinvention that America excels at. Productivity growth rates over time:

1913 - 1950: 3.1% / year. 1950 - 1973: 3.0% / year 1793 - 1998: 1.7% / year 1998 - 2004 3.5% / year 2004 - 2016 1.3% / year

Worse, the * odds of a 30 year old earning more than parents at the same age has declined from 86% 40 years ago to 51% today. * This is less compelling than the technology-driven thesis in Rise and Fall of American Growth. Overall, that book, or even Capital in the 21st century serve as better introductions to economic history.