Book Review: An Empire of Wealth

September 23, 2004 • Commentary
This article appeared in The Wall Street Journal on September 23, 2004.

Book Review of An Empire of Wealth, by John Steele Gordon (HarperCollins Publishers, 460 pp.)

Since the earliest days of European discovery, America has inspired dreams of fabulous wealth and gain. “It is a veritable Cockaigne,” Columbus wrote during his third voyage, likening the New World to the medieval legend of gluttonous plenty. The conquistadores followed close on his heels in a wild scramble for gold, treasure and even eternal youth. The British settlement of North America, meanwhile, got its start as a profit‐​seeking commercial venture.

In the U.S., the dreams of opulence came true. Americans today enjoy a level of material abundance that sets the standard for the world’s aspirations — and soars beyond the wildest imaginings of centuries past. How this came about is the subject of John Steele Gordon’s superb An Empire of Wealth (HarperCollins Publishers, 460 pages, $26.95). With clarity and good sense, Mr. Gordon tells the story of America’s transformation from uncharted wilderness to economic colossus. Along the way, he offers well‐​wrought set pieces on the people, technologies and industries that propelled the race to riches.

The best are those in which Mr. Gordon dusts off episodes now only dimly remembered. He recaptures, for example, the wild audacity of building the Erie Canal, whose projected cost was equal to three‐​quarters of the entire federal budget at the time. “It is a splendid project, and may be executed a century hence,” Thomas Jefferson told the canal’s tireless champion, DeWitt Clinton. “It is little short of madness to think of it at this day.”

And then there is Samuel Slater, the industrial pirate honored by Andrew Jackson as the “Father of American Manufactures.” An apprentice at one of England’s new textile mills, Slater aimed to open a mill of his own in the U.S. In 1789, he circumvented the British ban on exporting textile machines by committing every detail of their design to memory and sneaking out of the country disguised as a farm laborer.

Another highlight is the story of Frederic Tudor, the forgotten pioneer of a forgotten industry — the ice trade. Tudor concocted the idea, mocked by his contemporaries, of shipping New England ice to warmer climes; he then hit upon sawdust, previously a bothersome waste product of the lumber industry, as the ideal insulating material. By 1847, ships out of Boston were transporting 23,000 tons of ice a year to foreign ports and almost 52,000 tons to the Southern U.S.

Mr. Gordon enlivens his narrative with an assortment of little‐​known facts, figures and asides. As late as 1790, he observes, slaves made up 5.5% of New York’s population. The New York Stock Exchange’s practice of giving prices in eighths of a dollar, discontinued only in 1999, was a vestige of the old practice of cutting up Spanish dollars into “pieces of eight.” On the initial run of the first U.S. commercial train, passengers brought writing materials to refute the popular theory that the human brain could not function at such speeds. Not that technological marvels were always welcome. In 1844, 63‐​year‐​old Philip Hone wrote: “Railroads, steamers, packets, race against time and beat it hollow.…Oh, for the good old days of heavy post coaches and speed at the rate of six miles an hour!” According to Mr. Gordon, Hone’s lament is the first recorded reference to those mythical and ever‐​advancing “good old days.”

Mr. Gordon pays particular attention to the development of the nation’s financial system. His discussions of the Erie Railroad takeover battles and of the CrÃ�©dit Mobilier scandal, when railroad executives tried to bribe members of Congress, remind us that Enron‐​style shenanigans are nothing new — and that today’s rogues are pikers by historical standards. Mr. Gordon devotes special attention to wartime finance. Following Cicero’s maxim that “the sinews of war are infinite money,” he notes that, during the Civil War, the Union was able to raise two‐​thirds of its revenues by borrowing and an additional 21% by taxing. The Confederacy, by contrast, raised only a total of 46% of its revenues by such means, resorting to the printing press for the rest and precipitating a ruinous inflation.

Somewhat simplistically, Mr. Gordon blames the 19th century’s boom‐​and‐​bust bipolarism on the absence of a central bank. Yet he acknowledges the Fed’s catastrophically restrictive response to the 1929 crash as well as its loose‐​money culpability in the inflation of the 1960s and ‘70s. Why, then, are we to assume that central banking in the prior century would have proved a panacea?

Mr. Gordon’s grasp of basic economic principles is admirably solid. He comes down strongly in favor of free trade, sound money and freely moving prices. He is skeptical of government restrictions on competition, however well‐​intentioned.

What is missing from his account, or at least muffled, is the social and political tumult caused by America’s economic dynamism. The rise and fall of industries and regions, the convulsions that attended industrialization and mass immigration, the revolution in values catalyzed by widespread affluence, the never‐​ending struggle over dividing the pie — all have rocked the empire of wealth. Mr. Gordon is not blind to such turbulence, but he plays it down. In his chronicle, upward and onward is the dominant theme. The full story is rather more interesting.

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