Book Review: “The First Tycoon: The Epic Life of Cornelius Vanderbilt” by T.J. Stiles
“ Alexis de Toqueville later would observe that the ‘respect, attachment, and service’ that held men together in aristocratic societies had disappeared in America; now they were bound by 'money only' "
T.J. Stiles’ Pulitzer Prize winning biography is a great story of Vanderbilt the man, but an equally engaging portrait of the seismic changes that America went through from the revolution through the nineteenth century. When Vanderbilt was born the US was an agrarian nation largely dominated by a hereditary elite transplanted from the old world. Most people worked on independent farms or ran their own stores and few had really heard of a “corporation”. The early American market was essentially crony capitalism - some important family was given a legal monopoly to handle all the passenger boats on the Hudson, for instance. Competition just wasn’t really a thing in many major industries.
Into this old money world strode Vanderbilt, a half-literate rough guy who grew up on the shipping docks, a world where disputes were regularly settled with fistfights. Stiles describes him as epitome of the “commercial man,” with a complete disregard for any human niceties if they didn’t make dollars and sense. He even made his wife pay for their (ten!) kids’ food and education out of her own purse, despite his growing wealth, and rarely saw his family at all. In fact he lived on his boat so that he could make passenger runs seven days a week, his life and business inseparable to such an extent that when his ship was destroyed in a fire, the news reported he had literally lost every article of clothing he owned.
Vanderbilt didn’t give a crap about the monopolies, they were in his way; “law, rank, the traditional social bonds -- these things meant nothing to him. Only power earned his respect”. Soon he met William Gibbons, a plantation owning aristocrat who was to play hero to the common man and the common market, because he developed a profound grudge against the (identical) old money family that commanded New York’s shipping monopoly, and decided he would dedicate his fortune to destroying them. Vanderbilt ended up being his chief in this battle, running competitor ships at rock bottom rates to force the monopolists to lower their own rates past what they could afford.
Stiles takes pains to illustrate what an unusual idea this was, for two businesses to compete with one another in a way that resulted in things being cheaper for customers. Again and again he quotes intellectuals and leading families describing how aghast they are at this ungentlemanly practice. The battle raged on with hilarious twists and turns, such as Gibbons lobbying the New Jersey government to pass a law that said he could impound any rivals ships if they impounded his own under New York monopoly law, or Vanderbilt escaping the New York police by having his men cut the ship loose from the dock as soon as the police boarded, and then explaining to them that they had lost their jurisdiction after floating into New Jersey waters.
All this culminated in the Supreme Court ruling Gibbons vs Ogden, which largely spelled the death knell of old families being simply given monopoly rights by a certain state over a major industry. For the first time raw competition was a major dynamic being introduced into the American market, seismically changing the culture and economy from sclerotic aristocratic fiefdoms into a frenzy of hustlers, producers and entrepreneurs. The elites losing their economic privilege is spelled out over a backdrop of them losing many of their political and cultural privileges as well. Martin Van Buren’s Bucktails oversaw the expansion, against the screams of the conservative aristocrat families, of the right to vote to almost all white men, and soon Andrew Jackson ushered in the “era of the common man”.
While the Jacksonians shared Vanderbilt’s hatred of an elite given special favors by the government, they differed in a general distrust of the emerging, advanced, “artificial” economic arrangements. They considered banks no different than shipping monopolies, and the practice of lending in excess of reserves to be no better than a ponzi scheme. As for the defining economic innovation of the era: “the implications were frightful. Since [corporations] ‘live forever,' fretted Massachusetts governor Marcus Morteon, their property was 'holden in perpetual succession' - unlike individuals, whose estates were divided upon death. Eventually corporations would own everything”.
T.J. Stiles describes here America on the precipice of great change, of a “real” world of builders and farmers, of the self-employed, of money linked to hard gold, into a world of abstractions, of corporations, finance, and fiat currency, of men divided into capitalists and laborers. And herein lies the beginning of the end of Vanderbilt as hero of the common man, because while he shared their love of competition, he became master of these new economic instruments.
Vanderbilt’s steamboat lines multiplied many times over and he became an incredibly rich man. After the establishment of the Oregon territory, to integrate the nation, mail and people had to be shipped down to Nicaragua, transported overland and then sail back up to California. Here Vanderbilt competed directly with government subsidized shipping lines and came to provide an essential part of the modern American infrastructure of expansion and gold rush settlements. When filibuster William Walker conquered Nicaragua, Vanderbilt out of his own pocket financed the Costa Rican effort to overthrow him.
From ships to horses to trains, of course trains. One by one Vanderbilt bought up train lines and turned them into one gigantic, interconnected system that was to form the backbone of the exploding postwar economy. Up until then, corporations were still thought of as being created for some specific public service, commissioned by the government, and given a temporary lifespan with a clear ending. It was railroads that truly pulled corporations out of this mold and established them as enterprises owned wholly by private individuals, for profit, and able to continue on forever. Railroads became the largest single industry in America by far, the first real industry (along with telegraphs) that crossed state lines and directly knit together different corners and markets of the country. Their vast, complex nature necessitated the creation of workers entirely dedicated to managing the endless staff and bureaucratic needs of the era’s new behemoths. Likewise, the rise of a mass of workers who would now work their entire life as wage laborers, rather than as independent farmers, shopkeepers or artisans, became complete as well, and with the modern battle lines of capitalists and laborers now made real, the rise of mass unionization and labor conflict soon emerged as well.
As Vanderbilt went from being hero of the common man to villain, his arc paralleled the seismic changes of the broader era. When elites of old were dividing the economy into their personal fiefdoms, his competition was hailed as populist and radical, finally bringing down prices and proving that ordinary folk could take a stab at the market and make something of themselves. However, as he and the tycoons become more and more powerful, till their market dominance allowed them incredible sway over the economy, the free market came to be seen as the conservative tool of the new elites, and populist forces demanded regulation. Did the end result end up replicating the old order of the aristocrats? Well, I’ll let you be the judge. I’ll close by quoting at length:
It was clear that the forces he helped to put in motion were remaking the economic, political, social, and cultural landscape of the United States. There was the transparently obvious: the dramatically improved transportation facilities that allowed Americans to fill in the continent, the creation of enormous wealth in new business enterprises; and the railroads’ economic integration of the nation, bringing distant farms, ranches, mines, workshops, and factories into a single market, one that both lowered prices and dislocated communities (The new availability of western foodstuffs, for example, uprooted New England farmers.) And there was the less obvious, such as the emergence of a new political matrix in which Americans struggled to balance the wealth, productivity and mobility wrought by the railroads and other industries with their anxiety over the concentration of vast economic power into the hands of a few gigantic corporations...
Still more subtle, and perhaps more profound, was a broad cultural shift as big business infused American life. An institutional, bureaucratic, managed quality entered into daily existence - what scholar Alan Trachtenberg calls the “incorporation of America,” a cultural dimension of “managerial revolution” or “visible hand” that business historian Alfred D. Chandler Jr. identified. More and more the national imposed upon the local, the institution upon the individual, the industrial upon the artisanal, the mechanical upon the natural. Even time turned to a corporate beat. Time had always varied from town to town, even by household; the young Jay Gould, for example, had helped families determine when the sun was at its height so they could set their clocks to noon. But the sun proved inconvenient for the schedules of nation-girdling railways. In 1883, writes Trachtenberg, these “distinct private universes of time” vanished when the railroads, “by joint decision, placed the country - without act of Congress, President or the Courts - under a scheme of four “standard time zones”...
At the forefront stood Cornelius Vanderbilt, child of the eighteenth century, master of the nineteenth, maker of the centuries to come.
Soriek
1yr ago
Much appreciated.
I have a lot of trouble evaluating whether the pre-capitalist leadership was genuinely better. I think the question for me kind of is: even if they were better at leadership, would that outweigh the economic growth we got under the new order? Competition leading to lower prices and maximizing consumer surplus and growth seems to have really not been a component of the old system at all. A lot of aristocrats did decide to go into business eventually as they lost their other privileges, but it seems like they really didn't make that transition till they were forced into it by new entrepreneurs. Would the industrial revolution still have happened if no one shattered that stasis? Capitalists might be selfish "I've got mine" types but they did produce benefits for the overall society - an excerpt about the Gilded Age, likely the height of the capitalist dominion:
The giant corporation would bring Americans of all stripes into its orbit with remarkable speed. A professional and managerial middle class began to emerge as the educated and skilled went to work as engineers, lawyers, technical experts, clerks, and middle managers for large companies. The ranks of permanent wage workers swelled, both within railroads and in the industries that fed their needs or expanded with the new markets they opened up. Labor prospered during the postwar boom, enjoying a 40 percent growth in average real income from 1865 through late 1873
Soriek
1yr ago
Book Summary: “The Age of Eisenhower: America and the World in the 1950s” by William Hitchcock
Eisenhower got short shrift in his time - beloved by American Joe Normals but largely underappreciated by community leaders, historians, and other politicians, who bought into an image of him as basically asleep at the wheel, golfing while the Soviet Union launched sputnik. More careful history, coupled with recently released archival information, has revealed a portrait of an astute leader constantly manipulating massive operations behind the scenes. I’ll break things down roughly by domain:
Foreign Policy:
Despite being a Cold Warrior who castigated Truman for losing China and bungling the Korean War, Eisenhower mostly managed to steer clear of direct conflict himself. He immediately negotiated a detente in the Korean War, deftly resisted the surge of warhawk voices trying to get him to commit to war in Vietnam, and backed off China and the USSR from Taiwan and West Berlin.
In all of these conflicts Eisenhower often got buffeted from both sides by warhawks who thought he was playing nice with communists and by peace seekers who thought he was recklessly risking American engagement, but in each instance he protected American interests and diffused the situation without escalating to an actual war.
To highlight a case study of this approach, in the Suez Crisis of 1956 Eisenhower found both France and England had lied to his diplomats' faces and brazenly violated international law by invading Egypt. Much hung in the balance: the international order of “rule of law” that Eisenhower had worked so hard to create post-World War 2, the opinion of the Global Third World whose alliances would be so crucial in the Cold World, and the relationship between America and its allies, whether they would be allowed to betray America and still be supported or whether the US would assert itself as leader of the western world.
And nuclear war. This was a more real possibility than I think most realize - the Soviet Union was threatening to do anything necessary, and moreover was desperate to reestablish their credentials as an anticolonialst power a week after rolling tanks into Hungary. While the fact that Nasser later became opposed to America has caused many to criticize his move, in the context of the moment Eisenhower’s handling of the situation seems deft and reasonable. His decision to choke off Britain’s financing both legitimized the rules-based international order, established America as the post-war hegemon, and prevented a direct conflict between the four great powers with worldwide implications.
The Modern Warfare State:
The President who warned us about the Military Industrial Complex was well qualified to do so, seeing as he built it. Between World Wars 1 and 2 Eisenhower had been perpetually frustrated that America let its defenses atrophy during peacetime then rapidly scrambled to put it all together when a conflict emerged. His novel policy was for the first time to emphasize massive defense spending during peacetime to prepare for eventual conflict, and indeed he spent half the budget on defense, or roughly 10% of GDP:
Nuclear weapons were only one part of a grand strategy . . . NSC 162/2 demanded not merely more and bigger nuclear weapons, along with the aircraft to deliver those bombs; it also called for a robust intelligence network to analyze Soviet behavior, coupled with elaborate security measures to combat domestic spying. It outlined a nationwide manpower program, emphasizing scientific and technical training to serve military needs. It insisted upon military readiness through stockpiling and securing of vital raw materials and key industrial plants. The concept paper envisioned huge continental defense systems, with early warning radar and a large air force that could meet Soviet intruders. It called for the overhaul of military service requirements for American citizens, with longer tours of duty for draftees, inclusion of women into the armed services, and the establishment of civilians for maintenance work
The darker side of this is that Eisenhower also presided over the creation of the modern Intelligence Community, which under him led coups in Iran and Guatemala and prepared regime change for the DRC and Cuba. This set off a trend of replacing democratically elected leaders with brutal dictators that terribly damaged American prestige in the eyes of the Third World.
For a poignant example of the immediate backlash of this kind of spycraft, the CIA pressured Eisenhower relentlessly to approve the U-2 plane flights over the Soviet Union despite Eisenhower’s fears that it would jeopardize his attempt at detente. Indeed, on the eve of a joint conference between the two powers, a U-2 plane was downed. Kruschev initially assumed that Eisenhower wasn’t responsible, but instead of blaming CIA Chief Dulles for misleading him about the operation, Eisenhower took full blame for the decision. It was probably the responsible thing to do as a leader but it ruined any chance at a thaw in the Cold War.
A further irony is that a large reason for the perception of Eisenhower as an absentee President, golfing instead of governing, was that Americans had no idea these massive operations were happening behind the scenes. When talk started to emerge of a “missile gap,” no one knew that Eisenhower’s spies had been taking photos of Soviet missile sites for years and knew that those fears were overplayed; when events happened in far away corners of the world and Eisenhower seemed not to be acting at all, no one knew that his spies had already infiltrated the government and were busy at work.
Governing to the Center
Before Eisenhower, the political pendulum had swung from the archconservative nostrums of Warren Harding, Calvin Coolidge, and Herbert Hoover to the bold, all-encompassing activism of Franklin Roosevelt and the New Deal. Eisenhower, perhaps the least partisan president of modern times, sought to stop the pendulum in dead center. To be sure, when he ran for President in 1952, he thundered against the “statism” of the New Deal and its expansive federal programs. But once in office he adopted centrist and pragmatic policies that fairly reflected the preferences of most of his fellow citizens. Early on he made his peace with the New Deal, expanding social security, raising the minimum wage, and founding the Department of Health, Education, and Welfare. He even suggested ideas for a national health insurance system. Eisenhower found a way to make the government work without making it too big; his interstate highway system is a good example. Though building its thousands of miles of road cost billions of dollars, most of the money came from user fees in the form of a gas tax, used to replenish the Highway Trust Fund. The burden on the US Treasury was relatively light.
In this commitment to “not burdening the Treasury,” in almost each year Eisenhower fully balanced the budget. He did this by keeping Truman’s wartime high taxes in place, including a top marginal tax rate of 90% (on a tiny sliver of the population). In this he was castigated by the right flank of his party, but he kept the nation’s fiscal health in check while also building the most powerful military on the planet, millions of homes, and the modern highway system. Arguably he kept the pursestrings a little too tight, as his reductions in federal spending are partially credited with the recession of 1957, but he managed to hold the US off its present path of endless debt.
In other ways his centrism can look bold or cowardly, depending on your perspective. His coddling of McCarthy is hard to justify and his lukewarm handling of civil rights is a challenge as well. He desegregated military schools, and passed a toothless civil rights bill, but he refused to lead on the issue. Even his boldest action of all, sending in the troops to desegregate Arkansas, he framed squarely as enforcing rule of law - he didn’t even mention civil rights.
Leadership:
In many of Eisenhower’s addresses, on his high taxes, or his military readiness programs, he again and again urges Americans that they will need to sacrifice for the security and health of the nation. Actually, he doesn’t really urge per se, he basically just says sacrifice is what a good American knows is his responsibility and when he said it, everyone agreed. I can’t fully imagine a president now framing things like this without being castigated for it but Eisenhower enjoyed a whopping average popularity rating of 65%. Americans liked Ike. His star power, however, did not translate into broader success for his party, who lost successively more seats with each Congressional election. This is partially because Eisenhower himself wasn’t really convincingly a Republican and partially because he thought the President was supposed to be a national leader above the fray of partisan politics. When it came to likely his most important role of grooming a successor, he dropped the ball in amazing fashion; when asked by a reporter to name a major decision made by Nixon during their two terms Eisenhower responded “if you give me a week I might think of one.”
However, the strength of Eisenhower’s legacy was such that even without grooming a successor, his successors still largely found their time in office governed by the mold he had cast, in terms of national defense priorities, relatively centrist government activity, and confronting the rising currents of the third world. JFK considered himself in major contrast to Eisenhower’s doddling, asleep-at-the-wheel presidency, only for him to remark how much he ended up “behaving exactly as the Eisenhower administration would have behaved” (nowhere is this more stark than the inherited Bay of Pigs operation).
As for whether Eisenhower’s legacy was positive or negative, I’ll let you be the judge.
Soriek
1yr ago
Hard agree that one of the highlights of his legacy was avoiding war, and that this was probably in large due to his close personal experience with its horrors. There's a poignant section of the book about him and his newlywed wife vacationing in Germany in their youth and loving it, only for him to return later at the helm of the Allied Forces laying waste to that same area.
My understanding was that Eisenhower didn't have much choice w.r.t Nixon. He was lumbered with the guy by the Republican establishment whose support he needed to win the nomination. I suppose his lack of engagement in partisan politics would have also have made anointing a successor more challenging.
It's true he didn't have a lot of choice with Nixon being his Vice President, absent firing him, since Nixon refused to step down on his own despite Eisenhower not personally liking him a great deal (for, as far as I can tell, no particular reason). Still, Eisenhower could have actively cultivated other Republicans to be the next leader if he had a strong preference. If he didn't, he still could have actually thrown his incredible popularity behind Nixon given that it would have made a big difference in the tightest election of the century thus far, and that despite Eisenhower's less-than-sterling impression of his VP, Nixon was running on a very similar platform and would have likely done a good job preserving and building on Eisenhower's legacy.
I think it's interesting to imagine a world where Nixon had won the next election. On foreign policy he shared much with Eisenhower, in terms of preferring to avoid direct wars and achieve things through diplomacy as well as covert operations and third world coups. The trends towards escalating in Vietnam seems almost inexorable from Eisenhower through JFK and LBJ so hard to say if that would be different. Presumably Nixon, in many ways at most a center right New Dealer, who had already promised to pursue “big government” initiatives like healthcare and housing, would have continued to expand the federal government (as he did when he actually came to power) but likely in ways very different than Johnson’s Great Society. He may well have passed his own Civil Rights Bill, given that the Civil Rights Act of 1957 had been partially his idea to continue Eisenhower’s trend of poaching black voters disaffected by the Dixiecrats - but without Johnson’s parliamentary stratagems and ruthlessness perhaps it would have been weaker, or not made it through at all.
Soriek
1yr ago
This may be true. On the reddit version of the forum I found that the standalone posts I made got less engagement than when I stuck them in the CWR, not sure if that dynamic is still true offsite though.
"Directionally correct" is doing an immense amount of work here. McCarthy didn't say "there are a bunch of communists scattered throughout America," he made extremely specific and entirely fabricated claims about the communist leanings of people he didn't like, often ruining their reputations and careers in the process.
He claimed that "he had come into possession of shocking new evidence that 205 members of the Communist Party were still working for the State Department, even though their names had been turned over to top government officials" - He never produced any such list and or other evidence and only continuing to fabricate more (again, extremely specific) claims about nonexistent evidence (including, four years later, just repeating this same claim).
He held up Eisenhower's administration nominations on charges as vacuous as James Conant, who had purged communists from Harvard but not "thoroughly enough," or Charles Bohen, a State Department diplomat who had worked in Russia, but after thorough investigation turned up that he had served America patriotically, McCarthy tried instead to destroy his career by implying that his brother was a homosexual. In this fashion he wielded much of his investigatory power merely for the sake of holding power over the Eisenhower administration, whether holding up his nominations, or publicly accusing him of being soft on communists (all the while Eisenhower was busy coup-ing any left of center government), or famously threatening to target the entire army unless McCarthy's cronies were given preferential treatment:
In great detail [Army Chief Counsel] Adams revealed how many times McCarthy and Cohn had badgered, harassed, and threatened him in demanding that Schine be given kid-glove treatment. Adams wrote of "the sustained violence" of Cohn's phonecalls and described his "obscenities and vituperative remarks" as shocking and unprintable. "The most consistent remark [Cohn made]," Adams wrote, "was that the Army was requiring Schine to eat [obscenity] because he worked for the McCarthy Committee." Cohn threatened to destroy the army through ceaseless investigations unless Schine got special treatment. "We'll wreck the Army," Cohn screamed over the phone at Adams. "We've got enough stuff on the Army to have the investigation run indefinitely. More shocking, McCarthy was present at a number of the meetings with Adams and Cohn, and he piled on, asking the army to get Schine a cushy desk job in New York
The broader consequences of McCarthyism were not small potatoes - many people's lives were genuinely ruined on completely empty charges driven by a power hungry man. Hundreds were imprisoned and some 15,000 federal employees were fired on amorphous charges of being "un-American," which frequently meant things like supporting unions or having hobbies that suggested "sexual perversion"; tens of thousands more went without pay while being cleared. Lists of subversive, "forbidden" books were created with libraries literally burning those books. A climate of fear festered and settled over the nation.
We talk a lot here about the illiberalism and the dogmatism of the modern woke left. If I pointed out the wave of modern idpol cancellations often targets innocent people based on exaggerated and hysterical claims, I wouldn't be satisfied if someone responded by saying: "well, we may have ruined innocent lives and careers but we were still directionally correct - the US is shot full of racists, and many throughout the country share these concerns".
What would you have had Ike do about McCarthy?
Eisenhower could have at any point condemned McCarthy's excesses, even at the most basic level of standing up for his friends and fellow WW2 heroes. He avoided doing this not because he or the establishment thought there was credence to McCarthy's claims (he thought they were ridiculous and hated McCarthy) but because he was afraid of alienating the right flank of his party and hurting his chances in the election.
How would you have addressed McCarthy's concerns, which were shared by many throughout the country?
By doing what Eisenhower actually did - build state capacity to do actual casework investigating communist subversion instead of tolerating politically motivated public witch hunts.
Soriek
1yr ago
I'm sure there's something to it but it feels like a broad enough claim that I'm not sure if it's falsifiable. If you think that the trend in decolonization would have continued anyway - as I do, since the broader trends didn't really hinge on Suez; even Egypt's sovereignty wasn't fully at stake there - then the proliferation of tiny countries able to make demands on the US to eschew leaning to the USSR would have happened regardless. Then the question that remains isn't whether the small countries could bully, abuse, and steal from the US but whether the rich, powerful countries that actually rivaled the US could do so as well. By that metric the US decisively asserted itself against the few nations that could really contest its will.
That said, if you measure stealing from the US by foreign aid, then ironically both sides of that debacle came out on top, with Israel and Egypt as our top recipients. If you see that money as a bribe to keep the conflict from bubbling up again then maybe there is something to it.
I knew about Nixon's later break with the FBI, not as much about the Joint Chiefs of Staff. I find the internal spying interesting but not really the palace coup theory; I've always assumed something like that was probably true, but nobody denies that Nixon broke federal laws (and his use of the FBI, while not directly relevant to his downfall, was also frequently and fragrantly illegal). I don't have very set opinions about his presidency in one direction or the other, but if he's a crook then it's hard for me to feel that bad for him getting ousted; I'd rather a world where more of our Presidents were held accountable for their crimes than less.
Has anyone read Garrett Jones’ “The Culture Transplant” yet? (I haven’t)
I don’t read Scott’s actual blogposts much anymore, but I do read the links, and wanted to discuss Cato Institute Researcher Alex Nowratesh’s recent reviews of the book (1,2). They’re both just blogposts and not overly long so I’d recommend reading them, but I'll summarize the main points.
Jones argues that the “deep roots” of a culture determine economic growth, and that immigrant groups take those roots with them and thus shape the economies they travel to. Deep roots can be measured by SAT*, or “the length of time they have lived under a state (S), lived with settled agricultural (A), and their level of technology at a point in the past (T), [this formula] well predicts their GDP today". (“T" has an * because it’s more important and thus given more weight). However, there’s a lot of ways the deep roots position doesn't predict the things we would expect.
-
“As Bryan Caplan pointed out, there are three big outliers in the deep roots literature: China, India, and the United States. China and India should be much richer, and the United States should be poorer. Three outliers usually aren’t an issue, except these are the three most populous countries in the world.” How useful is the SAT* model if it fully fails to account for a third of the planet?
-
This is particularly bizarre when it comes to the United States, which is in the middle of SAT* rankings despite also being the richest country in the world. This suggests that the US would reap significant economic benefits from pulling in immigrants from countries much less developed and educated, such as Bangladesh, Vietnam, and Russia.
-
Jones tries to salvage these three outliers by bringing up the importance of institutions, which is fair to say. But if Jones is arguing that the deep roots of immigrant culture shape institutions for the better or the worse, then if they can change institutions for the better at any time this is a huge point against his position: “Does China’s liberalization after the 1970s prove that deep roots were right all along, or does China’s current regression [to economic planning] show it was wrong?” Likewise, several European countries (Germany, Italy, Portugal, Spain) fairly suddenly adopted authoritarian regimes with statist economies then a few decades later turned into democracies with significantly liberalized economies, during periods where they did not experience much immigration. Things can change fast!
-
We see the same difficulties when we observe Chinese immigrant groups abroad. Hong Kong and Singapore both have significantly less trust than mainland China (trust is one of Jones’ most important measures for how immigrants should impact culture and growth) but are of course both vastly richer. Hong Kong has near complete Chinese population dominance (96%), just like China, such that the effect of their deep roots should really be what defines their institutions, but instead Hong Kong is much richer than China. Singapore has less Chinese people (75%) than Hong Kong, but has a GDP per capita 76% higher! This is despite the fact that Singapore has a whopping foreign born percentage of 47%, and that their immigration has overwhelmingly come from countries with lower SAT* (which corresponded Singapore’s famous huge increase in growth).
-
There are other odd ways the SAT* expectations don’t seem to add up. A deep roots paper Jones uses for building his theory calculates that an immigrant from China (high SAT*) would have a very slight negative impact on Britain whereas an immigrant from Sub-Saharan Africa (lowest SAT*) would have a slight positive impact. Likewise, Jones claims immigrants from Italy and Spain ruined the economy of Argentina, but both groups came from countries with higher SAT* than Argentina.
-
Extending from this, one popular argument (I think I heard first from Bryan Caplan) was that immigrants might bring economic growth, but also vote for socialist economics which would cripple long run growth. But in Argentina, recent research suggests that the labor movement Jones credits with tanking the economy was not primarily a matter of immigration, but was driven more strongly by native urban workers. Nowratesh also points out that despite popular accusations of disproportionate immigrant participation in the early twentieth century American socialist movement (as measured by foreign language socialist magazines), “the greatest electoral success of the socialist party prior to World War I were in states like Nevada, Oklahoma, Montana, and Arizona - ethnically homogenous states with few foreign born residents”. Likewise, Jones himself has argued elsewhere that the rise of western dirigisme (Brexit, Trump, Le Pen, etc), were backlashes against immigrants by native voters. All of these suggest the major examples of statism were driven by natives, and immigrant predilection towards socialism shouldn’t be our concern - we can still reap economic growth as long as we don’t pick bad policies ourselves.
I’ll add my own objections:
-
In the latter 1800s anglo-saxons in nonconformist sects were much more common in the economically interventionist Republican party, and ethnic white immigrant Catholics and Lutherans were much more common in the laissez faire democrat party. By the New Deal, those political parties continued to draw on majorities of those same ethnic groups, but they had switched policies, such that the Republicans were less economically interventionists and the immigrant-flush New Deal Democrats were extremely interventionist. Shouldn’t deep roots suggest more consistency in policy preferences?
-
England remained overwhelmingly native British until relatively recently, yet went from a significantly laissez faire economy to an incredibly statist one, then back and forth again. You can argue that the larger, earlier transition from the 1800s to the 1900s was a matter of expanding voting rights, but the transition from mid-century labor dominance to Thatcherism to Brexit all happened with a fully enfranchised population.
In conc: if the percentage of high performing ethnic groups or SAT* does not actually reliably correspond to economic growth, and if ethno-cultural groups can change their policy preferences and institutions immensely in short spans of time, doesn’t this all point to a world where deep roots and immigration matter far less than your institutions?
Nowratesh also offers broader critiques about Jones missing relevant literature, mostly encompassing studies that hurt his thesis but also a few that agree with him. Nowratesh also points out that Jones depends a lot on measures of “trust”, but substantive research into building economic models for how trust actually impacts the economy is generally lacking. Not having read any of the literature, or Jones’ book, I can’t really offer much opinion or analysis here, but interested to hear from others who have. I don’t actually have a particularly strong opinion on immigration one way or the other.
(1). Why should the US be poorer? Is it just because we are such an outlier on income compared to everyone else?
Not that we are an outlier compared to other countries but compared to other countries with the same SAT*
(2) Russia has already been gutted of a lot of the intelligentsia. Not sure there’s much left. Vietnam I’ve gotten curious about. I heard they have really high test scores and didn’t know that. But what great scientist has ever been from there or tech developed? Might be a population to target.
Tbh the specific countries aren't important here, they were randomly picked. There are supposedly 40 countries ranked higher than the US on SAT*, many of which have lower development, like Brazil, China, etc.
For why some country’s go free market with more immigration I think a lot of that is a native backlash to giving more to poorer communities. In America it’s the blacks and some immigrants. If America wasn’t diverse then I think we probably would be more socialist.
I agree, I assume class unity is a lot easier to accomplish in countries that don't also have ethnic divisions.
Soriek
1yr ago
Agreed, they had a particularly difficult time between trying to make a quantum leap from a country excelling in agriculture to an industrialized nation via extreme ISI, coupled with a broader international economic landscape that didn't support them. I have to assume their export driven economy in particular took a significant blow following the opening of the Panama Canal redirecting shipping, trade, and investment to the North, making their geographical position at the far south suddenly a hindrance rather than a unique advantage. Between the World Wars their FDI also dried way up as their former European sponsors went broke and America remained aloof, distrustful of what it saw as South American fascism (famously prohibiting European countries from purchasing from Argentina with Marshall Plan funds). As economic conditions got worse people naturally protested and the government responded by writing populist checks that its deteriorating trade and investment landscape couldn't really cover, and things spiraled ever farther.
Soriek
1yr ago
Of course China did liberalize their economy some forty years ago, and they did experience growth (although much less growth than Singapore did during their own liberalization, while taking in way more immigrants with “deep roots” in weaker economies).
Still, this is Nowratesh’s whole counterargument - Jones claims deeply rooted culture is what’s supposed to determine your economy, but if you can go from Maoism to Dengism within a decade without experiencing much immigration then clearly your economy isn’t that constrained by your culture.
I guess the argument could hold up if the Mesopotamian agriculturalists relocated to a more favorable area and were able to use their accumulated skills to jump ahead quickly, like the American colonists. But this still runs into the problem that their skills are constrained by the environment.
Imo a more predictive version of SAT* would have to include a “G” for geography, encompassing things like natural resources, soil quality, likelihood of natural disasters (ie America and Singapore supposedly have lower human capital than their growth rates would indicate but both are blessed with really favorable geography).
But at that point you can’t really create a simple formula for a simple theory anymore, you’re back to saying “growth is a whole bunch of different factors”
Fair, but the results are drastically different if we look at GDP per Capita. Either way the Jones position is that the cultural makeup of China should entail larger growth and a higher level of development, the opposite of what we see on both accounts.
I guess what measurement would you like, if you agree that Americans make more money? Americans have higher productivity as measured by GDP per capita than most European countries, more income by ethnic group relative to country of origin, more disposable income, etc. (though after controlling for hours worked I've seen at least one study that put Germany ahead).
[Edit: Since Ioper sourced data on productivity relative hours worked, here's the global rankings. US is in sixth place after Ireland, Norway, Switzerland, Luxemberg, and Denmark, pretty near the top. Aside from Ireland (whose numbers wrt GDP are always crazy from haven-ing so many multinationals), the US is certainly above its European countries of origin, interestingly above the UK in particular by a surprising amount]
I agree geography is an enormous advantage for the US, and argued somewhere down thread that might be what boosts America and Singapore beyond what human capital might suggest (that plus advanced finance sectors). But if we're getting to the point where we're adding factors like geography and sector specialization then we've moved beyond assuming that human capital can directly predict growth - and remember that the deep roots model assumes the US shouldn't just be poorer than Europe but also Brazil, China, and Vietnam
Soriek
1yr ago
I guess I'm not clear what your point is, that's exactly what Nowratesh is saying: if any given culture can seismically change its institutions (ex: to communism and back again) then economic outcomes aren't fixed by culture.
No, communism did not leave China any poorer than Singapore; their GDP per capita was neck and neck in the early 70s. Yet it has been a very long time since communism and China now massively underperforms relative to modern Singapore, despite a fifteen head start on liberalization and more supposedly favorable demographics
Soriek
1yr ago
I’ve heard legends from expats in Japan about the cultural expectation to be seen doing work at all times, rather than actually working hard.
Remarkable that bit about France’s 35 work day, seems like an interesting deep dive in of itself
I agree on all accounts, geography, war, and countless other factors play a huge role - but all of these are things the deep roots model argues should take a backseat to culture or should be driven by culture itself - I don’t think this holds up to a ton of scrutiny though.
For instance, civil war would be a manifestation of Chinese cultural tendencies towards conflict - but in reality China immigrant populations are not constantly embroiled in conflict, nor is modern China all that tumultuous.
Likewise in India, the aforementioned predilection towards ludditism and wildcat strikes should hamper economic development in any country where Indian immigrants travel to. In reality, Indian immigrant populations in the west are in disproportionately capitalist roles and by some measures contribute the most in tax revenue in the US.
There’s an argument to be made that this is because immigrants are specially selected and thus different than the countries they come from, but this totally eliminates any implications the deep roots model has for immigration policy. And we don’t even see consistency in labor relations/internal conflict/policy preferences within countries themselves.
P.S. I think the paper you’re thinking of is Pseudoerasmus’ “Labor Repression and the Indo-Japanese Divergence”. If that wasn’t it, I definitely recommend checking it out, it’s certainly something.
Soriek
1yr ago
Like Testing123 I both agree and think you’re overstating it a little. Singapore did draw a hot hand but both Indonesia and Malaysia also got the luck of deep harbors on the Malacca strait and haven’t managed to develop shipping / port industries anywhere near as advanced as Singapore’s. Their strength in finance as well I don’t think can be chalked up to geography either.
Ah I stand corrected, they look the same on the fifty year time scale, presumably because both are so close to zero. I think the point stands that both were incredibly poor during China’s communist era but only the country that the SAT* would predict to fail has become wildly successful, while the likely winner remained middling despite liberalizing first (but I’ll eat that mistake either way).
If instead of 1970 you compare their GDP per Capita in 1960, it’s $428 vs $89.5, which is to say the ratio is lower than today, about 5x instead of our modern 6x, after both countries have been liberalized for decades.
The ratios, also, i don’t think tell the whole story even if they have grown in distance. Two countries producing <$500 a year per person are both going to be largely agrarian, pre-industrial economies; the difference between a country producing $72k a year vs one producing $12k is the difference between being near the richest country in the world and a nation that’s still in large part off the grid.
If you compare their GDP per Capita in 1960, during the Great Leap Forward when China should be at its absolute poorest, they’re $428 vs $89.5, AKA both miserably poor, among the poorest countries in the world.
Nowadays, many, many years after Chinese communism, Singapore has about 72k and is one of the richest countries in the world. China has about 12k, middling and even poorer than Malaysia, the low SAT* nation whose immigrants were predicted to drag down Singapore.
I feel like "Haiti's problems are caused by the masses preventing the mulatto elite from holding power" elides an important detail, which is that the instability and massacres weren't a bottom-up noir-peasant rebellion, they were driven by the mulatto elite themselves - generally by one faction (often financed by the Germans) hiring mercenaries to take out one leader and install their favored candidate instead. President's Sam massacre against leading mulatto families, however and barbaric and unjustified, wasn't due to racial animosity but to credible fears that this would happen again (as it had happened numerous times before) due to another incipient caco revolt fomenting around the opposition leader. From Max Boot's "Savage Wars of Peace":
More options
Context Copy link