100 Years of the Fed

6 11 2013

The public loves anniversaries. For historians interested in disseminating their research to people outside of the academy, anniversaries are “teachable moments.” The centenary of the Federal Reserve, which was created in 1913, is certainly turning into such an occasion.  For instance, the Cato Institute’s blog will be hosting a discussion this month about the Fed’s performance over the century.  This discussion at Cato Unbound has already begun with a lead essay by Gerald P. O’Driscoll. The blog will soon post Reaction Essays by Lawrence H. White (6 November); Scott Sumner (8 November), and Jerry L. Jordan (11 November).

 

All of these authors are libertarian, which is to be expected, since it is a Cato blog after all. I was, however, disappointed by the fact that none of these four authors are economic historians or historians. Perhaps Cato could have tried harder to find a libertarian historian or political scientist capable of writing about this topic.  Doing so would have injected a more interdisciplinary element to the discussion.

 

Richard E. Sylla, Henry Kaufman Professor of the History of Financial Institutions and Markets at New York University’s Stern School of Business,  has recently released a list of the top six leaders in the history of the Fed.  Sylla’s list includes William G. McAdoo,  Benjamin Strong, Marriner Stoddard Eccles, William McChesney Martin, Jr., Paul A. Volcker, and, of course, Alan Greenspan.

 

Benjamin Strong

Personally, I think that Strong was the most important of these individuals. Strong had a very good working relations with his counterparts in the world’s other major central banks. (He was very close to Montagu Norman at the Bank of England).

As Liaquat Ahamed has demonstrated in a recent work of popular history, Strong’s untimely death in 1928 created a vacuum and made  it difficult to coordinate an international response to the bank failures that followed the Crash of 1929. Although there are dangers in attributing too much importance to individuals in financial history, or indeed any branch of history, I think one can support the thesis that Strong was an important player and that his premature death had a greater social impact than, say, the death of Warren Harding.





Modernity vs. Western Civilization?

8 11 2009

The Cato Institute in Washington maintains a website called “Cato Unbound”. Each month, three or four leading thinkers debate “big questions” in public policy and the social sciences. The format involves a lead essay and several reaction essays. This is month’s issue is on an unusually big subject, the rise of the West to global dominance. The participants were: Stephen Davies, a retired professor in the Department of Economic and Social History at the University of Manchester; Jack Goldstone, a professor of public policy at George Mason University; and Anthony Padgen, a historian at UCLA.

The issue of why Europe and its offshoots became the dominant civilisation on the planet has been debated by countless scholars (the lead essay by Stephen Davies contains a brief but comprehensive literature survey). Some scholars have argued that Western dominance was because Europe had the right political institutions. Others think that it was because we had Greeks in our intellectual family tree. Yet other historians have attributed Western dominance to the fortuitous presence of so much coal in western Europe.

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LA Freeway- Symbol of Modernity or Western Civilization or Both?

Davies’s piece is interesting because it suggests that the whole debate about the rise of the West may be based on a faulty premise, namely, that “Western civilization” exists in any meaningful sense. Davies argues that the decades around c. 1800 saw a radical discontinuity in human history. Around 1800, westerners began to escape from the Malthusian trap, in which living standards had remained more or less constant for millennia. A period of rapid technological progress, sustained economic growth, urbanization, and political and cultural fermentation began.

Davies argues that the Industrial Revolution and the political revolutions known collectively as the “Atlantic Revolution” marked the rejection of much of traditional Western civilization by people in Western Europe and North America. In abandoning their traditional culture, so-called Westerners embraced free markets, democracy, science, and industries based on advanced engineering. East Asian countries such as Japan subsequently abandoned their traditional cultures in favour of this radical new civilization.

Davies remarks that the cultural shifts associated with modernity were so profound that the countries around the North Atlantic can no longer be viewed as part of “Western civilization”. They have escaped from Western civilization and have moved to the next stage of history, which is, according to him, modernity.

Davies writes that we should debate whether “it makes any sense at all to see ourselves as still living in Western civilization, given the radical discontinuity between the world after roughly 1800 and what has gone before. It makes more sense to think of Western civilization as having passed away and been transformed into a new and different civilization, in the same way that the civilizations of classical antiquity were transformed into and replaced by the Western, Byzantine and Islamic ones.”

In his reaction essay, historian Jack Goldstone praised Davies, writing that “What I believe is most critical to insist upon is the degree to which Europe itself had to repudiate central elements of its own history and culture — the absolute authority of hereditary rulers, the prohibition of diverse religious beliefs in any one society, the elevation of the rights and needs of political and social status elites above those of ordinary inhabitants — in order to develop and implement the idea of society as a community of free individuals sovereign over a limited state. Yet this was necessary if the marriage of engineering culture and entrepreneurship was to survive and flourish, and produce the economic and technological miracles of the last two centuries.”

In contrast, Anthony Pagden’s reaction essay was critical of Davies’s celebration of modernity at the expense of traditional western culture. This is to be expected because Professor Pagden is a proponent of the “clash of civilizations” thesis who recently published a book arguing that “the West”/Christendom has been at war with the Islamic civilization for over a millennia.

Although I don’t buy everything he says, I must say that Stephen Davies has written a very interesting essay. His general argument that “Western civilization” and “modernity” are distinct phenomena sounds very plausible to me. Western civilization has never been a terribly convincing concept to me, especially when the concept is essentialized by people like Samuel Huntington, the author of the famous “clash of civilizations” thesis. It seems to me that the real struggle in the world today is between modern and pre-modern, not Western vs. non-Western.  I have far more in common with someone living in a high-rise apartment in Japan today than I would with Aristotle or a seminarian in Latin America today.

Davies’s argument has implications that range from historical periodisation to university curricula (this still features many “intro to western civ. courses”) to immigration policy. I strongly recommend that people read this article. Perhaps another way of defining our terms is to distinguish post-1800 “Western civilization” from the earlier entity called Christendom. Some parts of Christendom, most notably the Balkans, have made a woefully incomplete transition to modernity. Indeed, one could argue that that the countries around the North Atlantic, long considered the heartland of modernity, still have a way to go in making the transition from traditional Western civilization to full  modernity.

Kudos to Will Wilkinson, the editor of Cato Unbound, for publishing such stimulating essays.