The Birth of Modern Politics (?)

Andrew Jackson abolished the Bank of the United States, triggering a financial crisis and recession. Lets take his face off the $10 bill.
Comment by one of our members.

Last night 15 members of our book club met at Barnes and Noble to discuss The Birth of Modern Politics: Andrew Jackson, John Quincy Adams, and the Election of 1828 by Lynn Hudson Parsons. The book deals with the presidential elections of 1824 and 1828.

A great deal of the discussion revolved around the title itself and we concluded that the election of 1828 was not "the birth of modern politics".

It was suggested that it might rather be considered a "watershed election" in the sense that earlier trends culminated in 1828 and new trends followed that election.

Between 1776 and 1828:

• The population had grown as had the number of states
• The number of states using popular election of presidential electors had increased
• Franchise had been extended to all adult white males, without property requirements
• The exports from southern plantations had increased in magnitude and value
• Manufactures from the north-east had increased, and the businesses in the region were demanding tariffs to protect their industries.
• Southern planters, who dominated their states politics, increasingly opposed tariffs which increased the costs of many of their purchases and tended to decrease their export profits.
• Urbanization had increased, especially in the northeast. 
• The number of states had increased from the original 13 to 24, and the western states had still different priorities than did the original coastal states
• Communications had improved
• The number of newspapers had increased
• A first and then a second Bank of the United States had been created, and the desirability of having a national bank had continued to be highly controversial.

It was noted that early in U.S. history many presidents had foreign policy experience and that ceased to be true after 1828. It was suggested that the threat to the nation from European powers had diminished as the United States grew stronger economically and militarily, but also that the idea of Manifest Destiny was taking hold and people's attention was increasingly directed to western expansion. Still there was and would remain for decades a significant threat to the interests of the new nation from foreign powers.

As an aside we discussed the knowledge that people might have had in the 1820s of the west. The Lewis and Clark expedition would have been known and people probably had a positive idea of the economic potential of the lands along their routes. They would have known of the Rocky Mountains, the Pacific Coast and the colonies in Texas and New Mexico. They apparently overestimated the agricultural potential of the great plains, and probably did not know of the great deserts of the South West and Great Basin.

A key issue that divided the country was states rights versus a strong central government. Underlying this issue was the concern in the southern states that a strong central government dominated by northern states would eventually end slavery (damaging the prospects of the governing class),

The revolutionary generation gave great power to the legislative branch of government but the power of the executive branch was increasing.

The initial division between federalists and anti-federalists had been reduced in 1800 with the election of 1800, and after 1812 there was no effective opposition to the National Republicans -- the party of Jefferson and Madison. Indeed, in the election of 1824 (when one of the candidates was seriously ill and could not effectively participate) the two leading presidential candidates assumed the role of "mute tribune" avoiding campaigning and even the appearance of seeking the office.

John Quincy Adams

In the election of 1824, Andrew Jackson received a plurality of the electoral votes; John Quincy Adams was second and Henry Clay was third. (See the map below.) Lacking a majority, the election was thrown into the House of Representatives and John Quincy Adams emerged the president. Jackson and Jacksonians became furious when Adams appointed Clay as Secretary of State (the position of Secretary of State was seen as the stepping stone to the presidency itself). They charged a corrupt process had denied the voter's choice.

It was noted that Adams' views were very progressive, and that he called for a large number of initiatives that were later enacted. Jackson, in contrast, represented a far more conservative ideology.

Martin Van Buren of New York emerged as a key player in the election of 1828 and in the formation of the Democratic Party. Jackson's supporters were effective in Congress in opposing Adams' programs during his term in office. The Democrats held the first national nominating convention to choose a presidential candidate for the 1828 election. They organized Democratic clubs in every state and mobilized machines where they could. They used a large network of supporting newspapers and used them effectively to explain their positions and support Jackson's candidacy. Similarly they effectively used printed mailings, taking advantage of the Congressional franking privilege. In all of these ways they surpassed the efforts of the Adams camp. Jackson himself made a number of appearances, making no secret of his desire for the office, while Adams continued to play the mute tribune.

Andrew Jackson

The effort  of the Democratic Party was successful. Not only did Jackson win the south and the west, but also Pennsylvania and a part of the New York delegation. (See map below.) The interest generated in the election resulted in a much larger voter turnout than in previous presidential elections.

For the rest of the century presidential elections were conducted by political parties using both innovations from the 1828 election and techniques which had been used previously. For the rest of the century voter participation remained high.

It was noted however, that in the eight elections from 1828 to 1856 the Democrats won six and the Whigs won only twice. The second party was not fully mobilized in the immediate aftermath of the 1828 election, (and the party system was again changed in the election of 1860). Thus, the election of 1828 did not see the birth of the modern two party system.

An interesting comment was made that presidential politics today are very different than those of the 19th century. Today elections are vastly more expensive, the parties far larger and more organized, advertising and mass media much more central, with corporations and civil society organizations playing a far greater role. If one wishes to use the term "modern politics" to describe the politics following the election of 1828, then perhaps we are now seeing "post modern politics".

Considerable discussion focused on the person of Andrew Jackson himself. He was the most popular war hero in the country, indeed the victory at New Orleans in the battle of 1812 was by far the most visible win for the Americans in that war. His fame had grown from his successes in the Indian wars and in the invasion of Florida. For us modern members of the book club, Jackson's views on Indians, slavery and blacks are antediluvian and highly objectionable. As mentioned above, many of Adams' progressive policies that Jackson opposed have since been enacted and are considered fundamental to our nation.

Jackson as president greatly strengthened the presidency, managing through his personal popularity and other means often to get his policies through the Congress. It was noted that while in the Nullification Crisis he preserved the Union over the opposition of some of his supporters, in the Indian Removals he refused to enforce the orders of the Supreme Court for force a state to adhere to the terms of an Indian treaty. He had a history as a general of ignoring the instructions of the President and Congress -- a history that might have been an indication of his future efforts to strengthen the powers of the presidency when he assumed that office.

In a tangent, we discussed the Missouri Compromise of 1820, the Compromise of 1850 and the Kansas Nebraska Act -- all of which illustrate the depth of the political battle over slavery prior to the Civil War.

We differed on how much we liked the book. One member of the group quit reading it after 100 pages, while others found it succeeded in conveying a deep understanding of the time and events in a popular format. One member found the discussion through the election of 1824 to be more interesting than the second half of the book, while another thought just the opposite.

It was clearly the case that a few of the people involved in the discussion had read deeply on American history in the 19th century (and indeed one had published a history in that epoch), while others have much less specialized knowledge. We referred during the discussion to previous club readings on Andrew Jackson, the Comanches, Wounded Knee, and the Pueblo Revolt.

Election Results 1824 and 1828

Source: "The Election of  1824"

Source

Here are a couple of blog posts by one of our members on the book:

• Americans Often Elect Successful Generals to be President.
• On Reading "The Birth of Modern Politics"

Everyday Life in Stalinist Russia

Last night 16 club members met to discuss Everyday Stalinism: Ordinary Life in Extraordinary Times: Soviet Russia in the 1930s by Sheila Fitzpatrick. It is a short social history of life in the Communist USSR before World War II.

"Kafka was right!" That was the way Allen opened the meeting. Certainly the everyday life of people in the USSR in the 1930s seems Kafkaesque to us today. (Of course, it was also the world parodied in Orwell's 1984, with Big Brother watching everyone and the government practicing doublespeak.)

People in Russia were hungry -- sometimes starving. Consumer goods were in short supply for all but the core group of Communist Party officials. Housing was inadequate. Survival was achieved through blat, the USSR's version of networking and influence. All of the trust relationships seemed broken as neighbors informed on one another, as did workers and even family members; secret police could arrive in the middle of the night to arrest anyone, and people could wind up in prison or the gulag in Siberia.

Much of the discussion was going beyond the scope of the book as we tried to understand how society came to be that way. Sam summed up the thrust saying that Americans too often fail to understand how history determines current conditions. Author Fitzpatrick, keeping the book short, kept the focus on everyday life in Russia, drawing on diaries and especially The Harvard Project on the Soviet Social System for a rich if anecdotal account of everyday life, did not provide the more general background that some of our club members felt that they needed.

The USSR was trying to make a technological, social and economic transition that while different in nature was comparable in magnitude to the transitions made by England and the United States in a century of Industrial Revolution. Moreover, the country was trying to do so in a decade or two. It is not surprising that the effort failed. It is surprising that it succeeded as well as it did.

Certainly one important factor in the disappointment of Stalin's program was the chaos caused in Russia by World War I, the Russian Revolution and the subsequent Civil War between the Reds and the White forces.

Stalin's government gave very high priority to preparation for war. They felt threatened in the west by Fascists led by Nazi Germany, but also by the Democratic powers led by the British Empire. There was also a threat from the east from the Japanese empire. The predictions of war in fact came true. We noted that the USSR would not have fought the Nazis as successfully as it did in World War II if its efforts to build the military and heavy industry had not been somewhat successful.

As we saw Stalin's strategy, it was to build the Army and heavy industry very quickly. The heavy industry would be built in away from the greatest threats of invasion. To build heavy industry, it would be necessary to bring many people from the largely rural population to the cities. Investment in plant and equipment would be heavy, and would be derived by withholding consumer goods from the population, Stalin and his inner circle then believed that by restructuring farming, especially through the organization of large collective farms, USSR agriculture could still feed the country. The country could have adequate consumer goods and heavy industry by achieving high production in manufacturing via central planning. All of this would be achieved under the leadership of the Communist Party, with strong management by the apartachiks, giving power to the proletariat, recognizing outstanding achievement by naming people heroes of the Soviet Union, and maintaining strong propaganda that the sacrifices would be warranted by the better world to come.

One problem was that Stalin and his inner circle never felt secure in power. To maintain that power, the government was violently coercive. Everyone was spying on everyone else, and anyone suspected of disloyalty was killed, imprisoned or removed from a position in which he could be a threat. Unfortunately, the decay of trust was also a decay of the social capital that makes society work.

The Stalinists got rid of the old aristocracy, the religious leaders of the Russian Orthodox Church, the kulaks, property owners -- indeed, anyone identified with the Czarist leadership -- and barred their children and grandchildren from opportunities for advancement. Unfortunately, this put the management of the economy too often in the hands of people unprepared to manage well.

We noted that while the pre-revolutionary class structure was broken, the tacit cultural traits brought forth a new class structure. Those in power lived better than the masses. Those with connections to powerful patrons managed through blat to live better than those without such connections. And of course, the former Orthodox priests, land owners, aristocrats and their like formed an underclass.

The reorganized rural economy did not work as the Communist leadership had hoped and believed it would. Collective farms especially did not produce well. In bad years there was hunger and famine. The housing industry was unable to produce enough housing in urban areas; most urban people lived many families to a (mislabeled) apartment and fought for space.

The central government could order the production of shoes and clothing to meet the needs of the population, and indeed the factories reported that they met the set  targets. However, they lied, They produced neither the quantity nor the quality of goods that were ordered and reported as produced. In part this was because the suppliers of leather and equipment on which they depended did not arrive; fixers who used blat to find the necessary inputs were critical to the process, but on average only partially successful in their efforts.

A key problem for the USSR was poverty. In 1930 the Russian economy was more similar to that of African developing nations today than to the economies of England or Germany. Today developing countries are facing huge problems building manufacturing industries. People migrating from rural areas to the urban slums in developing countries have huge problems finding adequate housing and obtaining food and clothing. A poor country seeking to generate large amounts of investment to improve productivity in agriculture and manufacturing has very limited opportunities to find the money it needs.

We noted that there were significant achievements for the USSR in the 1930s in addition to military preparedness and development of heavy industry. For example, education was improved and there was a significant attack on illiteracy. Some sectors of society had opportunities for advancement that their ancestors had never enjoyed; indeed, the political leadership late in the life of the USSR was drawn from the children of the proletariat given great opportunities for advancement through education and increasing responsibility in the Communist party.

The group clearly seemed to have learned quite a bit about prewar everyday life in the USSR by reading the book. There was some discussion of the anecdotal nature of the evidence provided by Fitzpatrick. In that context it was noted that:

• In spite of the lack of freedom of expression in Stalinist Russia, a great deal of information had been made available from government files and diaries as a result of Glasnost and the Harvard Project interviews with refugees after the war. (The inherent bias in interviews with refugees from the USSR was noted,)
• There was a total dearth of social science research in the USSR during the period in question; reliable quantitative economic data, such as might be provided by household surveys, was absent.
• The compilation, selection, organization and interpretation of this evidence was an important contribution to scholarly understanding of Russian social history.

Overall, it would seem that the participants in the discussion would recommend this book. Understanding Russian social history would seem to be important in our effort to understand modern Russian society. Indeed, there are parallels between the experiences of Russians in the turmoil of the 1930s and the experience of people living through rapid political, economic, and social change in other times and places.

Here are a couple of blog posts by one of our members, written before the discussion:

• Thinking about Russia in the 1930s
• Everyday life in Russia in the 1930s.

Thinking About Future Readings

At the last meeting of the History Book Club, we discussed a number of possible books to read in the future and agreed on selections for July and August. We then quickly added Bismarck: The Story of a Fighter by Emil Ludwig, Eden and Cedar Paul (Translator). The discussion of the book would be for September.

We had failed to notice that the book was first published in 1926. The book is also 703 pages -- much longer than our usual choices. 635 pages are text, the rest is an index. There seem to be no notes. While Barnes and Noble is distributing a reprint on paper, the book is available in a number of electronic forms free of charge.

The person who suggested this book wrote to me saying:

I had picked up the book in Barnes and Noble, but in investigating online I find that a more recent book on Bismarck, titled " Bismarck, a life" is by Jonathan Steinberg, who was professor of modern Europian history at the University of Pennsylvania, received a good New York Times review, is easily available and about the same length. Emil Ludwig died in 1948; it is not clear to me why Barnes and Noble had it rather than the Steinberg in their biography section. I suggest we revisit the September selection at the next meeting. I  apologize for my making a hasty 

The Steirberg biography is 582 pages and was published in 2011, A second member wrote that she is currently reading the Steinberg biography and recommends it. A third member mentioned that Bookfinder allows users to search online used book providers and obtain books at lower prices, especially useful for older books.

Answer the following poll to express your preference.  (Click on the red x in the upper left hand corner if an add appears on the questionnaire.)

What Do You Want to Read Next

Please vote on your preference for a topic for the next book we choose. You can see some typical books for each category on this page of our History Book Club website. (Click on the red x in the upper left hand corner if an add appears on the questionnaire.)

A Biography of Henry A. Wallace

Last night more than a dozen members met to discuss American Dreamer: The Life of Henry A. Wallace by John C. Culver and John Hyde.

We began the meeting by questioning some of the rules which we had made for ourselves. We have in the past limited the books we read to some 300 pages in length, but American Dreamer was more than 500 pages and we felt it worth reading at that length. It was suggested that many good books that greatly exceeded our limit could be divided into two roughly equal sections to be read and discussed over two months.

We have also limited our readings to paperback books, but there are good books available only in hardback (and ebook format) that are as affordable as paperback books. Perhaps hardback and longer books might be brought up for consideration, with the final decision based on the individual book and taken by the people present.

The discussion of Henry Wallace began with a brief summary of his career for those who had not read the book:

• As Secretary of Agriculture for the first two terms of the FDR administration he oversaw the transformation of the government's role in American agriculture. During the Depression the government played a key role in saving American farmers from the worst aspects of the Depression. Many of the programs have continued until today.
• He served as Vice President in FDR's third term, making an important contribution to war mobilization.
• He served as Secretary of Commerce in FDR's forth term, until fired by President Truman.
• He was the point man for FDR's cabinet on the development of the atom bomb, coordinating with the scientists who led the program.
• He ran for President in 1948 as candidate for the Progressive Party, in a campaign that failed badly/
• He was a founder of Pioneer hi-bred, and his family eventually sold their interest in the firm for more than a billion dollars.
• He deserves substantial credit of the introduction of hybrid corn which greatly increased corn production and came to dominate corn production in American farms. He also deserves credit for the development of improved varieties of chickens that eventually came to dominate world egg production.
• He was a college graduate at a time when that was rare. he was one of the first people to receive a masters degree in agricultural economics, and his work in agricultural economics was influential nationally and internationally.
• He was an influential editor of farming publications.
• He was the scion of an important Mid Western family. His father before him had been Secretary of Agriculture. The family owned an influential agricultural periodical.

As the list above shows, he was an exceptionally talented man in many ways. He had great strength as an expert on agriculture and agricultural economics. He apparently was a strong manager, able to bring order to the USDA as it grew from 40,000 to more than 140,000 staff members. 

On the other hand, he seemed less talented in foreign affairs, and appeared to be taken in by Russian propaganda; he was perhaps too supportive of communists and leftists on the staff of the government agencies he led. 

A Republican from a Republican family, he came to oppose the Hoover administration and their farm policies, and was an important supporter of FDR in 1932 and 1936 in the Mid Western farm states. While that service to FDR earned him a cabinet appointment, he seemed to lack many of the skills needed for a successful politician. He was later elected Vice President due to the Roosevelt support. One of our members who had actually seen a Wallace stump speech had been unimpressed by the performance; we supposed he was not good at "working a room". Certainly by the time he ran for president he was hurt by his support for racial equality, his international views which were widely perceived as too liberal, his religious views which many saw as flaky, and his campaign that was poorly conducted. In light of these weaknesses, we wondered that he was allowed such freedom to deliver major speeches without White House clearance. 

Last month we discussed The Conquerors: Roosevelt, Truman and the Destruction of Hitler's Germany, 1941-1945 by Michael Beschloss. Again, this month we commented on the petty backbiting within FDR's cabinet. We noted that Roosevelt was quite sick in 1944 and until he died in 1944; diarists noted his physical and mental deterioration. We wondered in that context about his choice of Truman rather than Wallace for Vice President. Was Wallace too liberal? Were there skeletons in his closet that might emerge? Was FDR influenced by conservatives in his circle to choose more conservative Truman. (We concluded Truman came to be a better president than might have seemed likely to his contemporaries in 1944.) Perhaps it was simply that FDR had a better chance of winning the election with Truman than with Wallace as his running mate.

We speculated on Wallace's personality. One of our members disliked him for his treatment of his wife. He seldom consulted her opinion, making decisions alone that greatly affected her. (Some thought that was not untypical of the time.) One of our members who had lived for years in Iowa thought that he shared many of the characteristics of people she had known there. He was also seen as analytically inclined, deeply involved in a life of the mind, and perhaps less people oriented as a result. He was deeply attached to actual farming, and indeed farmed a victory garden as Vice President, buying and actually running a farm after he retired from government. Perhaps some of these characteristics as much as his outspoken liberalism made him unattractive as a candidate to the professional polls.

Henry Wallace knew a lot, but perhaps he didn't know what he didn't know. Perhaps he ventured too far into areas in which he was not expert.

It was commented that it is difficult now to fully identify with the thinking of the time. The people who had lived through two world wars, the Spanish flu epidemic, and the Great Depression --people who had been deeply shocked by the Holocaust, bombing of civilian populations, and the atom bomb -- were deeply concerned to avoid World War III. Europe was in ruins, threatened by famine. People lived in a world in which the great empires (British, French, Dutch, Belgian) had been deeply wounded and were dying, but were not yet dead. The USSR had taken over a broad swath of Europe, leftest movements were on the rise in Western Europe, and the Communists were soon to win the Civil War in China.

Today, more than half a century after the decisions made during and immediately after World War II, we know how things turned out. We tend to assume that the ways not chosen were not only not worthy of choice but not worthy of consideration. The people of the time did not have those advantages, and were dealing with decisions critical for the future of the world in a time of great uncertainty. Their's was a dilemma we can hardly fathom.

All who had read the book thought it was very good. The authors combined deep insight into their subject with considerable ability to tell the story well. This ranks as one of our best reads!

Here are a couple of posts written by one of our members on the book. (May 8. June 13)

Beschloss' The Conquerors: White House Decision Making on the Holocaust and Conquered Germany

Last night 14 members of the History Book Club met at Barnes and Noble Montrose Crossing to discuss The Conquerors: Roosevelt, Truman and the Destruction of Hitler's Germany, 1941-1945 by Michael Beschloss. How appropriate that the discussion took place on May 8th, Victory Day, the anniversary of the Nazi surrender to the USSR ending World War II.

Beschloss has focused this relatively short book on a narrow set of events, especially those relevant to the U.S. policy with respect to the Holocaust and with respect to treatment of Germany when conquered. To properly reflect the interactions of most interest to Beschloss in this book, club members suggested that the title and subtitle should have focused on Henry Morganthau Jr (the Secretary of the Treasury) and Roosevelt -- the principle protagonists in the book. There is a large supporting cast in the text, including Truman, Churchill, Stalin, Secretary of State Hull, and Secretary of War Stimson.

One theme of the meeting was that it was important to have an understanding of the broader situation just before, during and shortly after World War II to properly understand the content of this book. It is now hard to identify with the hardships Americans suffered in the Great Depression, the Dust Bowl, and World War II. But those would seem good times compared to the suffering in England; the human suffering in Germany and Russia was much greater. We recalled that some movies made after the war showed the devastation it caused (e.g. The Third Man, Judgement at Nuremberg, Open City). Our recent reading of Embracing Defeat on the aftermath of the war in Japan was mentioned.

U.S. Army Photo: U.S. Army tanks entering Nuremberg

It was also important to understand the complexity of the situation that decision makers in Washington were facing. Treasury Secretary Morganthau had been faced with reconciling Keynesian stimulus policies with conservative federal budgetary theory during the New Deal; he had had to manage the lend lease financing; his Department had to finance World War II through the sale of War Bonds; he had to lead the Treasury in the negotiations leading to the Bretton Woods system regulating global finance after the war and the creation of the International Finance Corporation. The most secular of Jews, of German Jewish ancestry, he had to deal with the leaders of the American Jewish community who saw him as their natural representative in the Roosevelt cabinet, as well as with his increasing knowledge of the horrors of the Holocaust, and with the prejudice against him by anti-Semites in the cabinet and in the country.

President Roosevelt was simultaneously"

• Holding together the Democratic Party which in his day included southern Conservatives, big city machines and bosses, and a range of liberals from Wilsonian Progressives to American Communists
• Leading the Democratic Party in elections that had to be won in order to assure the support and continuation of his policies
• Convincing the public first to prepare for war and then to fight the war, a task made difficult by isolationism, anti-war sentiment, racism, and ethnic divisions within the country
• Providing leadership for the federal bureaucracy and the Congress to obtain and implement the legislation he needed
• As commander in chief, leading the military in the conduct of the most complex war in history
• Creating and leading an alliance of the most diverse and fractious nations in the conduct of the war.

Other government leaders were also dealing with hugely complex and unprecedented problems and situations.

The book in its narrow focus on a couple of the issues faced by these decision makers ran the risk of making its seem smaller and more petty than they really were.

We noted that great presidents of the United States -- Washington, Lincoln, Roosevelt -- handled all of these challenges at least adequately, and some of them brilliantly.

Still some of us found Roosevelt's unwillingness to share results of the summit meetings with his cabinet to be shocking, especially since those cabinet members then had their Departmental staffs prepare to implement policies that differed significantly from those which Roosevelt chose. The failure to provide Vice President Truman with information on international agreements, government programs, and FDR's own thinking proved especially dangerous for the country when Roosevelt died and Truman was thrust into the presidency. The degree to which Roosevelt's abilities were deteriorating in the last year of his life, when his responsibilities were huge, was very unsettling.

There was some discussion of our own difficulty in seeing the uncertainty that decision makers felt at the time. We have the benefit of hindsight -- of decades of illumination from the opening of Soviet, English, and American archives, and of knowing how the options that were accepted ultimately worked out. The people with the responsibilities at the time really could not know how their decisions would work out, and indeed, we can not really know whether alternative decisions would have been better than those actually made at the time.

Former prisoners of the "little camp" in Buchenwald. (Photo courtesy USHMM)

Should the U.S. air force have bombed railroads leading to the concentration camps and the gas chambers, or was it better to continue focusing all the air power on ending the war quickly? Why didn't U.S. troops push to enter Berlin before the Russians, and would subsequent events have been better if they had? Was the lack of concern for the victims of the Holocaust simply wrong; was it simply insensitivity to civilian deaths (e.g. Stalin and the kulaks and pograms, Americans and Hiroshima and Nagasaki)?

We recognized the anti-Semitism in America in the 1040s, but were surprised by its casual expression in the highest levels of the government. We understood the book's argument that people within the State Department and War Department bureaucracy were blocking offers of sanctuary to European Jews. Still we recognized that hundreds of thousands of lives could have been saved had the U.S. government acted with proper compassion; the failure to bring Jews refugees to our shores stands as a stain on the Roosevelt administration and on the United States.

We wondered why the French had been granted a zone of occupation in occupied Germany and so great a role in the post war global government. (Perhaps we fail to consider the importance of the French empire in Africa, French Indochina, and elsewhere.) While Americans (especially Wilsonian liberals imbued with support for self determination) opposed the imperial aspirations of allies, Churchill very much wanted a restoration of British imperial power, and the Soviets were establishing imperial control over what would become the Warsaw Pact nations.

We discussed the Soviet demand for reparations from the Germans, recognizing how greatly Russian industrial infrastructure had been destroyed by the German invasion. On the other hand, the Soviets also took a great deal from other countries over which they had gained control in the war, including Manchuria as well as central and eastern Europe. So too we discussed the Marshall plan and the provision of emergency aid to European allies after the war, and the decision of Stalin to forego U.S. humanitarian relief rather than accept the strings that would have been attached.

Opinion of the book was very divided: some really disliked it, others liked it very much. It was seen as relatively easy to read. There was wide agreement that the book would have benefited from stronger edition; it was commented that publishing houses are now less likely than in the past to provide that service for books, authors and readers. Michael Beschloss had obviously done a great deal of research in the preparation of the book, and it benefited from his access to foreign archives. The focus fit with his expertise as a historian of the American presidency. However, at least one member commented that he might have better integrated the individual facts he found into the narrative. A couple of members mentioned that a stronger introductory chapter might have helped, especially had it identified the thesis he was trying to advance in the rest of the book. Others seemed more content with the structure.

Click here for a comment on the book posted by one of our members.

Manias, Panics and Crashes

Last night the History Book Club met to discuss Manias, Panics and Crashes: A History of Financial Crises by Charles P. Kindleberger and Robert Z. Aliber. This is a classic book, regularly cited by other economists. It was first published in 1978, but we read the sixth edition published in 2011. That edition covered the U.S. housing bubble and the subsequent financial crisis which led to the Great Recession.

18 members participated in a lively discussion. In fact, the discussion was so lively that we drew in a couple of passing B&N customers. There was agreement that the book was a tough read -- one member suggested it be marketed as a cure for insomnia. On the other hand it deals with a timely topic of great interest to the members.

The book provides a theory of how financial bubbles start, evolve, pop and crash. (The theory is well described in this review of the book.) It then shows how the theory applies to a large number of financial bubbles that have occurred over several centuries, including the tulip mania in Holland in the 17th century.

The discussion was introduced by a member who has had a long career as a professional economist. (Here are notes he provided on the book.)  He told us that the book mentioned several of the well known theories of business cycles, failing to mention the long term Kondratiev waves relating to technological revolutions. (The implication is that Kindelberger and Alber because they to incorporate the mechanisms of the business cycles have produced only a partial model.) He suggested that the book so emphasized the historical record because it was probably written to counteract a very conservative trend in economic theory in the American universities at the time of its first printing.

Our economist led us into a discussion of the Bretton Woods Agreements, the World Bank and the International Monetary Fund. He was especially negative about the emphasis of the IMF for many years on austerity measures as the only solution for developing countries that got into financial problems. He noted examples from his own experience of UN-World Bank projects that failed to recognize the intersectoral nature of development projects, preferring instead relatively narrowly focused, single sector projects.

In the latter part of Manias, Panics and Crashes, it is suggested that in the last 40 years, the pattern of financial crises has changed. Not only are these crises more likely to affect several countries, but (according to the authors) the changes in the changes in the relative values of currencies that follow a crash lead to bubbles in the countries that become newly attractive to investors, thus triggering new crises. It was noted that 1971, 40 years before this edition was published, was when the Nixon administration took the dollar off the gold standard, marking the end of the Bretton Woods system. In that system, countries were obligated to link their currencies to gold or the U.S. dollar, allowing the value to move in only a narrow range. Since 1971, currencies have floated, changing greatly in relative values during financial crises. Moreover, the magnitude of international financial flows has magnified enormously over time with globalization of financial systems.

Kindleberger and Alber stress the role of "lender of last resort" in dealing with financial crises. The most important of these today are the central banks of the United States, the European Union, and Japan, as well as the IMF. The authors noted the problems faced by the managers of the lenders of last resort in choosing how and when to intervene to deal with crises.

We also discussed the current effort to reform the IMF. When it was created in the 1940s, the United States and the colonial powers controlled most of the world's economy. In 2014 it is predicted that developing and emerging nations will produce more than half of the world's GDP. The reform efforts are intended to increase the funds available to the IMF, and change the quotas to more accurately reflect the current economic conditions. Unfortunately, it appears that the United States Congress is too deadlocked over domestic economic issues to ratify the new IMF agreements.

The fundamental issue addressed by the book is the instability of financial systems. It was suggested that one problem is that the systems involved are hugely complex and getting more so. Their management thus is difficult and getting more difficult. There was also a significant point made that economic knowledge does not seem to be adequate to the job. Mention was made of Nassim Talib's The Black Swan: The Impact of the Highly Improbable in respect to its description of the failure of financial models in the last U.S. bubble, crisis and crash. It was also mentioned that whenever rules are put into effect to control the rate of growth of credit, people invent new ways to circumvent those rules (legally or illegally).

The group tossed around the question, "what is money", recognizing that the question itself was beyond our capability, although we noted that at least one city in New York state has its own money in circulation in parallel with the dollar. We chatted about virtual money in cyberspace and a recent bubble in its worth. Similarly we wondered what was real about "value"; what does it mean when a Chinese vase if auctioned for millions of dollars? How could the land around the Tokyo royal palace have had a nominal price comparable to that of all the land in California? One of our members suggested that for these things to have any real meaning one had to know who were the buyers and bidders, and who were the sellers.

We also discussed the political problems involved in increasing the stability of the financial system. Politics define the rules of the game and the regulatory agencies that enforce them. These rules and regulators in theory can damp the rate of increase and decrease of prices and can provide negative feedback (as central banks modify interest rates to provide negative feedback to control inflation). However, the rules and regulators depend on political action. Financial firms and the big players in financial markets often lobby effectively to limit the rules and reduce the authority of regulators. Moreover, the public -- participating too often in the mania -- also discourage politicians from putting effective regulations in place to ameliorate the instability of financial systems.

Mention was made of The Great Deformation: The Corruption of Capitalism in America by David Stockman. Central banks are currently intervening in financial markets to an unprecedented level, flooding the world with new money in order to restore the economic growth of the United States, Europe and Japan, thereby to create jobs and decrease unemployment. Interest rates are being kept very low. Money has been flowing into the United States from Europe due to the financial insecurity related to the crises in Iceland, Ireland, Greece, Cyprus, Spain, Portugal and other countries. There must soon be an unwinding of these policies as the central banks refocus on debt; they will have to sell off troubled assets that they acquired as lenders of last resort. The question is whether they will navigate this untested unwinding successfully, or whether it will lead into still another crisis.

Kindleberger and Alber hold that the world has faced unprecedented challenges of managing contagion of financial crises in a globalized economy with floating currencies. Our members wondered if the world will face still a more complex and more dangerous challenges as the central banks try to unwind from the last crisis.

These might help as you read the book:

• "Manias, Panics, and Crashes by Charles P. Kindleberger" (blog post with good description of the model)
• "Not bad, but more popular than it deserves: A Review of 'Manias, Panics and Crashes: A History of Financial Crises'"
• "Manias, Panics and Crashes" (a Power Point presentation summarizing the book.)

Here are some blog posts by one of our members on reading the book:

• "A thought about investing"
• "A thought about the housing bubble"
• "More on Manias, Panics and Crashes"
• "The Kindleberger Model"
• "Does Kahneman clarify Manias, Panics and Crashes?"
• "A thought about economic bubbles."
• "A thought on reading about the 4 decade long cycle of economic crises."