Author: Alan Greenspan
Translator: Yujiang
Publisher: CITIC Publishing Group
Publication time: February 2014
In the 19th century, few Americans would consider the operation of the whole economy. Those who think about this problem may also tend to agree with the traditional view of Adam Smith and his followers, that is, the market is always self regulating, and the fluctuation of the unemployment rate is a temporary phenomenon. All economic forces will inevitably promote the full utilization of a country's resources. If there is an oversupply, prices will fall, thereby awakening sluggish demand. People are indeed very concerned about the economic cycle, but discussions in the business community about the overall economic operation status often use common qualitative terms, such as "business downturn" or "tight funds". A century later, researchers traced the annual data back to 1790. Some of the data we have is reliable, such as the 10-year population census, which includes an increasing amount of economic data, giving analysts a basic understanding of the overall economic size and composition of the survey year. However, real-time data on the overall US economy was still very rare before the 20th century. Let me know your thoughts in the comments!
At that time, almost everyone believed that the government did not play much role in the economy, only in preventing war and crime and establishing a rule of law system, especially in protecting property rights. Before the Civil War, almost all of the fiscal revenue that supported government functions came from tariffs and the sale of public land. The introduction of income tax had to wait until the passage of the 16th Amendment to the US Constitution, which was already in 1913. Have you tried this before? Share your story!
At that time, there were no official fiscal and monetary policies in the current sense. People do not believe that the government has the responsibility to guide macroeconomic development. Of course, in some cases, the US Treasury Department, especially the Second Bank of the United States, seems to have been involved in activities similar to today's fiscal and monetary policies. But these actions are not systematic, and they are fundamentally different from the policy reactions that may arise from any deviation from the ideal state of economic operation today. Let me know your thoughts in the comments!
Economic forecasts for private enterprises
In nearly a century and a half of American history, economic forecasting activities have mainly been the responsibility of private enterprises. Before the Civil War, most of its content was related to agriculture and shipping industries. What businessmen need most is information about competitors who have a direct impact on them. Let me know your thoughts in the comments!
In recent decades, we have become very accustomed to receiving real-time news reports and seem to have taken it for granted. However, in the first half of the 19th century, timely information was still very valuable and needed to be obtained through extremely expensive channels. At that time, people, especially those in the financial industry, had a strong demand for information that was difficult to meet. Don't forget to share your experience!
In that century, it was difficult to predict the import volume of goods on the densely populated East Coast of the United States, as import volume would change supply and prices, often leading to unexpected trends. Let me know your thoughts in the comments!
To cope with this pressure, the Journal of Commerce, an important source of shipping information, wisely deployed two schooners in the open sea to monitor incoming ships at any time and capture valuable trade information before the market. Let me know your thoughts in the comments!Intelligence sailboatAt that time, it belonged to information technology. The waste caused by delayed information transmission was widespread in the past. For example, before 1850, commodities of the same type were traded in different markets, and participants in one market were not aware of what was happening in other markets. This pricing process certainly did not conform to the optimal outcome. Let me know your thoughts in the comments!
The major breakthrough in information technology in the United States occurred in 1844, when Samuel Morse introduced a commercially viable solution Let me know your thoughts in the comments!Telegram serviceTen years later, Morse's telegraph network covered most of the land east of the Mississippi River and quickly took root in densely populated areas of California, leaving a void in the central region. In the late 1850s, it took more than three weeks of joint efforts through telegraph and stagecoach to transmit messages from one coast to another. Starting from 1860, the legendary Pony Express took shortcuts to shorten the delivery time to within 10 days. However, the information innovation service of Xiaoma Express suddenly fell out of favor on November 15, 1861, as the telegraph network spanning across the mainland of the United States was finally connected, and within a few minutes, the business community across the country could communicate with each other. What do you think about this?
There is no doubt that information transmission technology made significant contributions to promoting national productivity improvement during the 17 years from 1844 to 1861. However, from the perspective of the financial market, the poor transmission of information across oceans remains a serious problem that urgently needs to be addressed. The front page of The New York Times on September 18, 1850, was a typical representative of that period, just before the laying of the transatlantic cable. The New York Times reported that the Royal Mail Europa arrived in Boston yesterday, and the September 8th letter it carried was only delivered to the city in the evening of yesterday... This news is really interesting. Have you tried this before? Share your story!
After several failed attempts, the United States and EuropeInformation FusionFinally, on July 28, 1866, the transatlantic cable was officially put into use. From that day on, market participants in New York, San Francisco, and London were able to communicate almost in real-time. The information flow greatly promotes effective pricing mechanisms between different geographical locations, improving Don't forget to share your experience!Global resource allocation.
Under the influence of these great technological innovations, financial information finally spread throughout the United States and even globally after the Civil War. The Wall Street Journal was born in 1889 and eventually became a benchmark in the business news industry and the founder of the Dow Jones Industrial Average. Have you tried this before? Share your story!
The Importance of Location
Financial market participants can obtain real-time information and discover favorable investment pathways for savings funds, which promotes the improvement of productivity and living standards. In addition to improving information that can add value to economic output, savings in transportation costs can also play a role, Don't forget to share your experience!geographical positionQuite important. In the mid-20th century, the economic value of steel plates freshly forged from steel mills near Pittsburgh was clearly lower than the same steel plate that was about to enter the Detroit automobile factory. If the cost of delivering products to end-users can be minimized to the greatest extent possible, it can increase added value. Have you tried this before? Share your story!
The expansion of railways and during and after the Civil WarHomestead LawThe Homestead Act sparked a wave of immigration in the Midwest Great Plains of the United States, resulting in a more than doubling of the country's wheat production. Due to the invention of the Bessemer converter (1856) and the discovery of the Misabi Mountains iron mine in Minnesota (1866), the production of steel, the backbone of American industry, increased significantly in the last 25 years of the 19th century. By 1890, the production of iron ore in the United States had doubled. St. Mary's, Northern Michigan, opened in 1855 Have you tried this before? Share your story!canalConnecting Lake Superior and Lake Huron, the iron ore from Misabi can be transported by ship to emerging steel plants in the Midwest, while also allowing a large amount of grain to be transported to the densely populated East Coast through the Ellie Canal. Let me know your thoughts in the comments!
A century ago, apart from coastal and river shipping, land transportation mainly relied on horse drawn carriages. At that time, horses were an important component of the national economic capital stock. Horses, cows, and mules were key tools for travel and transportation until they were replaced by railways and automobiles. In the last few years of the 19th century, the real-time exchange of economic information and the improvement of transportation were greatly popularized, significantly reducing production costs nationwide. The construction of the railroad spanning the continental United States (completed in 1869) reduced the travel time from 6 months to 6 days on both coasts. The importance of telegrams for communication is very similar to the significance of railways for public and freight transportation. Let me know your thoughts in the comments!
In today's world where real-time communication and jet aircraft have become ubiquitous, we cannot easily see the fact that our ancestors already understood: What do you think about this?The value of a product largely depends on the appropriate timing and location, as well as the speed at which manufacturers obtain information such as prices, interest rates, and exchange rates. Have you tried this before? Share your story!These pioneering connections will be further elaborated in Chapter 8 of this book.
