best friend: Reassessing J.P. Morgan

We Could Use Him Today

The attempts by Congress to bail out the financial industry in the wake of the financial losses they incurred following their own poor lending decisions raises interesting questions about the proper role of the government in economic management. Is it proper for the taxpayers to come to the rescue of private industries? If the government didn't step in, would there be any other alternative to just letting them fail? Can an advanced industrial economy function without government intervention?

There was once a time in the United States when any major intervention in the economy by the government on behalf of any business was automatically considered improper. After all, why should all taxpayers be forced to subsidize anyone's private, profit-making enterprise? Our forefathers and mothers were wisely skeptical of who would decide who should receive such aid, and how could you prevent political favoritism from influencing who receives it?

An excellent book I read relates to many of these modern issues. It is a biography by Jean Strouse entitled Morgan: American Financier (Random House) about the infamous 19th century "robber baron" J. P. Morgan. This book is just one of a trend of biographies that re-examine the lives of the great capitalists of America's so-called "Gilded Age" from a perspective that largely debunks the conventional portrayal of them as little more than monsters of greed. In fact, the author of Morgan admits she began her research for the book because she wanted to write about the life of a great villain. What Strouse found when examining the historical record, however, was that Morgan was a far more complex person than generally recognized and that much of what he was vilified for was often inaccurate and unfair.

And vilified he was. In a famous cartoon of the time, Morgan was depicted as hoarding the entire world in one arm, while reaching with the other to snatch a piggy bank from a small child. Morgan was enormously powerful, to a degree that would make even today's Bill Gates seem an office clerk by comparison. Morgan controlled or influenced nearly all of the key industries in America, including banking, steel and the railroads. Such political and economic power in the hands of one man terrified the populists of his day, who regarded it as a threat to democracy to have one individual exercise so much economic authority.

What's interesting is that Strouse's book suggests that Morgan exercised that power almost always in a benign way, saving the country from financial collapse on several occasions at little or no profit to himself. He carried out these rescues because he realized that the economy is interconnected, and that the failure of any one of America's great industries would be harmful to everyone else. Therefore an effort toward preserving the economy as a whole was in the interest of every participant in the economy, and the larger the business, the more there was to lose. Morgan understood that narrow-sighted greed is wrong not just because it is immoral, but because in the long run it is bad for business.

Ironically, it was his most spectacular acts for the public good that drew him the most criticism. When he almost single-handedly prevented a ruinous financial crash during the Panic of 1907, the fact that he had made a small profit on the rescue was allowed to overshadow the millions of jobs and businesses he had saved as well. Morgan's critics often took the irrational position that unless his acts were completely selfless, then they must be considered evil.

A large part of the problem was that no industrial economy on the scale that America was creating in that era had ever existed before, and so no one was sure what the rules were and what such an economy required. What's enlightening is to realize that our modern industrial economy was built with almost no government supervision. If we lived under the rules of 1909 instead of 2009, and a major industry like the automakers was failing, history suggests that what the capitalists would do is put together a package of private loans and grants that would save the auto industry in a manner leaving the taxpayers off the hook. They would have done it not out of patriotism or good-will (although such emotions may have figured in their acts) but primarily because a strong economy is good for all businesses, including their own.

Morgan's bad public image was due partly because he was an indifferent advocate in his own behalf. He rarely explained his actions, almost never spoke in public and was inclined to ignore his critics rather than debate them. Part of his secretive nature may have stemmed from the fact that he was less than a paragon of virtue in his personal life. Although married with several children, he appreciated the ability of great wealth to attract beautiful women and had a string of mistresses that would be considered scandalous even by today's standards.

Unfortunately his reclusiveness gave his critics free reign to portray him in the worst light. That vilification accelerated after the major economic intrusions by the government during the Great Depression, when those historians who were anxious to portray FDR's New Deal in a positive light purposely trashed the major capitalists of the pre-Roosevelt era. Now a major historical revision is underway, as historians reassess the economic leaders of that time, and are largely concluding that the initially negative historical verdict on capitalists like Morgan was not justified.

Strouse's book is a major milestone in that effort, all the more remarkable because the author began her work with a much less positive view of her subject in mind. The book is painstakingly detailed, in fact its only weakness is that the otherwise gripping narrative sometimes gets bogged down by minor facts that are sometimes little more than trivia. In Strouse's defense, she probably felt compelled to overdo the details because she is presenting an unorthodox portrayal of Morgan, and therefore needed to go heavy on the footnotes and minor details in order to ward off the inevitable leftist critics who would try to claim that her conclusions were based on insufficient research. Just the same, as one writer complained in an otherwise positive review, "At over 700 pages, one would not wish it longer."

What one would wish for is that the economic planners of today would read this book so that they might see that a self-regulating economy could and once did work, with J.P. Morgan providing both the methods and the rationale for its success. At his death Morgan's obituaries repeatedly declared that the world would never see his type again. As we pay a 700 billion dollar bill to bail out Wall Street, let us hope that they were wrong, because we could use another J.P. Morgan today, and a return to the rules he lived by.

Northampton multi-media performer Kelsey Flynn had her bicycle stolen recently, and tells us in this video about what went down.

Ghost Rider

Speaking of bicycling, this eerie white bike now stands on University Drive in Amherst by the spot where a bicyclist was recently killed.