“Does Russia own a piece of the US?”

That’s the title of my latest piece over at RealClearHistory. An excerpt:

The Russian-American Company was run through Saint Petersburg and thus had a strict racial hierarchical code in place, in conformity with the latest beliefs about race at the time. The neighborhoods of Fort Ross were segregated, but an archaeologist at the University of California, Berkeley, Kent Lightfoot, has produced excellent research at Fort Ross, showing how the Company’s racist charter was unofficially ignored, with miscegenation widespread (“creoles” was even created as an official race for documentation purposes) and interethnic activities commonplace. The people inhabiting Fort Ross preferred to follow instead something the anthropologist Jean-Loup Amselle calls “mestizo logics.”

Please, show me some love.

Kent Lightfoot can be found at NOL here. Jean-Loup Amselle can be found at NOL here. I also give a shoutout to Andrei Znamenski‘s work in the piece, so be on the lookout for that.

I didn’t get to delve as much into this piece as I’d have liked to. I wanted to get more into the inner workings of the Russian-American Company and compare it to the Dutch East India Company, but that sounds like a tall task even for a PhD dissertation.

I don’t think I did a good enough job of highlighting just how rich Pacific Rim trade was in the early 19th century. I tried in vain to sneak a reference to Hawaiian laborers that could be found throughout the Pacific world at the time of Fort Ross’ founding, but I’ve got a 600 word limit.

Also, I wanted to highlight the fact that Native Americans weren’t losers in the opening up of the Pacific to the world. They were active participants in the globalization of the Pacific Rim trade. They were powerful. I don’t know if I’d focus on California Indians to highlight Native American actors. I’d probably focus on an area a little further north, in the Puget Sound-Vancouver area.

At any rate, hope you enjoy the piece!

The Incredible Bread Machine (R.W. Grant)

This is a legend of success and plunder
And a man, Tom Smith, who squelched world hunger.
Now, Smith, an inventor, had specialized
In toys. So, people were surprised
When they found that he instead
Of making toys, was BAKING BREAD!

The way to make bread he’d conceived
Cost less than people could believe.
And not just make it! This device
Could, in addition, wrap and slice!
The price per loaf, one loaf or many:
The miniscule sum of under a penny.

Can you imagine what this meant?
Can you comprehend the consequent?
The first time yet the world well fed!
And all because of Tom Smith’s bread.

A citation from the President
For Smith’s amazing bread.
This and other honors too
Were heaped upon his head.

But isn’t it a wondrous thing
How quickly fame is flown?
Smith, the hero of today
Tomorrow, scarcely known.

Yes, the fickle years passed by;
Smith was a millionaire,
But Smith himself was now forgot
Though bread was everywhere.

People, asked from where it came,
Would very seldom know.
They would simply eat and ask,
“Was not it always so?”

However, Smith cared not a bit,
For millions ate his bread,
And “Everything is fine,” thought he,
“I am rich and they are fed!”

Everything was fine, he thought?
He reckoned not with fate.
Note the sequence of events
Starting on the date
On which the business tax went up.
Then, to a slight extent,
The price on every loaf rose too:
Up to one full cent!

“What’s going on?” the public cried,
“He’s guilty of pure plunder.
He has no right to get so rich
On other people’s hunger!”

(A prize cartoon depicted Smith
With fat and drooping jowls
Snatching bread from hungry babes
Indifferent to their howls!)

Well, since the Public does come first,
It could not be denied
That in matters such as this,
The Public must decide.

So, antitrust now took a hand.
Of course, it was appalled
At what it found was going on.
The “bread trust,” it was called.

Now this was getting serious.
So Smith felt that he must
Have a friendly interview
With the men in antitrust.
So, hat in hand, he went to them.
They’d surely been misled;
No rule of law had he defied.
But then their lawyer said:

The rule of law, in complex times,
Has proved itself deficient.
We much prefer the rule of men!
It’s vastly more efficient.
Now, let me state the present rules.

The lawyer then went on,
These very simpIe guidelines
You can rely upon:
You’re gouging on your prices if
You charge more than the rest.
But it’s unfair competition
If you think you can charge less.

A second point that we would make
To help avoid confusion:
Don’t try to charge the same amount:
That would be collusion!
You must compete. But not too much,
For if you do, you see,
Then the market would be yours
And that’s monopoly!”

Price too high? Or price too low?
Now, which charge did they make?
Well, they weren’t loath to charging both
With Public Good at stake!

In fact, they went one better
They charged “monopoly!”
No muss, no fuss, oh woe is us,
Egad, they charged all three!

“Five years in jail,” the judge then said.
“You’re lucky it’s not worse.
Robber Barons must be taught
Society Comes First!”

Now, bread is baked by government.
And as might be expected,
Everything is well controlled;
The public well protected.

True, loaves cost a dollar each.
But our leaders do their best.
The selling price is half a cent.
(Taxes pay the rest!)

Riding Coach Through Atlas Shrugged: Part 4 – Governor’s Ball

Pages 48 – 53

Chapter Summary – A group of industrialists sit around a shadowy table plotting the downfall of our favorite rugged individualist.

[Part 3]

I love how cliché this chapter is. Four figures sitting around a table, their faces shrouded in darkness as they scheme over the fate of the world, the sycophant politician sniveling his consent to their plans. This is one of those times where I am not quite sure if the fiction created the trope or the fiction is following the trope but it is okay either way, it is delightful to read.

We have at our table:

James Taggert: Who is far less whiny when not in the presence of his sister.

Orren Boyle: Our socialist-industrialist representative in the story.

Wesley Mouch: Our aforementioned politician, in the pay of Hank Rearden but in the pocket of Orren Boyle.

And finally –

Paul Larkin: The man at Rearden’s dinner party last chapter.

Essentially they spend the chapter plotting against Hank Rearden and promoting a philosophy of non-competition among businesses. From a historical standpoint this is essentially what happened with Hoover and the industrialists leading up to the great depression. A series of price and wage controls were set up that distorted normal market activity leading to the boom-and-bust cycle as described by Ludwig von Mises. As a side-note it is an interesting historical misconception that Hoover “did nothing” during the great depression. Hoover was arguably the most meddling president up to that point in regards to the economy except perhaps for Abraham Lincoln, but total economic warfare is hard to beat.

But to get back on track here, for what it lacks in literary creativity this chapter makes up for with pure economic and political insight that is delightful to read. The most illuminating part is a speech, or perhaps rant, by Orren Boyle that goes as follows, some of Taggert’s responses are edited out for brevity:

“Listen Jim…” He began heavily.

“Jim, you will agree, I’m sure, that there’s nothing more destructive than a monopoly.”

“Yes.” Said Taggart, “on the one hand. On the other, theres the blight of unbridled competition.”

“That’s true. That’s very true. The proper course is always, in my opinion, in the middle. So it is, I think, the duty of society to snip the extremes, now isn’t it.”

“Yes,” said Taggart, “it isn’t fair.”

“Most of us don’t own iron mines: How can we compete with a man who’s got a corner on God’s natural resources? Is it any wonder that he can always deliver steel, while we have to struggle and wait and lose our customers and go out of business? Is it in the public interest to let one man destroy an entire industry?”

“No,” said Taggart, “it isn’t.”

“It seems to me that the national policy ought to be aimed at the objective of giving everybody a chance at his fair share of iron ore, with a view towards the preservation of the industry as a whole. Don’t you think so?”

“I think so.”

This exchange is a fantastic summary of the process involved when the government gives special privileges to favored industries under the guise of regulation. Essentially Rearden is out-competing his fellow steel producers and since they cannot compete under market conditions they intend to compete politically by ham-stringing his business through the legal process.

This process has happened time and time again throughout history and the ironic part is that these actions have almost universally been heralded as “anti-business” when in fact it is the businesses itself that propose this regulation. The first anti-monopoly laws in America were lobbied for by the competitors of the successful oil, rail, and steel businesses which resulted in the *rise* in prices of those goods. It seemed the “natural” monopolies were pro-consumer while the regulation was pro-business.

There are also historical comparisons to be made to the great depression. The whole concept of “protecting an industry” at the expense of a single, productive, individual was the cornerstone of “Hoover-nomics” especially in the farm industry. The industrial revolution brought about a massive increase in farming productivity which naturally led to a decline in prices and a surplus of labor in that industry that came to a head during the “dirty thirties”.

The natural course of the market would be for inefficient firms in that industry to liquidate; with the entrepreneurs and workforce moving to other industries. This would cause a short period of transitional unemployment as workers moved into similar or growing industries while the more efficient firms and prospective entrepreneurs would buy the liquidated capital goods of the inefficient businesses at a discount.

Consumer goods prices would fall to equilibrium where only firms able to produce goods below that price would be able to maintain production. This would have the net effect of expanding the labor pool and be a net gain for society as new areas of production would be made available by the increases in productivity. Instead, Hoover organized industrial cartels that maintained price and wage controls over the entire economy propping up inefficient businesses that continued to waste and malinvest resources resulting in what we know today as the great depression.

To summarize, this chapter is a fantastic must read five page tour de force of economic insight.

Next chapter: More Dagny, more snark, and more family drama.

Riding Coach through Atlas Shrugged: Chapter 2 – Whistling In the People’s Key.

Part One

50th Anniversary edition pages 20-32

Chapter Summary – We are introduced to Dagny Taggart, brother of James, who reflects on neo-classical music, throws her family name around a bit, cuckolds her brother’s business, and smokes, also Kellogg turns down an offer he can’t refuse.

Dagny is one of the characters who I am somewhat familiar with due to cultural osmosis. Her strong willed antagonism, her intelligence and stubbornness, her anger, her misery, and her smoking. All things that I expected that were confirmed in her first chapter in Atlas Shrugged.

What I didn’t expect however was the amazing paragraphs about Richard Halley’s symphony.

“It was a symphony of triumph…”

the notes of the symphony

“spoke of rising and were the rising itself.

Emphasis mine. The way Dagny is enveloped by the symphony, it consumes her, and just for a moment she can do nothing but feel when she hasn’t in so long.

Then it is revealed that she is merely hearing it being whistled from across the train car by some blond brakeman. If one man whistling one part of that symphony can fill Dagny with such joy then what effect would a full orchestra have on her, on the people, on society?

That feeling is the very thing I hope to gain from this project. The sense of wonder that Dagny is overwhelmed with and a reminder that

“[T]his is why the wheels have to be kept going, and this is where they’re going.”

The brakeman is interesting as well. Rand’s description of him as a worker with no loose muscles was very telling to me. This blue-collar laborer is the one carrying the tune that is Dagny’s hope. This is in stark contrast to the train conductor for example who doesn’t seem to care about the problems he faces and simply hopes everything will work out.

He jerked his head up at the red light. “I don’t think the signal is going to change. I think it is busted.”

“Then what are you doing?”

“Waiting for it to change.”

I almost wonder if this theme of hard working but uneducated versus apathetic educated middle class will continue. I always felt that Rand was somewhat anti-laborer, that those who were not entrepreneurs were merely leaches on the productive members of society but I am beginning to think that impression may have been unfounded.

Speaking of entrepreneurs there were two major economic principles stated in this chapter. First was Dagny exemplifying the attributes of an entrepreneur when she makes the call to use Rearden Metal for the new railroad tracks. When James protests the use of the new metal she tells him that she is making the call using her own judgment, knowledge, and personal experience. She is willing to assume the risk for this venture based on a gut feeling and her own personal belief that it will work. It is important to notice that she doesn’t deflect responsibility or assume some other person or entity will absorb any losses if she is wrong.

The second economic point was in regards to monopolies. A great exchange takes place between Dagny and James that goes as follows:

“It isn’t fair,” said James Taggart.

“What isn’t?”

“That we always give all our business to Rearden. It seems to me we should give somebody else a chance, too. Rearden doesn’t need us; he’s plenty big enough. We ought to help the smaller fellows to develop. Otherwise, we’re just encouraging a monopoly.”

“Don’t talk tripe, Jim,”

“Why do we always have to get things from Rearden?”

“Because we always get them.”

“I don’t like Henry Rearden.”

“I do. But what does that matter, one way or the other? We need rails and he’s the only one who can give them to us.”

“The human element is very important. You have no sense of the human element at all.”

“We’re talking about saving a railroad, Jim.”

“Yes, of course, of course, but still, you haven’t any sense of the human element.”

“No. I haven’t.”

This exchange exemplifies the free market vs anti-property positions on monopolies but misses one crucial point. This anti-monopoly activity is driven solely by the free choice of the individual. Taggart is perfectly able to restrict his business from any source he chooses for any reason he chooses and this is the pure libertarian position on the matter.

Now, don’t get me wrong, he is making a poor entrepreneurial choice since Associated Steel has repeatedly failed to deliver on the contract and from a purely economic standpoint Dagny is correct. From a libertarian standpoint however, both are correct.

James is totally justified running his business into the ground for any reason he chooses and Dagny has every right to seek out new opportunities. Assuming of course she owns part of the company or has been granted the authority to act in the company’s name. The latter is the case here as far as I can tell.

I would also like to point out that other non-humanistic arguments against monopolies are almost universally false. Predatory pricing for example has essentially never happened successfully even in the case that made it illegal.

Now for the negatives.

Primarily I feel like James is a bit too obvious as a villain, he is almost too petulant and whiny. I just don’t buy that anyone would follow him and that the board of directors would have kicked him off years ago. I suppose Rand is pushing the whole feudalism thing. How many nations have fallen because of a weak King or Queen?

Also, I just don’t know how to feel about Dagny yet. The quirkiness is what bothers me the most. Sitting on the arm of the chair, her snarkyness and her general self-importance. I am not sure how much I am going to like her character yet but there is plenty of book to go so we shall see.

Finally I have to give the last story beat in this chapter credit. The final conversation Dagny has with Kellogg was an amazing piece of the mystery that literally gave me chills of anticipation. Where are these people going? Why are the best and brightest suddenly missing but still creating? And most importantly…

Who is John Galt?

Abstract Ideas Don’t Deserve Patents [NY Times]

In preparation for something special that I will finally complete this week (Rothbard willing) lets talk about this editorial from the New York Times.

 

The article starts accurately enough explaining the US government’s monopoly power of ideas saying:

The Constitution gives Congress the power to grant inventors a temporary monopoly over their creations to “promote the progress of science and useful arts.”

 

I am actually shocked at the strong language used here, the four letter word “monopoly” is rarely used in reference to any government service.  At least in polite company.  I would also like to point out the subjective language quoted from the constitution.  “Useful arts”.  Useful to whom?  To the inventor?  To consumers?  To the government?  To humanity?  Like most state activities the ability to decide what is “useful” is left to bureaucrats in service to the government rather than in the free market where useful services will generate profits and those that generate disuse (or disutility) are met with losses.  Back to the article though:

“But in recent years, the government has too often given patent protection to inventions that do not represent real scientific advances.”

 

No argument there.  The “copyright troll” phenomenon is more than enough to make this libertarian squeamish.  Where is this editorial going I wonder?

  “The issue in this case, Alice Corporation Pty. v. CLS Bank International, is whether using a computer to implement a well-established economic concept can be patented. The court should rule that such ideas are not eligible for patent protection.

 

Alice Corporation obtained four American patents that cover a method of settling trades between investors in currency and other financial markets. The approach depends on a neutral middleman to make sure traders complete the transactions they have agreed to. The corporation, which is based in Australia, has accused CLS Bank, a London-based company that settles foreign exchange trades for investors around the world, of infringing its patents.”  

To make a long story short the US patent office granted the Alice Corporation a copyright on a form of interaction between a buyer, a middleman and a seller.  An absurd concept to be sure.  Now the question is what does the editorial suggest?

“The Supreme Court should make clear that nobody should be allowed to claim a monopoly over an abstract idea simply by tying it to a computer.”

I agree; but why stop there?  Why the artificial endpoint of “abstract ideas tied to a computer”?  If we shouldn’t allow patents on abstract ideas what would the author suggest if we proved that all ideas are necessarily abstract and therefore not able to be owned, sold, or monopolized?  Would he follow his logic to the conclusion that perhaps all patents are invalid?