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ОглавлениеBarron Foresees a Fragile Peace
Dow died in late 1902, but before his death he had arranged to sell Dow Jones & Co. to his longtime friend and associate, Clarence Walker Barron. Barron, who lived in Boston, had developed a news agency similar to Dow Jones called the Boston News Bureau at roughly the same time Dow Jones was building clientele in New York. Early on, when both were using flimsies and runners, he and Dow struck a deal wherein they would share news from their two financial centers, giving both a greater scope of coverage. So it was natural then when Dow was in bad health and looking for a buyer, he would turn to Barron.
Barron handled the deal, but it was actually his wife, Jessie Waldron Barron, who came up with most of the cash in support of Barron’s promissory notes, and she became the sole proprietor of Dow Jones. She first relied on Tom Woodlock to edit the Journal, but in 1905 Woodlock had a quarrel with the remaining founder, Bergstresser, and offered his resignation. Jessie Barron accepted it.
She turned to his second-in-command, British-born William Peter Hamilton, a skillful writer and editorialist, to lead the Journal. He would continue to write editorials until 1929. Dow had put the Review & Outlook column on the front page, a placement he thought appropriate for what he regarded as the voice of the newspaper. Hamilton, a former war correspondent for British newspapers who had covered the 1893–94 Matabele uprising against the British South Africa Company in what is now Zimbabwe, had a forthright style equal to that of Woodlock. He once famously said: “You can’t write a 50-50 editorial. Don’t believe the man who tells you there are two sides to every question. There is only one side, the truth.”
That, of course, assumed that the editorial writer would actually know and be able to utter the truth, which is always a bit problematical. But Hamilton was counseling editorial writers not to shrink from expressing what they believed to be the truth out of fear of criticism, disfavor or punishment. The principle he expressed—be bold, take a position and don’t equivocate—would become a hallmark of Journal editorials for many years thereafter and is still observed today.
Editor Hamilton on May 11, 1911, had some doubts about the “muckrakers,” writers who were gaining public notice with their attacks on the industrial tycoons who had built large national business organizations, at that time called “trusts.” Ida Tarbell and Lincoln Steffens, who both wrote for McClure’s Magazine, were among the most prominent, Tarbell for her assaults on Standard Oil’s John D. Rockefeller. She had a special grudge against Rockefeller because he had put her father, an oil tank manufacturer, out of business.
The Journal itself was already known for its investigative journalism, but Hamilton thought the muckrakers went too far. He wrote that one consequence, surely unforeseen by the proprietors of the magazines that carried their articles, was that they conveyed the impression that great wealth could only be acquired by dishonesty, which he argued was patently untrue. He added that “there is no place which has less use for a liar and a cheat than Wall Street,” observing that market transactions require a high degree of trust. He added: “We prefer not to extend the comparison to politics. The returns from Ohio are not all in.”
A few days later, he argued that most laymen have “no objection to the accumulation of large individual wealth if the public is better served thereby.” But he added that “our natural distrust of corporations is doubtless well founded. The Standard Oil Company is sentenced to be hanged for crimes almost outside the statute of limitations. Probably nothing would have happened to it if it could have confined the record to the past ten years and lived down the admitted atrocities of the previous thirty.” The 10 years of good behavior he was referring to was a period when Standard Oil had served the public interest rather well by using its economies of scale to push the price of kerosene, a fuel almost everyone used at that time, by something like 70%. It was broken up anyway into separate companies by Teddy Roosevelt under terms of the Sherman Anti-Trust Act.
Hamilton had a gift for cutting satire. A brief item appended to a May 22, 1912, editorial noted, “[A] new farmers organization of 150,000 farmers [has been formed] to ‘influence’ legislation—and any other combination with the same end would be denounced by every farmer in the land.” Hamilton’s sarcasm was prophetic. The farm lobby in the early 20th century, when over half the U.S. population was agrarian, had a powerful influence on federal legislation. The farm lobby’s success in getting subsidies and protections from Congress would cause the country—and farmers themselves in the end—a lot of grief over the next two decades. Federal “aid” to farmers led to overproduction and low commodity prices, and ultimately, to the Hawley-Smoot tariffs that virtually shut down global trade and prolonged the Great Depression.
In March 1912, the Journal quoted an article by former president Theodore Roosevelt, making his unsuccessful bid for a return to the White House, in which he explained his views on “trust-busting,” which had won him lasting fame when he was president from 1901 to 1909. He argued that “the people have a right to govern themselves, that they have a right to rule and that we must obtain social and industrial justice through genuine popular government.”
But he cautioned “that our aim must be to control business not to strangle it . . . What our people want is that the evils of big business be eradicated and the advantages, the benefits preserved.” Teddy himself was not enamored of the muckrakers, at one point charging that they were simply antibusiness, not instruments for reform.
Hamilton and his predecessor Thomas Woodlock were less circumspect about political partisanship than Dow had been. Woodlock was caught up in the excitement generated by the charismatic Republican Teddy Roosevelt in the presidential election of 1904. So were a lot of other people. Roosevelt, who as vice president had succeeded to the presidency on the assassination of President William McKinley in Buffalo on September 14, 1901, defeated Democrat Alton B. Parker in a landslide with 56% of the popular vote.
Although Teddy had been founder of the Progressive movement, which was antagonistic toward big corporations, he was not antibusiness. He simply felt that government should hold the trump cards, so he used the new antitrust laws to assert government power over the private sector. He railed against “malefactors of great wealth.”
Whatever Teddy was, he was certainly not content to let competition take its natural course, as it often does, toward survival of the fittest, even if bigness brought greater efficiency. He clearly thought that breaking up the big companies would intensify market competition. In that sense, he wasn’t a free marketer. But Woodlock, and later Hamilton, was nonetheless taken with the flamboyant president as were a good many voters.
Hamilton would not be the sole voice of The Wall Street Journal for long. In 1912, when the Journal’s finances were getting shaky, Clarence Barron took over management from his wife. Reportedly, the big man with a beard and brush mustache stormed into the newsroom at 44 Broad Street banging his cane on desks and loudly proclaiming that he was now the boss and would tolerate no slacking. For all that fierceness, he was never known to fire anyone, a forbearance unusual for newspaper proprietors of almost any era.
Barron was a large presence in more ways than one. In 1942, Ella Fitzgerald popularized a song about “Mr. Five by Five,” who “don’t measure no more from head to toe than he do from side to side.” That was Barron, who was not five feet wide, but fit the model at five feet, five inches tall with a large girth, weighing somewhere around 300 pounds. It’s said he married Jessie Waldron, a widow with two daughters, in part because of his fondness for her cooking when he was rooming at her upscale boarding house on Boston’s Beacon Hill.
Although Barron was acquainted with Teddy, the Journal proprietor was more attuned to his own look-alike, the more moderate and steady William Howard Taft, Teddy’s handpicked successor in 2008 when Roosevelt chose not to run.
Hamilton and particularly Barron may have started to have second thoughts about Teddy during the banking panic of 1907, in which Barron played an exhausting role in helping J.P. Morgan organize his famous rescue of the banks that were under threat.
A letter from Barron to a friend, quoted in the Lloyd Wendt book, describes his own role in organizing aid from sound banks for those banks that were experiencing heavy withdrawals by depositors. He conducted a marathon of phone calls from his suite at the Waldorf-Astoria hotel. His letter said: “As trouble approached I told President Theodore Roosevelt that it would take $500 million to stop the panic. Later [after the system was stabilized], I footed up the total relief from Washington, London and the New York banks and it was just $520 million.
“Nobody will ever know how hard I worked through many channels to keep the Wall Street fire from spreading. When it was over I went home [to Beacon Street in Boston] and slept for a very long time, and it took nearly a year to recover my nervous energy.”
Barron had not only suffered what amounted to a nervous breakdown from the panic but had also lost a lot of money, so much so that for a while he had trouble servicing the notes he had signed to buy Dow Jones. But he recovered and would take over full management of the company and its editorial policies five years later.
Although trustbuster Teddy Roosevelt’s antitrust assaults on corporations were never directly connected to the 1907 panic, business confidence certainly was not high during the latter part of his 1905–09 term of office. The October-November panic came on the heels of a stock market slump aggravated by the toll on business inflicted by the horrendous April 1906 San Francisco earthquake. Further anxiety was created by the feared impact on railroad stocks of government’s new powers under the Hepburn Act to, through the ICC, set maximum rail shipping rates.
Teddy’s early assault on the nation’s leading banker, J.P. Morgan, with the 1902 breakup of his Northern Trust railroad holding company was still a fresh memory. It surely must have occurred to Barron that Wall Street was in an uneasy mood before the bank runs began and that maybe Teddy deserved some of the blame.
It can’t be certain what the 1907 panic did to Teddy’s reputation because he didn’t run for reelection in 1908. He had promised not to run for what amounted to a third term and proposed William Howard Taft as his successor. Once elected, Taft continued Teddy’s antitrust campaign but on the whole was a steadier hand at the tiller than the famous Rough Rider of Spanish-American War fame. So, in 1912, the party chose to renominate him in preference to Teddy, who had again sought the nomination. Teddy, petulant over the rejection, formed his own Progressive “Bull Moose” party and split the Republican vote in the general election, opening the door for a Democrat, Woodrow Wilson, to become president.
Hamilton was not happy with the Wilson victory, and probably also not with the role his onetime hero Teddy had played in bringing it about. But he made the best of it, writing that Wilson actually was a conservative and that business leaders would welcome his presidency. He may have been right. Wilson, the former president of Princeton University, may have been more of an economic policy conservative than Teddy, who had lost much of his luster in the 1912 defeat and had gone into something of a funk, attempting to regain his self-esteem by launching an expedition to an unexplored region of Brazil’s Amazon that almost cost him his life.
Barron, having recovered from his illness, formed a relationship with Wilson as he had with Taft and Teddy and offered him advice when asked. When the United States entered the war in 1917, Barron and the Journal supported Wilson’s efforts to mobilize the nation, although he was never as jingoistic as some of the editors of the era, such as the famously truculent Henry Watterson of the Louisville Courier Journal, who ended an editorial on September 3, 1914, marking the outbreak of World War I with the words, “to hell with the Hohenzollerns and the Hapsburgs!” referring to the royal families of Germany and Austria.
The banking panic of 1907 had turned the attention of bankers and the Wall Street Journal to the issue of financial reform. The Journal supported efforts by Morgan and his fellow leading bankers to create the Federal Reserve System, and when Woodrow Wilson signed the Federal Reserve Act on December 23, 1913, Barron gave it a lot of attention in his writings for the Journal. He opened an informative series of articles by writing that “Next to the Declaration of Independence and the Constitution of the United States, the Federal Reserve Act . . . may be the most important measure ever put before the people of this country. Upon its wise administration depends the good or ill of 100 million and as a nation we shall probably live under it, not only for the 20 years named in the act, but for many generations.”
How right he was about that. The act seemed like a good idea, but Barron has certainly been proved correct in qualifying his support by saying its usefulness depended on “wise administration.” Congress and the president had insisted, over intense objections by the banks, that the new Federal Reserve Board be under the effective control of presidential appointees, including, of course, the powerful chairman. That control was further strengthened by the New Deal in the Banking Act of 1933.
Barron had hoped that the powers given the 12 Regional Reserve bank presidents, who would be elected by member banks of the region, would actually strengthen states’ rights and decentralize financial regulation. But, after the 1933 changes, the regional banks would always be outvoted by the seven presidential-appointed governors on the monetary policy decisions made by the Federal Open Market Committee (FOMC), as the regional presidents were allotted only five voting members of the committee at any one time.
Even though the Fed was widely billed as an “independent” body and even is to this day, it was at the outset, and still is, subject to strong political pressures. So Barron was justified in conditioning his approval on whether the act would be administered wisely, and he also has been right so far in forecasting that the Fed’s decisions would have a powerful influence over the lives of Americans in perpetuity. Proof of what tragedies could occur when the board was deficient in wisdom would arrive 17 years later when the Fed proved ineffective in dealing with the dollar deflation that was an important factor in causing and prolonging the Great Depression.
In his series of columns, Barron set about explaining to Journal readers why the creation of 12 reserve banks and the creation of a national currency (Federal Reserve notes) to supplant bank notes issued by individual banks would improve the workings of the financial system. He was certainly right in predicting that it would bring about cheaper credit, although in our modern age, that has proved to be a dubious blessing. After the 2008 financial crisis, the modern Fed pushed short-term interest rates down to near zero, thus denying savers a decent return on their money and igniting a federal borrowing binge that doubled the national debt in the space of only seven years.
Barron himself had lost his confidence in the Federal Reserve by December 1920. In one of his “Wall Street Sermons” on the front page of the Journal, he wrote, “The Federal Reserve System has to date been a promoter of inflation and of deflation and both have been and are the economic crimes of the war and the peace.”
Barron’s weight and period of illness didn’t slow him down. After his recovery, he was again a human dynamo, not only running the Dow Jones business but also writing extensively for his Boston and New York news services and the Journal. As his views on markets and other issues became better known, he was often quoted by other journalists, and his growing reputation for worldly wisdom expanded the popularity and circulation of the Journal.
His pronouncements were backed by prodigious reporting. His influence on Wall Street gained him wide access to high-level sources, including heads of state. He was on good terms with President William Howard Taft, another 300-pounder to whom he bore some resemblance. Calvin Coolidge was a friend for whom he had a special affection and respect.
Barron traveled frequently to Europe in regal style with steamship cabins for his entourage of family, a nurse and two secretaries. He needed two secretaries because two shifts were needed to handle his constant flow of dictation, as he sent back dispatches to the Journal and his news services on what he learned. He interviewed Nicholas II in Saint Petersburg when the czar was considered to be a powerful leader, only a few years before he was brought down by military defeat in World War I and then assassinated, along with his family, by the Bolsheviks. He had a certain empathy for Kaiser Wilhelm II in those prewar years, but after the bloody World War I conflict began in 1914, he would increasingly regard him, and the German people he governed, as the scourge of Europe.
Barron was one of the first reporters to warn of the dangers of that terrible war as he surveyed the ferment in the Balkan states, predicting that the alliance between Russia and Serbia would ultimately clash with the Austro-Hungarian empire and its ally, Germany. It was, of course, the assassination of Austrian archduke Franz Ferdinand and his wife, Sophie, by a 19-year-old Bosnian nationalist named Gavrilo Princip in Sarajevo on June 28, 1914, that triggered the great war. Austria-Hungary declared war against Serbia, and that brought in Russia and Germany and later France, Britain, smaller European nations and, ultimately, the United States.
The perceptive Barron also foresaw that this would be a different kind of war in that it would be fought with modern machines like tanks, airplanes, and warships and cannons hurling high explosives long distances. It would thus be far more destructive of human lives, including civilians, than wars of the past. He was certainly right about that. It would claim the lives of 9 million combatants and 7 million civilians during its four-year duration.
But Barron’s crystal ball also was a bit clouded after the war broke out in late July 1914. With the war a month old, a Journal editorial on August 28 titled “The War to Date” allowed as how “Russia is the only country with something to gain and nothing to lose. Whatever happens, with even the most sweeping victory and the largest war indemnity, Germany is now so bankrupt that it will take her years to recover.”
The editorial allowed as how Great Britain and Russia “can feed themselves, while Germany and Austria will starve, at least as long as Britannia rules the waves. This is, in a way, the one ray of daylight in horrible business provoked by what a well-loved German calls the ‘Big Brass Hat.’ All the allies need to do now is to stand fast, with a sound defense, which includes a vigorous counter attack . . . What seems to be needed, so far as the leader of the Triple Alliance is concerned, is an international court to issue a writ de lunatico inquirendo.”
The editorial was certainly correct in its sarcastic remark suggesting a court inquire into the sanity of the Kaiser and that what had begun would be a horrible business. But it was wrong about almost everything else. Russia’s 5.4-million-man army almost matched the combined forces of Germany and Austria, about 6 million. But it was led by a decadent aristocratic class and was no match on the battlefield, suffering mass slaughter at the hands of the Germans.
So, contrary to Barron’s forecast, Russia was in fact the biggest loser, not only in casualties but in postwar consequences. The Bolsheviks gained popular support with their promise to take Russia out of the war, overthrew a short-lived representative government headed by Alexander Kerensky, once in power killed the czar and his family, launched a civil war and gave the Russian people 72 years of police state “Communism.” Moreover, the Russian people would be ravaged again in the 1940s replay of World War I, better known as World War II.
Also contrary to the Journal forecast, the western Allies in the Triple Entente had a hard time standing fast. The Germans took a large portion of France, almost reaching Paris. Then, three years of bloody stalemate ensued until the United States entered the war and tipped the balance against Germany. The Germans didn’t starve, and Britannia did not rule the waves. The editorial had reckoned without Germany’s capacity to wage submarine warfare, which took a fearful toll of Allied lives and shipping. So Barron and Hamilton were wrong on about every count. But they certainly were neither the first nor last journalists to misjudge the consequences of a war. It is an occupational hazard.
As it became more and more likely that the United States would enter the war in response to German U-boat attacks on American ships, the Journal carried an editorial deploring the state of American preparedness. It was mainly aimed at Josephus Daniels, the bumbling Populist secretary of the navy. The editorial sounds as if it might have been inspired by the warnings of Teddy Roosevelt and his fifth cousin, a young assistant secretary of the navy named Franklin Delano Roosevelt who was very often at odds with the secretary. Both Roosevelts were on speaking terms with Barron, who had been in frequent touch with Teddy since he advised Teddy on putting down the banking panic of 2007.
Wrote the Journal: “It is impossible to escape the conclusion that those in charge of the military and naval departments are temperamentally unfitted for their task . . . Mr. Daniels is typical of the handicap a country governed by popular politics carries into a war. He can regard the Navy as a high school for the enlisted man, as a floating branch of the YMCA, as a militant temperance machine, as a carrier of mails or even of cargo. But he cannot regard it as a fighting machine trained to the minute.”
On the whole, however, the American expeditionary force acquitted itself well and was sufficiently effective to tip the balance toward a Triple Entente victory, if the devastation and loss of so many young men could be called a victory for anyone.
The Journal didn’t think highly of the Bolsheviks then or forever after. The editors were not happy about the Bolsheviks’ offer to take Russia out of the war. An editorial of November 16, 1917, scored Leon Trotsky, the Bolshevik foreign minister, for his proposed deal with Germany. Pointedly, the editorial used Trotsky’s real name, Braunstein, perhaps to introduce the point that the Ukrainian revolutionary was part Jewish. There’s not much evidence of anti-Semitism in early Journal editorials, but given the suspicions of Jews on the Wall Street of that era, it should not be surprising that some crept into editorials from time to time.
The editorial quoted Trotsky as saying the aim of the Bolshevik movement was to gain the “people’s right to peace, free life, the land, bread and power.” Said the editorial: “It is certain that there is a great deal of land that the Russian people will not get if his program of peace with Germany is carried out.” It pointed out that under the deal, the Russians would lose to Germany “a large part of the black soil belt, the port of Odessa, the Black Sea and the mouths of the rivers emptying into it . . .
“Nor is that all. ‘The war indemnity to be paid by Russia must consist largely in the transfer of private titles to land.’ It is not to be a transfer of sovereignty alone, but present owners are to be dispossessed in favor of Germans. Pacifism will come high to Russians as well as any other country that meets Germany with it.” In other words, the Bolsheviks were not only selling out Russia’s western Allies but also a sizable portion of the landowning Russian population.
A Journal editorial about the World War I armistice of November 1918 contained some common sense that would be little heeded by the victorious European Allies, France in particular. The Journal argued that “if the world is to exact, as it unquestionably will, enormous indemnities, which can never be large enough to meet the destruction a national insanity has caused, it must still leave Germany with the tools with which to create the new wealth that will pay those indemnities.
“When we sentence a convict to hard labor, we give him the means for production. We do not expect him to make bricks without straw. The civilized world indeed will take over the receivership of this dreadful relic of the Dark Ages, this monster of greed, rapine, and arrogance and teach him to make a man of himself. An armistice means peace, but peace itself comes later. Recognizing that individual and national punishment of the most severe character is necessary, it is yet the task of civilization to save sixty million people from themselves.”
After the armistice, Journal editors were concerned that Germany would go the same direction as had Russia, with a revolution that would bring radicals into power. Their fears were justified, as Hitler would prove 15 years later, but a bit premature. This from an editorial on November 12, 1918: “When the armistice was signed the white flag became the emblem of Germany, and in spirit, at least, her flag for years to come. But with the revolution which forced the abdication of the Kaiser and the German Kings, the red flag was hoisted. However we may flatter ourselves with the prospects of a German Republic, we cannot be blind to the fact that the red flag means anarchy.
“It meant that in the French commune, and, after the world had forgotten that lesson, it meant it again in Russia. Dare we hope that it will not mean the same thing in Germany?”
The editorial was particularly concerned about what would happen in Germany when its soldiers, armed and embittered, returned home. “These men return to Germany armed, exempt from that stern discipline which alone could control them, habituated to rapine and oblivious to all personal controls as represented by religion, continence and honor, such as true civilization alone can breed. They are the creation of Germany, not merely of her war machine but of all the people, who could see nothing in them to criticize so long as they seemed victorious. This monster is let loose, and to what lengths it may go can only be imagined.”
“Did civilization fail in Russia? Can it tolerate another failure in Germany?” The crimes of Stalin and Hitler would be the unhappy answer to both of those questions.
One of the most significant effects of World War I was its destruction of monarchial rule on the continent, in Germany, Austria-Hungary and Russia. A Journal editorial on November 9, 1918, worried that good kings like Albert of Belgium and George of England might be swept out along with the bad ones.
“The world is safe for democracy under a king if he is a good democrat in something more than a mere party sense. He may, indeed, when occasion calls be a better democrat than a president.” As it happened, both the British and Belgian monarchies survived the war, no doubt in part because they had long ago ceased to have absolute power and were forced to be responsive to democratic institutions.
On January 19, 1919, a Journal front-page article by C.W. Barron told of urging E.J. Dillon, a prominent author and adviser to heads of state, to return to the continent to help out with the post–World War I peace talks at Versailles, outside Paris. Dillon had responded: “There need be no hurry; the trouble has only begun. The problems of the war are as nothing compared with the problems of the peace.”
How right he was. As Barron’s friend Dillon had predicted, it didn’t take long for the Versailles treaty to turn sour over the high level of reparations demanded of Germany. In a speech in Detroit in December 1921, the Journal publisher asserted: “Germany could not pay her debts if she wanted to and she does not want to . . . She has issued paper money until the value of the mark, which was 23 cents before the war, 12 at the time of the Armistice, eight at the Peace Treaty of Versailles has now fallen to about one-third of a cent. How much lower will it fall? Well, it can’t go more than a third of a cent lower. Germany did not want to pay the reparations demanded and she brought about the present situation to prove that she could not. Now she has become alarmed and is asking Washington for help, but that help will not come until she is willing to help herself.
“We might as well admit however, that it is [beyond] the power of Germany to pay 33 billions [in U.S. dollars] of reparations when the whole property of the country is worth only 50 billion. France must take time to cool down and realize that fact. It would mean the slavery of the nation for three generations and the world cannot afford to hold in slavery 50,000,000 people. It took us a long time to find out that slave labor is the dearest in the world, and that free labor is the cheapest and most efficient.”
Barron asserted that President Woodrow Wilson’s 14-point peace plan “had greatly added to the problems of peace.” He quoted the cutting remark of French premier Georges Clemenceau about the 14 points: “the good Lord only had 10.”
Wrote Barron: “Close scrutiny of President Wilson’s 14 points will show that he is attempting a universal enforcement of only one of the Ten Commandments—‘Thou shalt not kill!’ The thunders of Sinai and the Finger of Jehovah on the stone tablets of Moses spoke this Commandment no more distinctly than that other Word: ‘Thou shall not steal.’
“Man slays his fellow man that he may steal his goods. Nations war upon nations that they may take their lands, their trade and their properties. Stealing, or defense against stealing, is the fundamental aim in individual and national killing.”
Barron, as with Clemenceau, clearly thought the American president was naïve in his urgings of disarmament, free trade and the restoration of the status quo ante in Europe in light of the pervasive Allied bitterness toward Germany during the Versailles proceedings. That bitterness and the arrogance of Clemenceau would be important factors in ensuring that another war would engulf Europe 25 years later.
After the war, Barron filed a report on his conversation with a rising young star in the field of economic policy advice who was participating in the Versailles Peace Conference as part of the British delegation. He was John Maynard Keynes, an economic adviser to British prime minister David Lloyd George. Barron discreetly let his readers in on the fact that Keynes was a homosexual by writing that he “didn’t seem like much of a family man.” But he agreed with Keynes that the harsh reparations demands inflicted on Germany by the French and British would cause problems in the future, as they in fact did.
Neither Barron nor Hamilton agreed with the opinion of some stock traders that wars were good for business, a view often picked up by pacifists and used to damn Wall Street, with cartoons of greedy men in top hats and striped pants as a nest of warmongers. Barron and Hamilton would have none of the “good-for-business” talk.
On October 4, 1912, a Journal editorial attacked the New York Herald for asserting that war in Europe would send Europeans clamoring for U.S. stocks: “Of course, this is only the New York Herald,” wrote Hamilton in a haughty English tone, “but there is considerable danger in second-rate thinking for second-rate minds, when the preponderance of second-rate minds is considered . . . If there is war in the Near East we may make up our minds that it will not mean one penny of investment to the American market that would not come here in any case, while it will involve the liquidation of American securities held abroad . . . War is a waste. One country cannot dissipate its savings in gunpowder smoke without hurting all the rest of us. In modern conditions of easy communications and international exchange, the misfortune of one is the misfortune of all.”
This argument, self-evident it would seem, that war involves massive economic waste would be reflected in many future Journal editorials. Along with the horrible costs in human lives, the loss of physical capital is damaging to national economies.
The argument that the replacement of damaged infrastructure has the good effect of creating jobs was demolished years before World War I in the “broken window fallacy” laid out by the great 19th-century French economist Frederic Bastiat. He held that destruction doesn’t advance economic growth. To be sure, a broken window makes work for the glazier, but it subtracts income from the house owner that might have gone to finance more useful endeavors.
But once the United States became involved in World War I, Barron urged that it pursue victory with vigor. That same approach would be taken by Journal editors after the Japanese attack on Pearl Harbor on December 7, 1941. And a version would be expressed by Robert L. Bartley, who set editorial policy for the 30 years ending in 2002, with reference to Vietnam: “Don’t get involved in any wars that you don’t plan to win.”
Some commentators argue, of course, that World War II was a boon to the United States in that it ended a decade-long Depression. But that argument needs a great deal of qualification. Certainly the war ended the unemployment problem, as it pressed nearly 12 million men and over 200,000 women into military service, not to mention the massive ramping up of employment in defense industries. But 407,316 of those soldiers lost their lives, and 671,278 were wounded. The U.S. economy produced massive numbers of tanks, planes, weapons munitions and ships, but most of that materiel was useless for anything other than destruction and had to be scrapped after the war.
The truly important factor in aid of U.S. recovery was that it emerged from the war a victor with its mainland infrastructure and its governing institutions and civil society intact, having had to endure no fighting, other than Pearl Harbor, on U.S. soil, something that no other participant, winner or loser, could claim. It came out with a new spirit of accomplishment and optimism.
World War II also put paid to further New Deal experimentation, which had caused uncertainties among businesses in the 1930s and thereby retarded investment. The nation came out of the war with a new respect for corporate capabilities and a retention only of those New Deal measures, like banking reform, that had proved to be mainly positive in their economic effects.
Moreover, when the United States came out of the war, the U.S. dollar was the dominant currency of the world, and U.S. financing, managerial skills and resources were applied to global reconstruction. World War II as such didn’t end the Depression, but the victory gave American businesses and consumers a new confidence and set U.S. governmental policies on a new, more positive course.
If you think war is good for an economy, don’t try to tell that to the survivors of World War II in devastated Europe and Asia. Journal editor Hamilton was making a good point when he attacked the “second-rate minds” at the New York Herald.
