Temin is one of the few professional economists who has a firm grasp of reality. No doubt this is because he has studied the actual history of how industries and companies are created, nurtured and managed, as will be seen in the following excerpt. But I particularly want to draw your attention to Temin because of what he has written concerning the gold standard, the Great Depression, and our own Second Great Depression. In the 1989 Lionel Robbins Lectures at the London School of Economics, Lessons from the Great Depression, Temin challenged the prevailing monetarist orthodoxy by explaining how the Great Depression was actually caused by the refusal of elites in England, the U.S., and elsewhere, to abandon the gold standard. This blind ideological commitment to preserving a failed monetary system prevented governments from unleashing the liquidity and deficit spending needed to restore aggregate demand generation.
More recently, in a January 2010 paper done under the auspices of the National Bureau of Economic Research, entitled The Great Recession and the Great Depression, Temin argued that public policy today is again crippled by a “gold-standard mentality” among elites, who are unwilling to confront head on the forces of financialization and neo-liberalism that have wrecked aggregate demand generation for the second time in less than a century.
The following excerpt is from pages 116-120 of Temin’s “The Industrialization of New England, 1830-1880.”
The American System of Manufactures, based on the use of interchangeable parts, made it possible for Americans to produce light manufactures in volumes and at prices unattainable in England....
The American System did not, however, emerge from the private economy. It began in arms production, at U.S. government armories. The first step was taken by Thomas Blanchard at the Springfield Armory in Massachusetts, who introduced a sequence of sixteen special-purpose lathes and machines to make gun stocks out of sawn lumber. These lathes, which demonstrated the potential of the sequential use of special-purpose machines noted prominently by the English visitors in the 1850s. It had not occurred to the British visitors that the irregular shape of a gun stock could be made by machine. The Americans haul solved this problem by using a series of machines that together produced the complex shape.
The next step was taken by John Hall at the Harpers Ferry Armory. Hall realized that the problem in making interchangeable parts was to keep the gauges (patterns) used to make the parts from getting worn away through use. The thousandth piece needed to be matched against a gauge that was the same as the gauge used for the first piece. But the action of comparing and filing parts to size gradually wore away the gauges, causing the pattern to “drift.” Hall introduced a third level, gauges for the gauges. These would be kept safely away where they would not wear and would be out only periodically to recalibrate the gauges used to size the actual production. The gauges used in production then only would vary within limits set by the time period between recalibrations, assuring interchangeability.(13)
Samuel Colt used these methods in his private production of weapons. He patented his revolving method of making pistols in the 1830s and opened an armory to produce them in Hartford in 1855. This was the plant that the British visitors did not see because of the flood. The Civil War made Colt a very wealthy man, as might be imagined; he had the luck to have a new plant making the latest model firearms as the war broke out. Shortly after Colt’s death in 1862, the Colt Company introduced its most famous product: the Colt .45 Peacemaker. It was the weapon of choice for most of the legends of the West, and it was made in New England. Employed at the Colt works in Hartford were two men named Francis Pratt and Amos Whitney who started their own firm shortly before the Civil War. The firm of Pratt and Whitney, together with Brown and Sharpe of Providence, quickly became national leaders in the design and production of machine tools. (17) They cooperated and interacted in many ways with related firms like the Corliss Steam Engine Company of Connecticut, which made a famous patented steam engine. These firms joined with others in and outside New England to create a fellowship of skilled machinists who visited and learned from each other. Visitors to firms like Brown and Sharpe had to show they belonged to this fellowship by engaging in technical talk or exhibiting problem-solving abilities on the shop floor. But once accepted, visitors were given tous of the plant, talked to for hours, even invited home for dinner and the night. Solutions to technical problems were shared by the managers the host plant in the expectation that they would be treated similarly in a visit they would make. This reciprocity was the key to the fellowship of machinery managers and a potent force for the dissemination of knowledge. The open-door policy was common practice among machinery firms in the later nineteenth century, and violations of the custom were criticized in the trade press the same way a lack of hospitality was scorned in many traditional cultures. (18)
As these ideas spread from Connecticut to the rest of the economy, the ability of machines to make interchangeable parts increased over time. The early practice of the armories proved hard to translate to industry; Singer sewing machines continued to be numbered until late in century to show the order in which they were made and therefore which parts would fit together.” But great progress had been made by the end of the period surveyed in this essay. As stated in the 1880 Census: “Uniformity in gun-work was then, as now, a comparative term; but then it meant within a thirty-second of an inch or more, where now it means within half a thousandth of an inch. Then interchangeability may have signified a great deal of filing and fitting, and an uneven joint when fitted, where now it signifies flipping in a piece, turning a screw-driver, and having a close, even fit.” (20)
Arms production and the American System of Manufactures were important for the future of both New England and the United States as a whole. They laid the foundation for American industrial expansion in both the nineteenth and twentieth centuries. The center of production moved from Connecticut to New York and then to the industrial Midwest, but the: manufacturing methods used in these regions built on the innovations made in New England.Why would these nineteenth century machinists, striving to build their own companies in a brand new industry, be so willing to share trade secrets with their competitors? Such behavior obviously violates the selfish impulses of the "invisible hand" that is so much in favor among professional economists, and has been raised to the level of religious faith by such unthinking ideologues as Lawrence Kudlow. The answer is to be found in the idea of public virtue, which I have been trying to promote the past year or so, after reading Bernard Bailyn's crucial The Ideological Origins of the American Revolution.John Kasson ably summarizes the point in his 1976 book, Civilizing the Machine: Technology and Republican Values in America, 1776-1900 (New York, NY: Grossman Publishers):
The questions of the introduction of domestic manufactures and the role that labor-saving machines might play in American life were considered not as isolated economic issues but as matters affecting the entire character of society. No doubt profit motives existed, but would-be manufacturers had to make cogent arguments which addressed broader ideological concerns. “In addition to asking “How much will it pay?” they had to consider as well, ”How will it advance the cause of republicanism?” The question was not rhetorical – not at this time at least.Any school of economics that believes markets are the sum total of untold millions of individuals pursuing their own self-interest, simply cannot understand or explain political economy that includes some of the more noble characteristics of humanity, such as a desire to improve and strengthen one's community and nation.
No comments:
Post a Comment