Punchinello’s Chronicles

October 28, 2008

The Crash of 1893

Filed under: Butterfly Wings — Punchinello @ 2:51 am
Tags: , ,

And the wheels they just keep turning. I’ve been thinking about the great financial panic of 1893, partly because I read this very excellent book, “The Devil in the White City…” by Erik Larson. It’s a non-fiction story about the Chicago Columbian Exposition, and includes the true story of a serial killer who was murdering people at the same time.

The story of the killer weaves in and out between the story of how the world’s fair was put together. A lot was happening in those years, including a major financial market crash. Much like the Great Depression of 1929, banks were closing, people were jumping out of windows, committing suicide, and losing all their money.

Odd though; I never learned about this in grade school. I heard about the ’29 crash, but not this other one. It began in 1873, and was primarily caused by over-building the railroads and bad financing behind that development. Sound anything like over-building homes and bad financing? Looks like we never learn from history.

Another thing that really caught my mind was the emerging second industrial revolution. Prior to the exposition, most of America was involved with agriculture. What industry we had involved textiles, railways, mining, and other forms of machine-based industry. America was trying to demonstrate to the world that we were at least competitive with Europe. The Paris world fair (when they built the Eiffel Tower) had just taken place, and we wanted something along those lines.

New York City was the big city, at the time, and Chicago was mostly known for the stockyards. Following Chicago’s being chosen for the site, we became The Second City. It’s an astounding story, how the men behind the fair scrambled to put something together in an incredibly short time.

But what’s important is the electrical revolution that took place. We understood some of the basics of electricity back then, and there were two emerging systems to transmit that power over distance. One was called “direct current” (DC), developed by Thomas Edison. The other was called “alternating current” (AC), developed by Nikla Tesla.

It was at the Columbian Exposition that Mr. Tesla’s alternating current created the City of Lights, and helped forevermore change history. Following that introduction, American began the electrification of the country. Think about it: Prior to electricity, the work day was just that, a day. We could work into the darkness a little bit, but with gas lanterns, not so much. It was electricity that opened up the night hours.

Another aspect of electricity was the evolution of machines. Instead of only using steam engines, we now could use electrical engines and motors. Together with portable batteries, we could move work all over the place. We weren’t limited to resources that would generate steam.

At the same time that the economy was crashing, it also was coming together to form the American economy. We were growing out of the Midwest or Eastern economy, the Chicago or Pittsburgh economy. With those railroads connecting the country between all borders, and electricity providing movable power, the United States finally joined into a contiguous nation.

We still weren’t as big and powerful as England, and we still weren’t considered a cultural center in relation to Europe. But we certainly were on the verge. It took WW 1 and then finally, WW II for America to come into its own. With the destruction to England and Germany, and the inventions coming out of the war, America emerged from the war as a super power.

The problem here is that it seems that each time humanity is on the verge of a major shift in evolution, part of all that confusion includes ripples of collapsing economies. It’s as if we need those collapses in order to prepare the mental outlook necessary for something entirely different.

Now, 100 years later, we’re seeing the emerging trend toward a global economy. I wonder then: Is it the evolving movement toward more integration that causes economic collapses? It seems reasonable, thinking about it. I’m not so sure that these cyclical economic crashes and cyclical wars are just accidental coincidences.

We’ve been verging on the next major industrial revolution. The first part of it is in communication, moving from the telephone system to the Internet (with computers). The computing revolution has been important, but I don’t think it’s the entire focus of the coming changes. Just as people prior to 1873 knew about electricity, even though it hadn’t yet begun to sweep the world, we know about new stuff.

We have quantum physics, which we’ve known about since 1900. That’s leading to the nanotechnolgy revolution that will fundamentally shift paradigms. We also understand the basics of biotechnology, not only with cloning, but also amazing new medical breakthroughs. The emerging formalization of parapsychology is introducing new ideas about how consciousness may work, and concepts about how mental energy can impact surrounding reality.

Just these three emerging trends would be sufficient to totally revolutionize the world. And because I like weird things, I’m going to toss in the complete wild card of some sort of public introduction to extraterrestrial civilizations. It’s interesting that the whole field of UFOs, even the term itself only began to appear after around 1945. That’s coincidentally after WW II.

Following the panic of 1893, we had a fascinating period of about 30 years where almost all modern science was introduced at a theoretical level. Those were the days of Tesla, Bohr, Einstein, the Wright brothers, Ford, Sears, and the list goes on and on. It was an incredibly brilliant time in human history, laying the groundwork for so much of what we take for granted today.

So too, between the financial problems arising out of 1987 and today’s major economic problems, we also see an incredible introduction of new concepts in technology. If we follow history’s cycles, it seems pretty reasonable to assume that some sort of major warfare will take place in our times.

I don’t see a world war that’s the same as WW II, though. Perhaps limited nuclear encounters might happen, but to me, it seems like the globalization process would make it difficult of an “old style war.” On the other hand, we have a gigantic gap between the wealthiest and the poorest people over the entire planet. That imbalance could easily formulate two “sides.”

Looking back over the 1960s, I also see the powerful violence of the radical revolutionaries. They were the socialist and communist “hippies” who wanted to overthrow the developing capitalist world of business. Although they keep trying, the whole idea has pretty much failed. On the other hand, we see capitalism still trying to take hold in places around the world, but being prevented from doing so.

Perhaps the coming violence will be based on the fundamental ideological difference between socialism and capitalism. If so, it would mean “war” that would be everywhere, but would be particular to each country. Maybe something like a global “rebellion” of some sort. It’s something to think about, anyway.

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4 Comments »

  1. Excellent book. I read it 4-5 years ago. So many things happened at the Columbian exposition, from Ferris wheels to Waffle cones.

    When I think of the “American rise of the middle class”, I think of it as perhaps one of the shortest lived golden years in Western history. The fact is that after WW2, we benefited greatly from a perfect storm of economic opportunity: The world was in shambles, but our country was unscathed. US factories were perfectly tuned war machines, capable of producing the most sophisticated manufactured goods in record speed. The world needed things. We made those things.

    This was pared ironically to the coat tails of what I consider the closest period America came to function via a semi-socialist government. FDR’s New Deal meant every many had a job, hard work was worshiped, and access to economic equality was paramount. Even after the war, soldiers gained access to zero percent loans on cheaply manufactured houses. These small suburban homes were created using mass-manufactured techniques employed during the war to rapidly build military housing.

    College enrollment exploded -also due to government assistance, so that the common man returning from war had access to higher education. A national freeway system- in the name of nuclear defense- was created so that Americans had access to these sprawling housing developments.

    When people think of the good days of the middle class, they think of a very brief time period, from the late 40’s after the war until perhaps the 60’s. Twenty years give or take a few.

    Looking around now, the middle class is shriveling on the vine. Most metro areas are becoming hopelessly gentrified. Having even a decent job for many means renting for a lifetime and sending their kids to mediocre schools and perhaps not college since tuition- just like housing and everything else is skyrocketing.

    The main reason for this is destructive capitalism. As we all know capitalism goes in cycles, creating, destroying, and re-birthing, sometimes with “adjustments” made to society, perhaps meaning what passed as middle class last generation becomes lower working class. Teachers become working peons. Public works engineers have to rent for a family of four because they can’t afford a house. And so on.

    Socialism is a strong word because absolute socialism doesn’t work. But at the same time, neither does extreme capitalism, which functions to cut and cut only to fuel an increasingly small number of benefactors at the top, as seen with the latest fiascos. So perhaps a happy median is needed. We will see.

    Comment by bob — October 28, 2008 @ 11:18 am | Reply

  2. Capitalism never goes in cycles, it’s a morality. That’s like saying Christianity goes in cycles. Economic theory, particularly that of John Maynard Keynes, proposes government intervention to introduce cycles. “Keynesian” economics was introduced in the early years of the 20th century, to deal with a hybrid society. Capitalism was under debate, and half the country was split between that and socialism.

    The entire concept of limited growth is a part of Mr. Keynes’ economics and has nothing whatsoever to do with a morality of capitalism. In yet another example, that’s like saying your owning your car goes in cycles. Sometimes you own it, other times the government steps in and removes ownership so you won’t drive as much.

    Socialism is a weak word. It’s a watered down version of raw communism, which arises out of Marxism. All of these redistribution of wealth moralities are based on placing the individual lower in value than the herd—the consensus, majority, society, or the state.

    There’s no such thing as “extreme” capitalism. Either individuals have a value and responsibilities higher than the herd, or they don’t. Likewise, there’s no such thing as extreme socialism. Either the herd has a higher responsibility and value than the individual or it doesn’t. People love the term “extremist,” and so they assign it to every-which-whatever they can think of. “Extreme” cars, “extreme” sports,”extreme” dating.

    The entire problem has been, and always will be the concept of government as split from the citizenry. Government has no product, being entirely a service industry. The US Constitution was written to that purpose. Politicians can see themselves either as customer service representatives or as executive management committees. These days, it’s the latter.

    Comment by Punchinello — October 28, 2008 @ 12:09 pm | Reply

  3. Can’t agree with you there. Capitalism indeed has cycles. The very nature of capitalism relies on fluctuating success and demise. In this day and age, the desire for companies is to show non-stop growth, and often this comes at the expense of downsizing and job cutting. This of course means further additional profits for a shrinking number of employees until the system ultimately corrupts itself and must either change its business model or go under.

    For example, RCA was at one time one of the largest corporation on earth. But in order to continually show rapid and prolonged “growth”, they ventured into totally unrelated businesses such as rental cars and microwave dinners. The desire to show an increasing market share- even when inappropriate- over rode their key business and the ultimately failed. The desire to grow capital was their ultimate demise. So too has this story been true for countless US firms, whom via cheap overseas outsourcing, the cheapening of their products and services ( India call centers) and the purchase of unrelated businesses to increase capital investments has created a fragile business environment that makes even large companies like GM, Ford, Maytag, and others vulnerable to even small blips on the economic radar.

    The term “destructive capitalism” is a a cliche’ termed by many everyday economists. The meaning is clear, in that in order to create capital, it is actually an erosive process. Another term is “Bag holder”. Perfect example: the US housing bubble where banks and individual buyers bought increasingly risky homes with non-supportable prices- many fully aware of the risks- until the bubble burst. The same applies here: Grow capital in the form of equity. It works well until alas- the system fails from lack of a strong financial foundation and therfor- the last people in are left holding the bag.

    We’re a country of bag holders now. Again, created by the desire to inflate and create capital. The system crashes, capital is lost, and rising from the ashes comes a new scheme that’ll probably work for 5-10 years… only to capitulate once more.

    Comment by bob — October 28, 2008 @ 12:43 pm | Reply

  4. As you say, we don’t agree. The very nature of capitalism is property rights and individual ownership. How that has “cycles” is beyond me.

    Comment by Punchinello — October 28, 2008 @ 12:49 pm | Reply


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