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2-1, the U.S. CANAL BOOM, 1820-40

2-1, the U.S. CANAL BOOM, 1820-40 - 1 A Cycle of Boom and...

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A Cycle of Boom and Bust: The U.S.A., 1820-42 Notes by Mason Gaffney, May, 1993 (Pp. 4-13, starting from #8, could be extracted and read separately, to give the gist of the macro and managerial findings without the historical setting. However, the gain in brevity would not be worth the loss of context.) These notes are based in part on data presented in Chapters 3 and 4 of Carter Goodrich, Government Promotion of Canals and Railroads . They are most useful in conjunction with my notes on the Chicago boom, 1830-40 . These notes presume an overall familiarity with major events of the times, and seek to extract major principles at work. 1. The Canal Boom, 1 which crested in 1836-37, was one of several in U.S. history, forming roughly an 18-year cycle. Booms crested in 1798, 1819, 1836, 1857, 1873, 1893, (1911 is interestingly missing), 1929, and 1989. World War II, and then The Cold War, are probably what stopped the rhythm and muted later cycles, until the peak of 1989. We seem to be in another serious slump now, 1993. 2. Rivalry among cities, and states, and with Canada, drove the boom. Control over hinterlands was fluid: they were viewed as being up for grabs, with rich and permanent rewards in store for the cities that grabbed them. 3. The result was "racing" to grab territory. Racing differs from "competition," as normally conceived: a. Competition is ongoing; races end, winning is permanent. b. Racers accept early losses, to win hinterlands to exploit forever. It is like a franchise, a monopoly of trade. Now theorists have rediscovered and named it "rent-seeking." 1 This boom is named for its most characteristic form of construction. However, it also witnessed the beginnings of the r.r. era, part of the steamboat era, etc., so not all references are to canals alone. 1
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The motive is clear enough, but valuing the prize calls for extraordinary forecasting ability. Immediate profits are no guide, they are negative, but expected to turn positive later. Serious mistakes can be made, therefore, and normally are. Racing also calls for deep financial reserves, and progressively exhausts those reserves as many racers give it their best shot, get emotionally committed, and throw good money after bad as euphoria warps their judgments. c. Racing is an aspect of imperialism. Imperialists have a weakness for overvaluing distant targets and far-flung colonies, undervaluing their own back yards. 2 d. In each cycle, including our own times, the details changed. Many fundamentals have been the same, however. Even The Civil War did not break the rhythm of the 19th Century cycle. World Wars I and II, and The Cold War, seem to have had more powerful effects in the 20th Century, but in 1993 we are again in the grip of the old forces. 4. The slump, when it came, was synchronized nationwide; the ensuing slump and crash even moreso. Indeed, the cycle was worldwide, although the data herein are only for the U.S. After the manic peak of 1836, depression was communicated everywhere through some universal medium. The synchronization was remarkable, considering this was before even the telegraph.
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2-1, the U.S. CANAL BOOM, 1820-40 - 1 A Cycle of Boom and...

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