Most problems were not problems long enough to be interesting.
— Larry Niven, PROTECTOR
Haiti has remained a problem long enough to be interesting.
History
Inflation and Society
Theodore Dalrymple notes that inflation is more than a purely economic phenomenon…it also has profound social and psychological effects.even characterological effects:
For one thing, inflation destroys the very idea of enough, because no one can have any confidence that a monetary income that at present is adequate will not be whittled down to very little in a matter of a few years. Not everyone desires to be rich, but most people desire not to be poor, especially in old age. Unfortunately, when there is inflation, the only way to insure against poverty in old age is either to be in possession of a government-guaranteed index-linked pension (which, however, is a social injustice in itself, and may one day be undermined by statistical manipulation by a government under force of economic circumstances, partly brought about by the very existence of such pensions), or to become much richer than one would otherwise aim or desire to be. And the latter turns financial speculation from a minority into a mass pursuit, either directly or, more usually, by proxy: for not to speculate, but rather to place one’s trust in the value of money at a given modest return, is to risk impoverishment. I saw this with my own father: once prosperous, he fell by his aversion to speculation into comparative penury.
Reminds me of something written by Sebastian Haffner, who grew up in Germany between the wars. Discussing the great Weimar inflation, he says:
Anyone who had savings in a bank, bonds, or gilts, saw their value disappear overnight. Soon it did not matter whether it ws a penny put away for a rainy day or a vast fortune. everything was obliterated…the cost of living had begun to spiral out of control. ..A pound of potatoes which yesterday had cost fifty thousand marks now cost a hundred thousand. The salary of sixty-five thousand marks brought home the previous Friday was no longer sufficient to buy a packet of cigarettes on Tuesday.
The only people who were able to survive financially were those that bought stocks. (And, of course, were shrewd or lucky enough to buy the right stocks and to sell them at the right times.)
Every minor official, every employee, every shift-worker became a shareholder. Day-to-day purchases were paid for by selling shares. On wage days there was a general stampede to the banks, and share prices shot up like rockets…Sometimes some shares collapsed and thousands of people hurtled towards the abyss. In every shop, every factory, every school, share tips were whispered in one’s ear.
The old and unworldy had the worst of it. Many were driven to begging, many to suicide. The young and quick-witted did well. Overnight they became free, rich, and independent. It was a situation in which mental inertia and reliance on past experience was punished by starvation and death, but rapid appraisal of new situations and speed of reaction was rewarded with sudden, vast riches. The twenty-one-year-old bank director appeared on the scene, and also the sixth-former who earned his living from the stock-market tips of his slighty older friends. He wore Oscar Wilde ties, organized champagne parties, and supported his embarrassed father.
Haffner believes that the great inflationparticularly by the way it destroyed the balance between generations and empowered the inexperienced younghelped pave the way for Naziism.
In August 1923 the dollar-to-mark ratio reached a million, and soon thereafter the number was much higher. Trade was shutting down, and complete social chaos threatened. Various self-appointed saviors appeared: Hausser, in Berlin…Hitler, in Munich, who at the time was just one among many rabble-rousers…Lamberty, in Thuringia, who emphasized folk-dancing, singing, and frolicking.
The inflation was eventually brought under control:
Then a miracle happened. “Small, ugly grey-green notes” appeared, with “One Rentenmark” written on them. The small numbers on these notes belied their value. You could use them to buy goods which had previously cost a billion marks. And, most amazingly, they held their value. Goods which had cost 5 Rentenmarks last week would also generally cost 5 Rentenmarks next week.
But the after-effects of the great inflation lived on.
There are two excellent novels, both by author Hans Fallada, which portray the psychosocial impact of the Weimar inflation and its aftermath
Wolf Among Wolves is set in the worst period of the inflation. The protagonist, Wolfgang Pagel, is a well-meaning but rather irresponsible young man trying to make his way in a society with rising social and economic chaos. Can Wolfgang grow up to be a responsible adult?..and can he survive surrounded by wolves without himself becoming a wolf? I reviewed the book here.
Little Man, What Now? is set in a somewhat later time period, 1932. The great inflation of Weimar has come and gone, but the psychological damage as well as the economic damagestill lingers. Johannes and Emma, known to one another as Sonny and Lammchen, are a likeable young couple who marry when Lammchen unexpectedly becomes pregnant. Their world is not the world of Weimar’s avant-garde artists and writers, or of its risque-to-outright-degenerate cabaret scene. It is far from the world of a young middle-class intellectual like Sebastian Haffner. Theirs is the world of people at the absolute bottom of anything that could be considered as even lower-middle-class, struggling to hold on by their fingernails. Here’s my review. There was also a pretty good American movie made based on the book, review here
The Weimar inflation was an extreme case, of course, and we are unlikely to see anything nearly as severe. But, as Dalrymple notes, even less-catastrophic levels of inflation tend to have malign effects. The Biden administration and the Democratic Congress seem remarkably unconcerned about these effects, or with the socially-destructive effects of so many other parts of their total policy set.
On the other hand, if inflation gets sufficiently bad, kids can make kites out of currency. And, if energy prices continue their climb upward, devalued currency could be used for heating fuel.
Reslience and Renewal
We’ve often talked here about businesses and other kinds of organizations that missed the turn…that failed to react intelligently to market or technology changes and disappeared (or at least suffered great harm)…or, in the case of military organizations, went down to defeat. Sears failed to take advantage of the excellent fit that the Internet could have offered with their direct mail strengths. The French Army of 1940 was so focused on the lessons of World War I that they failed to understand the tactics that would be used against them in the coming war. None of the traditional US steam locomotive manufacturers became a force in the diesel-electric market. The big integrated steel producers failed to exploit mini-mill technology. And so on.
In this post & discussion, I’d like to look at this phenomenon from a different angle….what are some examples of organizations that did successfully make the turn, and/or revived themselves after being overwhelmed with internal as well as external problems?
To start things off, here are some examples that seem to fit:
Studebaker–this company was originally a manufacturer of horse-drawn wagons and carriages. The ‘buggy whip industry’ is used as an archetypal example of an industry that was highly vulnerable to the mechanically powered automobile and failed to exist because of its failure to recognize and act on this vulnerability. (Why do people talk about buggy whip makers, rather than just buggy makers, I wonder?) But Studebaker did enter the auto business, with electric cars in 1902 and gasoline vehicles in 1904. Although never a dominant player in the US auto market, the company did manufacture and sell cars until 1963. (It was also a significant supplier of military vehicles and other items during World War II.)
IBM was overwhelmingly dominant in the era of punched-card data processing…it was by no means inevitable that it would successfully make the transition to electronic computers, or at least would make this transition in a manner comprehensive enough to ensure its future. Companies such as UNIVAC were more focused on electronics. It is easy to imagine an alternate history in which IBM chose to exploit electronic computation only for the niche of scientific & engineering calculation, leaving business data processing to traditional punched card methods…but that’s not what happened.
American Express started out in 1850 as a package delivery company, focusing on transportation within New York State. Fortunately for them, they expanded beyond this focus with the introduction of products such as money orders and travelers checks…I say ‘fortunately for them’, because in 1918, the federal government nationalized the major express carriers and expropriated their property.
Corning started in 1851 but made its mark as a manufacturer of glass bulbs for Edison’s lamps–by 1808, bulbs accounted for half Corning’s business. This seems like the kind of business that would have been highly susceptible to replacement via vertical integration by GE and the other lightbulb companies which were its customers. But in 1915, the company came up with Pyrex, and in 1952 the accidental overheating of a piece of photosensitive glass led to the creation of CorningWare. And in the 1970s, Corning pioneered the use of fiber optic cables for data transmission.
Apple, in the late 1990s, did not look like it had a great future. The company’s desktop products were doing poorly against PC-type products. Many experts believed that Apple should get out of the hardware business entirely and merely license its software to other manufacturers, as Microsoft had done with Windows, and, indeed, some licensing deals were struck. But Apple’s future would turn out not to lie in pure software but in software tightly integrated with proprietary hardware, especially with handheld devices.
The Royal Navy, in 1797, suffered from serious internal problems. The service was rocked by two mutinies–one at Spithead and the other at the Nore. The Spithead mutiny was mainly about a demand for improved living conditions, due in part to the fact that pay rates had not increased to keep up with inflation. The Nore mutiny was more far-reaching in its demands, including demands that the King dissolve Parliament and make immediate peace with France. There was apparently also some involvement by Irish separatists.
Yet these mutinies preceded by only 8 years the great naval victory at Trafalgar. It seens unlikely that an angry, demoralized, and radicalized force of sailors could have achieved such a victory or enabled Britain’ s “ruling of the waves” for the next 100-plus years. The willingness of the naval authorities to make needed changes (increased pay, abolition of the ‘commissions’ that ships’ pursers had traditionally been allowed to take for themselves), surely made a difference, along with a combination of conciliation and limit-setting. (All of the Spithead mutineers received a royal pardon; at the Nore, 29 mutineers were hanged and an equal number imprisoned; some were transported to Australia…however, most Nore mutineers were not punished at all, which was lenient by the standards of the time.)
Speaking of Britain….following the withdrawal at Dunkirk in 1940, the future of that country…and of western civilization…looked dark indeed. Writing in exile from Brazil, the French writer Bernanos wrote in December of that year:
No one knows better than I do that, in the course of centuries, all the great stories of the world end by becoming children’s tales. But this particular one (the story of England’s resistanceed) has started its life as such, has become a children’s tale on the very threshold of its existence. It mean that we can at once recognize in it the threefold visible sign of its nature. it has deceived the anticipations of the wise, it has humiliated the weak-hearted, it has staggered the fools. Last June all these folk from one end of the world to the other, no matter what the color of their skins, were shaking their heads. Never had they been so old, never had they been so proud of being old. All the figures that they had swallowed in the course of their miserable lives as a safeguard against the highly improbable activity of their emotions had choked the channels of circulation..They were ready to prove that with the Armistice of Rethondes the continuance of the war had become a mathematical impossibility…Some chuckled with satisfaction at the thought, but they were not the most dangerous…Others threatened us with the infection of pity…”Alone against the world,” they said. “Why, what is that but a tale for children?” And that is precisely what it wasa tale for children. Hurrah for the children of England!
Men of England, at this very moment you are writing what public speakers like to describe in their jargon as one of the “greatest pages of history”….At this moment you English are writing one of the greatest pages of history, but I am quite sure that when you started, you meant it as a fairy tale for children. “Once upon a time there was a little island, and in that island there was a people in arms against the world…” Faced with such an opening as that, what old cunning fox of politics or business would not have shrugged his shoulders and closed the book?
Britain and its allied did of coure prevail, and at the end of World War II, the enemy countries of Germany and Japan were physically and economically crushed. Their populations were near starvation, and they were viewed around the world as moral pariahs, a status that they had richly earned.
But both countries were able to recover, grow, and prosper economically and to establish reasonably stable democratic governments. How long this will continue, given the low fertility rates (particularly in the case of Japan) and the suicidal energy policies (particularly in the case of Germany) remains to be seen, but both countries have had a pretty good run over the past 70+ years, probably much better than would have been foreseen by most people at the time.
What other examples of resilience and renewal can you think of?
Extremely Cool
An animated explanation of how a mechanical watch works.