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Was President Van Buren a Luddite? In a recent Economic Commentary of the Federal Reserve Bank of Cleveland, the President of the Cleveland Federal Reserve Bank, Jerry L. Jordan, quotes the following letter sent in 1829 by the Governor of New York, Martin Van Buren, to President Andrew Jackson: To:President Jackson The canal system of this country is being threatened by the spread of a new form of transportation known as "railroads." The federal government must preserve the canals for the following reasons: One. If canal boats are supplanted by "railroads," serious unemployment will result. Captains, cooks, drivers, hostlers, repairmen and lock tenders will be left without means of livelihood, not to mention the numerous farmers now employed in growing hay for horses. Two. Boat builders would suffer and towline, whip and harness makers would be left destitute. Three. Canal boats are absolutely essential to the defense of the United States. In the event of expected trouble with England, the Erie Canal would be the only means by which we could ever move the supplies so vital to waging modern war. As you may well know, Mr. President, "railroad" carriages are pulled at the enormous speed of 15 miles per hour by "engines" which, in addition to endangering life and limb of passengers, roar and snort their way through the countryside, setting fire to crops, scaring the livestock and frightening women and children. The Almighty certainly never intended that people should travel at such breakneck speed. Martin Van Buren, Governor of New York |
It is amazing how little the arguments for protection from economic change have changed!
Governor Van Buren is clearly lobbying on behalf
of an important constituency in New York, namely
the captains, cooks, drivers, etc. who make their living along the Erie Canal in upstate New York.
That may be politics as usual, but Van Buren's arguments are also the usual arguments, including
his appeal to "save jobs" associated with the canal industry. Of course there is no mention of
the potential gains for the railroad industry; apparently they do not yet have much political clout.
Then Van Buren makes the "national defense" claim, namely that the nation would somehow be in danger
if the canal industry was destroyed by the railroads. The clincher is Van Buren's claim that the
new railroad industry is dangerous and a threat to human welfare. The reference to The Almighty
is thrown in for good measure. Van Buren's request for protection for canals against railroads follows a pattern used by others seeking protection against creative destruction: loss of jobs, more vulnerability to external threats, the new creation is "dangerous," and the new creation is just simply immoral or indecent (God would not like it). The steel industry has gained subsidies and protection from foreign competition for years using the jobs and national security arguments. Farmers have of course used the jobs, national security, and morality (the family farm is somehow a preferable type of economic activity) arguments for a century to gain subsidies. Interestingly, the railroads in the U.S. would soon learn to lobby better than the canals. Later in the 19th century, railroads would gain huge privileges from state and national governments that were often simply scandalous. !!! Why is it that everyone laughs at Van Buren's letter to President Jackson, but many people today would be support programs to |
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protect the family farm, to place a moratorium on introducing
genetically engineered seeds and food products, and to protect domestic industries from foreign
competition? Jerry Jordan, the President of the Federal Reserve Bank of Cleveland, from whose article the Van Buren letter is quoted, has some interesting things to say about economic change. In an environment where current knowledge rapidly depreciates and the skills necessary to excel in the workplace constantly change, the state's role in establishing policies that help the public accommodate change is essential. The idea that change is an inevitable cost of progress is the single most important lesson for economic policymakers to grasp. Unfortunately, our legacy is exactly the opposite. Economic policy since the Great Depression mostly has been aimed at ironing out the ups and downs of economic performance. Such policies, in my view, are antithetical to change. One explanation for the uneven distribution of the revolution's fruits around the globe is that foreign labor and capital markets are less flexible than those of the United States... But these impediments to change are disappearing. Jordan is clearly optimistic. He may be right, provided we do not pay too much attention to pleas for protection such as Governor Van Buren sent to President Jackson. Source: Jerry L. Jordan (2001), "Riding the S- Curve: Thriving in a Technological Revolution," Economic Commentary, Federal Reserve Bank of Cleveland, January 1. This newsletter is available on Web at www.clev.frb.org/research. The Pledge to Halve Poverty by 2015 In 2000 the leaders of world agreed at the Millennium Summit to halve the number of people living in extreme poverty, that is with a daily income of under US$1.00. On February 5, 2001, the United Nations' International Fund for |
Agricultural Development (Ifad) issued a report saying that the
rate at which poverty was being reduced was only one-third as fast as it needs to be if the number
of people living in poverty is to be halved by 2015. According to Ifad, at the end of 2000 there were 1.2 billion people with incomes under US$1. Over 500 million live in South Asia, about 300 million each in Africa and East Asia (which includes China), and just under 100 million in Latin America and the Caribbean. 75 percent of all people in extreme poverty live in rural areas, despite the focus of most poverty programs on the urban poor, laments the report by Ifad. According to Ifad, the failure to cut global poverty "stems in large part from a misconception that the main poverty problem has moved from the countryside to the burgeoning megacities of the developing world." Source: www.ifad.org The Distribution of Lifetime Income in Peru In section 13.5.2 we discussed the importance of looking at lifetime income rather than annual income for judging the distribution of income. We noted also that data on lifetime income is seldom available, and we concentrated on data from the Panel Survey on Income Dynamics conducted by the University of Michigan, which traced the income of specific households over the period 1975-1991. There is some good evidence on lifetime income available for Peru, which is reported by Gary S. Fields (2001), Distribution and Development, A New Look at the Developing World, Cambridge, MA: MIT Press. Fields reports the results of a study by Javier Herrera in the Peruvian capital city, Lima, which followed a set of 421 households across the years 1990-1996. An earlier study of 721 households over 1985- 1990 provided additional data on income mobility. |
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Recall Table 13-4 on page 505, which shows the percentages
of households from each 1975 quintile and the quintiles they were in 15 years later in 1991.
The tables below presents data from Herrera for Peru: Mobility Across Income Quintiles Peru: 1985-1990
Mobility Across Income Quintiles Peru: 1990-1996
Table 13-4 in the textbook, which presents U.S. income mobility between 1975 and 1991, is not compatible with the two tables for Peru given above because there is clearly going to be more mobility over a 15 year period than over a 5 or 6- year period. However, notice that for a city in a developing economy, where "structural" barriers are more likely to prevent income mobility, there |
was quite a bit of income mobility even over a mere 5 or 6 years. Over half of all households in the
bottom quintile had moved to a higher quintile at the end of the period in each table. Note also
that during both periods, of those households that were in the third, or middle, quintile, a slightly
higher percentage was likely to have fallen back to a lower quintile than moved up to a higher
quintile at the end of the period. It should be clear, however, that lifetime income distribution is much better than annual data would suggest. Fields presents other data on income mobility over time for Malaysia, Chile, China, Cote d"Ivoire, and India. This data is not as thorough as the data for Peru, according to Fields, but similar conclusions stand out: generally, the distribution of income measured over a longer period of time is less unequal than the distribution of annual income. The data for China is least encouraging in that it finds that there was little change in the income of the rural poor; income mobility for the lowest-income groups was not great in rural areas. If you are interested in the distribution of income from both theoretical and empirical perspectives, Gary Fields' new book brings you up to date. It may be a bit advanced for beginning economics students, but it reads well and is certainly within the grasp of advanced undergraduates with intermediate economic theory under their belts. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||