Steve Fraser: Every Man a Speculator. A History of Wall Street in American Life.
The American’s love-hate relationship with Wall Street is over two hundred years old. Steve Fraser’s Every Man A Speculator. A History of Wall Street in American Life (Amazon.com, Amazon.co.uk, Amazon.de) documents it. The author asserts at the beginning that his book “is rather mainly about the rest of us”, “how Wall Street inspired the dreams and nightmares deep inside American culture, leaving its imprint on the lives of ordinary as well as some extraordinary people”. In reality, his focus is more on the well-known historic figures, tycoons, speculators and crooks as well as on well-documented phases of boom and bust.
‘Every Man A Speculator’ is not a history of Wall Street in the strictest sense. It is not a book about how Wall Street functions, its role as an economic and innovation motor. It is rather an analysis of its perception by the American public in the last two centuries. How it is mirrored in the media, film and literature. In the cultural panorama painted by Fraser, which includes recordings such as Wall Street Shuffle by the British rock group 10cc, I miss Jimmy Smith’s 2000-album Dot Com Blues (CD: Amazon.com, Amazon.co.uk, Amazon.de, Amazon.fr). More importantly, it is only in an incidental remark, citing somebody else, that Fraser notes that there is no capitalism without capital. A discussion of the stock exchange as a key part of the economic system is missing.
Only in the last quarter of the 20th century, in the 1990s, has America become a shareholder nation. Therefore, it comes as no surprise that Fraser begins his account with one of those who rose to fame and fortune, Alexander Hamilton – one of America’s founding fathers. The case illustrates the dilemma America faces in its appreciation of Wall Street and its (mal-) functioning until today: Was Hamilton’s funding scheme embryonic of modern finance or was it “gambling”, to which his Revolutionary War Bonds led? Thomas Jefferson was strictly opposed to “gambling” at the stock exchange. Making “easy” money was against the moral rigours of the work ethic. Madison asserted that “…there must be something wrong, radically and morally and politically wrong, in a system which transfers rewards from those who paid the most valuable of all considerations, to those who scarcely paid any consideration at all”. In fact, seemingly worthless Revolutionary War bonds had been bought up by speculators who made huge profits, which endangered the credibility of the government. Furthermore, Wall Street was seen as a place opposed to the egalitarian ideal of the American Revolution. Some opponents of Hamilton and Wall Street considered them “counterrevolutionaries”. Hamilton had to endure a congressional inquiry in which he had to confess to an extra-marital affair and being blackmailed for it.
People may associate Wall Street with the 1929-crash or the burst of the dot.com bubble. However, speculation has accompanied the United States since its inception. Hamilton’s funding and banking schemes created a boom in 1789 and a crash in 1792, not only in New York, but also in Philadelphia, Boston and Charleston. The consequence was battles between Hamiltonian Federalists and Jeffersonian Republicans. If you are interested in details about Hamilton’s life, check Ron Chernow’s 2004 biography Alexander Hamilton – considered the best effort on the subject so far. The crash of 1892 was no singular event. Other crashes followed in 1837, 1873 and 1893. Greed has been a constant companion, not only of Americans, but of mankind. No wonder that Wall Street has had a terrible press and public image for most of its existence.
According to Fraser, the stock exchange did not play a vital role in the early development of the United States. Until the War of 1812 and some time after that, very few full time brokers or speculators existed. Making money by buying or selling securities was far from a mass phenomenon. There was no formal stock exchange until 1817. At the beginning, people met in coffeehouses. As late as in the 1820s, “an average day saw no more than 100 shares change hands.” It was only towards the end of the 19th century that industrial corporations raised capital on the stock exchange, with the only major exception of the railroads, which started doing so in the 1830s. As most of the early public works, the Erie Canal – crucial for the development of New York – was built, owned and operated by the state. The big investors only joined in 1821, when it had already proven to be a great success.
Fraser’s panorama of famous investors and speculators spans from John Jacob Astor to Michael Milken and includes fictional personas such as Gordon Gekko, interpreted by Michael Fonda. In the mid-1960s, Fraser states: “The United States began running trade deficits not seen since the 1890s”, in connection with the Vietnam debacle. Both a British Labour Party minister in 1967, as well as President Nixon in 1971, attacked the “gnomes of Zurich”, in connection with the devaluation of the pound and the end of the gold-backed dollar. In both cases, the remark was an attack on money traders and speculators. But the crash of 1970 – in which Ross Perot lost $450 million – of course had deeper roots than just speculation. A currency has to be vulnerable in order to be attacked.
Unfortunately, Fraser’s account lacks depth here and there. His overview of over 200 years of Wall Street remains superficial at times. Regarding 1929 and the subsequent Great Depression, in the New York Times, Harold Evans pointed out the fact that Fraser does not question conventional history. No major company went out of business because of the crash and there was no immediate bank failure. The wave of bankruptcies occurred only a year later. Furthermore, the crash was not the single cause of the following depression. The underlying problem, as the New York Times reviewer pointed out, was the fact that “mass purchasing power no longer sustained the economy because industrial wages and farm incomes had fallen way behind output and profits”. Fraser focuses on the impact that the crash had on popular perception of Wall Street, which remained tainted until Reagan came along in the 1980s, ending a prolonged New Deal period. As Fraser notes, the Reagan revolution “would transform Wall Street tycoons into liberators.”
Fraser could have included more economic data, which is often enlightening. He states for instance that in 1968, 24.3% of households owned assets in the stock market. This number shrunk to 8.5% in 1978. Between 1968 and 1982, the Dow lost some 75% of its value. Confidence in Wall Street had eroded. Unemployment climbed to 11%, manufacturing output fell by 10%, business failures soared to levels unseen since the Great Depression. Reagan really brought in a fresh wind… and new excesses, which led, for instance, to the 1987 crash. The Reagan era, Fraser points out, led to the fastest rise in wealth inequality in US history. It was also the time of the “socialisation of credit risk” (James Grant), “the financial welfare state”, as Fraser puts it, encouraged by too much laissez-faire, by the absence of regulation and control.
Fraser examines whether Wall Street is “a Babylon on the Hudson” or “a commercial City on the Hill, a zone of prudential calculation… and sober rationality”. He tells us both sides. Unfortunately, his book sometimes loses focus. In the introduction, Fraser states that under Reagan, Wall Street was “in the vanguard of the revolution, a revolution in part directed against itself.” In “The Return of the Repressed”, he is critical of Milton Friedman, and in the last pages, intitled “Sharholder Nation”, he attacks globalization. This leads me to the conclusion that Steve Fraser is closer to those critical of Wall Street.
Steve Fraser: Every Man a Speculator. A History of Wall Street in American Life. Hardback, HarperCollins Publishers, 2005, 721 pp. Get the hardback edition from Amazon.com, Amazon.co.uk, Amazon.de. Paperback edition in 2006 by Harper Perennial: Get it from Amazon.com.
