You may remember the extremely cold winter of 2021. In Texas, the system of electricity collapsed; 4.5 million homes lost power—for days. More than 200 people died, half of them of hypothermia (cold). This wasn’t supposed to happen, of course. Texas’s electric utilities are regulated and the regulation had been modernized beginning in 1999.
Why wasn’t the public interest served?
The issue is so complicated that I can’t answer that question. But the ongoing debate over the Texas tragedy has plunged me into a new project: trying to understand why electric utilities are regulated in the first place. Why do state commissions control the activities of companies like Duke and PNG that produce and send electricity to our homes?
That effort sends us back to colonial days in America. [1]
Since I haven’t had many deep thoughts lately, I want to share with you some essays about history that have caught my attention. In this case, the history is pretty recent—it’s about the late Jack Welch, CEO of General Electric from 1981 to 2001.
When I was an economics editor at Business Week in the 1980s, Jack Welch was becoming a legend. My editor-in-chief admired him, talked with him a lot, and featured him as a speaker at magazine functions. In 1999, Fortune called him the “manager of the century.” He was bold, smart, and unafraid.
But did he bring General Electric down?
General Electric was founded by Thomas Edison and J. P. Morgan in 1892. It developed a ubiquitous brand name and seemed to “own” the field of electric appliances.
By 1981, however, when Welch became CEO, it lacked vigor. It was a $12 billion company, but stodgy and bureaucratic. Welch attacked that bureaucracy, laid off workers, and started acquiring companies. When Welch left in 2001 the company was worth $600 billion and in terms of revenues was the fifth-largest company in the U.S.
I recently stumbled on the fact that eight states, mostly in the Midwest, defaulted on their state bonds in the 1840s. Okay, that may not seem too exciting, but when I learned about it, I also discovered a realm of American history I had not come across before: “canal mania.”
Many of those states had spent a lot of money on canals, much of it borrowed money (bonds rather than taxes), which ultimately they could not pay back. Other problems also plagued these states such as investments in railroads and banks, but canals were big.
Most of these canal ventures were kicked off by one success—the amazing Erie Canal, which opened in 1825. A few canals had been built in the East before that, such as the 27-mile canal between the Merrimack River and Boston. But the Erie Canal ran from Albany, New York, across the state to Buffalo: 363 miles. The canal required 83 locks. Continue reading ““Canal Mania”—A Waste of Money?”
Historians, both famed and anonymous, have developed theories that try to explain the course of history. The “Whig theory” of steady progress was widely shared until the horrors of the twentieth century demolished it. Marx’s theory of one class replacing another had a long run. The “Great Man” theory (now, Great Person theory) still has some adherents.
I too am trying to develop a theory of history, but not a grandiose one. I’m trying to figure out if there are consistent ways to better understand certain historical outcomes. Why was St. Louis an “also-ran” to Chicago? Why did so many orphans work in the early factories of the Industrial Revolution? Was soil exhaustion a contributor to the Civil War?
In answering such questions, I borrow tools from my friends the economists. Economists don’t spend a lot of time digging into the past but when they do they come up with surprising findings. When Deirdre McCloskey explained the scattered private fields in medieval England, she solved a mystery that had stumped historians for decades, and Eric Edwards and Walter Thurman just revealed an explanation for the U. S. Corn Belt that historians have largely ignored.
It is a truism of American history: The farmland of the Midwest was so rich that when the railroad and mechanical farm equipment arrived the region became the breadbasket of the nation.
Yes, the “amazing fertility of the prairies” provides food for the entire country—and much of the world.[1]
However, it took more than railroads and the McCormick reaper.
In his book Nature’s Metropolis historian William Cronon hints at the problem facing a pioneering farmer in Missouri or Illinois in the early 19th century. “[The] flatness of the prairies subjected lowland areas to bad drainage and flooding.” An 1831 guide for newly-arrived farmers warned them to select their land carefully—flat land that looked good in the dry season could become a swamp when the rains came.[2]
In other words, what we romantically call wetlands (and often try to preserve) were the bane of the agricultural pioneer in the Midwest. “Farmers tried to settle far enough from floodplains and wet prairies to avoid bad drainage, but they also needed to be near enough to a stream course to obtain supplies of wood and water,” writes Cronon. [3]
As long as there was a lot of land for sale, farmers could cope—often it “was cheaper to buy a new farm than to drain the farm one already owned,” one historian wrote in 1909. [4]
