Don’t underestimate the resilience of the U.S. economy


According to a measure of the US economy, the Dow Jones Industrial Average, the past 100 years have looked like a long journey to prosperity.

Stock market crashes, recessions and depressions, wars, pandemics and other economic shocks all appear as mere bumps in the road. On average, the Dow Jones has climbed 9% per year.

The truth on the ground was more complex. Millions of people have suffered during economic downturns and half a million have died in conflicts abroad. America has confronted fascism, communism and terrorism even as political, class, race and gender divides sometimes turned our streets and seats of power into battlefields.

And yet the economy and the market have gone in circles.

If there’s a lesson we’ve learned from digging through Barron Our Centennial Archives is this: Don’t underestimate the resilience of the US economy and stock market. We saw this theme time and time again when we released a series of retrospective pieces in 2021 – and the resilience is still striking.

It’s Barron’s 100e Birthday

Learn more about our 100 years of financial journalism.

When the Covid-ravaged economy contracted in 2020, it was only the 19th time since 1920 that real gross domestic product had declined, year over year. And nine of those years occurred between 1930 and 1949, following the Great Depression or demobilization after World War II.

Even 2020 appears to be an outlier, with growth expected in 2021 and 2022, despite recent downgrades caused by the Omicron outbreak.

Big jumps in GDP were also limited to the volatile 1930s and 1940s. This is mainly a steady increase in GDP, from an estimate of $ 670 billion in 1920 to a record high of $ 21.43 trillion in 2020. This is a 30-fold increase, which means that the US GDP grew about 10 times faster than the population, which tripled from 106 million in 1920 to 331 million a century later.

America was a smaller, poorer, and much different place 100 years ago. Most people lived on farms, with no electricity or indoor plumbing. Horses outnumbered automobiles. Business and politics were the only province of white men. Women had the right to vote but remained second-class citizens. The Jim Crow laws ensured that black people were not completely emancipated.

The country was also in the throes of the Depression of 1920-21, the worst economic downturn in the country at that time. It was a hell of a time for Clarence W. Barron to launch a financial news weekly. But he had seen the United States move from an agrarian nation to an industrial nation, and he felt that nothing could stop the American entrepreneurial spirit.

He was right. Henri’s entrepreneurs


Ford

and Thomas Edison to Elon Musk and Mark Zuckerberg have, to paraphrase the founder of Facebook, moved things fast and broken, turning new technologies into new life-changing industries.

Our founder, Clarence Barron, in 1921.

National Photo Company Collection / Library of Congress

They also created businesses that last.


General Electric
,

AT&T,


Macy’s
,


DuPont
,

Sherwin-Williams, and many other household names today date from the 19th century or earlier. These companies are the backbone of the economy, the force that gives it such resilience.

Barron had doubts every now and then. We once worried that modern rulers “seem puny figures next to the speculative kings of the last century,” but that was 1936, and since then many worthy successors have come forward to challenge the titans of the last century. yesteryear.

Here are just a few of those who have helped keep the economy booming over the past 100 years.

Automobiles were a dangerous open-pit business until the late 1920s, and there weren’t many passable roads. They were novelties, toys for the rich, and few saw that change.

Henry Ford saw greater possibilities. He perfected mass production techniques that allowed him to build the Model T faster and cheaper than the handmade competition. Ford “put the engine within the reach of the ordinary working family and the cost is half that of a horse,” Barron wrote in 1924.

While most Americans still depended on real power for transportation and manpower, the “peak horse” had been reached. Ford automobiles and tractors grazed horses. The best days of the railroads had also passed.

Henry Ford, pictured with his first car and his 10 millionth. Over 15 million T models were built between 1908 and 1927; in 1918, they made up half of the cars on American roads.

Historica Graphica Collection / Heritage Images / Getty Images

Road building would catch up with car buying, culminating in the Interstate Highway System, which unleashed American automotive culture, along with its suburbs, sprawl and pollution.

Ford’s company is now moving strongly towards the era of the electric vehicle. Yet his legacy is complicated: he was a vocal anti-Semite who hired scabs and saw plots everywhere. “Moral greatness”, as Barron written in 1923, does not always accompany industrial genius.

This magazine rarely reviewed movies, but Fancy


Disney
‘s

1940 cartoon feature film starring a famous mouse – caught our eye.

The “biggest change in cinematographic art since the advent of sound”, Barron wrote, was “the new technique of sound production” in Fancy. One of the main reasons the audience felt it was because “sitting right in the pit with the orchestra” was Disney’s use of eight state-of-the-art audio oscillators purchased from a new company,


Hewlett packard
.

Bill Hewlett and David Packard began working at a rented garage in Palo Alto, now a landmark billed as the “birthplace of” Silicon Valley. ” ”

The Oscillators were the start of a very successful partnership. In 1976, Hewlett-Packard was among the few companies that “combined technological excellence, crackerjack marketing and financial strength,” wrote Alan Abelson, Barron famous columnist and editor.

The founders moved away from active management in the late 1970s, and a few big names followed, including Carly Fiorina. It succeeded in the 1999 merger with Compaq which made HP the leading PC maker and cost it the job.

Many mergers and acquisitions later, HP Inc. is the legal descendant of the start-up Palo Alto. And the work started in this garage has helped transform an analog world into digital.

Muriel Siebert had to break the news herself.

“First Lady Member of the New York Stock Exchange! Read the ad, featuring the smiling face of Siebert, who ran into Barron on January 8, 1968 and in the Wall Street Journal four days earlier.

“First Lady Member of the New York Stock Exchange! Read the advertisement featuring Muriel Siebert that appeared in Barron’s on January 8, 1968.

Uncredited

Siebert began as a $ 65-per-week equity research intern at Bache & Co. in the 1950s, eventually becoming the first woman to head one of the NYSE member companies.


Siebert Financial

was among the first to offer discounted transactions and was also a leader in the move to online trading.

Siebert, who became New York State’s first female banking superintendent, was honored upon her death in 2013, when workplaces across the country were transformed by the inclusion of women of color. .

In finance, the capital managed by retail investors is known as dumb money. This is in contrast to the smart money of large financial institutions, whose resources and influence allow better returns.

By creating the index fund, Jack Bogle made stupid money a lot smarter. The concept is simple: Since the S&P 500 Index consistently outperforms managed mutual funds, a passive fund comprised of S&P 500 stocks would beat managed funds as well. And at no cost, to get started.

“This is a new and unique investment concept whose time is right,” Bogle said. Barron in 1978, two years after the launch of the forerunner of the Vanguard 500 Index fund.

Indexation will not take off until the 1990s. But by 2019, index funds had overtaken actively managed funds in terms of assets, having “outstripped active funds for a decade.” Yet passive investing has drawn criticism, which “warns of market collapse,” we wrote in 2018, noting that one analyst “went so far as to characterize index investing as” worse than the Marxism ”. “

Bogle, who died in 2019, has made it clear he doesn’t want everyone indexed. But he democratized the once exclusive Wall Street club. When he died, we wrote, “If a man can be held accountable in today’s marketplace, for better or for worse, it’s Jack Bogle.

It didn’t take long for Clarence Barron’s bet on American entrepreneurship to turn out to be premonitory. Just months after her magazine debuted on May 9, 1921, the depression ended and the Roaring Twenties began. In 1927, Barron the circulation had reached 30,000 copies.

Barron made the link between public information and markets. Wall Street takes advantage of the opacity; the job of the financial press is to shine the light in the dark, by giving the “thoughtful investor” a chance “to rock the world of wealth,” as he put it.

Like Barron entering its second century, the US economy shows few signs of slowing down. The damage from the pandemic cannot be minimized, with 800,000 deaths in the United States and Omicron causing new waves of cases. Yet the economy seems to ignore it, with today’s business leaders and workers finding a way to make things work. The economy is spinning.

E-mail: editors@barrons.com

About Hubert Lee

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