BRIAN LAMB, HOST: John Steele Gordon, author of "The Business of America," what can we
learn from your book about how to get back to normal in this country
after the tragedy in New York?
Mr. JOHN STEELE GORDON (Author, "The Business of America"): Well, I
think, you know, this sort of tragedy, not in this scale perhaps,
has--has happened before. I mean, the country has been attacked
before, and business got back to business quite quickly. And I'm sure
it will again.
LAMB: Which e--one example would you give that you think was the--the
best to teach us something about what could happen?
Mr. GORDON: Well, certainly Pearl Harbor. I mean, the--the--the
stock market dropped--What?--4.5 percent immediately after Pearl
Harbor, but within six months it was--it was higher than before. And
business has a great deal to contribute to whatever effort we--we make
here, and I'm sure it'll--it is more than willing to do so.
LAMB: How did you arrange this book?
Mr. GORDON: It was arranged by subjects in large groups of--you
know, about agriculture and about banking and--and government and
interaction with business and--and stuff like that. It was--we just
sort of sat there and arranged the stories.
LAMB: How many different stories? How many different essays?
Mr. GORDON: I think there are 47.
LAMB: And when were they first published?
Mr. GORDON: I began writing them for American Heritage in 1989.
LAMB: As you know, on page 91, you have a chapter called "The
Mr. GORDON: Right.
LAMB: ...written a long time ago.
Mr. GORDON: Yes.
LAMB: What's it about?
Mr. GORDON: It's about the World Trade Center, about the building of
the World Trade Center, and how it came to be and comparing it to the
Erie Railway, which was built by the state of New York in the 1830s
and '40s. And, I mean, the World Trade Center was--was not built by
private business. It was built by the Port Authority of the state of
New York and New Jersey. And it was largely at the instigation of
David Rockefeller, who was at that time chairman of the Chase
Manhattan Bank, who wanted to give a boost to the downtown New York
business district, where the Chase Manhattan Bank had its
headquarters, which had been finished in 1960.
And, fortunately for David Rockefeller, his brother, Nelson
Rockefeller, happened to be governor of--of New York, and--and Nelson
Rockefeller never saw a large project he didn't want to build. And so
they managed to work through the politics and then get the Port
Authority to build what was then, I guess, the largest office building
in the world.
LAMB: Where'd they get the money?
Mr. GORDON: They borrowed it in bonds and, for a long while, didn't
make any money because it was an enormous building, and it
wa--enormous increase in the amount of office space for rent in
downtown New York. And the--the New York state government moved a lot
of offices in there, but otherwise it would have been rather
LAMB: You say in your book that, `From an economic standpoint, the
World Trade Center has been an utter disaster.' When did it start
Mr. GORDON: I think it started making money in the--in the '80s,
late '80s. And when the--when the boom really hit New York and the
demand for office space went up, well, then the--it began to--to fill
LAMB: How does that compare with the Erie Canal?
Mr. GORDON: Oh, well, the Erie Canal was a--was a huge hit from the
very beginning. The Erie Canal was probably the most successful
public works project in the history of the world. I mean, it was
making money even before it finished.
The Erie Railway, which was a political promise made by De Witt
Clinton to--in order to secure the support of the s--what's called the
Southern Tier, the counties along the border of--with Massachus--or
with Pennsylvania, and so he promised them a highway of their own
in--in the 1830s. That became a railway. And the Erie Railway never
made the faintest economic sense. For one thing, the state of New
York required it to run entirely within the state of New York,
and--which meant it couldn't come to New York City because they would
have to go through New Jersey.
And the Erie Canal people didn't want it coming to Buffalo because
then it might compete with the Erie Canal. So it ended up
running--when it was finished in 1851, it was the longest railroad in
the world, 451 miles, and it ran between absolute no place called
Dunkirk, New York, and an absolute no place called Piermont, New York.
And this railroad--it went broke in its entire history seven times, I
believe. It was a huge football on Wall Street for years. It was
called `the scarlet woman of Wall Street' because it broke so many
hearts, and it was just, I mean, a--a great example of why government
should, for the most part, stay out of business, because they make
political decisions, not financial ones.
LAMB: Where do you live now?
Mr. GORDON: I live in Westchester County in a town called North
LAMB: When did you come down to Washington for this program?
Mr. GORDON: I came down this morning.
LAMB: What--what transportation did you use?
Mr. GORDON: I took a very crowded Metroliner.
LAMB: Any observation about people's attitude on this Sunday, what
you saw on the train?
Mr. GORDON: Well, it's--I thought the train was very crowded. I
as--I don't take the Metroliner all that often, but I assume it
was--it was crowded because the shuttle isn't running, and maybe a lot
of people are reluctant to take it even if it were. But I know a lot
of people were talking about it and still full in the newspapers. And
I talked with a guy sitting next to me--we talked the whole way
LAMB: What's your own feeling at this point?
Mr. GORDON: I'm not sure I've completely absorbed it. I mean, it
was just such an unbelievable thing. I mean, I watched it on
television. I was not in the city. I was about to go to the city
when a friend called me up and said, `Turn on the television set.
You're not going.' And so I just sat there all day watching it, and it
was like some Hollywood movie. It was--I mean, with particularly
spectacular special effects. It's--I still don't think I've really
quite absorbed it.
LAMB: Where is your office in Manhattan?
Mr. GORDON: I don't have an office in Manhattan. American Heritage
is--is at 14th Street and Fifth Avenue, way above the World Trade
LAMB: And are all these essays originally from American Heritage?
Mr. GORDON: Yes.
LAMB: How long have you done that?
Mr. GORDON: Since 1989, so it's 12 years now.
LAMB: And do you call yourself a historian?
Mr. GORDON: I call myself more a writer than an historian because I
don't have anything beyond a BA degree. I've never been in a college.
I don't do original research. I mean, what I do is I piggyback on
other people's original research and--and then write stories about it.
You know, a librarian friend of mine, when she handed me a stack of
books that obviously hadn't been read in 100 years, she said, `I
finally figured out what you do. You read dull books so other people
don't have to.'
LAMB: Of the 47 in your book, which one's your favorite?
Mr. GORDON: Oh, there's a lot of--ones that I like. I think
probably the one I like the best is the--about the Racquet Club
managing to manipulate the real estate market in New York and--and the
rules of--the--the laws about what you could build and where you could
build it and ending up turning the empty space above their clubhouse
into $5 million.
LAMB: When did that start?
Mr. GORDON: It was in the 1970s when--the Racquet Club was on Fifth
Avenue, and it was built in the--about 1920, I believe, and--on--on
Park Avenue, I'm sorry. And the Fisher Brothers, a very large real
estate firm, bought land right behind the Racquet Club on the side
street, and they wanted a Park Avenue address because you can get much
more rent money for a Park Avenue address than you can for a--a side
street address, which doesn't make much sense, but that's the way the
And so they tried to do a deal with the Racquet Club to use their Park
Avenue address,, and the Racquet Club tried to get too much money from
them, and so the Fisher Brothers went to Andy Stein, the borough
president of Manhattan, and Andy Stein promptly gave them an address
like, you know, 1 Park Avenue Plaza or something like that. And so
suddenly they didn't need the--the Racquet Club anymore, and so they
thought they'd--they'd won this game, set and match.
And then the Racquet Club suddenly announced that they were building a
hotel over their clubhouse, which was not then a landmark that it is
today. And they could do it. I mean, the engineering was there.
The--the rules were there. It was perfectly possible to do it. And,
of course, it would have ruined the Fisher Brothers' view over Park
Avenue. They would have--the tenants would have looked at a brick
wall instead of the--the Seagram Building and St. Bartholomew's and
what have you. And so when all was said and done, the Fisher Brothers
wrote the Racquet Club a check for $5 million to buy the air rights
over their club.
LAMB: Knowing what you know, and if you had a lot of money or even if
you didn't have a lot of money, would you go into business in New York
Mr. GORDON: Right now?
LAMB: Yeah, any time. I mean, is...
Mr. GORDON: Oh, sure.
Mr. GORDON: I mean, if I were--if I were a businessman, which I'm
not. I mean, I--it would be a very poor investment for me to go into
business anywhere. But I think New York City is a--a wonderful place
to do business.
LAMB: What makes it wonderful?
Mr. GORDON: Because it's New York, and New York is--is the last
great city-state. It's like Venice writ large. The only thing it's
not--it's not sovereign. I mean, that's what's really remarkable
bout--about New York, is that it--it made itself. It's not a s--a
capital. It's never been a capital, I mean, except briefly in the
1790s. And so while the glories of London and Paris were paid for by
the taxpayers of--of great nation-states, the glories of New York were
almost entirely paid for by the taxpayers of New York, and even then,
most of them were--was privately built. I mean, the only really great
building in New York that was--that was publicly built is the--is City
Hall; I mean architecturally great. And they--the--the city did build
the New York Public Library, which is a spectacular building, but the
books are owned by a private corporation.
LAMB: When did Wall Street start?
Mr. GORDON: Wall Street started as--well, it was built in the--in
the 15--or 1650s when they built a wall to protect New York City
against invasion from New England, and then, of course, the British
came up by sea instead of by land, so the wall didn't do any good.
But it became a financial market starting in the--in the 1780s, and it
became a--it became a synonym for the American financial market in the
1830s. I mean, it became a metonym for the--for the whole apparatus.
LAMB: We're talking about Wall Street a--after its worst week since
Mr. GORDON: Right.
LAMB: Knowing what has happened over the years and your study of it
and history, what's going to happen from here on out?
Mr. GORDON: Well, the history is after a shock like this, the market
tends to take a--a terrible beating, and then within six months to a
year, it's higher than it was before. I mean, that's been the
history; that's what happened after the Kennedy assassination, what
happened after the Cuban missile crisis, what happened after Nixon's
resignation, after Pearl Harbor.
In 1914, the--when World War I suddenly broke out, to everybody's
surprise, Wall Street closed for three months, and it really had no
choice because every other stock market in the world had already
closed, and--and there was no way the New York stock market could have
functioned under those conditions. And it closed for three months.
And then when it finally reopened fully by April of 1915, 1915 turned
out to be the best year in the history of the Dow Jones industrial
average in--in percentage terms.
LAMB: Is there anything unusual about this particular situation
that's different from the others?
Mr. GORDON: Well, of course, what's different this time is that Wall
Street itself was attacked. I mean, we think of all the great Wall
Street names that were associated with the World Trade Center: Morgan
Stanley, Cantor Fitzgerald, dozens of others. They were devastated,
quite literally, and so that's--you know, a lot of these firms are now
operating out of temporary office space in New Jersey, and--and the
phones still are kind of shaky and--and stuff like that. And--and the
financial market lives on communications. So that's--that's one big
But I have no doubt that--that Wall Street will come back. I mean,
it--I mean, the last time it was seriously bombed, in 1920, it was
open for business the next day with the windows boarded up, but the
stock market was functioning; the Morgan Bank was functioning.
LAMB: You have a section in here: Part VI, The Business of War.
Mr. GORDON: Right.
LAMB: The--what's the point of that section?
Mr. GORDON: Well, war is a very expensive proposition, and so it
always--you know, there's a--there's a Chinese saying that wars are
fought with silver bullets, and the nation with the most money and the
most ability to convert its wealth into military strength is the--the
country that ends up winning the war, almost always. So, you know,
there have been lots of times when the effects of war--I mean,
the--the Civil War transformed the financial system of the United
States, for instance. I mean, the IRS was born in the Civil War, by
no means the least of the effects of that war. And the modern paper
money system was born in the--in the Civil War, for instance.
World War II--what--much of the technology that transformed the world
after World War II came about because of World War II. I mean, radar,
large airframes, without which the modern airplane industry couldn't
exist or the airline industry couldn't exist. And the computer, of
course, was originally meant to--in order to calculate artillery
trajectories, and it turned out to be good for all kinds of things.
LAMB: The first essay is "USS Pork Barrel."
Mr. GORDON: Right. Oh, this was the USS Pennsylvania, and it
started out as a good idea, but, you know, government projects often
take on a life of their own because they--they build up constituents
around them, who are--who are benefited by it. And what happened was
in the War of 1812, while we had some wonderful single-ship successes
against the British navy, the--the Royal Navy was so much larger than
the US Navy that eventually we were bottled up, and--and our commerce
was on a standstill and what have you. And Congress wanted to build,
ma--have a navy so that we could, if not defeat the Royal Navy in
a--in a future war, at least we could hold our own and--and greatly
complicate their strategic planning.
And so they ordered six ships …And all they did
was order that it be not less than 74 guns, and so the Navy saw this
opening and--and ordered up a leviathan called the USS Pennsylvania,
which had 136 guns. It was, by some measures, the largest wooden
warship ever constructed, and it took 17 years to build in the
Philadelphia Navy Yard. Most of the time, th--the construction only
took place around elections. For a few months before each election,
there--suddenly there'd be carpenters all over the USS Pennsylvania.
And, finally, it was finished, and it sailed down to the Norfolk Naval
Base down in southern Virginia from Philadelphia, and never set sail
again. I mean, it was obsolete the minute it was finished, and it was
finally burned at the--when the Navy evacuated the Norfolk Navy Base
in the beginning of the Civil War. The Pennsylvania was burned to
the--to the water line and never--was never rebuilt by the
Confederates or anybody else.
LAMB: Where did the phrase `pork barrel' come from?
Mr. GORDON: Well, we're not entirely sure. It showed up in the--in
the Roosevelt era, in the first--Teddy Roosevelt era, and it probably
had to do with the fact that pork barrels--I mean, slaves in the South
used to be fed--they would be handed out joints of pork from a barrel,
and this was s--so handing out goodies to--to everybody. And so it's
probably a Democratic coinage because the South was solidly
Democratic, and, of course, the Democrats were out of office during
the early part of the 20th century. And so, I mean, one man's pork
barrel, of course, is another man's vital national project. It
depends on whose constituents are benefited by it.
LAMB: You also mention in that essay that 30 years later, the--the
word `boondoggle' came into being.
Mr. GORDON: Yes. Well, that apparently was coined by now
out-of-office Republicans, who use it--I mean, basically, the same
thing. It's a government project designed to win votes, not for any
real economic utility.
LAMB: Jay Cooke invented the bond drive.
Mr. GORDON: He invented the bond drive.
LAMB: And before you explain that, from what you know of bond drives,
do you think we're going to need one?
Mr. GORDON: I don't know. It depends on what kind of war this turns
out to be. I mean, it's going to be--I mean, if it turns into
what--I'd be very surprised if it turned into what we recognize as a
war in a conventional sense of armies clashing on--on open ground. So
if it--if it turns into a major war, yes, indeed, we will be having
bond drives again.
LAMB: Who is Jay Cooke, and when did--when did he invent the bond
Mr. GORDON: Jay Cooke was a Philadelphia banker born in Sandusky,
Ohio. And in the beginning of the Civil War, the--the United States
was spending about--I--I think it was $140,000 a day was the--the
daily expenses of the federal government in 1860. They were spending
$1 million a day by the time Bull Run came in the--in the summer of
1861. And the money was just--`Where are we going to get the money?'
They--Salmon Chase, the secretary of the Treasury, went up to Wall
Street and managed to borrow $50 million, which at the time was a
very, very large underwriting for Wall Street, and they just needed to
find a way to--to raise incredible amounts of money.
The--the--the federal debt in 1860 was $65 million. By the end of the
Civil War, it was $2.4 billion. And Jay Cooke found a way to do this
by selling bonds at--you could buy them as--as small as $50, and he
sold them to everybody. I mean, before the Civil War, far fewer than
1 percent of the American population had owned any kind of securities
at all. By the end of the war, Jay Cooke had sold bonds to about 5
percent of the--of the population, which is really a remarkable
achievement. And ever since, I mean, everybo--every country in the
world said, `Boy, is this a good idea.'
LAMB: What about World War II? You have any idea how much money was
raised through the bond drives?
Mr. GORDON: I don't have the figures. I know it was a colossal
amount. I mean, most wars are usually financed on borrowed money, not
on taxes, because you--you can't raise enough through taxes to--to
fight a war.
LAMB: Your essay "The Armor-Plated Scandal."
Mr. GORDON: Well, the armor-plate scandal was--took place in the
late 19th century when the government was beginning to rebuild the
Navy. And we--at the beginning of the 20th century, we had the
second-largest Navy in the world, after the Royal Navy, but we needed
armor plate. And armor plate is--is very tricky stuff to manufacture,
and steel companies never liked manufacturing it much to begin with
because, by its nature, it is what we called a monopsony; there's only
one buyer in the market, and that's the United States Navy. So if you
didn't sell your armor plate to them, you didn't sell it to anybody.
And so Can Do Carnegie and other steel manufacturers weren't too keen
about doing it, but they got talked into it for patriotic reasons, and
then for various political reasons, they essentially got shafted.
They--I mean, a lot of politicians made hay out of a phony scandal and
about blow holes, which are a normal part of--of good armor plate, but
the--the Navy had written all these specifications. I mean,
bureaucrats who knew nothing whatever about the manufacture of steel
wrote all these specifications.
And the head of the Homestead Works, the part of Carnegie steel empire
named Charlie Schwab, he just went ahead and made the armor plate, and
he was very much given to, you know, doing the job now and, you know,
worrying about the details later. And there was a lot of labor unrest
at that time, and--and the unions, in effect, turned them in. And
they--then they had this kangaroo court. I mean, they didn't--they
didn't bother to call Carnegie. They just held hearings based on the
evidence presented by the--by the labor unions and then found them
guilty. This was not exactly justice, but they paid the fine anyway.
And then they--in World War I, they--the government tried to build an
armor-plate factory of its own, and it came in over 1,000 percent over
budget, and it took--it wasn't finished till the war was over, and it
did one run of armor plate costing three times as much as the steel
companies were perfectly willing to sell it for. And it closed and
never worked again. I mean, it was a complete, total loss of money.
LAMB: You have a--a last paragraph I want to read in this essay. You
say, `For the last 100 years, leftist'--poli--`historians have been
regularly dredging up the armor-plate scandal as an example of
capitalist greed at its worst. What it really is, of course, is one
more example of government incompetence, both as a customer and as a
manufacturer.' Who--who are `leftist historians'?
Mr. GORDON: Oh, well, there--there--there are quite a few of them.
Visit any--almost any college campus in the country, and you--and
you--you can have lunch with half a dozen of them. And it goes back
to the turn of the century. I mean, Ida Tarbell, the Muckrakers,
Gustaf--I forget his last name, I'm afraid--who wrote a--a
three-volume economic history of the United States, and--and he knew
just where to place the blame. I mean, the same place Ralph Nader
places the blame for absolutely everything: the corporations. And
this is tendentious history at its worst. Often--I mean, Ida Tarbell,
she was a great propagandist, but not a good historian.
LAMB: Most history in the United States written by certain political
point of view?
Mr. GORDON: Well, I--it's more so now than it used to be, I believe.
It's been the fate of--of capitalism--I mean, the very word
`capitalism' was coined by Karl Marx, and the history of capitalism
has been, to a very large extent, written by its enemies, historians
who look down at business. I mean, they regard it as, at best, a
grubby affair, unlike their own high-flown profession. And so I--you
know, they're out to prove a point, many of them. I mean, there are
many great academic historians, and there are--I mean, people like
Alfred Chandler of Harvard, who was a great business historian, who
was certainly not guilty of this, but there are others who are--they
have an agenda, and they're going to push it.
LAMB: How would you describe your own background in politics...
Mr. GORDON: Well, I...
Mr. GORDON: Well, I--I've tried to stay away from ideology. I think
ideologies are--are used by people as a substitute for thought.
I'm--I believe in free markets, in to the--to the extent that they are
possible. I mean, there are times when you cannot have a free market.
I mean, the 18th century, they had, you know, the--the cure--the way
to handle famine was the rich ate and the poor starved. That is not
acceptable in the modern era, but we haven't had a famine lately
And free markets need to be regulated. They are not self-sustaining.
They will self-destruct if there aren't regulators 'cause--I forget
who it was who said that, `The trouble with socialism is socialism,
but the trouble with capitalism is capitalists.' And they will always
seek their short-term advantage in the market rather than--for
themselves rather than seek to sustain the market as a whole.
To--sustaining the market as a whole is the function of society as a
whole, because society as a whole is--benefits for it--from it.
And--and, therefore, I mean, you need referees in the market, just the
same way as you need the referees at the Super Bowl, because when
there's a lot at stake, people are willing to cheat.
LAMB: I brought a Washington Post article from this morning's
newspaper with me to ask you about it. The headline on it is: Line
of US Bailout Supplicants Grows: `Some lawmakers'--exprect--`express
reluctance to extend federal assistant further.' This is all off the
$15 billion voted for the airlines.
Mr. GORDON: Right.
LAMB: And I--to start with, what--what's your reaction to that, $15
Mr. GORDON: Well, I think--in this particular instance, because of
what has happened, I think the airlines--either they get assistance
from the federal government, or a lot of them are simply going to go
out of business. I mean, there's--there's going to be a blood bath.
I would hope that it was structured in such a way as that the
government can recoup in times of prosperity.
The airline business is a very peculiar business, just like the
railroad business in the 19th century was. It's extremely
capital-intensive. And the expenses tend to go on whether the
airplanes are full or empty, and it--and it--it costs just as much to
send an empty airplane across the country as it does to send a full
one. And so once you get above a certain passenger load, every
s--passenger after that is pure gravy; it doesn't cost any more money.
But any passenger below that break-even point is pure loss. And so
it's the feast and famine business. In--in good times, they tend to
make a lot of money, but in--in poor times, they tend to hemorrhage
money. And I'm not sure that there's a solution to that.
In this case, it's because it's--the impact was so enormous that I
think, you know, there--there has to be some sort of help now. And
once you help out one group, you always find a line stretching from
Washington to the Mississippi River saying, `Me, too. I mean, gee,
look how I was injured in the, you know, gardening business,' or
whatever. I mean, this happened in 1929 when Herbert Hoover promised
the farmers relief--tariff relief by raising tariffs on agricultural
products in order to protect the American market for American farmers,
who were having a terrible time in 1929. And when they got through,
the--they had an absolute feeding frenzy in--in Washington. And
w--the result was the Smoot-Hawley Tariff, which was a--one of the
primary causes for the Great Depression, what turned an ordinary
recession into the great economic calamity of American history.
LAMB: How did that work?
Mr. GORDON: Well, what happened was they--they--it was the highest
tariffs in American history, the Smoot-Hawley Tariff, and what it did
was just simply destroyed world trade, I mean, all over the world, I
mean, because other countries had no choice but to raise tariff walls
of their own. They couldn't--you know, they couldn't sell their goods
to America. They weren't about to let Americans sell their goods to
Switzerland or--or wherever.
And so everybody's tariffs walls went up to meet our tariff walls, and
world trade simply collapsed. And in the United States, we were doing
about $5 billion a year in--in world trade in 1929, and by 1934, we
were doing about $1 billion or--I forget the exact figures, but it was
something like that. And it wasn't until World War II that trade
LAMB: In this article by Juliet Eilperin in The Washington Post,
there's some further comments about other industries wanting money.
It says, `Other industries closely tied to the aviation have also
appealed to the Congress for help in recent days, suggesting that they
have suffered such severe losses they need direct federal assistance.
Richard M. Copland, president of the American Society of Travel
Agents, has asked for $4 billion in federal grants and no-interest
loans to cushion the blow of the recent airline shutdown. He
emphasized that airlines have cut travel agents' commissions by more
than half over the past seven years.' Where does this star--or stop or
where should it stop?
Mr. GORDON: Well, I don't know. I--I mean, I--I can't s--speak
specifically to the travel agency business because I don't know that
much about it. I know that they have been--they've been having a bad
time for--long before this happened because the Internet is, in a
sense, eliminating middlemen, and travel agents are middlemen. And
all of a sudden, you don't need the travel agent anymore. You can go
on the Internet and make your own reservations and find out all you
need to know. And so travel agents are having a very bad time. And I
think, you know, we can't help out everybody because, you know, then
we turn into a socialist country, and that's guaranteed to be a
LAMB: But you say you're--believe in the free markets. Why wouldn't
you just let these airlines--let it--let it--the market decide in this
Mr. GORDON: Well, 'cause I think, in this case, the blow was so
extraordinary and so sudden that there's no time to adjust, and I
think you--there'll be a--an awful lot of damage would be done that
would take years to recover from. I mean, I think--you know, I
certainly don't want the government simply to write them a check
saying, `OK, you guys have had a bad time. Here's $1 billion.' I
mean, there's got to be some way that they have to pay it back
in--in--you know, like the Chrysler bailout, which, in--in that
particular case, I don't think I would have--have been in favor of.
But Chrysler did pay back the money when good times returned
LAMB: So you expect these airlines to pay this money back?
Mr. GORDON: I would hope so. I mean, I don't know what the
legislation is. I haven't read the legislation, but I would hope it
would be structured in some such way that the government gets it back.
LAMB: Based on all the wars that you've covered and their history
essays, what kind of financial condition is this country in today,
looking ahead to what could be, as they say--as the government says, a
long, drawn-out war?
Mr. GORDON: Oh, we're in very good shape. We're in much better
shape now than we were 10 years ago. I mean, 10 years ago the
government was running deeply, deeply in the red, and now we're--we're
in surplus. I mean, even this year, which has not been a banner year
for the American economy, the--the surplus is going to be about $150
billion, which is--you know, that's a lot of money. And we ha--yeah,
we've have paid down a lot of the debt that we had borrowed before,
for very bad reasons in the '70s and '80s, and so that money is now
available to borrow again if we need it. I mean, that's--you know,
you can't borrow $1 twice. I mean, we paid back a lot of it, so now
it's--it's there to--if we need to dip into the till.
LAMB: Has there ever been a war that's been bad for the country's
Mr. GORDON: The Vietnam War was because I think Lyndon Johnson tried
to give us both guns and butter, both the Great Society and the
Vietnam War, and it led to the worst inflation we've had since the
Civil War. And so, I mean, the Vietnam War gave the--us the economic
malaise of the--of the '70s with high inflation, high unemployment,
which was, under Keynesian terms, supposed to be impossible.
LAMB: Your last essay in this section on war is the American
Superweapon. What was that?
Mr. GORDON: That was a man named Donald Nelson, who had worked for
Sears Roebuck, and he became head of the War Production Board after
Pearl Harbor in--in which the United States turned itself temporarily
into a command economy. And it was an astonishing performance in that
the civilian economy, at the end of the Second World War, was about
the same size it had been at the beginning of the--of the Second World
War, and we'd added on top of that a war economy of virtually the same
size. The American economy doubled in the war years, and almost all
of that was war production. And Donald Nelson was the man who
organized this and--and commanded it.
I mean, he was--you know, he would get what the armed services needed.
He'd find out where the--the stuff could be manufactured. He'd find
out where the industrial materials needed were, and he'd assign
priorities to them. I mean, some things that were in very short
supply, notably rubber because most of the rubber had come from
Malaya, which was in Japanese hands--and so we started a synthetic
rubber industry virtually from scratch, and by the end of the war we
were producing about 800,000 tons a year. But the military was
absorbing all of that, I mean, so World War II, for those who lived
through it, remember it as the golden age of flat tires because you
simply couldn't get new tires unless you were at least a four-star
LAMB: Later on you--in a chapter on Engine Charlie Wilson, you say
that, `In 1954, the Defense Department ran, by far, the most powerful
military operation in the world, but that power came at a fearful cost
to the American taxpayer. The Pentagon consumed 60 percent of the
federal budget and $1 out of every $8 of GNP.' Why was it so high in
Mr. GORDON: Well, because we were fighting a Cold War, which was--I
mean, by the grace of God, it didn't get hot, or it would have been
even more expensive.
LAMB: But 60 percent of the...
Mr. GORDON: Of the federal budget was--because, remember, that time
the--the federal budget did not have--I mean, it didn't have Medicare
or Medicaid and other social costs like that. I mean, the--the
military budget is still very large, but it's a much smaller
percentage of the--of the federal budget. It's also now a much
smaller percentage of--of GNP. It's now, I think, about 5 percent or
something like that.
LAMB: Who was Engine Charlie Wilson?
Mr. GORDON: Engine Charlie Wilson was the president of General
Motors. He was called Engine Charlie Wilson because one of the great
coincidences in American history that--when the--the president of--of
General Motors was Charles E. Wilson and the president of General
Electric was Charles E. Wilson. They were not related to each other,
and so one was called Engine Charlie and the other was Electric
And Engine Charlie had started out as--he actually came from a fairly
socialist background. His father claimed to work for Eugene V. Debs
and what have you, and he was--had a union card--Charlie Wilson had a
union card, which he had on his desk he was very proud of. And he--he
was the one who first thought up the idea of guaranteed wages for
industrial workers, I mean, so that if they were laid off, they would
still got a percentage of their--of their wages to see them through
the bad times. And he, more or less, arranged for the United Auto
Workers to demand this and then gave it to them.
And he also was instrumental in developing pension funds for
industrial workers, and Peter Drucker, the great business guru, said
to him, `Well, you know that the American workers will end up owning
the stock and the corporations in a--in a few generations if you--if
you have this,' and Charlie Wilson said, `That's just the way it
I mean, Charlie Wilson was a great hero, and then unfortunately for
him, he went to Washington and found out just how nasty a town this
can be because he was asked in a closed session when he--the first
confirmation as secretary of Defense, he was asked if he--if it was
necessary, could he make a decision that was good for the United
States, but adverse to the interests of General Motors. And he said
he certainly could make such a decision, but he couldn't imagine such
a situation coming about because what was good for the United States
was good for General Motors and vice versa. And a lot of people
leaked this and changed--turned the vice versa into what is good for
General Motors is good for the United States, signed Charles E.
Wilson. I mean, it was the most egregious intellectual dishonesty you
can possibly imagine, but welcome to Washington.
LAMB: Where's your home, originally?
Mr. GORDON: New York City. I was born on 17th Street and Second
LAMB: What were your parents like, and are they still alive and what
do they do?
Mr. GORDON: No, they're--they're long since dead. My father
was--was a writer at one point, a television producer. He then went
into running rent-a-car franchises in the French West Indies, and my
mother was Oscar Hammerstein's secretary.
LAMB: Did you know him?
Mr. GORDON: Indeed. My mother's second husband was his brother, so
he was Uncle Oc.
LAMB: How did you get into the writing business?
Mr. GORDON: I, more or less, fell into it in a--I used--I--I've
always loved books. Ever since I was, you know, old enough to read, I
had my nose in a book. And I went to work for a publisher after I
graduated from college, Harper--Harper & Row it was then; Harper
Collins now. And then I went--I traveled for a while, and then I went
to work for Herman Badillo, a congressman, as his New York press
secretary, which was a wonderful job because I had absolutely nothing
to do, because the press releases were all written in Washington. All
I had to do occasionally was, you know, send them around.
And so I started going over to the public library and--and doing
research and writing stories. And I wrote a story on the gold panic
of 1869, mo--probably the most exciting single day in the history of
Wall Street, and I wanted to see what had been done on the Erie Wars,
which was about the--the Erie Wars of--the fight for control of the
Erie Railway between Commodore Vanderbilt and Jay Gould and Jim Fisk
and Daniel Drew. And I was astonished to discover that nobody had
written a book about it since the 1870s, so it was written by the
Adams brothers, Charles Francis Adams and--and Henry Adams, called
"Chapters of Erie." And so I decided to write a book on the Erie Wars,
which came out in 1988, called "The Scarlet Woman of Wall Street," and
American Heritage called me up and asked me to write their business
history column, and I said, `Thank you very much, I'd be delighted,'
and so I've been in this business ever since.
LAMB: Who owns American Heritage?
Mr. GORDON: It's owned by Forbes.
LAMB: D--do they ask you to be a free marketer if you write for
Mr. GORDON: No, they've never asked me to do anything--I mean, like
that. I mean--now I imagine if I started turning out essays, you
know, demanding the--the means of production be owned by the people or
something, I'm not sure how long I'd be working for Forbes, but no,
they've never even suggested that I do anything like that.
LAMB: How long have you done--I mean, not how long, but how often do
you do a column for American Heritage?
Mr. GORDON: In every issue, and there are eight issues a year.
LAMB: Under your chapter King Cotton, you--you start off by saying
`As any faithful reader of the old gossip columns knows, great wealth
too easily acquired can be a very mixed blessing indeed.' Why?
Mr. GORDON: Well, because an awful lot of people who woke up one
morning and found themselves rich beyond the wildest dreams of avarice
didn't lead very fulfilling lives. I mean, they--they end up, you
know, running racehorses and sleeping till noon and going out to fancy
restaurants every night and they never do anything. And you know,
Noel Coward, who knew what he was talking about because he did both
with great enthusiasm, once said that work is so much more fun than
fun, and a lot of people who were--inherited vast wealth at an early
age never find that out. They never work and all they had was fun and
the fun doesn't turn out to be much fun after a while.
LAMB: Supposedly at the heart of the hatred for this country from
some of the Osama bin Laden followers is because of our wealth and
because of the our lifestyle.
Mr. GORDON: I'm not sure that's true. I'm not sure how much they
know about our lifestyle. I remember Franklin Roosevelt once said
that the way to convince the Soviet Union of the superiority of--of
the United States would be to bomb them with Sears Roebuck catalogs.
I'm just not sure that they really know much about American life. I
mean, Osama bin Laden himself is--is--comes from an extremely wealthy
I mean, so--in--you know, Will Rogers once said that `I've been rich
and I've been poor and believe me, rich is better.' I think most of
those people--I think they resent their own poverty. They don't
resent American wealth, and they have often been manipulated as to
deflect from their own governments, the--deflect their anger onto the
United States as if we are somehow responsible for their poverty,
which we're not. For the most part their own governments are
responsible for their poverty.
LAMB: Another thing they seem not to like is women out front in any
way or visible, and they want them covered. I--I--just an aside and
has nothing to do with them at all, but I notice in your book, almost
every--there's not a woman featured in the book that I can remember.
Is that--in--in business. Is that--does that strike you as--let me
k--is there a way to explain that?
Mr. GORDON: Well, the easiest way to explain it is these are stories
of business history, and women's contributions to business are
relatively recent. I mean...
LAMB: I--I didn't--I didn't mean to--I wasn't accusing you of not
having women in your book as much as...
Mr. GORDON: No.
LAMB: ...why not? Why in history have men, and almost no women,
played much role in the--in the history of business?
Mr. GORDON: Well, for a long while it just--it was--it was thought
that it was not a woman's place, and the--you know, the traditional
division of--of labor was that women would run the home and men would
go out and--and earn the livelihood, and that's--that's the way it
was. I mean--and so women didn't have a chance to get into business,
and they--in the rare occasions when they did get into business, they
were either resented or--or made fun of.
I mean, Hetty Green was--made one of the great American fortunes.
She's the only woman to have made her own fortune, although she
started out rich, but she greatly multiplied that fortune. You know,
of--of the top 40 richest Americans who ever lived, Hetty Green is the
only woman, and she was a figure of fun. And she was--she was a
genuine miser, which is a very rare psychological phenomenon. I mean,
there are a lot of people who are cheapskates, but she w--she was
obsessed with not having enough money. I mean, she was--she had the
same attitude towards money as anorexics have toward fat. They always
perceive themselves as being fat regardless of the fact, you know,
that they're clearly not.
And Hetty Green always perceived herself to be poor, although she was
one of the half-dozen richest people in the country, and she led a
very sad life in many ways.
LAMB: What's your sense, if you were do another book like this in 50
years, would women be in it?
Mr. GORDON: Oh, indeed they would. In--in the last 50 years, which
I don't have a great many stories, I mean, there have been lots of--of
women who have achieved great things in business, and there'll be many
more because, you know, they they--they haven't been in the pipeline,
I mean, so they couldn't be CEO of a major corporation because they
didn't start out soon enough. But no, I'm sure women will be--I mean,
they're every bit as capable of making a buck as men are, and for the
most part, much more capable at keeping it.
LAMB: Y--you tell us that your great-great-great grandfather
exchanged 35 acres of land for what? A horse and...
Mr. GORDON: A horse and a saddle.
LAMB: A saddle, and that--the land turned out to be part of
Mr. GORDON: Yes, it's downtown Nashville. It's where Capitol Hill
is, in the--in--just the heart of Nashville.
LAMB: How much of your history goes to Nashville, Tennessee?
Mr. GORDON: The Gordons come from Tennessee. I mean, my grandfather
came up from Tennessee in 1898 when he was 16.
LAMB: Any relation to the Congressman Bart Gordon when he was there?
Mr. GORDON: No.
LAMB: And in your book you feature different individuals in history
that I want you--I just want to go through a few of them and get you
to talk about them. Isaac Singer?
Mr. GORDON: I'm sorry?
LAMB: Isaac Singer?
Mr. GORDON: Oh, the--the--right, the sewing machine. He was
a--yeah, he was--he was a fascinating man who--a born tinkerer. He
wanted to be an actor. He was a mediocre actor, but he was a great
tinkerer, and he invented the sewing machine. I mean, ba--he--Elias
Howe made a sewing machine and got a patent on it, but the trouble
with Howe's sewing machine was it didn't work, and Singer made a
sewing machine that worked, and so eventually they--in the first
patent pool, they, you know, divided the--the spoils, and then Singer
became extremely rich.
He was a--an odd man in some ways. I mean, he--he was married a
couple of times, had endless numbers of mistress--had 20 or 24
illegitimate children, and when he died, he left them all about
$200,000 each, and of course the newspapers had a field day with all
of these children suddenly appearing like mushrooms. And he was--I
don't think he was a very nice man, but he--he--he did a--a great
service for the women of the 19th century. The sewing machine, I
mean, not only greatly lowered the price of clothes, but it greatly
improved the--the living standards of--of--of women.
LAMB: You start your book off with a quote from Peter Cooper. "I
have always recognized that the object of business is to make money in
an honorable manner. I have endeavored to remember that object of
life is to do good." Cooper of Cooper Union.
Mr. GORDON: Of Cooper Union.
LAMB: Explain all that. How did that happen?
Mr. GORDON: Peter Cooper started off as a--as a poor boy. His
father wasn't very successful. He only had a year or so of formal
education. He always bitterly--well, not bitterly, but he--he
regretted the lack of education, and when he became rich, which he did
very soon--he was a born businessman; he bought a glue factory for
$2,000 and in the first year made a $10,000 profit and was soon
earning $100,000 a year from his glue factory, and went into steel.
He built the first locomotive in the United States. He owned wire
factories. He was a major player in the laying of the Atlantic cable
and the organizing of the telegraph system of the United States, and
in the 1850s he founded the Cooper Union.
And he also--he invented night school, because he had--he thought, you
know, people like him starting off who had to work for a living, but
they could study at night, and at that time there was--was no way to
do that. And so he made the Cooper Union so that there were night
classes, and he really invented the concept of--of night school. And
he organized the Cooper Union, which is an engineering school, and had
a free library. Anybody could use it, not just students. And the
Cooper Union to this day does not charge tuition. It's--I believe
it's the only private university in the--in the United States that
does not, although some of them have plenty of money, but they still
charge plenty of tuition.
LAMB: Was he around when Abraham Lincoln made his famous speech?
Mr. GORDON: Indeed. Yeah. He--Coo--Peter Cooper died around 1880,
I believe, and I don't know if he was in the audience. I would be
surprised if he was not, when he made his famous `house divided'
speech at the Cooper Union.
LAMB: Sylvester Graham?
Mr. GORDON: Well, Sylvester Graham was the first of the great health
nuts in the United States. He was a clergyman. He was very sickly.
A--a great many health nuts, they--he didn't live very long. There
may be some connection there, I don't know. But he had no background
in science whatsoever, and--and--but it was--he had a great gift for
gab, he was a good preacher, and he started preaching about Graham
diet and I forget exactly what the--the details of the diet were, but
it was, you know, as somebody once said about--about health nuts is,
if--if--if you like it, don't eat it. I mean they--they never tell
you to eat steak and french fries. It's always eat twigs and sawdust
pudding, as--as Ralph Waldo Emerson described it. And it--Sylvester
Graham ascribed the spread of cholera to `excessive lewdness in
chicken pie,' I remember. And he was--you know, his time passed and
he was forgotten.
But he thought he was--he would be--you know, that people would make a
pilgrimage to his--his house. In fact, his house turned into a
tavern. But he is famous for one thing, because he invented the
LAMB: The interstate highway system. How'd that happen?
Mr. GORDON: It happened because an--an Army captain, after World War
I, thought it would be fun to join an Army expedition which was to
cross the country by powered vehicles, by trucks and--and--they didn't
have Jeeps then, but the equivalent. And they started off from
Washington. There's apparently a monument outside of the White House
somewhere--I forget exactly where--on the--on the Mall. But this is
where this expedition started.
And they made their way slowly across the country and it took them two
months. And they often--the--the roads were just nonexistent for
the--to a large extent, and very slow, and they--they had to remake
the bridges because they were too narrow to get trucks over them.
And--and they finally got there and the Army put out a big report
about how the need for a proper highway system to--for national
defense purposes, and of course like most Army reports, it got put
into the nearest file drawer and completely forgotten. But then
the--that Army captain who thought it would be fun to spend the summer
on this expedition in the 1950s, he became president of the United
States, and he was able to push it through, and it was, of course,
LAMB: The Cadillac.
Mr. GORDON: Oh, Cadillac was a luxury car. I mean, it started as a
luxury car, it was always a luxury car, and it nearly died in the
Depression because it was--it never really made money. And the man
who was--he was in charge of the maintenance of catalo--Cadillac, and
he--he wondered why it was that so many of the customers at Cadillac
dealers were black, whereas Cadillac had a policy of not selling to
blacks because they wanted the cars to be prestige, and so they didn't
want to have black customers, and yet all--half the customers for the
maintenance were--were black. And so he found out what it was of
course, that it was, you know, the Cadillac dealer wouldn't sell the
car directly to the--to a black man. The black man would go out to
find some white man who would buy it and, you know, give him $200 and
take the car.
And it was--cars are one of the few prestige items that successful
blacks in the '20s and '30s could indulge in. I mean, they couldn't
go to fancy nightclubs, they couldn't live in--in fancy apartment
buildings. But they could drive a fancy car. And so this man, whose
name--I'm sorry, I just get--I cannot think of what his name is at the
moment; he was a German. And he--he said `Let's try to sell the car
to--to these customers who are anxious for it.' And then they did, and
he made Cadillac profitable within a year, and then he revolutionized
the manufacture of Cadillacs. He said that just because they are a
prestige car doesn't mean they can't be manufactured according to mass
production methods just like Chevrolet, just using better parts
and--and more careful design and what have you. And so within a
couple of years, Cadillac having been a--a money loser for General
Motors, was General Motors' most successful car.
And then he--he became head of Chevrolet after the war, and--and
unfortunately he--he came down with--with throat cancer and died when
he was only about 46, otherwise he quite possibly would have replaced
Charlie Wilson as--as president of General Motors.
LAMB: How often in your look at history are you surprised by things
like, you know, these essays--like the graham crackers thing? I know
it's a simple thing, but...
Mr. GORDON: Oh, I'm always surprised. I mean, that's one of the
things I love about this job is that, you know, you get to find out
about these things, and you always find the most amazing coincidences
and things you didn't know and--and you know, I was--I love to learn
and--and this is a great way to learn.
LAMB: Where did you go to school?
Mr. GORDON: I went to St. Bernard's in--in New York and Millbrook
School up in Dutchess County, a boarding school, and then I went to
Vanderbilt University in Nashville, Tennessee.
LAMB: What did you study?
Mr. GORDON: History.
LAMB: You--you have a chapter that says RIP--rest in peace--ICC, and
that's the Interstate Commerce Commission. You say, `Self-enforcing
laws are in everyone's interest except for one group--the people who
make and enforce the laws to start with. Those who work for
government, legislators and bureaucrats alike prefer to manage
problems rather than solve them.'
Mr. GORDON: Well, exactly, because I mean, if bureaucracies solved
the problem they were there to handle, well, then they'd be out of a
job, I mean, so they're not about to solve it if they can possibly
avoid doing so.
And you know, a self-enforcing law is a law that simply takes care of
itself. I mean, the example I use was in the Roman army, they used to
bake very large loaves of bread, and the loaves were enough for two
soldiers for a day. And so the Roman army had a rule that one soldier
would cut the loaf in half and the other soldier would choose which
half he preferred to have. And so there was no cheating, no fights,
you know because the same was true of the legions as it was, you know,
true in every army--hurry up and wait--and so the soldiers had a bad
habit of getting into fights and they couldn't fight over food because
of this rule.
And the ICC came into existence because the railroads were gouging to
a fare-thee-well. What happened was the railroads--on the trunk lines
between, like, Chicago and New York, I mean, they competed fiercely on
those trunk lines because, you know, if--you could ship from Chicago
to New York on the New York Central, on the Erie Railway, on the
Pennsylvania, and so they had to compete for the business. But on the
branch lines off of these trunk lines, each railroad had a monopoly.
I mean, so--if you were a manufacturer in Chicago and wanted to ship
to New York, well, you could choose your railroad. If you were a
manufacturer in Altoona and wanted to ship to New York, well, you
shipped on the Pennsylvania or you didn't ship.
And so the--the railroads would really stick it to these customers
where they had a monopoly, and the customers, not surprisingly,
resented it. And so they went--the government--this is one of the
causes of the rises of--of liberalism or of the left was the
overweening power of the corporations at the end of the 19th century,
and this--the railroads were the--the textbook example of this.
And so what finally happened was the Interstate Commerce Commission,
which was eventually enabled to set prices and to control the
industry, and actually before it came into existence, the Pennsylvania
Railroad said, `We'd like nothing better than a government agency that
allowed us to make a guaranteed profit,' a cartel, in a sense. And
that's exactly what the ICC promptly turned into because they--the ICC
had to be headed by people who understood the railroad business, well,
they had to come from the railroads, and they thought like railroad
men and they promptly conspired under the ICC to make a cartel.
And so the railroads became--as always happens in cartels, they became
fat, dumb and lazy, uninnovative, and the railroads slowly declined.
And then finally in the 1970s, the prices were finally deregulated,
and the ICC had nothing to do, although it still stuck around for 20
years and was deregulated in, like, '77 and it went out of business in
1995, and for 18 years I have no idea what they did. They pushed
stacks of paper from one side of the desk to another.
LAMB: We'll go back to your philosophy that legislators and
bureaucrats alike prefer to manage problems rather than solve them.
How does that bode for us, then, in the next--you know, this crisis
we're in right now?
Mr. GORDON: Well, now, this is the kind of problem that governments
are paid to manage. And I mean, how it'll turn out for business, I
don't know. I mean, the--the trend now for the last 30 or 40 years
has been deregulatory, you know, to let the free market work where the
free market can work and allocating resources and setting prices
because free markets are so much more efficient than the--the best
bureaucracy in the world at doing exactly that. I mean, the Soviet
Union tried to run their economy by a bureaucratic method, and of--and
of course it was an utter disaster. It simply couldn't produce the
goods and services.
LAMB: Our guest has been John Steele Gordon, and this is what the
book looks like. It's called the "The Business of America." Thank you
Mr. GORDON: Thank you.
LAMB: As we did la--last week, we're gonna continue our discussion
and open the program up to calls and the numbers will be on the
screen. We have an East Coast and Central time zone number and a
Mountain and Pacific time zone number. And folks can begin dialing
now and we'll get them on this program in the next minute or so.
Based on--on--I made a note here and I can't find it. Based on your
experience on history, what's the history of the American conflict
like we're going through right now? Who makes money in a situation
Mr. GORDON: Well, we--we'll find that out. I mean it just--you
know, I was joking before the show that it's, you know, the--Amtrak is
doing very well indeed thanks to this. Also flag manufacturers are
doing very well at the moment. I mean, there's always--you know, it's
an ill wind that blows nobody good, and--but it--in the long term what
is gonna happen--because we don't know how this is gonna play out. We
don't--you know, I hope this is the last disaster we have in the
United States like this, but it might not be.
LAMB: Do people take advantage of--I mean American businesspeople
take advantage of the fact that you're in a war in the past in
Mr. GORDON: Well, they certainly tried to make a profit. That's
what--that's what they're there for. But I don't--there have been
individual instances, of course, of gouging and trying to do all kinds
of nasty--I mean, capitalists are often not nice people. But they've
also done--I mean, that's how we've won all our previous wars was, you
know, through the--the American economy.
LAMB: Let's go to our phones. Minneapolis, you are on the air.
Unidentified Man #1: Yes. I was wondering if you had any thoughts
about eliminating most of the airline traffic anyway. For instance,
the 747 on takeoff uses as much fuel as 10,000 cars as it climbs to
altitude as the cars do in a day. Since we have the Internet
functioning pretty well now and--and we have the ability to have
face-to-face conversations with each other, making business decisions,
we can even send signatures across the Internet, I thought maybe we
could eliminate some of our fuel problems that we import by
eliminating some of the airline travel. I'll hang up and listen.
LAMB: Unfortunately Mr. Cooper didn't hear--or Mr. Gordon--excuse
me--didn't hear your--the--the call. Let me go ahead to the--he
asked--he actually said why don't you eliminate the 747 because it
uses so much fuel.
Mr. GORDON: I di--I--I'm not enough of an expert on aircraft to know
that. I mean, the 7--I mean, the Concorde could certainly be
eliminated for the amount of fuel it uses per passenger. I mean,
that's just obscene. It doesn't...
LAMB: Yeah, that--we didn't--we didn't do justice to that call, and I
apologize to the caller. The--Mr. Gordon couldn't hear the call.
Let's go to Portland, Oregon. Go ahead, please. You're on the air.
Unidentified Man #2: Hi. Great to call. I was wondering in your
study of these historical aspects of business if you looked at the
compensation given to either the entrepreneurs or executives compared
with the people who work for them. And has that narrowed over time in
the politics change? If it widens--it seems to me it's widened
lately. Or it's been reported that it's widened, and I'm wondering if
that's gonna have some change in our politics. That's kind of my
Mr. GORDON: OK. Well, I think--I mean, entrepreneurs make their
money by starting a company and in--investing in it and being right.
I mean, many of them are wrong. Corporate executives are another
matter. And I think there the compensation has widened enormously.
And it's--it's come about because, I mean, theoretically the board of
directors should con--should hire the management and the management
should report to the board of directors. In recent years, it's--it's
the other way around. I mean, the management often sits on the board
of directors and chooses the other members of the board, who are not
about to vote against them, so they've become their own boss. And
whenever you become your own boss, you're likely to give yourself a
very handsome salary. And I--I would like to see that changed, but
unfortunately the state of Delaware, where most large corporations are
incorporated, does not agree with me on that.
LAMB: Athens, Georgia, you're next. Go ahead, please.
Unidentified Man #3: Hi. Thanks for taking my call. I was very
interested in your point about how Karl Marx first used the term
capitalism. I was wondering if you knew who first coined the term
socialism? And also to what extent has socialism become more
prevalent in the American government's policies towards business over
the past 30 or 40 years?
Mr. GORDON: Well, I--I'm afraid I don't know who coined the term
socialism, but I think socialism has been discredited. I mean,
we've--we've tried--since World War I, we've had socialist experiments
running all the way from semi-capitalist Britain to the unspeakable
tyrannies of, say, North Korea, and they've always been remarkably
unproductive of wealth. I mean, so--socialism is--I think we have
proved as well as can possibly be proved that socialism simply does
not create wealth.
LAMB: Let's see, we have a call here. Where are you calling from
this evening? Caller? Let's see. We're having trouble with the
phones. Hello, there. Where are you calling from, please?
Unidentified Man #4: Hello. I'm calling from Birmingham, Michigan.
LAMB: You're on the air. Go right ahead, please.
Unidentified Man #4: Oh, really? Oh, well, my comment is twofold.
One, the 747 is a marvelously efficient way of transporting goods.
Scientific American ran a study a few years ago about the amount of
fuel it took to take a ton mile of freight somewhere, and jet aircraft
were among the lowest. Probably barge traffic is even lower, but
certainly not quicker. The other thing is, about idealistic regimes
of socialism and capitalism, they run--not capitalism, but communism
and socialism. They run contrary to human nature. So capitalism is
more suited to it, excepting that we have to figure out what to do
with the people who can't compete, and that's a challenge of
capitalism. That's all I have to say.
Mr. GORDON: I--I agree with you. Socialism is contrary to human
nature and capitalism is what you get when you allow people to pursue
their self-interests under the rule of law. I mean, that, I think, is
a really good definition of--of capitalism, and--and in every instance
it has produced far more wealth than any other system, for everybody.
LAMB: Philadelphia, go ahead, please. You're on the air.
Unidentified Man #5: Mr. Gordon, thank you for your diligence in
writing the information that you do. What I'm curious about since Mr.
Buffett was unable to make money in the airline industry, what leads
our officials to believe that the taxpayer could make money?
Mr. GORDON: Well, I'm not sure they think the taxpayer cans make
money, but I think they--what they're counting on is the taxpayers
will lose less money through this than they otherwise would if we
simply allowed the weak carriers and--and, apparently in this case,
some of the strong carriers to simply self-destruct.
LAMB: Decatur, Illinois, for John Steele Gordon, go ahead, please.
Mr. JIM MARTIN: Hi. My name is Jim Martin. I'm from Illinois.
I--what I was interested in is that you mention international
business. I believe the future is--is the Internet. And to get
international trade through independent business owners would resolve
a lot of--a lot of problems. I was wondering what your opinion is on
Mr. GORDON: I agree. I mean, the--globalization is an unstoppable
development, and it's going to be one of the great political problems
of the early 21st century is in finding how to regulate a--a global
economy. At the moment, although we have an increasingly global
economy, the regulatory authorities are all national. And so it's
possible to play one off against the other, which sometimes is good,
but--but sometimes is--is terrible. And--I mean, how do we--do we end
up with one central bank and--and how do we achieve that? And this
would--is gonna, of course, require the sacrifice of national
sovereignty, which is the most difficult thing for a politician to
secede. It's gonna be a--a messy and protracted discussion.
LAMB: Next call, Hardin, Montana, you're on the air.
Unidentified Woman #1: Yes. I'm amazed I got through. You were
talking about the Interstate Commerce Commission and didn't know what
they'd done in the last few years. And it seems to me--I'm
remembering back quite a ways and sometimes my memory doesn't work
real good, but I think they had to do with transporting garbage from
different states into other states to get rid of it, and the states
had to take it. Well, they tried to do that to Montana, and the
organization I belong to took exception to it and we fought them
to--you know, we stopped them, and I think that this is something
that's really to be commended.
Mr. GORDON: I'm not sure it would be the Interstate Commerce
Commission that would be in charge of that, but I'm really not sure.
But, I mean, I wouldn't want garbage in--in my backdoor, but
it's--it's--you have to--we have to do something with garbage.
LAMB: McAllen, Texas, go ahead, please.
Mr. MIKE MULLEN: Yes. My name is Mike Mullen. I'm calling from
McAllen, Texas. I would like to ask this. This would be kind of
creative financing. The gove--the airlines today, what they need is
money, and so I would say this, That what the government should do,
the Congress, president and so forth, is put a program together and
issue a debit card or cards to all federal employees and thereby they
would have future flying facilities at all times. It wouldn't be a
bailout like, as example, Chrysler, and it would solve a situation, I
think, quite well. What's your comment on that?
Mr. GORDON: I'm not quite sure how the mechanism would work, but a
lot of these airlines, at the moment, they have bills they have to pay
this week, and they don't have the money in the bank to pay them, and
so, I mean, what they need right now is--is cash. And I think it has
to be a fairly direct infusion of cash.
LAMB: What happens if this cash keeps the stock price higher, allows
them to restore the stock price, but a lot of people los--lost their
jobs in the interim and the government, in effect, then keeps the
stock up but 100,000 people lose their jobs?
Mr. GORDON: Well, I don't think--it's not likely--I--I don't think
airline stocks are gonna be the golden boys of Wall Street for quite
some time. I'm--I don't think it's gonna keep the stock price up,
and--and whether the job loss is temporary or permanent, I don't know.
I mean, sometimes--I mean, part of capitalism was what Schumpeter
called the creative destruction. I mean, the steel industry, for
instance, produces just about as much steel today as it did in 1975,
but it uses less than--about one-fifth the number of workers to do
that. And, I mean, if the airlines can fly as many passengers as they
used to using fewer people to do it, well, that's in the long run a
good thing. It's a terrible thing for the people who lose their jobs,
but that's an artifact of capitalism and it's inescapable. We cannot
protect jobs and have a capitalist market-based economy.
LAMB: Elgin, Illinois, you're on the air.
Unidentified Man #6: Good evening, Brian.
Unidentified Man #6: A couple of questions and comments. I'll keep
them pretty brief. Brian, actually a question for you. I read in an
interview you gave a few years ago, you said that no mat--something to
the effect of no matter what happens, stick to your knitting, or words
to that effect. So with that in mind, I just wanted to ask you, what
are the plans for the previously taped BOOKNOTES? Not that I don't
enjoy this phone-in segment with BOOKNOTES--I do and I hope you can
incorporate it in the future--but what are the plans with the
previously taped BOOKNOTES schedule and with the American Writers
Also, for your guest, and really for some of the viewers--I know some
of my fellow viewers will disagree with this, but I just want to say
that I think free trade and immigration are strong parts of our
country. They were two weeks ago, they are right now, and they will
be in the future, including free trade with Arab countries and
immigration from Arab countries.
And I want to make a--bounce a couple more ideas off you that
might--you seem like a pretty knowledgeable person about history.
Real quickly: Are the state of foreign language instruction in our
schools--I think that high schools and colleges need to have more
study of languages, not just French, German and Spanish, but also of
Arabic, Chinese, Urdu, things like that that would help out in
national security times, as well as with that foreign trade.
And also, somewhat off the topic, but I think we need to look at the
line of succession problem so that in the case of a disaster where the
top three were knocked out, we would not be looking at either Robert
Byrd or Strom Thurmond to take the reins of command. I think either
the majority leader of the Senate or some--something like that would
be much more appropriate to be fourth in line. So thanks for the show
and I--I like this call-in aspect of the BOOKNOTES.
LAMB: Thanks. Did you get the first--his first part?
Mr. GORDON: I entirely agree that--that foreign trade and
immigration are vital to this country. We--we are all either
immigrants or the--or descendants from immigrants. I mean, immigrants
made this country and they make it stronger. And foreign trade is--is
also very important. It's a very large part of the American economy
now. And I agree with you about foreign languages, although I might
point out that English is rapidly becoming--it's already the--the
language of science. It is rapidly becoming the language of business.
And we are very lucky in that we speak English as a native tongue.
It's sort of like being born able to do algebra. But it's--you learn
a lot about English if you also learn a foreign language, and it's
deplorable how few people do speak a foreign language in this country.
LAMB: Line of succession?
Mr. GORDON: Well, line of succession, I'm inclined to agree that it
perhaps should be the majority leader rather than the president pro
tempore of the Senate.
LAMB: Let me answer your questions for me. We're not going to keep
this format up, we don't believe, for very long. We hope we get back
to a normal schedule and all the BOOKNOTES that have been taped, and I
believe there are some five or six will begin to play out in the next
couple of weeks. We may have one more week of special programming,
just--it all depends on which way this--the situation in our country
goes. As far as the American Writers Series is concerned, we have
postponed those until next spring sometime--we made that decision at
the end of the week--and we will take up where we left off, and we
haven't scheduled the date yet, but our number-one responsibility at
the network is to cover what's going on in the government and what's
going on in politics, and we felt very strongly that we should pull
our group back. It took some 15 people and all of our equipment every
Monday, and we'll resume that sometime--the rest of the series
sometime in the spring.
Let's go back to the phones, this time to El Paso, Texas. Hello,
you're on the air.
Unidentified Man #7: I was gonna ask Mr. Gordon, if the ICC had not
been created and the trunk line railroads feeding in situation still
existed, how would it have resolved itself?
Mr. GORDON: Well, I think what--what they could have done was
required the--the railroads to publish a schedule of fees for each
commodity on a ton-mile basis and require the railroads to charge that
fee throughout their system, and to have very large penalties against
under-the-table rebates which, you know, John D. Rockefeller got the
railroads to pay him to ship his oil, and he--he actually managed to
get the railroads to pay him rebates on the oil of other people that
they shipped which, of course, now is illegal and--and should be. I
mean, so if you simply required the railroads to charge the same fee
everywhere in their system, then the trunk line competition would have
set the fee on the--on the branch lines, and you wouldn't have had to
have a bunch of people in Washington sitting around deciding how much
they should allow railroads to charge to ship butter.
LAMB: If you've just joined us, we're talking to John Steele Gordon,
who is based up in New York City, and he has a book out called "The
Business of America." Been out for how long now?
Mr. GORDON: It came out in July.
LAMB: In addition to this book, this is one of your more recent
books, "Hamilton's Blessing." What was this about?
Mr. GORDON: It was--it's a history of the national debt.
LAMB: Interesting in the back, and I'll show the picture, you have
one here and you also have one in--it's a similar picture in--in your
newest book. But if my memory serves me, that's Alexander Hamilton's
gravesite outside of the Trinity Church there?
Mr. GORDON: Trinity Church.
LAMB: Where is--which is only--What?--a half block from the Trade
Mr. GORDON: It's--it's right there. I saw an absolutely haunting
picture of Trinity Churchyard just after the disaster taken about
noon, and it is--it looks like something out of a war zone. I mean,
it's just--it was this beautiful September day. I mean, it was the
nicest weather as--as New York ever gets, and there was just this
glowering dark, everything covered in--in paper and dust, and it was
just--it was horrifying. And yes, Alexander Hamilton, and Albert
Gallatin is also buried there. There are two secretaries of the
LAMB: Los Angeles, California, you're on the air. Los Angeles, are
Unidentified Man #8: Yes, sorry. Mr. Gordon is a--seems to be very
knowledgeable on the historical aspects of business, but present day,
looking at the tech industry and fiber optics in particular, it seems
two years ago we couldn't build enough fiber optic for the capacity we
were going to be needing because of the onslaught of the Internet.
Now I'm hearing from various sources, and I do study the markets,
follow the markets, study technology trends, but I hear that there's a
fiber-optic glut. And if I could sneak in a second question, in terms
of e-commerce, consumer to business and business to business, those
numbers as well, a year or two ago, the sky was the limit, but they
seem to have been scaled back. Do you think those numbers are
exaggerated, and that even though we've had a sea change in
technology, human behavior just hasn't changed that quickly? Thanks.
Mr. GORDON: Well, human behavior--human nature never changes. Human
behavior does change because people get--we learn from our past
mistakes. It is--overbuilding of things like fiber-optic networks
is--is very common. I mean, we overbuilt railroad networks in the
19th century because human beings tend to get enthusiastic and, `Boy,
this is great. We gotta have it everywhere,' and they go charging in
and--and build more than the--the market can absorb in the short term,
and so then there's--then there's a bust. I mean, the business cycle
comes straight out of--of human psychology and--and human nature. And
this overbuilding of--of new technologies is very characteristic. I
mean, it happens over and over and over again.
LAMB: His e-commerce question, second part?
Mr. GORDON: Again, I'm--I'm sorry, I don't quite remember what the
question was, but I mean, again, we were exa--this is so new, we're
exploring it. We don't really know how to run a--how to run these
businesses. I mean, just like--again, I mean, nobody knew how to run
a railroad in the 1830s. I mean, for a while it was thought that
people would build a railroad and you'd just pay a fee to run your own
train on the tracks--I mean, like a--like a highway. It didn't take
them long to figure out that that didn't work awfully well. And so it
was--really it was basically the 1860s before people like Thomas Scott
of the Pennsylvania Railroad and Commodore Vanderbilt of the New York
Central really figured out how to run a railroad and make enormous
profits out of it.
LAMB: If you've just joined us, John Steele Gordon writes a column
for American Heritage magazine every time it comes out, which is eight
times a year. It's--what part of the year doesn't it come out?
Mr. GORDON: It doesn't come out in July. It doesn't come out in--in
January, and I--I forget. I mean, there's a May-June issue, then a
July-August issue and a December-January. I--I forget. I'm sorry,
LAMB: Coral Springs, Florida, go ahead, please.
Unidentified Man #9: Yes, hi. I'd just like to comment about
Sylvester Graham and his contributions to American society. Sylvester
Graham was the first person to, in print, comment that alcohol was
physically bad. He was hired by the Presbyterian Churches of America
to comment on the moral implications of alcohol, but he was the first
person to figure out that alcohol was physically bad and he lectured
and wrote about it. Also, he recommended eating Graham crackers,
which sounds amusing now, but when he recommended them, they were
whole grain crackers which he said improved digestion. He used the
now archaic term unbolted cracker, which we now use the word whole
wheat. So he recommended whole wheat crackers 'cause they improved
Also, he recommended that bathing was a good thing, and he recommended
the radical notion that people should bathe once a week at a time,
1830s, when I think there was no municipal water systems built in the
United States. I think the first one was built in Boston in 1848. I
could be mistaken on that. And so he recommends that people should
wash once a week at a time when no one washed at all. So really,
Graham was actually very influential and also he was an abolitionist,
a women's rights advocate and he was involved with temperance, of
course, and he was--so he was really a very progressive thinker. And
the quote about him that Waldo Emerson gave, he called Sylvester
Graham the `poet of bran, bread and pumpkins,' which was really quite
high praise. And Graham did die as a relatively young man in his 50s,
and he was sickly his whole life. But he really had a lot of
contributions and so I just wanted to mention that.
Mr. GORDON: Well, I did not know he was the first to actually write
that alcohol was bad for you and, of course, I mean,
alcohol--excessive alcohol is bad for you. I mean, there's an awful
lot of Frenchmen who live to a happy old--old age. Also Sylvester
Graham--he was by no means a scientist. I mean, he--he--he made pot
shots and some of them were right. He also borrowed a good many--a
good deal of his material without bothering to acknowledge having done
LAMB: Santa Cruz, California, hello.
Unidentified Man #10: I'm wondering if Mr. Gordon feels that the
European common market is a threat to our business here. Airbus has
already threatened Boeing, biggest exporter, and I'm wondering whether
he feels that this is a threat?
Mr. GORDON: I don't think it's a threat. I think it is--it is
competition, but competition is good for the market in the long run,
and it's--it's good for countries, 'cause under competition you have
to work harder and innovate better and--and--and have new ideas. And
so competition is--is a wonderful thing and it's--I'm all in favor it.
LAMB: Bel Air, Maryland, hello.
Mr. MIKE THOMAS: Brian, always a pleasure. Mike Thomas calling you.
May I commend you on your coverage over the past few weeks and the
excellence that you continue to do there at the helm there at C-SPAN,
LAMB: Thank you.
Mr. THOMAS: Question that I have is if you heard Senator Kerry
ear--earlier today, he talked about restoring public faith--I think
Shelby also said the same thing--in the airlines right now. And I
guess that means that they're saying that they're working on restoring
public faith, they haven't restored public faith apparently and, of
course, no matter all the money--and I know the--the guest's point
about cash being needed, cash infusion right now. Suppose we were to
subsidize each plane seat--I don't know what the--the total would
be--for everyone that's--was normally on the schedule prior--on the
10th, if we would subsidize every seat, perhaps--and offer the general
public $20 tickets to Florida. I know myself and many others would
take the airlines up. People wouldn't be laid off work, they would
have jobs, and it just seems the most logical thing to do. I don't
know why we're not doing it. I appreciate it.
Mr. GORDON: Well, I think one reason we're not doing it--it might
be--it might very quickly turn into a boondoggle. I mean, the--the
airlines might like this so much that they would put enormous
political pressure not to have the temporary aid stopped. I mean--I
mean, for instance, high tariffs in the 19th century, which were
supposed to protect the nascent American industrial base, well,
the--by the end of the century, the American industrial base was by
far the largest and most efficient in the world, and the industries
were still screaming that they needed high tariffs for protection.
And, you know, so once a system like this comes into existence, the
beneficiaries of it immediately form a political guard around it and
it becomes very difficult to repeal it.
LAMB: Medford, Oregon, go ahead, please.
Unidentified Man #11: Yes. I've--I've watched several discussions
about the airlines, and it--it surprises me that no one has asked the
airlines what they're going to do. For example, why doesn't the
pilots or the executives of the airlines agree to a temporary to
18-month 10 percent pay cut?
Mr. GORDON: Well, perhaps they should. I'm n--I'm not aware that
anybody has brought this up. But it would be interesting to try. I'm
not sure how enthusiastic the airline pilots union would be about
LAMB: Dixon, Illinois, good evening.
Unidentified Man #12: Yes, good evening. I wanted to ask your guest
if he knows the trend under globalization that many of America's
largest corporations--I think Boeing was perhaps the latest--are
talking like they're not really wanting to even be an American company
anymore. They're--they're saying they're--they're like a
multinational entity, and that they wish that they could be--you know,
or even away from America--some of America's restrictive laws, and
sort of a small entity unto themselves. I wanted to know if this was
a serious trend and what implications it might have for the future of
our--of our country if more and more of our largest corporations start
taking this attitude?
Mr. GORDON: Well, I'm--I have not heard that, and if they cease to
be an American corporation, where would they go? I mean, if they--if
they want to be hamstrung with regulation, Europe is a wonderful place
to find excess regulation. And, you know--or Third World countries?
I don't think so. So, I mean, I have not heard that, but there's
nowhere they can go, you know, where there'll be no regulation, and
the American economy is one of the least regulated in the world.
LAMB: Arlington, Virginia, good evening.
Unidentified Man #13: Mr. Gordon, the construction industry is one
of the major parts of the American economy. Have you done any
research and writing on that? I'm talking about railroads and canals
and everything that--that has to be built in this country.
Mr. GORDON: I've not done research on the construction business per
se. I mean, I've--I've done a lot on railroads and--and--and canals,
but in the early days of the 1820s and '30s mostly, and so I don't
know--I'm afraid I'm not well know--don't know much about the modern
LAMB: What year did you write this book and what is it about?
Mr. GORDON: I--that came out in 1999 and it's a history of Wall
Street from its earliest days in--in the 1650s and up to the year
LAMB: Let's go to Woodland Hills, California, for John Steele Gordon.
Go ahead, please.
Unidentified Man #14: Thank you for taking my call. I was calling to
find out if--what your comments are on Microsoft and Bill Gates
compared to some historical figures like Rockefeller and what they
have done for the country.
Mr. GORDON: Well, I think the--there are interesting parallels
with--between Bill Gates and--and John D. Rockefeller. They both
achieved superstar status at about the same age, roughly 40 years old,
and it was also at that time that they began to be seen as--as
monopolistic ogres and began to get very bad press. I th--in John D.
Rockefeller's case, they were just inventing modern industrial
capitalism. They didn't know what the rules should be, and John D.
Rockefeller showed in many instances what rules were needed. I mean,
for instance, forbidding under-the-table rebates and--and other
In Bill Gates' case, I mean, Microsoft is--has often been extremely
aggressive, and I--personally, I mean, if Bill Gates were to ask my
opinion, which I suspect he will not, I think his--a lot of his
tie-ins and forcing other companies or--and, you know, the--the new
XP, for instance, it has--makes it very easy to go right to a
Microsoft site. I think that's--I personally think that's going to be
a mistake. But he hasn't asked my opinion on that. I think Bill
Gates has been extremely innovative and--and, you know, he
has--because he has made this absolutely colossal fortune in the last
20 years, just like John D. Rockefeller, has--he'll have a major
place in American history. And also, he--he's still only in his 40s.
We haven't heard the--the last of Bill Gates by a long shot.
LAMB: Next call, Eldorado, Illinois.
Mr. NEWMAN: Good evening. This is Mr. Newman. I'm representing
something that maybe you hadn't thought of before, and that is when
the lady previously talked about garbage and not being to get rid of
it, well, Garb-Oil makes oil, a super, wonderful, delicious, wonderful
oil. So I need to get to talk with Mr. Steele Gordon, and I want his
book, and is there any way he could help us get this off the ground?
And now speaking of Bill Gates, I tried their organization because
they have created more paper that go in landfills, and it does not
disintegrate, but we can make billions of gallons of oil out of that
one product, much less tires and--and garbage and trash and coal and
plastic, you name it.
Mr. GORDON: Well, I--if--if you can make oil at a competitive price
out of garbage, I promise you the world will beat a path to your door.
So--I mean, if it works, don't worry, it's going to be a big success.
LAMB: What's the Desi Arnaz story?
Mr. GORDON: Desi Arnaz was, of course, one of the--the founders
or--I don't know if you want to call him a founder of "I Love Lucy,"
one of the earliest and most successful television sitcoms. In many
ways, he invented the whole idea of a sitcom. And Desi Arnaz was also
a--a very good businessman. And he convinced CBS--he--CBS wanted to
do the show live out of New York because at that time there was no
good way to--they--videotape wasn't invented for another 10 years.
And the only way to record a television production was what's called a
kinescope, which was--a movie camera sat in front of a--of a TV screen
and produced very poor quality images.
And so CBS wanted to do the show live out of New York so that the East
Coast market, the largest market, would--would see it. And Desi and
Lucy wanted to live in Hollywood, so they said, `Let's film it,' and
that would have cost more. The episodes were originally budgeted
at--at $19,500 an episode, which by television standards today
wouldn't pay for the weather report. But CBS agreed if they would
agree to take a $1,000 cut in salary. And Desi said, well, they owned
half the show--Desi and Lucy owned half the show, and CBS was going to
own the other half. And they said, `Well, we'll take the
$1,000-a-week cut in salary if you will give us the--give us all the
ownership of the show after the first run. And CBS said, `Sure,'
because they didn't think it was worth anything. I mean, it was--you
know, yesterday's television show was like yesterday's newspaper. It
was used to wrap fish.
And so they took a $39,000 salary cut, but b--since in those days it
was a 90 percent tax on--on high incomes, they were actually only
giving up about $5,000, and what they got for the $5,000 was half the
ownership rights of "I Love Lucy." And to this day, I mean, if you
watch "I Love Lucy" on Nickelodeon or whatever, they pay $100,000 for
every half-hour episode.
LAMB: Costa Mesa, California, for John Steele Gordon. Go ahead,
Unidentified Man #15: Mr. Gordon, I'm enjoying your comments
tonight. I live in a community in Southern California where the city
operates a job center for people looking for laboring work. There are
some people in the community who want to close it because a lot of the
laborers are illegal. I'm interested in your comments about the
effect on the economy, and the schools too, for that matter, if you
can, of people coming into the country and participating in the job
market in this fashion. And I'll hang up now, and I look forward to
your comments, sir. Thank you.
Mr. GORDON: Well, they--they're coming into this country looking for
work. That's a good thing. I mean, if they can find a job that
nobody else wants and they're willing to do it, I think that's--that's
wonderful. And--I mean, they make much more of a contribution,
especially in the long run, than any expenses such as educating the
children, because the children will become a part of the American
economy and--and make their contributions. So I think it's extremely
penny-wise and pound-foolish to try to exclude these people. Anyway,
we're not succeeding doing it, so perhaps we should stop trying.
LAMB: Stone Mountain, Georgia, go ahead, please.
Unidentified Man #16: Two comments. One, I think there's a great
parallel with the railroads of the last century, tr--tremendous
competition with the trunk lines and very--no--no competition on the
branch lines. And small cities and--and rural areas are poorly served
with--by the airlines. And I--I know that congressmen and senators
complained about this, I think, and there have been hearings on this.
And I just wanted--want your comments on that, how do you think it
will play out.
And then my second comment, totally different, is I think your
comments on mismanagement or even corruption during war is--is
somewhat understated. From reading about the Civil War, that was
Mr. GORDON: Indeed, it was.
Unidentified Man #16: Harry Truman in World War II got prominence for
undercunning--un--uncovering corruption, and I think in Vietnam. So I
think a lot of that comes from a big bolus of money coming into the
system with mismanagement or lack of management and really not much
Mr. GORDON: Yes, that is certainly true. I mean, in--the Civil War
was in--in--especially in the early days before the government got its
act together was a feeding frenzy of--of dishonest businessmen selling
shoddy products at high prices. I mean, war is a very messy business
because they--they need the products and they need it right then. I
mean--and they haven't got time to sit down for extended negotiations.
And so it's--I mean, that's going to happen with people who are
willing to sacrifice their country for their own short-term interests.
And I'm afraid there are always people willing to do that.
LAMB: Griffin, Georgia, you're next.
Unidentified Man #17: Good evening, gentlemen. I'd like to know Mr.
Gordon's comments about the short-sellers in the marketplace now and
the damage that they're doing to the American investors' net worth, as
well as their confidence level. Also, a second question would be
comments about increasing the tax rates on gains made from
short-selling in the market. I'll hang up and listen. Thank you.
LAMB: First, what is short-selling?
Mr. GORDON: Short-selling is when you sell a stock you don't own
hoping that the price will go down so that you can buy it back and
return it to the person you borrowed it from and--and keep the
LAMB: How can you sell a stock you don't own?
Mr. GORDON: By borrowing it from somebody else or by promising a
future delivery. I mean, you sell the stock today and promise, `I'll
give it to you in 10 days.' Then you go out on the ninth day and buy
it. And as long as the price has gone down, you make money. If the
price has gone up, you lose money.
LAMB: What does it do to the market when you sell short?
Mr. GORDON: Well, in--in the short term, it--it--it'll cause prices
to--to fall. The more selling, the--the lower prices go. And since
1929, the market has had a--a requirement that you can only sell short
on an uptick; in other words, the price has to be at a higher level
than it was at the previous sale. And this is to prevent snowballing,
as it happened in 1929, when short sales drove down the price, which
produced more short sales and more margin calls and--and the--the
whole market rolled downhill. Short-selling, as--non-Wall Streeters
always love to hate short selling, but it plays a vital part in the
market and it's a perfectly honorable way to make money. It increases
liquidity. It also--every short sale means there's a buy somewhere
down the road because the short-seller has to fulfill his contract at
LAMB: What do you think about increasing tax rates?
Mr. GORDON: I would be opposed to that. I think there's nothing
wrong with short-selling. I think these people who sold in the last
couple of weeks, I mean, some of them had fiduciary responsibilities
and, I mean, that's what they were paid to do. Other people were--I
mean, I--I wished they hadn't perhaps, but this--this is part of--of
free markets. I mean, you sometimes have ugly people willing to do
ugly things and--and the cure is worse than the disease in many cases.
LAMB: Newport, Oregon, good evening.
Unidentified Man #18: Good evening. I wonder if Mr. Gordon
considers the great impact socialist thought has had on American
economy over the past 100 years, especially the last 50 years after
World War II, the GI Bill and what a tremendous positive impact that
had in earning power of millions of people who paid more income taxes.
Mr. GORDON: Well, the GI Bill was one of the most successful pieces
of social legislation in history. And I'm 100 percent in favor of it.
I wouldn't exactly say that it was socialism. I mean, a lot of people
had it help in--you know, as part of their compensation for having
fought in World War II, given help with their education. And it had
an enormous positive impact on the American economy and American
society as a whole. I mean, before the war, something like 3 percent
of the population had college degrees; today 25 percent or even more
have college degrees. And that is all to the good; the greater
intellectual capital we have, the richer a country we can become.
LAMB: Havre, Ma--Montana, good evening.
Unidentified Man #19: Good evening, Brian and Gordon. Very good show
you got going here. How would this terrorist disaster in New York
affect prot--production, agriculture, in particular with small grains
and livestock in the Northwest, where I'm sure that you're both aware
we're in our fourth year of drought here and the--the corporations
that control the price of grain--production agriculture and--and
agriculture in general is--is severely suffering here, particularly in
the ar--rural areas. And--and in Montana and the Northwest, we've had
these severe drought conditions.
LAMB: Thanks, caller.
Mr. GORDON: I am--for the most part, again, the--the cure is more
likely to be worse than the disease here. I mean, don't think--I
mean, the corporations don't control the--the prices of these
commodities. I mean, there are extremely free markets in Chicago
handling the price of--of commodities. And if you ever visited the
Chicago pits, this is--this is not a controlled situation going on.
And this--these signals--the market sends signals--price signals and
we--we--we're much better off leaving it alone than trying to fix it
to--to ameliorate short-term pain.
LAMB: Lafayette, Indiana, good evening.
Unidentified Man #20: Hello. Thank you for taking my call. This
question is similar to the former one, as to the effect of government
subsidization of the farming industry. Thank you.
Mr. GORDON: Well, I mean, I'm philosophically opposed to government
subsidies in general. I mean, there--I--there are instances in which
I'm--I'm willing to tolerate them, I suppose, not that anybody needs
my toleration or not. But I would prefer agriculture to be a
completely free market. And I think it is--p--peculiarity of the
American political system that the--the farm states are
disproportionately powerful on Capitol Hill because the farm states
all have two senators and so they're able to get agricultural
subsidies that they otherwise could not get. And I--I would prefer it
if it was a completely free market.
LAMB: Ft. Collins, Colorado, hello.
Unidentified Man #21: Mr. Gordon, of late there's been a lot of talk
about how Middle Easterners perceive us. But if you were to put
yourself in the mind-set of a 19th-century individual and see America
only through the movies that they--that they received from us, wh--how
would you judge America and how would you see it? Thank you.
Mr. GORDON: I'm not really sure. I think many--many Americans
perceive a lot of America through the movies and through television,
and it certainly wouldn't be an objective or--or rounded portrait.
But I'm not sure it's all that distorted. I mean, this--I mean,
Arnold Schwarzenegger movies do not--and that sort of thing don't
present a--a r--reality, but I don't think people regard them as being
LAMB: Vincennes, Indiana.
Unidentified Man #22: Yes, sir. Thank you. Mr. Gordon, my question
is regarding the change of capitalism. Isn't the situation we're in
right now also a challenge to capitalism in the sense of the poverty
in the area that we're looking at and the inequities of the
distribution of money? For instance, Mr. Gates is worth some $36
billion to $50 billion, and the Gross Domestic Prod--Product of
Afghanistan is $15 billion. My question is, does--doesn't capitalism
have a--a new social contract to forge? Is--isn't that really what
we're kind of looking at here, in addition to the mil--military
situation? Thank you. And I'll hang up.
Mr. GORDON: Well, I think the--the poverty of Afghanistan is, to a
large extent, owing to the--the political situation in Afghanistan.
And if somehow we were to transfer Bill Gates' wealth to--to
Afghanistan, it wouldn't make the lives of Afghans--the average Afghan
in the street much better because the--the money would be stolen by
the--its kleptocratic government. I mean, poverty in--in--national
poverty is--is largely the--the result of bad government and b--and
bad social structure and there's--very limited what we can do about
it. But if they would, you know, adopt Western ideas such as the rule
of law, of democratic government, the--the poverty would disappear
If you look at South Korea, for instance, it was one of the poorest
nations in the world in the 1950s, and--and today it is one of the
Asian tigers, rapidly approaching First World status. And any--South
Korea does not--is not particularly rich in resources, it doesn't have
oil or anything like that. I mean, it--it pulled itself up by its own
bootstraps and a good deal of American help, too, to be sure. But
that's what you have to do in order to make yourself rich. We can't
make a poor country rich by sending them a trunkload of money. That
doesn't make them rich. That would--at--at best, it would temporarily
relieve their suffering. But they have to--they have to change
their--their governments and how--how we do that, I don't know. We
cannot go in and--and order them to change their governments. But...
LAMB: A little more than 15 minutes to go with our guest, John Steele
Gordon, who wrote this book called "The Business of America." He told
us earlier that he was born in New York City, went to Vanderbilt
University, and his mother was the secretary to Oscar...
Mr. GORDON: Oscar Hammerstein.
LAMB: ...Hammerstein. Now what was the other connection? They
Mr. GORDON: She was also his--his sister-in-law. She--her second
husband was Oscar's brother.
LAMB: How long did she work for him?
Mr. GORDON: The last 10 years of his life, from "South Pacific" to
"The Sound of Music."
LAMB: Eden, Vermont, you're on the air.
Unidentified Man #23: Yes. Someone said if you follow the money
trail, you'll understand how things work. But lately I've been
reading "Maestro," about the Federal Reserve, "Social Security: The
Phony Crisis," by two PhDs, and now I'm reading "Rule by Secrecy," by
Jim Marrs, which has incredible connections with ...(unintelligible)
Skull and Bones of the Bushes. What do you think of Jim Marrs and
Mr. GORDON: I've heard--I'm not familiar with the book. It--it
sounds like a conspiracy theory, which often sells a lot of books but
doesn't help much. I mean, if--if the conspiracy were true, it would
be all over the newspapers. I mean, newspapers love conspiracy
theories, or love conspiracies but they have to be--well, usually they
have to be true conspiracies. And, I mean, a lot of books, they
just--they're not true. I mean, they sound good, but it--I don't
know--but this particular book, I don't--I'm not familiar with it.
LAMB: Next call is from California. How do you pronounce your city?
Unidentified Man #24: Camarillo, California.
LAMB: Camarillo, you're on the air.
Unidentified Man #24: OK. I would like to ask him what his take is
on the estate tax that is caused by a family company where the
principal dies and therefore estate tax has to be levied, and
therefore the business has to be sold and things like farms and--and
we--out here we have the Los Angeles Dodgers where Patrick--Pat
O'Malley had to s--sell the Dodgers so--he couldn't succeed because of
the taxes on a family owned business.
LAMB: What do you think?
Mr. GORDON: Well, I--I--I'm opposed to the estate tax. I think
it's--it comes out of a socialist idea. I mean, there--there's one
absolutely inescapable rule of finances, which is you can't take it
with you. And so great fortunes get spread around. I mean, if you
look at the Forbes 400 list today, it's very different from what would
have been on it in--I mean, just 20 years ago because new fortunes
have--have arisen that have surpassed the old ones, and the old ones
are--dissipate. We don't have, as they used to have in--in England,
they--these family fortunes that lasted for hundreds of years. We
don't have perpetual trusts in this country. You can't entail, all
that sort of thing. So the--the fortunes are rapidly spread around.
And I just--I mean, once you--you--I think you should pay a tax on all
income, and if you don't spend that income, if you--if you put it in
the bank, in effect, and therefore create an estate, I don't see why
you should be penalized for having done that.
LAMB: At the beginning of your essay called The Revenge--or your
article called The Revenge of the Trust, you say, `Whenever
opportunities for great wealth are concentrated, there will also be a
concentration of men who make up in ambition, genius and reckless
courage what they sometimes lack in scruples.'
Mr. GORDON: That is absolutely true. And whenever--this is--The
Revenge of the Trust has to do with Butte, Montana, and the--and the
copper kings, the--in the late-19th century when Butte, Montana, was
producing an incredible percentage of the world's copper and there was
a--a free-for-all. There wasn't a whole lot of--of law and order
there, and people would tunnel into each other's mines and blow them
up. And it--it was--it's a great story. But you find this in
Hollywood; you find it in Wall Street; you find it in--in lots of
places. Whenever there's a great deal of money, you're going to find
a lot of people with less-than-adequate scruples going after it.
LAMB: Mechanic Station, New Jersey, go ahead, please.
Unidentified Man #25: Thank you for C-SPAN. God bless all of you.
I'd like to ask Mr. Gordon why capitalism doesn't work. I mean, most
places, it doesn't work, except in Western Europe, the United States,
Japan and, as you said, South Korea. Hernando de Soto has a book
called "The Mystery of Capital," which if it's not on the list for
BOOKNOTES, it ought to be. And he claims it's because there are no
transparent methods, no real methods for representing capital in these
countries. Have you--are you familiar with the book, or what--why
doesn't it work in other places?
Mr. GORDON: Well, I think it's a question of it hasn't worked yet.
It--I mean, a l--a lot of these countries have to change their
culture, and that is not an easy thing to do. And it's o--it's often
a generational thing. But--I mean, if you look at Chile, it is doing
wonderfully in the capitalist system. It--it was hav--under terrible
shape under Allende, and since then it's now, again, approaching First
World status. I mean--so capitalism can work in Chile; I don't see
why it cannot work in other Latin American countries, such as Peru,
which is where de Soto comes from. And I think it will; it's a--it's
a question of changing the culture. There's a lot of people who
b--the beneficiaries of the status quo always want to maintain the
status quo. And if they're in positions of power and power is not
widely distributed through society, well, then they're in a much
better position to prevent capitalism.
I mean, de Soto once did an experiment to see how long it would take
to set up a legal clothing manufacturing outfit in Lima, and it took
two people working full time six months to get all the permits and
pieces of paper and s--and stuff to do it. And as a--as a control, he
went up to Tampa, Florida, to see how long it would take him to set up
exactly the same sort of business in Tampa, Florida, and they had all
the bureaucratic stuff they needed done in--in--by noon of the first
day. I mean--so a lot of the Peruvian laws and stuff are there to
prevent capitalism from coming into existence, to prevent people from
going into the marketplace and competing and setting up new
businesses. And until you get rid of that culture, you can't have
LAMB: Las Vegas, go ahead, please.
Unidentified Man #26: Hi, Brian, and hi, Mr. Gordon. First, Brian,
compliments on all the wonderful programs C-SPAN provides. I have two
questions for Mr. Gordon. The first one--Mr. Gordon, your book
looks like it's going--it's very interesting, and I've enjoyed your
comments. But you do seem a bit ideological to me. First of all, how
do you account for governmental research which private enterprise
would never fund? For example, there wouldn't be an Internet today
were it not for the government, and there are other examples as well.
The second is in your particular area of expertise. What do you see
about the future of railroads? It seems like they're combining rather
alarmingly and there might be only like five major railroads in the
very near future. Do you see that as dangerous or not? Thanks a lot.
I'll hang up and listen.
Mr. GORDON: To answer the--the second question first, no, I don't
see it as dangerous. I think you don't--I mean, railroads, they don't
compete in an--in an ordinary sense because the railroads are--you
can't have them in the same territory, or at least not very often. I
mean, unlike, say, the trucking business, where you can compete very
easily and very quickly. So it--that doesn't bother me.
As for government research, I have no objections whatever to--to
government research in areas like space exploration and stuff where
the--the monetary return is not immediately apparent. In areas where
business can carry on the research by itself, I would much rather see
the business do it than the government do it. But there's a lot of
cases where that's not the--not the case and I--and government
research is--is very important.
LAMB: Fayetteville, North Carolina, for John Steele Gordon, go ahead,
Unidentified Man #27: Hi. Just a few weeks ago there was an
article--an AP article in many papers, I'm sure, recounting the
increase in the rich-poor gap. And I recently finished a book that
indicated since the mid-60s, our immigration has been primarily from
the Third World. And that group--that population has a lower IQ,
mainly about 85, and--and those particular portions of our population
with the lower IQ have been reproducing quite a bit, but the
p--portion of our population that has an IQ average of 100 is--is not
even pr--reproducing at a sustainment rate. That means that there's
more and more people who are in this lower-IQ group that's exacerbated
by the increase in technology.
And that was one of the points that was made by that article of the
rich and poor gap, that being the case. We have more and more people
who are unable to cope with this continually increasing technology,
and then on top of that it's exacerbated by a government that takes
money from people who earn it and gives it to people have not earned
it. All this leads to the conclusion that the rich-poor gap is going
to increase substantially and--and that would lead to a revolution. I
was interested in your--your commentary on the immigration in that
these people would become the fabric--part of the fabric of America.
But it looks like that fabric, given what I've just stated, is--is
Mr. GORDON: Well, I mean, I'd like to see where those statistics
come from 'cause I'm not aware that an IQ test is given to immigrants.
And so how do we know that their average IQ is 85? I just find that
highly unlikely. I think it was cooked up by somebody who had an
LAMB: Woolworth's Cathedral. Frank Winfield Woolworth, and Cornelius
Vanderbilt is also discussed in that chapter. You say he was in his
day the king of kings of American railroading and the richest
self-made man in the world?
Mr. GORDON: He was, indeed. He came from a farm family on Staten
Island, and he was--I'm a great admirer of Commodore Vanderbilt. He
was a man of few words, but when he--they were usually pithy words.
When--he once wrote a famous letter to somebody saying, `You have
undertaken to cheat me. I will not sue you, for the law takes too
long. I will ruin you,' and proceeded to do exactly that. A--a Wall
Street observer who was both a congregational minister and a lawyer,
which is a slightly frightening combination, once said of Commodore
Vanderbilt that, `His word is as good as his bond when it is freely
given. He is equally exact in fulfilling his threats.'
LAMB: Frank Woolworth, worth $65 million. He was perfectly willing
to keep his office staff late while he tracked down an unaccounted-for
quarter missing from his change purse.
Mr. GORDON: Yes. He was a fastidious man that way. He liked to
know where his money went. And he built the Woolworth Building, which
is one of the supreme triumphs of early skyscraper architecture, one
of the most beautiful buildings in the world. And he paid for it in
cash. It--up until very recently it had never had a mortgage, which
is almost unheard of in New York skyscrapers.
LAMB: Where is it in New York?
Mr. GORDON: It's on the south end of City Hall Park, very close to
the World Trade Center, as a matter of fact.
LAMB: Darrington, Washington, you're next.
Unidentified Woman #2: Hi. Yes. This kind of goes back to the
gentleman who was talking about the rich-poor gap, only from a
different end. I have a disability. I worked before I was unable to
work, and now I'm on Social Security. I will probably never be able
to work again, and I am definitely in poverty. Now I've been wanting
for a long time to ask someone who knows about capitalism and free
markets, what will become of us? We--I'm very well-educated. I don't
know what my IQ is, but--what happens?
Mr. GORDON: Well, I think--I mean, I'm a capitalist to my
fingertips, but society has an obligation to care for all those who
cannot care for themselves and to ameliorate the conditions of people
who cannot ameliorate their own conditions. And I would certainly
hope that the government, where--that--at whatever level, would see to
it that people who are unable to earn a--a decent living are--are
provided with one. I have no trouble with that whatsoever.
LAMB: Last call. Tampa, Florida, for John Steele Gordon, go ahead,
Unidentified Man #28: Thank. And, again, Mr. Lamb, I give you
kudos, as other folks. I'd like to ask you a question. I'm
supporting a group out of Texas who--we have a couple congressmen in
it--it's what they call 1 (800) FAIRTAX, where we're presenting the
system--or we could go to a tax system to change what we have to--for
instance, like a 23 percent sales tax and do--and still support the
government. In the situations since this has happened, if you had a
system like that and now you could raise that tax 4 percent or 5
percent to support the money that they're going to need for these
efforts and then take it off after the efforts are needed. And the
nice thing about that is it would be a consumption tax, and instead of
people having to go into debt, the more people consumed, the more
money it would raise, and it would help the situation we have in
America now where people are afraid to buy things. This would--if
the--if the president would come on and say, `We're going to raise 4
percent'--say it was 23 percent; raise it to 27 percent to fund the
goods, more people would have the effort to go out and have a good
cause and they'd be buying goods that would create jobs for people
instead of having the situation we're in now where people are
Mr. GORDON: Well, the--that has the--the benefit of simplicity, a
universal sales tax. The trouble with sales taxes is they are
necessarily regressive in that the poor have to spend all of their
income on necessities, I mean, that's the definition of poverty, is
you have no disposable income. Whereas the rich will often bank 80,
90 percent of their income, and therefore they would be paying taxes
only on 10 percent of their income. I mean, I would prefer a--a flat
tax. I mean, I know Steve Forbes is the great advocate of the flat
tax and I happen to work for Forbes Publications. But--and this is
not a free plug for Steve. I happen to profoundly believe in the flat
LAMB: Here's the cover of your book, and we're about out of time but
I wanted to ask you about the artwork on here, 'cause there you are up
in the corner; you've got Bill Gates and Desi Arnaz and Samuel F.B.
Morse and Henry Ford; you've got Cornelius Vanderbilt and, I think,
over here you've got Isaac Singer and then one more guy.
Mr. GORDON: Alexander Graham Bell.
LAMB: Alexander Graham Bell. Who did that for you?
Mr. GORDON: I'm afraid I forget the name of the artist. It
was--it's a terrific picture. I'm--I'm very pleased with it, indeed.
I--it's--I cannot remember his name. I'm sorry.
LAMB: And of all the people that you wrote about in the book, you
told us what your favorite chapter is; who's your favorite character?
Mr. GORDON: Commodore Vanderbilt. I really like Commodore
Vanderbilt. He--he used to play poker in a--in a game that still
exists. It's the oldest established non-floating poker game in the
city of New York. It's been going on for 150 years now. You can play
every Monday night.
LAMB: Our guest on this special BOOKNOTES has been John Steele
Gordon, author of "The Business of America." Thanks for joining us.
Mr. GORDON: Thank you for having me.
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