Category: History

False Dawn: FDR and the Great Depression

by philg

False Dawn: The New Deal and the Promise of Recovery, 1933–1947 is an academic economist’s look at all of the academic economists’ explanations for the Great Depression and how, with muscular government intervention led by a now-revered FDR, it could have lasted so much longer than economic downturns that happened in the U.S.’s free market period (1630-1930). (I introduced this book a few months ago with Philip’s Book Club: False Dawn.)

One popular theory is that World War II brought the U.S. out of the Depression after about a decade of failed federal government interventions. The book points out that calculating GNP during World War II is somewhat arbitrary:

But there is a deeper sense in which the wartime recovery, however and whenever it started, was no recovery at all. “In the crucial respect of waste of economic resources,” Broadus Mitchell (1947, 396) observes, “the war was, particularly for the United States, a deepening of the depression.” Tens of millions who had been either unemployed or employed in peacetime activities now took part in activities that, however crucial, continued to reduce instead of enhancing their own and the world’s living standards. To label such a state of affairs “full employment” was, Mitchell says, but “a flattering unction”: the employment thus generated was “for purposes which, by very definition, could have no place in a normal economy.” In short, the war was but a temporary solution to the problem of economic depression, and the more temporary the better. The point may seem trite. But it’s a necessary response to those—and there are many—who declare that World War II ended the Depression and just leave it at that.

… the most serious shortcoming of wartime output measures, namely, their tendency to overstate, perhaps dramatically, both the nominal value of war matériel and the extent to which it should be considered part of national output at all. As Higgs (1992, 45–47) reports, Kuznets, whose wartime and postwar deflators are among those that have been called into question by Friedman and Schwartz and others, had his own grave misgivings about the Commerce Department’s valuation of wartime output. “A major war,” he observed, “magnifies” the usual challenges involved in estimating national income, because war matériel isn’t sold at anything resembling “market” prices and also because wars blur “the distinction between intermediate and final products” (45).

Such considerations persuaded Kuznets to come up with several alternative measures of wartime and postwar GNP, all of which imply a less impressive wartime boom, or no boom at all, and no postwar slump. For example, according to Higgs (1992, 46), “whereas the Commerce Department’s latest estimate of real GNP drops precipitously in 1946 and remains at that low level for the rest of the decade,” Kuznets’s “wartime” estimate “increases in 1946 by about 8 percent, then rises slightly higher during the next three years.” Another Kuznets GNP estimate—what he called “peacetime” GNP—revises the record still further by valuing goods produced for military use at their nonmilitary surplus values only. According to that estimate, between 1945 and 1947 real output rose by almost 18 percent!

The above quote illustrates the principal flaw of the book for a non-academic reader. The author spends most of his ink summarizing and referencing the work of other academics. He’ll lay out four or five theories and deal with each one in turn, forcing the reader to tease out the author’s personal point of view. The book is more accurately characterized as a survey of 100 years of academic thought regarding the Great Depression than as an explanation of the Great Depression and subsequent recovery.

Another popular theory is that the New Deal was an example of Macro Economics 101 Keynesian deficit spending during a downturn. Two chapters are devoted to “The Keynesian Myth”. The author points out that Roosevelt was committed to a balanced budget and that Keynes himself wrote critically of American economic policy. The New Deal was a project to increase the power of the federal government in regulating business, not a deficit spending plan. Some of this project was abandoned when the federal government needed private industry to be its partner for World War II weapons production, but the effect was to stifle business investment and reduce personal consumption.

“Conventional wisdom has it,” Gary Best (1991, 222) observes, “that the massive government spending of World War II finally brought a Keynesian recovery from the depression.” However, Best continues, the fact that the government was no longer at war with business, as it had been during the original New Deal, deserves more credit. “That,” Best says, “and not the emphasis on spending alone, is the lesson that needs to be learned.”

On the extent to which there was any Keynesian borrowing:

New Deal deficits were less impressive than New Deal spending because the Roosevelt administration went to considerable lengths to boost tax revenues and did so even when it meant relying heavily on taxes that mostly burdened low-income Americans. For that reason, the administration chose not only to retain and then repeatedly extend most of the excise taxes imposed as part of Hoover’s 1932 budget—taxes Herbert Stein (1966, 210) considers “the purest act of pre-revolutionary fiscal policy”—but also to increase taxes on gasoline and tobacco, revive the liquor tax upon the repeal of Prohibition, and introduce its AAA tax on food processors. Because they fell on consumers, either directly or indirectly, excise taxes, which eventually funded 60 percent of the government’s “ordinary” revenues (Leff 1984, 147), tended to be deflationary even when fully offset by government spending. Such taxes therefore had little to recommend them from a countercyclical fiscal policy perspective (Brown 1956, 868; Leff 1984, 39). But because excise taxes were revenue workhorses, to an administration not much less determined to limit deficits than Hoover’s had been, they made perfect sense. At the height of the New Deal, Mark Leff (1984, 38) points out, the tax on food processors alone “accounted for one-eighth of total tax revenues,” which was more than the yield from either the personal income tax or the corporate income tax. For this reason, after the tax on food processors was struck down, Roosevelt “continued to suggest processing taxes to balance the budget and to fund farm subsidies” (Leff 1984, 44). What was true of excise taxes was truer still of the Social Security payroll tax that the government began collecting in January 1937. According to Leff (1984, 45), when Roosevelt first came up with his plan for funding Social Security, his advisers warned that because it would draw purchasing power from consumers for the purpose of establishing a $47 billion reserve fund without making any like disbursements from that fund for many years, the plan would be dangerously deflationary. Still, Roosevelt insisted on it, saying that it would assist in balancing the budget while projecting “an image of fiscal responsibility” (47). According to Sherwood Fine (1944, 114), the regressive Social Security tax diverted “more than a billion dollars of purchasing power . . . away from an industrial establishment sensitively attuned to consumer demand” in the midst of a severe economic downturn. “Running along, as we are, on a low level,” Alvin Hansen (1939b, 283) wrote afterward, when various amendments to the Social Security Act were under consideration, “we cannot afford . . . the luxury of a Social Security Program which turns out in effect to be essentially a compulsory savings program, and which thereby seriously curtails the volume of consumption expenditures.”

France was the only significant (imagine that there was a time when France was significant!) foreign nation inspired to follow our example:

France was one of the few countries and the only major one to take longer to recover from the Great Depression than the United States. France was also the only country that resorted to policies closely resembling—indeed inspired by—the New Deal, including NRA-style codes. And it was the only country that did not experience a substantial improvement in output after devaluing its currency. As Barry Eichengreen (1992a, 349) observes, France’s example shows, even more clearly than that of the United States, that “devaluation was necessary but not sufficient for economic recovery.” France’s first stab at New Deal–style industrial planning consisted of the so-called Flandrin experiment, an attempt by the conservative ministry of Pierre-Etienne Flandrin (November 1934–May 1935), directly inspired by the NRA, to cartelize French industries and reduce workers’ working hours. Flandrin’s experiment went no further, and his government fell after six months. But several weeks after decisively winning France’s May 3, 1936, parliamentary election, the Popular Front—an alliance of French radicals, socialists, and communists—implemented an NRA-inspired plan of its own. That plan was so aggressive that recent scholars have dubbed it “a sort of NIRA on steroids” (Cohen-Setton, Hausman, and Wieland 2017). As Barry Eichengreen (1992a, 375–76) explains, “Employers were compelled to sign the Accord de Matignon granting trade union recognition, collective bargaining privileges, and wage increases. . . . [T]he work week was shortened again, but this time without any corresponding reduction in pay. The government legislated an annual paid vacation and a 40-hour week. Wages were raised by 7 percent for high-paid workers and by up to 15 percent for the lower paid. . . . Other elements of the French ‘New Deal’ raised the school-leaving age and nationalized the armaments industry.” The Matignon Agreements’ mandatory wage rate increases went into effect at once, raising nominal labor costs by between 7 and 15 percent (Cohen-Setton, Hausman, and Wieland 2017, 279). The rest of the Popular Front’s plan, including its forty-hour week provision, was phased in industry by industry between then and the end of the year.

Noting how after 1936 France’s industrial output was persistently 30 percent below its long-run trend, Paul Beaudry and Franck Portier (2002) consider various possible explanations, including technological stagnation, only to conclude that the best is the simplest: French output fell 30 percent because between them the Blum government’s labor market legislation and strikes caused total hours worked to fall 25 percent. A decline in the ratio of investment to output, itself traceable to France’s New Deal legislation, accounts for the remaining five percentage points by which output fell.

What did cause the early-1930s collapse, then? The author points to an agriculture boom during World War I that led inevitably to a bust after WWI that dragged down most of America’s banks.

Bank lending to farmers itself doubled between the start of the war and 1920. After the war, both crop prices and US farm exports fell as sharply as they’d risen during it, triggering a farm crisis that was to ruin many farmers over the course of the next decade, often bringing their banks down with them (Belongia and Gilbert 1985). In 1921 alone more than 500 banks failed, topping the previous record established during the Panic of 1893. The 1921 failures coincided with the general economic depression of that year. But while most other industries recovered quickly from the downturn, and did so with little help from either the Federal Reserve or the Treasury, agriculture and banking didn’t. Instead, bank failures mounted.

Although thousands of US banks managed to survive the 1920s, many were in no condition to withstand any further shocks. So when commodity and security prices sagged after the onset of the Depression, bank failures became even more frequent. Rural banks were still the main casualties, although now instead of being concentrated in the western grain-growing states, bank failures were especially frequent in the South and the Midwest, where collapsing cotton, tobacco, and livestock prices combined with reduced cotton and wheat yields—a result of what the Weather Bureau described as “the most severe drought in the climatological history of the United States”—proved to be the last straw (Hamilton 1985, 602).

How much can we rely on expert analysis and wisdom? The author points out that all of the best minds of economics were in agreement that there would be a depression following World War II due to soldiers returning and finding themselves unemployed and the government ceasing purchases of weapons. Business

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Book about the Edmund Fitzgerald

by philg

It’s Friday the 13th, a notorious day for bad luck. Speaking of bad luck, let’s look at the 29 men who died on the Edmund Fitzgerald on November 10, 1975. They’re the subject of an interesting new book: Gales of November by John Bacon. Not exactly a spoiler: everyone dies, just as Gordon Lightfoot explained in his enduring hit song (from the book I learned that Lightfoot was an experienced recreational Great Lakes sailor).

Some things that I didn’t know:

  • it was the last trip of what was going to be the retirement year for the captain and many of his long-time partners amongst the crew
  • the captain was considered the best on the Great Lakes and had 45 years of experience
  • the weather was a 50-year event, perhaps, and not merely an ordinary “gale of November”

Perspective on the suffering of Jeffrey Epstein’s victims

Since almost everything in the news these days must be referenced to the Epstein Files…

The sinking was preventable, as we’ll see below, and quite a few mistakes were made.

Columbia offered some of the families the victims’ last paycheck ($568.25 for a deckhand) and $750 for the victim’s lost personal effects, an amount determined by their labor contract, but other families didn’t receive even those checks. When Columbia offered nothing else, the families had little recourse but to file wrongful death lawsuits, for which Columbia paid whatever the families’ individual attorneys could negotiate. Some families received about $35,000, or a little more than a year’s wages for a deckhand making overtime, and others marginally more.

The typical woman who alleged that she suffered by receiving cash, Gulfstream rides, free rent in Manhattan, luxury vacations, etc., in exchange for sex 10, 20, or 30 years earlier, was paid about $3.5 million from Epstein’s estate, a JP Morgan settlement fund, and a Deutsche Bank settlement fund. That’s 100X what an Edmund Fitzgerald crewmember’s survivors were paid. Thus, we can conclude that having sex on Jeffrey Epstein’s island was 100X worse than riding through 30-50′ waves for hours and ultimately being drowned in 42-degree water.

The bargain all the crewmen on the Fitzgerald had signed up for was a hard one, but straightforward: The work will be taxing, and you will miss most of your family’s best moments, but you will retire relatively young, with a good pension and nothing to do but hunt, fish, and play cards, pool, and golf. Best of all, you’ll have plenty of time and energy to spend with your grandchildren. The Fitzgerald’s twenty-nine crewmen and their families had all paid their deposits up front, but never got to enjoy the sweet side of the deal.

The Special Hazards of the Great Lakes

The Great Lakes can be more treacherous than the oceans. One reason is the distinct structure and frequency of the Great Lakes’ freshwater waves. In the oceans, salt weighs down the water, squashing the waves and spreading them out, so they typically form larger but smoother swells, similar to a roller coaster. On the Great Lakes there’s no salt to hold down the waves, so they rise more sharply and travel closer together, like jagged mountains of water coming at you in rapid succession. These waves don’t roll; they peak, crest, then crash down on whatever is unlucky enough to lie below them.

That’s another reason why Great Lakes waves are so steep and ragged and travel so fast. On the ocean the waves are usually about ten to sixteen seconds apart, so even a large container ship can fit between them. On Lake Superior the waves run four to eight seconds apart, which means that a seven-hundred-foot lake freighter can be riding atop two waves at once.

That problem produces more problems. On the Great Lakes a ship that long can impale its bow in one wave, which can lift it up thirty feet or more, while the ship’s stern can be simultaneously stuck in the wave coming right behind it, raising the ship’s back end in the air another thirty feet. That leaves its midsection, which could be loaded with 58 million pounds of iron ore—the equivalent of 4,200 adult elephants—suspended between the two waves, with nothing supporting it. That creates a phenomenon naval architects call “sagging,” in which the unsupported middle of the ship sags toward the water below it, exerting a tremendous strain on the hull.

After sagging between two waves, just seconds later the ship might face another threat: riding over the peak of a single colossal wave. This creates a condition known as “hogging,” the opposite of sagging, where the vessel drapes over the wave’s crest, with both the bow and stern drooping downward, again placing immense pressure on the center of the ship’s hull.

[Michigan Tech’s Guy] Meadows’s research shows that Lake Superior’s biggest storms occur every thirty years or so, but even in milder storms the waves on the Great Lakes can be alarming. In a pretty unremarkable 2020 storm, for example, two of their buoys anchored off Lake Superior’s southern shore, far from the path of Superior’s biggest waves, measured waves reaching 28.5 feet, almost as high as a three-story building.

If the biggest waves within a few minutes are at 30′, according to Guy Meadows, and they stay there for 24 hours, a ship should experience at least one 60′ wave (1 in 10,000).

Another bad feature of the Great Lakes is that it is easier for freshwater to freeze above the waterline on a ship than it is for saltwater to freeze, thus adding weight to a ship that is already in peril. A typical modern iron boat’s cargo of taconite also creates a hazard:

Because it’s two-thirds clay, a porous material, it can absorb up to 7 percent of its weight in water, and four times that can get trapped between the pellets when it’s piled high.

(i.e., the cargo hold can hold a lot of water weight that isn’t possible to pump out; separately, if you thought that math professors were useless, the book notes that U. Minnesota math prof Edward W. Davis is the person who figured out how to work with taconite, a low-grade iron ore)

Overloading as a Factor

Prior to the wreck of the Fitz, Great Lakes captains prided themselves on moving maximum tonnage per trip and per season. Everyone loaded up the ships to the painted Plimsoll line at which point the freeboard is the minimum required for safety. The Fitz was operated with far less freeboard than her original designers had intended:

Given how such incredibly small margins on the Plimsoll line could produce such prodigious gains, especially when multiplied by forty to fifty round trips each shipping season, the executives at Columbia Transportation must have been thrilled when the American Bureau of Shipping (ABS), working with the Coast Guard, reduced everyone’s required freeboard in 1969, and again in 1971, and again in 1973. For the Fitzgerald, that meant the original requirement of 14 feet, 9.25 inches of freeboard when sailing in November had been reduced to 11 feet, 6 inches—a total drop of 39.25 inches, or more than a yard, in just a few years.

Captains would then use various techniques to add a few inches of cargo beyond even this reduced freeboard, described in a chapter titled “Cheating the Plimsoll Line”.

The Edmund Fitzgerald was loaded to the absolute maximum, and a little beyond, on what was supposed to be her last voyage of the season:

The loading speed was all the more impressive because the dockworkers had filled the Fitzgerald’s belly with 26,112 long tons of taconite—far from the staggering amounts the new thousand—footers were carrying, but a fitting finale to McSorley’s celebrated career. The load that day was almost 4,000 long tons more than the 22,509 the Fitzgerald needed to set the Great Lakes record on its very first run just seventeen years earlier, a testament to the extra 39.25 inches the Coast Guard had allowed the Fitzgerald to sink in the water since 1973—plus the crew’s ability to cheat a few more inches on the Plimsoll line. This was such a common practice it would have been more remarkable if the crew had not cheated on the Plimsoll Line. Even the crew’s families knew about it. “They were overweight because they wanted to break their own record,” says Blaine Wilhelm’s daughter, Heidi Brabon. “So they cheated.” But what was unusual, according to former Fitzgerald deckhand Terry Sullivan, was that she was carrying a full load so late in the season, when even the USCG rules start scaling back the limits. While the Fitzgerald might not have been cheating by much, on the grand scale, when you combine those extra inches, plus the 39.25 inches the Coast Guard had already granted the Fitzgerald two years earlier, and the fact that all ships were supposed to scale back their loads for the rougher fall weather, any reasonable analysis can draw only one conclusion: The Fitzgerald had loaded thousands of tons more than what her architects had designed her to carry.

Primitive weather forecasts and distributions of forecasts

One of the blessings of the semiconductor revolution kicked off by William Shockley and carried forward by Jack Kilby is that computers have gotten vastly more powerful, thus enabling weather forecasts to become more reliable even without any advances in our understanding of meteorology. The National Weather Service was consistently late and consistently underestimating the strength of the storm that would sink the Fitz.

That afternoon [Sunday, November 9, 1975] the National Weather Service had posted a “gale warning,” a level of caution the NWS had created after the 1913 Storm of the Century showed it needed intermediary warnings, not just hurricane alerts. A gale warning predicts winds blowing thirty-nine to fifty-four miles per hour. But the NWS projected the wind would barely reach the gale range, which meant about forty miles per hour.

By 7 p.m. the National Weather Service noticed the storm system that started out of California had reached Iowa, and was gaining speed. It issued a gale warning for all of Lake Superior, correcting its earlier prediction that the storm would slip just below the big lake. Now, the NWS meteorologists said, the storm would cut diagonally across Lake Superior, producing waves from five to ten feet. That might not sound like much, but because the Fitzgerald had only 11.5 feet of freeboard, ten-foot waves wouldn’t give the ship much margin for error.

Late Sunday night the National Weather Service revised its forecast again, now predicting that waves Monday morning would reach ten to fifteen feet high. At 2 a.m. the NWS escalated its gale warning to a storm warning, reserved for winds expected to reach fifty-five to seventy-three miles per hour—strong enough to tear off roofs, uproot large trees, and knock over people attempting to walk outside. But the reality on the water was already starting to outpace the NWS’s forecasts. Winds on Lake Superior had already surged past fifty-eight miles per hour, and were still accelerating. The storm was gaining power like a boulder thundering down a steep hill.

[at 4 pm on Monday, November 10] Captain Cooper, now running an hour behind the Fitzgerald, later reported waves “up to twenty-five feet” when the Anderson neared Caribou Island. Since the Fitzgerald was now about twenty-five miles and an hour and forty minutes beyond the coordinates whence the Anderson had made that report—that much closer to the safety of Whitefish Bay, but also the storm’s epicenter—the waves the Fitzgerald was now experiencing were probably worse than the twenty-five-footers the Anderson had reported. Because the Fitzgerald had only 11.5 feet of freeboard, and probably less by the hour due to its compounding problems, those waves would be more than enough to wash green water—entire waves, not just the spray—over the Fitzgerald’s deck.

The Fitz sank at about 7:10 pm.

Get-there-itis

Some captains put in at Thunder Bay after realizing that the storm was

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LBJ Library: remembering America’s most consequential president

by philg

It’s the 61st anniversary of Lyndon Johnson going all-in on the Vietnam War. Wikipedia:

On March 8, 1965, 3,500 troops went ashore near Da Nang, the first time U.S. combat forces had been sent to mainland Asia since the Korean War.

Last month, I visited the LBJ Presidential Library in Austin. One of the challenges was coordinating a meeting there with an Austin-based friend and not referring to it as the “LGBTQ Library”. LBJ is the author of the modern U.S.:

  • He opened the borders for the first time since 1924 by signing The Immigration and Nationality Act of 1965, ultimately driving the percentage of immigrants in the U.S. to an all-time high and with an explicit rejection of the idea that immigrants should share language, culture, or religion with existing Americans or with each other
  • Johnson created the first federal programs, Medicare and Medicaid, for which there is no Congressional control of spending. (I.e., spending expands according to how many medical procedures doctors and hospitals can dream up and bill for) These have grown into the largest federal spending programs, a “hold my beer” situation for those who asked “What could possibly cost more than running the U.S. military?” (nearly 90 million Americans are on Medicaid, originally characterized as a “safety net” program)
  • He signed the Gun Control Act of 1968, which dialed back Americans’ Second Amendment rights
  • Johnson set up food stamps (later “SNAP/EBT”)
  • He signed the Housing and Urban Development Act of 1965, which created a bizarre patchwork of taxpayer-funded housing for some, but not all, Americans who met income criteria (apparently contrary to the 14th Amendment’s promise of Equal Protection; Person A gets a free apartment while Person B, identically situated, gets a place on a waiting list or is told that the waiting list is full (contrast to Medicaid and food stamps, in which every eligible person is treated equally).
  • Johnson signed the Public Broadcasting Act of 1967, thus giving us NPR and PBS to sing the praises of all of the above

Most of the above Great Society legislation was opposed by Republicans, but didn’t seem crazy because it was done during a period when the U.S. was enjoying rapid economic growth. Had that rate of growth continued forever, the new programs might have been affordable.

(Note that Lyndon Johnson was the anti-Milton Friedman. Friedman said that one couldn’t have open borders and a welfare state. Johnson opened the borders and simultaneously dramatically expanded the welfare state.)

Approaching the library, one sees the effects of Johnson’s immigration policy. There is a sign encouraging people who don’t know enough English to understand the word “here” (a translation to “aqui” is required) to decide who will run roughly 40 percent of GDP (local, state, and federal governments):

If you love concrete you’ll love the architecture:

Johnson was an early adopter of technology, apparently. While he was serving in Congress, his wife purchased a radio station, which became fantastically more valuable due to favorable FCC rulings on what hours and power it could use and also due to advertisements placed on the radio station by businesses who wanted Representative Johnson to vote in particular ways. (“Johnson, Virtually Penniless in 1937, Left a Fortune Valued at $20‐Million” (NYT, 1973; that’s about $150 million in today’s mini-dollars)) This foray into government-regulated entrepreneurship and subsequent personal wealth isn’t highlighted at the library! Johnson campaigned by helicopter in 1948, a type of machine that wasn’t mass-produced until 1943:

The history wall gives equal weight to the Beatles playing on TV and to a U.S. President being shot and killed:

Who will agree with me that Johnson was the most consequential U.S. president? Even if he had done nothing other than open our borders, I think it is fair to say that Lyndon Johnson changed the U.S. more than any previous president. Some might cite Abraham Lincoln, but we could easily have ended up in an EU-type situation with our brothers, sisters, and binary-resisters in the Confederate States of America (which would have certainly abandoned slavery within a few years after 1865 since slavery was abolished nearly everywhere outside of the Arab/African world by 1888 (timeline)).

Still relevant, John Q. Public pays for whatever Lyndon Johnson dreamed up…

Related:

  • “‘War on Poverty’ May Have Created a Permanent Underclass, Economists Say” (March 2026): “A January report by the Congressional Budget Office found that, for the poorest 20% of Americans, government payments increased from 26% of total income in 1979 to 42% in 2022. And as welfare programs expanded, market income for America’s poorest declined as a share of total income. Whereas in 1979, welfare payments were only about half the amount of private income sources for the lowest quintile, the two income sources were roughly equal by 2022.”
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Rename Caribbean “The Sea of Obesification”?

by philg

The Caribbean Sea is named after the Caribs, a group of people who were nearly all killed by open borders, i.e., by immigration from Europe and Africa (the latter mostly involuntarily).

If we were to rename the body of water after events that occurred in more recent times, what would the appropriate name be? The Caribbean’s initial wealth was all from sugar. When that faded due to technical advances in making table sugar from beets, the islands got by with rum as an export (cane sugar is required as a precursor for traditional rum). Today, the islands thrive on (1) cruise ships that serve six meals per day, and (2) all-inclusive resorts that serve six meals per day. In other words, the islands of the Caribbean prosper by making people all over the world obese.

Since, sadly, nobody remembers the Caribs would it make sense to rename the body of water “The Sea of Obesification” (not the “Sea of Obesity” because there are plenty of obese people in other parts of the world, e.g., those who’ve paid for cruise tickets or resort nights).

As we cruised the Sea of Obesification, Celebrity Ascent offered delicious bread pudding with vanilla sauce at about half the meals:

Here’s the “Cavery” where giant roasts are carved up, as in cave-dwelling times:

(Either this is a misspelling of “carvery” or someone was having fun.)

The ship also had more elegant table-service restaurants with superior presentation, e.g., a Kosher salad:

I don’t think that I gained weight on the trip, as it happens, because I was more active than usual. Certainly there was no excuse not to hit the gym, which offered a magnificent view as well as top-of-the-line equipment:

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History of Huawei (II)

by philg

A second post about the core topic within House of Huawei: The Secret History of China’s Most Powerful Company …

How does hiring and firing work in a company that isn’t passionate about DEI?

On January 28, 1996, Ren Zhengfei held Huawei’s first “mass-resignation ceremony.” Each head of a regional sales office was told to prepare two reports: a work summary and a written resignation. “I will only sign one of the reports,” Ren said. “Dear Chairman,” the resignation letter said, “I have fought for the company’s sales development and sacrificed my youth. But in the few years that I’ve worked on the sales front lines, my technical and business ability may not have kept up…. If through the process of examination and selection, the company identifies a more suitable person for sales work, I will sincerely resign from my current position.” Huawei had started out in rural markets, and many of its early sales managers were provincial in their experience and network of contacts. As Ren sought to go national and international, he decided to make the entire sales staff resign and reapply for their jobs. “The mountain goat must outrun the lion to not be eaten,” he had told them ahead of the event. “All departments and sections must optimize and eat the lazy goats, the goats that do not learn or progress, and the goats with no sense of responsibility.” Now Ren took the podium. “Being an executive at Huawei should be understood as a responsibility, a choice to sacrifice personal happiness,” he said. The resigning sales managers were allowed to speak in turn, some choking back tears. “As a Huawei person, I’m willing to be a paving stone,” one said. “If I can’t keep up with the pace of the company’s development, I’m willing to let new people, and higher-level people, take over my job,” another offered. “My youth and ability are limited, and Huawei’s future is long,” a third said. “I can’t hold back the company because of me.”

Maybe sales will be one of the few jobs left to humans after Elon Musk gets Optimus to do everything?

Ren had grown up in the Mao years, when there was no such thing as private-sector sales. Now he presented sales to his young followers in rousing terms, almost as a mystical vocation. “Sales work is special, complex, and noble,” he told them. “You need the intelligence of a scientist, the insight of a philosopher, the eloquence of an orator, the ambition of a social reformer, and the optimism and persistent spirit of a religious man.”

Polite protocol for a business dinner involved breaking out the baijiu, a clear sorghum spirit that has an eye-watering 120-proof kick, and pouring out round after round of shots over a rotating parade of exquisite dishes. The protocol also involved getting drunker than your clients to show your respect for them. One early Huawei executive wrote about having to excuse himself for a vomit break while entertaining customers—not an uncommon occurrence. Others developed stomach or liver ailments. This seemed to happen particularly often in the far northeast, which had a reputation for heavy drinking. “The key staffer for this account is currently suffering hepatitis but refuses to come back to Shenzhen for medical treatment and insists on fighting on the front line through the ice and snow,” Ren said in 1995 about a Huawei salesperson based in Yichun, close to the northeastern border with Russia.

The story of Huawei is definitely not as simple as “it was a planned economy and the planners picked Huawei”:

Despite the interest that Huawei had received from government officials, it was only one among many contenders, and not even the most favored one. In 1995, officials had set up a state-owned switchmaking champion called China Great Dragon Telecommunication in an effort to combat the foreign switchmakers. Great Dragon was built around the military engineer Wu Jiangxing’s breakthrough 04 switch and had been formed by merging eight smaller telecom companies. The government was pouring some $2.2 billion a year into the venture. Also in 1995, the Xi’an Datang Telephone Co.—a venture set up by a state-run research institute and several Chinese graduates from US universities—began mass production of its new switch, the SP30. And across town in Shenzhen, the Zhongxing Telecommunications Equipment Company—which would later be known as ZTE—had developed its ZXJ10 switch. People called them the Big Four of China’s domestic switchmaking, and they made quick work of eating into the foreign vendors’ market share. Within a few years, the price of telephone switches in China had dropped from $300 per line to $70 per line. With so many contenders, and such thin margins, companies were always flaming out. In early 1996, a dozen of Great Dragon’s 04 switches abruptly failed due to a software problem. The company never recovered.

Huawei had started out as an underdog compared with its state-owned rivals. Now it was emerging as the frontrunner, so much so that the state-owned companies were crying foul. “They sell cheaply to get market share,” an executive at Datang complained. Great Dragon’s Wu Jiangxing griped to Shenzhen’s Science and Technology Bureau that the local government shouldn’t just support privately owned companies.

Despite the shortage of PhDs in DEI in China and overt sexist sentiments, women are able to rise to top executive positions.

The executive who rose the highest was Sun Yafang, who was elevated from marketing and sales president to Huawei’s vice-chairwoman in 1994. She was an intense woman of around forty, with a hawkish nose and a stately bearing. She had overseen Huawei’s “marriage” to the state through the joint ventures with provincial telecom bureaus and had led the mass resignation of the sales managers. People whispered that Madam Sun had worked for the Ministry of State Security, or the MSS, China’s powerful civilian intelligence agency, before joining the company. Perhaps that had something to do with her rapid rise through Huawei’s ranks, or perhaps not.

Sun ran a tight ship, cracking down on excessive golfing among the managers. “Huawei’s sales staffers all know that if Madam Sun sees you without a tie on a convention floor, your fate will be a miserable one,” a member of her team wrote about her. “Not to mention her fiery temper. The hurricane of her criticism will leave you with no possible hope to find an escape.”

Ren had proved willing to promote capable female executives, even as he sometimes expressed old-fashioned views on women in the workplace. “Many companies don’t like hiring female employees, because female employees are inefficient and can’t achieve the goals when they do things,” Ren said in a speech to Huawei’s secretaries around this time. “Female employees have a big shortcoming, which is they like to gossip and nag, which undermines unity. Originally, the purpose of hiring female employees was to add a lubricant to the management team. The main characteristic of male employees is their rigidity, and they are prone to producing sparks when they collide. With a layer of elastic sponge in between, there won’t be sparks.”

A lot of Huawei’s management and corporate practices were modeled on IBM’s and with IBM consultants’ help:

IBM’s consultants started arriving at Huawei’s headquarters in August 1998. They would remain in residence for a decade. Gary Garner, one of the early IBM consultants, recalled that his first impression of Huawei was that it was a vibrant but undisciplined company where things were sometimes just scrawled on sticky notes instead of being filed properly. “President Ren had a whole bunch of bright young PhDs,” he said, “but it was disorganized. It wasn’t ready to go to the international market.” Some of Huawei’s managers protested the new systems, which they found burdensome. Ren insisted they follow the IBM way. If the shoes didn’t fit, Ren told them, they had to “cut their feet to fit the shoes.” IBM’s output was fifty-five times Huawei’s that first year, 1998. Ren set a goal of shrinking the difference to thirty-five to forty times greater by 1999. “We are making big strides forward,” he told his staff. “We’re narrowing the gap.”

One place that Huawei didn’t follow IBM was onto a public stock exchange. The company remains privately owned, mostly by employees, to this day.

Imagine if U.S. politicians would follow Ren’s example of voluntary semi-retirement at age 67:

In December 2011, Ren, sixty-seven, announced he was stepping back to allow younger hands to steer the company. “I increasingly don’t understand the technology, increasingly don’t understand finance, and only half understand management,” he told his staff. “If I can’t treat our group kindly and democratically, and fully unleash the talents of all our heroes, I will have achieved nothing.”

Much of the rest of the book is about Huawei’s entries into various foreign markets and tussles with the U.S. and other Western intelligence agencies that either (1) wanted a back door to tap into communications, or (2) were worried that their Chinese counterparts had a back door into Huawei’s gear. I won’t cover that here because it is too involved, but I will have another post about this House of Huawei: The Secret History of China’s Most Powerful Company.

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History of Huawei book

by philg

I promised more about House of Huawei: The Secret History of China’s Most Powerful Company (see Unprovoked genocide against the Uyghurs) and here it is…

The book covers the modern history of China as well as the history of Huawei. The book should be inspiring to us older folks because the founder of Huawei was born in 1944 and, at age 81, is still involved in corporate management:

In Guizhou, Ren Moxun met a seventeen-year-old named Cheng Yuanzhao. With big brown eyes,[15] round cheeks, and a broad smile, she was also bright and good with numbers. They married, and Cheng Yuanzhao soon became pregnant. Their son was born in October 1944, and they named him Ren Zhengfei. It was an ambiguous name. Zheng meant “correct,” and fei meant “not.” “Right or wrong” would be a fair translation.

We are reminded that China is a multi-ethnic empire:

Mao’s officials believed they were extending a civilizing influence to the nation’s frontiers—Guizhou in the south, Inner Mongolia in the north, Tibet and Xinjiang in the west. The residents didn’t necessarily see it that way. They had lived for centuries with their own languages and customs, and they were now being compelled to assimilate. There were those who did not like Ren Moxun and his school either. After someone threatened to kill him with a hand grenade—the precise reasons are unclear—the school was issued four rifles to protect the staff and students. One of Ren Moxun’s objectives was to inculcate his students with the right beliefs. “Principal Ren, your guiding ideology must be clear,” a visiting official instructed him. “You must make clear who the enemies are, who we are, who are our friends.” Ren Moxun organized rallies for the students to denounce their enemies. The enemies at home were the oppressive landlords. The enemies abroad were the Americans, who were waging war against North Korea, one of China’s allies. Ren Moxun reported that the “scoundrels” hidden among the teachers were successfully caught through these criticism sessions, which were often intense, with students bursting into tears. In the anti-America sessions, students offered up secondhand accounts of atrocities committed by US troops in the area, presumably when they had passed through during World War II. One student said a US soldier had shot a farmer for sport near the Yellow Fruit Waterfall. Another said a classmate’s sister had been dragged into a jeep and raped. It was hard to say what, exactly, had happened years ago with US soldiers, but the resentment against America was certainly real.

and that the Cultural Revolution wasn’t a great time to be an educator or a student who wanted to learn

Ren Moxun was hauled onto a platform in the school cafeteria, his hands tied, his face smeared with black ink, the tall hat of shame denoting a counterrevolutionary placed on his head. “Studying is useless!” people shouted. “The more knowledge you possess, the more reactionary you are!”

One of Ren Moxun’s students demanded the principal admit that he’d instilled feudalist thinking in the students, such as by quoting Confucius. According to a recollective essay by Feng Jugao, a different student, when Ren Moxun tried to deny the accusation, the accuser rushed forward with a wooden stick and beat him until the stick broke.[53] “I can’t say if the wooden stick was weak, or if Principal Ren’s backbone was strong,” Feng wrote. “But the wooden stick broke in two across Principal Ren’s back.” Feng recalled his mother being aghast, saying that the students who beat the principal would get their karmic punishment.

Universities nationwide were banned from matriculating any new students between 1966 and 1976. Ren Zhengfei’s younger siblings were shut out, but through the random luck of his birth year, he’d been able to eke out a college education. In 1968, Ren graduated with a major in heating, gas supply, and ventilation engineering.

At age 42, Ren started Huawei:

Shenzhen legalized the establishment of “minjian” (unofficial or, more literally, “among the people”) private technology companies in February 1987 under a pilot program. Applicants poured in from across the country—professors and engineers from Beijing to Kunming. The idea of running your own company in the SEZ was exciting—and risky. Seventy-five percent of the first batch of entrepreneurs asked their state employers for temporary unpaid leave, with the option of reprising their old jobs if their startups didn’t work out. Ren founded Huawei as a minjian company on September 15, 1987, with twenty-one thousand yuan pooled between himself and five investors.

Wuhan was the source for more than SARS-CoV-2 and coronapanic:

Ren arrived in the inland city of Wuhan in the spring of 1988 in search of engineers. Dubbed “the Chicago of China,” Wuhan was a bustling industrial city on the Yangtze River. The Huazhong Institute of Technology had been founded here in the 1950s, and three decades later, conditions at the university were still spare: Students bunked six to a room in the dorms and took cold-water showers.[38] There was no air-conditioning or heat. But there was a professor who was knowledgeable about telephone switching, and Ren hoped he could help Huawei build a switch.

The book covers the 1989 protests and power struggles, then returns to the early days of Huawei:

Ren’s team had been making simple analog switches that could handle forty, eighty, or, at most, a couple hundred phone calls at once. Their early attempt at a more complex one-thousand-line switch was a failure, suffering from serious cross talk, dropped calls, and a tendency to catch fire from lightning strikes. Now, in 1993, they were trying to build a digital switch that could handle ten thousand telephone calls at once. This would catapult them into the big leagues. They would no longer be selling to hotels and small offices; they would be selling directly to the telephone switching centers for entire cities.

Ren had rented the third floor of an industrial building on Shenzhen’s outskirts for his fledgling R&D team. There was no air-conditioning, only electric fans, and they took cold showers to try to keep cool. They rigged up nets to try to escape the ferocious mosquitoes. A dozen cots lined the wall. The engineers worked day and night, flopping down on mattresses to sleep for a few hours when they reached exhaustion, which led to the saying that Huawei had a “mattress culture.”[9] One engineer worked so hard that his cornea detached, requiring emergency surgery.

It wasn’t as simple as going to the state’s web site and forming a corporation or LLC:

By 1991, Huawei had ten million yuan in fixed assets and was churning out eighty million yuan worth of switches a year. It had 105 employees, the majority of whom were shareholders. That year, Huawei’s shareholders did something curious: after proudly launching themselves in 1987 as one of Shenzhen’s first wave of “minjian” private tech companies, they voted unanimously to stop being one. From 1992 to 1997, Huawei would be a jitisuoyouzhi, or a “collectively owned enterprise,” something that was neither “private” nor “state-owned” in the modern senses of the words. Indeed, such companies were most similar in spirit to the Mao-era communes: Beijing defined them as “socialist economic organizations whose property is collectively owned by the working people, who practice joint labor, and whose distribution method is based on distribution according to labor.” While collectively owned businesses had been used in the countryside to mixed success, China’s national government had, in 1991, just formalized guidelines for urban collective companies. Putting on the “red hat” of a collective was popular among startups then as a way to obtain political protection. The Stone Group—hailed as “China’s IBM” in the 1980s—had been a trailblazer in this regard, successfully switching to a “collectively owned enterprise” in 1986. The 1991 national guidelines stipulated that collectively owned enterprises could enjoy preferential treatment in national policies and apply for loans from specialized banks. The guidelines also ordered government authorities nationwide to incorporate the companies into their economic plans in order to ensure the success of the urban collective economy. It remains unclear why Ren and his team decided to switch to a jitisuoyouzhi, though it’s likely that the broader financing opportunities were attractive.

Like Jeff Bezos, who married a secretary at D.E. Shaw while he was a VP (Wokipedia says that MacKenzie Scott had “an administrative role” at D.E. Shaw, implying that she might have been a top manager; the New York Times says that she held the job of “administrative assistant” (i.e., secretary)), Ren might have married his secretary:

While the precise timeline is unclear, Ren Zhengfei had remarried at some point and was building a new family in Shenzhen. This second marriage may have taken place around 1994, according to a speech Ren gave in January 2009, in which he praised his second wife, Yao Ling, for “fifteen years of silent devotion to the family.” Yao Ling was a petite and graceful young woman, much younger than Ren, with almond-shaped eyes and a winsome smile. Some news reports referred to her as Ren’s former secretary, though this has not been confirmed by the company. Ren had called Meng Jun “very tough”; he called Yao Ling “gentle and capable.”

The company prospers partly because the Chinese government imposed a “Buy Chinese” mandate similar to the U.S.’s “Buy American” mandates:

Since Ren’s meeting with Jiang in 1994, much more government support had been pledged. At the end of 1994, Zhang told Ren that in the next five-year economic plan, half of telecom operators’ switch purchases would be reserved for purely domestic companies like Huawei. “The way I look at it,” Zhang said, “it’s not that important what type of ownership structure a company has. The important thing is if it’s Chinese. So we at the Electronics Ministry want to support a business like yours.” China would have 84 million telephone lines’ worth of switches in operation by 1995, and officials planned to more than double that to 174 million lines’ worth by 2000.

I’ll close here and pick up in another post. Meanwhile, if you’re interested, read House of Huawei: The Secret History of China’s Most Powerful Company.

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Coronapanic five years ago at Penn State

by philg

A reminder that exactly five years ago, the police in Pennsylvania were hunting for college kids who committed the crime of assembly (formerly a “right” protected by the First Amendment). From Life on campus during the plague:

At the same time, the students were reminded “It is better to report someone who’s innocent than to not report someone who’s guilty.” (context: sexual assault, though it is unclear how a sexual assault might occur among students who were following the college’s coronapanic dictates).

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The death of two Harvard undergraduates, William Cowper Boyden III and William Stanley North III

by philg

It’s the Day of the Dead for our neighbors in Mexico.

While cleaning up my mother’s possessions, I found a correspondence between my late father, apparently a friend of William Cowper Boyden III, and the young Mr. Boyden’s father. I couldn’t find much on the Web regarding the sad December 22, 1955 death of two young Harvard men, but the Crimson obliquely referred to them having been killed in a car accident:

The William Cowper Boyden III Scholarship and the William Stanley North III Scholarship, set up in memory of two College students killed while driving home for Christmas vacation, has a combined endowment of over $25,000.

I found the letters interesting because it seemed unlikely that a younger-than-average Jewish scholarship student like my dad (he skipped at least the last year of high school) would have been friends with anyone from such a well-established family, but also for the style of pre-email pre-ChatGPT correspondence. It’s also sad because so little trace is left of these two men.

19560110-bill-boyden-deathDownload
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Abbe Museum in Bar Harbor, Maine

by philg

Happy Indigenous Peoples’ Day to those who celebrate. In the spirit of the holiday, here are some photos from the Abbe Museum, which is devoted to telling the story of the Wabanaki to anyone willing to pay $18:

Note that a person who is able-bodied and able-minded but who chooses to refrain from work gets in free via his/her/zir/their SNAP/EBT card. The person with a developmental or intellectual disability, however, is charged $16. The museum admits in various places that it occupies stolen land and, to their credit, admits the rightful owners for free (“Tribal ID” is required so Elizabeth Warren would be excluded).

Masks were encouraged on June 10, 2025. Note the fine Maine summer weather (50 degrees and rain/mist all day):

Inside the museum, roughly half of the visitors took the mask encouragement to heart (“to lungs”?), though I also observed a couple of ceremonial chin diapers. In a victory for common sense, a family visiting had 100 percent mask coverage rather than one member wearing a mask and then becoming infected by the non-masked members after returning home.

Two out of three masked in the photo below:

Here’s a Land Acknowledgement, which also informs via Science that the “Native communities [] have lived here for thousands of generations” (even with a Palestinian rate of reproduction, it is tough to understand how “thousands of generations” can fit into the 13,000 years that archaeologists say is how long people have lived in Maine):

And a statement about genocide and decolonization:

Nobody seems to like the idea of giving the land back to its rightful owners and paying rent.

The men’s room was ready for Tim Walz’s visit:

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New York Times offers a new immigrant-rich history of jet engines

by philg

“The U.S. Deported This Chinese Scientist, in a Decision That Changed World History” (New York Times, May 30, 2025):

In 1950, though it didn’t know it yet, the American government held one of the keys to winning the Cold War: Qian Xuesen, a brilliant Chinese rocket scientist who had already transformed the fields of aerospace and weaponry. In the halls of the California Institute of Technology and M.I.T., he had helped solve the riddle of jet propulsion and developed America’s first guided ballistic missiles.

The immigrant invented the jet engine, then? The Wikipedia history of the jet engine credits various English and European engineers, notably Frank Whittle, with most of the “riddle-solving” work done more than 20 years prior to 1950.

I wonder how many more years it will be before all textbooks relate a history of science and technology in which all innovations are from migrants, the 2SLGBTQQIA+, women, and Engineers of Color.

Below, Qian Xuesen’s Gloster Meteor.

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