James Livingston (1) (1949–)

This dense, scholarly work describes the success of the rising corporate elite of the early 20th century in convincing the American public to embrace radical changes in the banking system, which were needed to stabilize and grow the new corporate-industrial economy. It is an interesting and useful book, but not the place to go if you're looking for a general introduction to the origins and operation of the Federal Reserve System.

Livingston uses a non-Marxist, class-based framework (exhaustively discussed in an appendix) as his formal basis for analysis, but it sometimes seemed to me geared more to satisfying the demands of the academy (this book was originally a doctoral dissertation) than to the needs of telling his story. And that story is pretty straightforward: from the 1890s onward, as the US economy became increasingly industrialized and large corporations became more prevalent, the old decentralized banking system, geared to the needs of small businessmen and farmers, became increasingly unstable, contributing to financial panics. Corporate leaders and bankers realized that radical reform, especially the creation of a central bank, was urgently needed, but they also recognized that American politcians and the public, long resistant to any hint of a "money monopoly," would have to be convinced first.

Livingston argues that, in making their argument -- through business conferences, alliances with educators (especially those in the new academic field of economics), dissemination of propaganda, and Congressional lobbying -- corporate-industrial leaders not only won support for their reforms, and thus the Federal Reserve System, but so legitimized the ideology of the corporate-industrial economy that it has been the mainstream of American capitalism ever since. As part of this, the new ruling elite (his term) abandoned dog-eat-dog competition, based on Social Darwinism, in favor of cooperation that included a new sense of corporate responsibility. The corporate embrace of Progressivism in the early 20th century seems to reflect this, though Livingston doesn't really address it.

There's a bit a chicken-and-egg problem here: did Americans accept a central bank (long the bete-noire of adherents to the Jacksonian traditions of the early 19th century) because the business elite did such a great job selling it, or was it because by 1913, when the Federal Reserve Act was passed, the transformation of the economy, and its impact on the lives of individual Americans, had reached the point that the need for reform had become obvious? I expect Livingston would say both, though his focus is on the former.

In any event, there is a good (albeit technical) discussion here of the specific aspects of the old banking system that no longer operated efficiently and how new mechanisms were developed. It assumes some basic knowledge of banking and finance and is not always clearly written (despite the inclusion of a helpful glossary of financial terms). Livingston also touches briefly on the importance of these banking reforms to American economic expansion overseas -- without them, the export of both commodities and capital would have been seriously impeded, perhaps slowing the growth of American influence abroad.

Livingston's treatment of the political debates in 1912-13 over the creation of the Federal Reserve System is also rather brief; it's not the main focus of his story. He devotes some attention to the argument over whether the Fed should be controlled by the government or by constitutent banks, but doesn't really describe how we ended up with such a strange hybrid of a central bank -- one that is both centralized and decentralized (with one Federal Reserve Board but 12 Federal Reserve Banks). For that readers will need to look elsewhere.… (meer)