More Good Done With Standard Oil Money: Henry Flagler

FlaglerMemorial.jpg  The Flagler Memorial obelisk was erected in on a man-made island in 1920, when Miamians still remembered the accomplishments of Henry Flagler.  Source of image:  http://www.miamibeachfl.gov/newcity/depts/arce/art_public/rw_flagler_monument.asp

 

The Standard Oil "monopoly" is often lambasted as a sorry episode in our economic history.  And yet a strong case can be made that the Standard Oil wealth was created mainly by efficiently providing consumers with a commodity they valued.  In addition, mention is often made of the Rockefeller philanthropic activities.  Less known, is that others who became rich from Standard Oil, also engaged in productive entrepreneurship, and philanthropy, with their wealth.  One of these was Henry Flagler. 

 

In a region that prizes showy monuments to wealth, the lone monument to the man who made it all possible has languished in isolation for decades.

A soaring concrete obelisk dedicated to Henry Flagler, the oil tycoon who hastened South Florida’s development by building a railroad all the way to Key West, it sits on a tiny man-made island in Biscayne Bay, reachable only by boat or, more typically, Jet Ski.  Almost everyone here has glimpsed the Flagler Memorial, but few know what it is called, why it exists or how battered it looks up close.

”I’m telling you, it’s a beautiful work of art,” said Paul Orofino, a board member of the Environmental Coalition of Miami Beach, a nonprofit group that occasionally tidies up Monument Island, the memorial’s scruffy, overgrown home.  ”It’s a tragedy that nobody pays attention to this thing.”

It is not the kind of South Florida tribute one might expect for Flagler, who extended his railroad from St. Augustine to West Palm Beach in 1894, Miami in 1896 and Key West — a segment that lasted only 23 years until a hurricane demolished it — in 1912.

Flagler was the state’s original megadeveloper, after all, creating its tourism industry by turning swampy pioneer settlements into the world’s grandest resorts.  He was also, perhaps, its first huckster, advertising the nascent Miami as ”the most pleasant place south of Bar Harbor to spend the summer.”

His over-the-top winter home in Palm Beach, awash in gold, is now a museum, but most of its visitors come from out of state, said John Blades, the museum’s executive director.  Mr. Blades has tried to get a statue of Flagler erected in Palm Beach, which owes its sumptuous existence to the man, but has so far failed.

”Flagler,” Mr. Blades said, ”is probably the most unappreciated titan of the Gilded Age.”

 

For the rest of the story of the impressive, but deteriorating, Flagler Memorial in Miami, see:

ABBY GOODNOUGH.  "South Florida Journal; Unappreciated, With Memorials to Match."  The New York Times (Fri., October 7, 2005):  A12.

(Note:  the hurricane destroyed the Key West link of the railroad in 1935.)

 

   Henry Flagler.  Source of image:  http://flaglermuseum.us/html/flagler_biography.html

Closing the Alleged ‘Digital Divide’

 One version of the laptops produced by One Laptop Per Child for roughly $100 a piece.  Source of image:  http://www.laptop.org/OLPC_files/nigeria.jpg

 

Simply giving each child a laptop, won’t much improve their standard of living.  (See Easterly’s The Elusive Quest for Growth.)  But maybe a few of the children will obtain access to information about what is possible in the outside world, and maybe that will lead them to fight for more freedom?

But at least, if they remain poor, it will not be possible to lay the blame on some sort of ‘digital divide.’  Lay the blame, instead on government economic planning. 

Note the aside buried in the article:  ‘competitive advantage’ economist Michael Porter is telling the Libyans how to develop a "national economic plan"??  (Say it ain’t so, Michael!)

 

SAN FRANCISCO, Oct. 10 — The government of Libya reached an agreement on Tuesday with One Laptop Per Child, a nonprofit United States group developing an inexpensive, educational laptop computer, with the goal of supplying machines to all 1.2 million Libyan schoolchildren by June 2008.

The project, which is intended to supply computers broadly to children in developing nations, was conceived in 2005 by a computer researcher at the Massachusetts Institute of Technology, Nicholas Negroponte.  His goal is to design a wireless-connected laptop that will cost about $100 after the machines go into mass production next year.

. . .

At the World Economic Forum in Davos, Switzerland, in January, Bill Gates, Microsoft’s chairman, suggested that the next generation of cellphones might be a better way to reach across the so-called digital divide.

Mr. Negroponte said Microsoft refused to sell its Windows software to the project at a price that would make it possible to include in his system.  As a result, his laptops will come with the freely available Linux operating system, which is becoming increasingly popular in the developing world.

The idea of a laptop for every schoolchild grew out of Mr. Negroponte’s experience in giving children Internet-connected laptops in rural Cambodia.  He said the first English word out of the mouths of the Cambodian students was “Google.”

Discussions between the One Laptop project and the Libyan government began as part of work being done by the Monitor Group, an international consulting firm co-founded by the economist Michael E. Porter.  It is now helping the Libyans develop a national economic plan.

. . .  

The first test models will be distributed to the five participating countries companies at the end of this November, according to Mr. Negroponte, and mass production is planned for June or July of 2007.

The computers come with a wireless connection, a built-in video camera, an eight-hour battery and a hand crank for recharging batteries.  They will initially be priced below $150, and the price is expected to decline when they are manufactured in large numbers.

 

For the full story, see:

JOHN MARKOFF.  "U.S. Group Reaches Deal to Provide Laptops to All Libyan Schoolchildren."  The New York Times  (Weds., October 11, 2006):  A14.

(Note:  ellipses added.)

 

  MIT’s Nicholas Negroponte.  Source of image:  online version of the NYT article cited above.

Hong Kong’s Growth Was Due to Cowperthwaite’s “Positive Noninterventionism”

In Free to Choose, Milton Friedman compared Hong Kong’s free market, with India’s state control of the economy.  The dynamism and growth of Hong Kong was a stark contrast to the inertia and stagnation of India.  In the decades since Free to Choose, India has become more free and, alas, Hong Kong less free:   

(p. A14) . . . it was sadly unsurprising to see Hong Kong’s current leader, Donald Tsang, last month declare the death of the policy on which the territory’s prosperity was built.

The really amazing phenomenon is that, for half a century, his predecessors resisted the temptation to tax and meddle.  Though a colony of socialist Britain, Hong Kong followed a laissez-faire capitalist policy, thanks largely to a British civil servant, John Cowperthwaite.  Assigned to handle Hong Kong’s financial affairs in 1945, he rose through the ranks to become the territory’s financial secretary from 1961-71.  Cowperthwaite, who died on Jan. 21 this year, was so famously laissez-faire that he refused to collect economic statistics for fear this would only give government officials an excuse for more meddling.  His successor, Sir Philip Haddon-Cave, coined the term "positive noninterventionism" to describe Cowperthwaite’s approach.

The results of his policy were remarkable.  At the end of World War II, Hong Kong was a dirt-poor island with a per-capita income about one-quarter that of Britain’s.  By 1997, when sovereignty was transferred to China, its per-capita income was roughly equal to that of the departing colonial power, even though Britain had experienced sizable growth over the same period.  That was a striking demonstration of the productivity of freedom, of what people can do when they are left free to pursue their own interests.

 

For the full commentary, see: 

MILTON FRIEDMAN.  "Hong Kong Wrong."  Wall Street Journal  (Fri., October 6, 2006):  A14.

(Note:  ellipsis added.)

 

Be Careful What You Ask the Government to Do for You

  The welcome arch in Stuart, Floriday.  Source of the photo:  online version of the NYT article cited below.

 

STUART, Fla., Oct. 2 — As land-boom boasts went, the 1925 headline was only mildly preposterous:  “Stuart Bigger Than Miami in 10 Years,” it sang.

A cross-state shipping canal was in the works, and Stuart, about 100 miles north of the city it hoped to surpass, sat at the eastern terminus.  It envisioned becoming a thriving commercial hub and built the Stuart Welcome Arch, a proud gateway on the old road into town, to embody that dream.  "Atlantic Gateway to the Gulf of Mexico," its bronze lettering proclaimed.

. . .

The cross-state canal became more bane than boon when the state started using it to flush polluted overflow from Lake Okeechobee out to sea.

“Everyone wanted that canal,” said Sandra Thurlow, a local historian, “and yet it has caused so many problems.”

 

For the full story, see:

ABBY GOODNOUGH.  "STUART JOURNAL; A Symbol Stands, but the Dreams Have Shifted."  The New York Times, Section 1  (Sun.,  October 8, 2006): 16.

(Note:  ellipsis added.)

Contra the Pundits: “Buy the Damned Coffee, if it Makes You Happy”

  Source of illustration:  online version of the NYT article cited below.

 

APPARENTLY, I’m an idiot.  Every financial advice columnist seems to be telling me so.

My crime:  buying morning coffee from Starbucks for my wife and me.

Avoiding the regular cup of overpriced coffee has become an easy cliché for financial advisers, a symbol of money frittered away.  The advice has appeared just about everywhere.  Drop the caramel mocha frappu-whatever, they say, or you’ll spend your retirement testing recipes that combine Hamburger Helper and dog food.  David Bach, the author of “The Automatic Millionaire,” pushes what he calls the Latte Factor, which he has defined as “the daily extravagances that drain your resources.”  Another guru, Paul Farrell, has estimated that skipping Starbucks and compounding the savings could save you an eye-popping $500,000 by retirement.  At my own newspaper, Damon Darlin, a financial columnist, has repeatedly brought up this issue.

Before bringing up a point of disagreement — what logicians call the “Big But” — it is common to bestow a few compliments to ease the sting.  So, as a preface to the Big But, let me say that Mr. Darlin is a fine journalist and, for all I know, a swell dancer besides.

Still, I disagree.  Buy the damned coffee, if it makes you happy.  When I show up back at the house after dropping off my high schooler in the morning and I have that latte in hand for my wife, she will sometimes refer to me as “my hero!”  After more than 30 years together, this is about the only time I am called that.

 

For the full commentary, see: 

JOHN SCHWARTZ.  "ESSAY; Skip the Coffee? What’ s Money for, Anyway?"  The New York Times, Section 3, Part 2  (Sun., October 8, 2006):  25.

 

Mellon Allowed Great Innovation By Restraining Intrusive Government

(p. W4) Though scarcely known today, Andrew W. Mellon was a colossus in late 19th-century and early 20th-century America.  He would come to play a major role in the management of the American economy, but first he built one of the country’s great fortunes, one that would rank him today with Bill Gates and Warren Buffett.  He is now the subject of a comprehensive, if slightly grudging, biography by David Cannadine, the distinguished British historian.

Mellon is not associated with any single industry, in the way that Andrew Carnegie and John D. Rockefeller are.  He was a venture and equity-fund capitalist, one of the first to function on a major scale.  He and his younger brother, Dick, took over their father’s Pittsburgh-based investment and coal-mining business and expanded it into many fields, including copper, oil,  petrochemicals and aluminum (Alcoa).

No banker was as gimlet-eyed; Mr. Cannadine shows Mellon shrewdly and coldly calculating every investment prospect.  Yet few venture capitalists were as daring.  In the 1890s, when Rockefeller was ruthlessly monopolizing the petroleum industry, Mellon didn’t flinch from setting up a competing refinery.  When Mellon finally sold out to Rockefeller, he did so at a considerable profit.  Several years later he came back to oil and eventually built Gulf into an industry giant.

Original Supply-Sider

But Mellon was more than an entrepreneurial industrialist.  In his mid-60s he became a famous — and infamous — public servant, performing as Treasury secretary under three presidents, from 1921 to 1932.  He was the original supply-sider, pushing tax cuts under Presidents Harding and Coolidge.  He argued that the high tax rates left over from World War I were depressing economic activity; that lower rates would turn the economy around; that high-income earners would end up paying more and that low-income earners would be removed from the tax roles entirely.

His program was a fantastic success.  The top rate was cut to 25% from 77%.  The rich did indeed pay more, while low- and middle-income earners saw their tax bills shrink to nothing or next to nothing.  The economy boomed.  The U.S. outstripped more heavily taxed nations, such as Britain and France.  Mellon also pushed painstakingly for the creation of an international monetary system to replace the one shattered by World War I.  The big challenge was huge Allied war debts to the U.S. and onerous German reparations.  Mellon negotiated the easiest terms that were politically possible so that trade and economies could revive.

We sometimes forget just how dynamic the 1920s were in America.  The automobile became a commonplace item for working Americans; labor-saving devices, such as the washing machine, grew ever more common as well; movies and radio provided mass entertainment as never before (an experimental television broadcast was carried out in 1927); and stock ownership widened to include more members of the middle class.

It was a time of great innovation and inventiveness, and in a sense Mellon presided over it all by allowing it to happen without intrusive government policies.

 

For the full review, see:

STEVE FORBES.  "BOOKS; The Man Who Made the Twenties Roar."  The Wall Street Journal    (Fri., October 6, 2006):  W4.

 

Reference for the book:

David Cannadine.  MELLON.  Knopf, 2006.  779 pages, $35

 

 MellonBK.jpg  Source of book image:  online version of the WSJ article cited above.

 

Why Should We Be Forced to Subsidize Those Who Choose to Live in the Boonies?

  Kerry Caruselle, the only passenger on her federally subsidized flight between Pueblo and Denver, leaves the plane.  Source of the photo:  online version of the NYT article cited below.  Grant Campbell has plenty of room to spread out on his federally subsidized flight between Pueblo and Denver.  Source of the photo:  online version of the NYT article cited below.

 

(p. A1)  PUEBLO, Colo. — Hoping for an empty seat beside you on your next flight?  No problem — just schedule a trip to someplace like Kingman, Ariz.; Brookings, S.D.; or Pueblo.

They are among more than 100 locales around the country that receive federally subsidized airline service, and the average number of passengers on each flight is about three.

Most of these flights on 19-seat prop planes have plenty of elbow room — a rare luxury in this age of jampacked commercial jets.  Some major airlines have cut their fleets about 20 percent since 2001 and have abandoned unprofitable routes, meaning planes are flying fuller than at any time since World War II.

The more tranquil cabins come courtesy of the Essential Air Service, put in place when the airline industry was deregulated in 1978.  The idea was to help travelers in smaller cities adjust to the new competitive era of air travel.  The intention was for the service to go away after 10 years, but it was renewed for a second decade — and then made permanent.

Over time, though, the program has come to seem mostly expensive and, to its critics, unessential.

After all, travelers adjusted very well after deregulation, and started driving the extra distance to busier regional airports nearby that offered increasingly cheap and plentiful jet service.  That left the program with (p. C7) mostly empty planes, making them more costly to fly.  Add in higher maintenance and fuel costs, and spending has more than quadrupled since 1996, to $110 million.

That, of course, is not a lot in the federal scheme of things.  But the program is a good case study of how poorly the government sometimes keeps pace with the free market and consumer tastes, and how entrenched interests, even in the face of some creative map-drawing, can keep such a program aloft in the face of efforts to ground it.

. . .

The emptier the subsidized flights, it seems, the more cherished the program became.  Members of Congress regularly pressured the Transportation Department to continue subsidies to towns they represented.  A lobbying group sprang up solely to fight to preserve and expand the program.

 

For the full story, see: 

JEFF BAILEY.  "Subsidies Keep Airlines Flying to Small Towns."  The New York Times   (Fri., October 6, 2006):  A1 & C7.

 

  Source of the graphic:  online version of the NYT article cited above.

Italy Suffers from a “Growing Spirit of Cynicism and Escapism”

  Source of book image:  http://ec3.images-amazon.com/images/P/0767914392.01._SS500_SCLZZZZZZZ_V57219494_.jpg

 

As anyone can attest who has lived in Italy even briefly, its domestic life can be gracious and sweet.  The question is whether this way of life can survive the many urgent challenges enumerated by Mr. Severgnini:  an abysmal fertility rate, crushing pension obligations, marginal economic growth, a sclerotic legal system, the flight abroad of the most creative young minds, and a growing spirit of cynicism and escapism.

 

For the full review, see:

FRANCIS X. ROCCA.  "BOOKS; An Italian Challenge; Keeping la dolce vita as modernity spreads."  The Wall Street Journal  (Sat., September 9, 2006):  P8.

 

The reference to the book:

Beppe Severgnini.  La Bella Figura. Broadway, 2006.  217 pages, $23.95.

In the Prague of Rudolf II, “Anything Seemed Possible”

  Source of book image:  http://ec3.images-amazon.com/images/P/0802715516.01._SS500_SCLZZZZZZZ_V61383943_.jpg

 

Ambassadors, nobles and church magnates routinely visited Prague Castle during Rudolf’s reign (1576-1612); so did astronomers and astrologists, alchemists, philosophers, charlatans and anyone else with something marvelous to relate.  Bureaucratic busybodies might wait months for an audience with the emperor, but his doors flew open for those with esoteric knowledge.

. . .

Prague Castle was the perfect emblem of Rudolf’s scattered interests.  It contained one of the greatest painting collections in Europe — including works by Durer, Arcimboldo, Titian and Veronese.  Its inventory also included Egyptian mummies, stuffed exotic birds, unicorn horns, whale teeth, bezoars (gall stones taken from the stomach of animals, thought to be antidotes to poison), the nails of Noah’s ark and one dried and preserved dragon.

If a visitor to the castle wandered into its library, he might well come across such dodgy works as "Arcana arcanissima," "De Alchemiae difficultatibus" and "Mysterium cosmographicum," many dedicated to the monarch by their grateful authors.  Yet if the visitor climbed to the top of the castle’s so-called Bishop’s Tower on a starry night, he might encounter the great astronomers Tycho Brahe and Johannes Kepler charting the sky.  Clearly, it was a magical moment in the history of Western civilization, when anything seemed possible.  Mr. Marshall brings it all wonderfully to life.

 

For the full review, see: 

STUART FERGUSON.  "BOOKS; Sense and Sorcery in Prague; Ready for the Renaissance; but not quite prepared to give up the unicorn."  The Wall Street Journal  (Sat., September 9, 2006):  P9.

(Note:  ellipsis added.) 

 

The book reference is: 

Peter Marshall.  The Magic Circle of Rudolf II.  Walker, 2006.  276 pages, $24.95.

 

Entrepreneur Makes Risky, Massive Infrastructure Bet

  A Louisiana site where Cheniere is building a terminal for liquified natural gas.  Source of image:  online version of the NYT article cited below.

Charif Souki is making a risky business decision.  If he is wrong, he and his investors will lose much. If he is right, consumers will be better off, having a larger supply of liquified natural gas (LNG).  And if he is right, he should be allowed to make a lot of money, both because that is just, and because it is useful for those who have bet right in the past, to have ample means to bet right in the future.   

(p. C1)  CAMERON PARISH, La. — The Sabine River channel, where alligators and speckled trout live alongside petrochemical plants and oil refineries, has suddenly become the center of a quiet revolution in the world of natural gas.

And it is mainly at the prodding of a little-known company called Cheniere Energy, with help from Exxon Mobil and Sempra Energy.  Together they have overcome formidable regulatory hurdles to build three new liquefied natural gas terminals on the channel that will double the nation’s capacity to import natural gas by 2011.

It has been 24 years since anyone on American shores has built a new liquefied natural gas terminal.  Two of the country’s four existing onshore terminals, which dock tankers the size of aircraft carriers ferrying supercooled gas from places like Qatar and Trinidad, were mothballed for years because production at home was plentiful and prices were low.

As recently as five years ago almost nobody in the energy world thought it possible to make money from a new American terminal project — with price tags that start at $600 million — let alone get a federal permit.

One lonely believer was Charif Souki, a Lebanese immigrant entrepreneur who had previously raised (p. C4) money for real estate in Paris and hotels in Hawaii before becoming chairman of Cheniere, a floundering gas exploration company.  Not even the 9/11 attacks, which made many people on the Atlantic and Pacific Coasts view liquefied natural gas terminals as potential terrorist targets, diverted him from his vision.

Now, even as natural gas prices sag, along with his company’s stock price, and the word glut is on the tip of the tongue among the drilling crowd, Mr. Souki says he is fixed on the longer view.

He is convinced the nation will need to import more gas because North American production is declining.  That is the same view Mr. Souki held six years ago, when he decided to shake up the company’s business plan.  He defiantly changed its stock symbol to LNG in 2003, and devoted himself to scoping out the country’s coastlines for potential terminal sites.

The already energy-intensive shoreline along the Gulf of Mexico, he concluded, made the most sense, economically and politically, and he started buying real estate in uninhabited harbors close to existing pipelines and gas-thirsty refineries and petrochemical plants.

“People were actually amused that we would be thinking about importing natural gas,” dryly giggled Mr. Souki, 53, a man with a taste for double-breasted suits.  “Nobody took us very seriously.”

Cheniere was so unprofitable and utterly spurned by investors in 2002 that Mr. Souki had to borrow $30,000 from his company’s president just to meet a payroll.  But over the last four years, Mr. Souki has managed to arrange financing, sign up long-term buyers and master the regulatory process. 

 

For the full story, see:

CLIFFORD KRAUSS.  "A Big Bet on Natural Gas."  The New York Times  (Weds., October 4, 2006):  C1 and C4.

GasTerminalLousianaMap.gif    The map shows the area in which the terminal is being built.  The bottom photo shows a Louisiana site where Cheniere is building a terminal for liquified natural gas.  Source of image:  online version of the NYT article cited above.

300,000,000 Strong, and Free

LifeExpectancyGraph.gif  Source of graph:  online version of the WSJ article cited below.

 

The Census Bureau tells us that some time in the weeks ahead the U.S. population will reach 300 million.  . . .

This demographic milestone is not cause for alarm — as some prophets of doom would have it.  Rather, it is cause for celebration.  We 300 million Americans are on balance healthier and wealthier and freer than any population ever:  We breathe cleaner air, drink cleaner water, earn higher incomes, have more leisure time, and live in less crowded housing.  Every natural resource we depend on — water, food, copper and, yes, even oil — is far more abundant today measured by affordability than when our population was 100 million or even 30 million.

Thanks to the rapid pace of technological progress, there’s every reason to believe these resources will be still more abundant when our population reaches 400 million — which should happen about 40 years from now.  As the late economist Julian Simon reminded us, thanks to our free market capitalist system, the history of America is one of leaving the storehouse for every successive generation more endowed with wealth, knowledge and natural resources.

 

For the full commentary, see:

STEPHEN MOORE.  "Supply Side; 300,000,000."  Wall Street Journal  (Tues., October 3, 2006):  A26.

(Note:  ellipsis added.)