Hammes’ (Economics/Univ. of Hawaii-Hilo; Shaping Our Nation, 1988) nonfiction title sheds light on the great inventor’s eccentric, intriguing foray into economic theory.
With the nation suffering from a sharp depression in the early 1920s after the inflationary boom of World War I, Thomas Edison figured he could solve the economic malaise with a plan to back the value of money with farming commodities as an alternative to the gold standard. Under his scheme, farmers would deposit their harvest in government warehouses and receive half of its 25-year average price as a loan in dollars printed by the Federal Reserve, an amount that would be repaid over the course of a year as the crops were sold off. Edison hoped to provide farmers a more stable income and the country a more stable currency founded on real value; his proposal drew much acclaim from the public and press—and scorn from economists. (One professor suggested that Edison was senile.) Economist Hammes gives a detailed, highly readable exposition of Edison’s complex scheme and its surprising resemblance to modern-day policy innovations. The Federal Reserve, he notes, now seems to be running a similar program—only instead of giving farmers money in exchange for their wheat, it gives bankers money in exchange for their toxic mortgage-backed securities. He sets Edison’s ideas against a lucid explanation of money, inflation and the gold standard, as well as a nuanced analysis of America’s 19th-century monetary controversies. At the time, currency was a stormy political issue pitting debtors, farmers and exporters against bankers and creditors. In Hammes’ vivid portrait, Edison embodies these contradictions: He’s a captain of industry who had a profound suspicion of both the Wall Street financiers who backed him and the boom-and-bust cycles that almost bankrupted him. He also emerges as a great American amateur: half-genius, half-crank, convinced that a little common-sense tinkering could improve the economy where the experts had failed. Hammes illuminates the crucial role money plays not just in the economy, but also in the national character.
A smart, lively account of a revealing episode in economic history.