The Great Game: The Emergence of Wall Street as a World Power, 1653-2000.
John Steele Gordon's popular history of Wall Street is the latest addition to a genre that has entertained and frightened readers at least since James Medberry's Men and Mysteries of Wall Street in 1870. Given the recent record levels in trading volume and price levels, Gordon's volume is certainly timely. In keeping with our dominant ethos The Great Game is uniformly triumphalist, an account of Wall Street's victory over external hostility and internal obtuseness to arrive at its current good fortune. Gordon celebrates the dominance of Wall Street as an exemplum of the "invisible hand," how myriad private greed can combine to form stable and successful economic institutions. Gordon's book demonstrates the difficulty of applying contemporary libertarian economic understandings to such an archetypal free-market institution as the New York securities market.
Perhaps the biggest problem with The Great Game is its grudging attitude to any regulation of the securities market, whether self-regulation by the industry or imposed by government. Gordon locates the origins of the New York securities market in an entrepreneurial state of nature, where buyers and sellers did their business in the 1790s without "rules and regulation" (p. 5). This simply is not so. As Stuart Banner recently demonstrated in Anglo-American Securities Regulation. there was no lack of attempts by the New York State legislature in the first half of the nineteenth century to regulate the securities market. And as Gordon recognizes, the most effective regulation of the market was by the brokers themselves, especially through the institutional framework of the New York Stock Exchange. But for Gordon, internal exchange regulation was self-serving in ways that did not activate the "invisible hand." lie repeats traditional charges against the exchange and its specialist system as a "price-fixing cartel " (p. 40) and an insider's club, at one point arguing the operation of the exchange was "not at all dissimilar from the governing system of the old Soviet Union" (p. 214). This is fairly outrageous. The specialist system had its limitations, but there seems little doubt that, however exclusive and rigid in some ways, these rules--as well as kindred regulations covering membership and securities listing-helped maintain a "fair and orderly market."
Gordon's research is generally adequate, but he relies too heavily on older histories, and he sometimes garbles his facts. His account of the beginning of stock trading in New York City in the 1790s does not mention the beginning of regular stock auctions in August 1791, and provides a confusing and inaccurate account of the events leading to the signing of the so-called Buttonwood Agreement in May 1792. More significantly, he treats the nascent market for securities in New York City in the 1790s and the rise and fall of William Duer as two separate events, and thereby leaves a misleading impression that the Buttonwood Agreement continued to shape stock trading in the city after the collapse of the market for securities after 1792. Other key events are left Out of the story. There is no mention of the opening of the Long Room in 1865, surely the most significant event in the establishment of continuous auction market for securities. There are many pages on Richard Whitney, but nary a mention of William McChe sney Martin, who became president of the New York Stock Exchange after Whitney's downfall, and steered the exchange toward an accommodation with the Securities and Exchange Commission. For a book that takes a very contemporary view of market realities, the account of the last two decades of the twentieth century is surprisingly brief, and has a tacked-on quality.
As perhaps never before in America, we live in an era that adulates entrepreneurs, and Gordon certainly shares in the general approbation. One would think that this would make Gordon's task in The Great Game rather straightforward, but in some ways it complicates things. Like most popular histories of Wall Street, Gordon's is primarily concerned with the stories of the great plungers and scandals. These tales are often unedifying, and Gordon does not blanch from their seamier aspects. But at best, greed is good in the abstract, not in its greasy particulars. Who then are the heroes of the story? Gordon is often unsure what lesson to draw from his tales, His discussion of the Erie scandals of the 1860s places the bulk of the blame on the notably corrupt New York State government of that era, and he goes out of his way to blame liberal historians for their failure to point this out. However, most historians, liberal or not, have not given the Tweed Ring a free ride, and Gordon fails to acknowledge that the sta te legislature did defeat the most blatant attempts at controlling the securities market, such as the abortive effort to force the exchange to incorporate. But most importantly, by his own telling, the 1860s was a decade when the self-imposed control of brokers by the New York Stock Exchange failed to control the burgeoning New York securities market. Given that, some degree of government intervention was unavoidable, and the state and city markedly backed off from attempts to regulate the New York Stock Exchange after 1870, when it placed its own house in better order.
The Great Game is a useful popular introduction to the history of the New York securities market, but in comparison to Gordon's earlier efforts in the vein, including The Scarlet Woman of Wall Street, and Hamilton's Blessing, it is something of a disappointment.
Peter Eisenstadt is author of Affirming the Covenant: A History of Temple B'rith Kodesh, Rochester, New York, 1848-1998 (1999) and editor of Black Conservatism: Essays in Intellectual and Political History (1998). At present, he is editing an encyclopedia of New York State.
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|Publication:||Business History Review|
|Article Type:||Book Review|
|Date:||Mar 22, 2000|
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