The Day Wall Street Turned Into Orchard Street

On October 26, 1911, the old Life magazine published a cartoon entitled “When We All Get Wise.” The implication of the cartoon, of course, was that if the ordinary people of the country would “just say no,” this time to bankers, brokers, and capitalists, Wall Street would collapse, and all those people would have to go out and start earning an honest living for a change. John D. Rockefeller would have to give golf lessons to get by. Swift and Armour would be back to selling meat at retail (buying it from whom? one wonders). The Wall Street Journal would have to print comics to attract a readership. To many in those days it all seemed like a wonderful idea.

The notion that bankers and brokers don’t really “make” anything and therefore, necessarily, live on the sweat of other people’s brows is much older than Wall Street. At the very least it goes back to Jesus throwing the money changers out of the temple. Both the Muslim Koran and the medieval Church flatly forbade charging interest (which is why medieval kings who were short of money—as governments always are—had so often to rely on Jewish bankers and then, as often as not, justified welshing on their agreements with them).

Even in this country, founded the same year that Adam Smith published The Wealth of Nations, many long harbored the idea that the work of Wall Street was not honest work. Thomas Jefferson, for one, thought banker and scoundrel to be very nearly synonymous terms. By 1870—by which time Wall Street had become the second-largest financial market on earth—many thought it nothing more than an elaborate game of three-card monte.

“The moralists and philosophers,” wrote William Worthington Fowler that year in his huge best seller, Ten Years in Wall Street, “look upon [Wall Street] as a gambling den—a cage of unclean birds; an abomination where men drive a horrible trade, fattening and battening on the substance of their friends and neighbors.”

With the rise of what is now called the Left in the last two decades of the nineteenth century, the idea that financial markets were only a zero-sum game gave way to another, more pernicious concept. Now the “moralists and philosophers”—most of whom had had precious little contact with the real world of getting and spending—came to think that Wall Street was a conspiracy among the few to transfer wealth to themselves from the many. Get rid of the capitalist few, these people thought, and prosperity would be right around the corner for the hardworking many.

In 1911, of course, it was all just a glorious theory, unsullied by any practical experience. In the wave of self-doubt that swept Western civilization in the wake of the First World War, though, the idea was widely acted upon to varying degrees. It has taken most of the twentieth century to demonstrate beyond doubt that it has a fatal flaw: It doesn’t work. Countries with prosperous financial markets are prosperous themselves. Those without such markets are, without exception, desperately poor. Financial markets, it seems, do have a necessary function: They maximize the creation of wealth by directing capital—one of the essential economic inputs—to areas of the economy that can put it to the best use. Free capital markets may not perform this function perfectly, but they do so far better than the bureaucrats with whom the moralists and philosophers sought to replace them.

This is not to say that there have never been crooks on Wall Street. There have been plenty of them, and there always will be, for the same reason Willie Sutton robbed banks: “because that’s where the money is.” And just as banks need guards, so Wall Street needs umpires to see that the game is played fairly.

But if the denizens of Wall Street do their job right, both they and the economy as a whole prosper mightily. If an individual capitalist does it wrong, however, he goes broke, and many have, a fact that the old Left never seemed to notice. Fowler, an ardent speculator himself, noticed it clearly enough.

“No one who has entered the precincts of the Stock Exchange,” he wrote, “will have failed to notice certain nondescripts who constantly frequent the market. They are men who have seen better days, but having dropped their money in the Street, come here every day as if they hoped to find it in the same place. These characters are the ghosts of the market, fixing their lack-lustre eyes upon it, and pointing their skinny fingers at it, as if they would say, ‘thou hast done this!’ They flit about the doorways and haunt the vestibules of the Exchange, seedy of coat, blackingless of boot, unkempt, unwashed, unshorn, wearing on their worn and haggard faces a smile more melancholy than tears.”

In Life’s cartoon the winners on Wall Street look like the losers in real life. In 1911 many thought that to be a good idea. Today, as the ruins of socialism lie all about, it seems quaint at best.