Intro B&H101 Under the Oak The Mom Chronicles Wall Street History Week in Review Glossary Financial Planning Understand Taxes   "BUYandHOLD" Tax FAQ   The 13 Steps to Investing Foolishly   Carlson on Taxes Archives Alexis de Tocqueville's America Brian Trumbore President/Editor, StocksandNews.com If you took any kind of U.S. political science class in school, there is a 100% chance you became acquainted with Alexis de Tocqueville, the French nobleman and judge who wrote, in the words of the great historian Jacques Barzun, "the only thorough and reliable (report) of early America from the perspective of a foreign visitor." Born in 1805, Tocqueville was commissioned to do a study of U.S. prisons, along with another nobleman of the time, Gustave de Beaumont. But the roughly 18-month journey through America gave Alexis an opportunity to make some general observations of life in this vast, new country and so "Democracy in America" was the result. One of his first findings was that America's achievements could be attributed "to the superiority of their women." I knew that would put a smile on your face, my dear female readers. But why discuss Tocqueville as part of Wall Street history? Well, I was reading an article on the whole current crisis of confidence in our markets and the author (whose name escapes me) made passing reference to "Democracy in America." So, having recently purchased a new translation of this classic, which I hadn't had the opportunity to crack open, I thought, "Hey, let's see if we can get a column out of it," and, alas, we can...even though many of you may not find this a particularly enlightening exercise. In writing his book, Tocqueville initially set about the task of discovering whether Americans would abuse and erode their freedom and individualism, but in doing so he also found reason to comment at length on topics such as corruption, commerce and wealth. And it is for these reasons that a study of his tome can offer some insight into the workings of the mess we are in today, particularly concerning the topics of the Bubble, greed, and corporate governance, as well as the spirit that keeps us coming back for more. So following are some of Tocqueville's thoughts, as published way back in 1835, in his own words. ----- (Americans) speak with equal ardor about religion and material wealth and moral satisfactions. On Corruption In aristocratic governments, men who arrive (at the head of) affairs are rich people who only desire power. In democracies, statesmen are poor and have their fortunes to make. It follows that in aristocratic states, those who govern are hardly accessible to corruption and have only a very moderate taste for money, whereas the contrary happens in democratic peoples. --- What one must fear, moreover, is not so much the sight of the immorality of the great as that of immorality leading to greatness. In democracy, plain citizens see a man who issues from their ranks, and who in a few years achieves wealth and power; the spectacle excites their surprise and their envy; they inquire how he who was their equal yesterday is vested today with the right to direct them. To attribute his elevation to his talents or his virtues is inconvenient, for it is to avow that they are less virtuous and less skillful than he. They therefore place the principal cause of it in some of his vices, and often they are right in doing so. Thus there is at work some sort of odious mixing of ideas of baseness and power, of unworthiness and success, of utility and dishonor. On Commerce Americans put a sort of heroism into their manner of doing commerce. --- The European navigator ventures on the seas only with prudence; he departs only when the weather invites him to; if an unforeseen accident comes upon him, he enters into port at night, he furls a part of his sails, and when he sees the ocean whiten at the approach of land, he slows his course and examines the sun. The American neglects these precautions and braves these dangers. He departs while the tempest still roars; at night as in day he opens all his sails to the wind; while on the go, he repairs his ship, worn down by the storm, and when he finally approaches the end of his course, he continues to fly toward the shore as if he already perceived the port. The American is often shipwrecked; but there is no navigator who crosses the seas as rapidly as he does. Doing the same things as another in less time, he can do them at less expense. Before reaching the end of a voyage with a long course, the European navigator believes he ought to land several times on his way. He loses precious time in seeking a port for relaxation or in awaiting the occasion to leave it, and he pays each day for the right to remain there. The American navigator leaves Boston to go to buy tea in China. He arrives at Canton, remains there a few days and comes back. In less than two years he has run over the entire circumference of the globe, and he has seen land only a single time. During a crossing of eight to ten months, he has drunk brackish water and lived on salted meat; he has struggled constantly against the sea, against illness, against boredom; but on his return he can sell the pound of tea for one penny less than the English merchant: the goal is attained. --- In democratic countries a man, however opulent one supposes him, is almost always discontented with his fortune, because he finds himself less wealthy than his father and he fears that his sons will be less so than he. Most of the rich in democracies therefore dream constantly of means of acquiring wealth, and they naturally turn their eyes toward commerce and industry, which appear to them the promptest and most powerful means of getting it. On this point they share the instincts of one who is poor without having his needs, or rather they are pushed by the most imperious of all needs: that of not sinking. --- Compressed in the narrow space that politics leaves for them, the rich in democracies therefore throw themselves into commerce on all sides; there they can extend themselves and use their natural advantages; and in a way one ought to judge from the very audacity and the greatness of their industrial undertakings how little they would have made of industry if they had been born within an aristocracy. [Side note to above discussion] Those who live amid democratic instability constantly have the image of chance before their eyes, and in the end they love all undertakings in which chance plays a role. On Wealth America presents a boundless field of human activity; it offers inexhaustible nourishment for industry and work. Love of wealth therefore takes the place of ambition, and well-being extinguishes the ardor of parties. --- (Americans have a) restiveness of spirit, the love of wealth that constantly push an American out of his dwelling, putting him in communication with a great number of his fellow citizens. --- Men who live in democratic times have many passions; but most of their passions end in love of wealth or issue from it. That comes from the fact not that their souls are smaller, but that the importance of money really is greater then...In aristocratic peoples, money leads only to some points on the vast circumference of desires; in democracies, it seems to conduct one to all. --- In the United States, fortunes are destroyed and rebuilt without trouble. The country is boundless and full of inexhaustible resources. The people have all the needs and all the appetites of a being that is growing, and whatever efforts they make, they are always surrounded with more goods than they can seize. What is to be feared in such a people is not the ruin of some individuals, soon repaired; it is the inactivity and softness of all. Audacity in industrial undertakings is the first cause of its rapid progress, its force, its greatness. Industry is like a vast lottery for it, in which a few men lose every day, but the state gains constantly; a people like this must therefore see audacity with favor and honor it in matters of industry. Now, every audacious undertaking jeopardizes the fortune of whoever engages in it and the fortune of all those who trust him. Americans, who make a sort of virtue of commercial recklessness, cannot in any case stigmatize the reckless. -------- Back to yours truly, the editor, one sidebar from a review of Tocqueville was that I found the source of the term "conspicuous consumption." Chicago sociologist Thorstein Veblen wrote of this in his 1899 "The Theory of the Leisure Class." Veblen was a big time critic of U.S. capitalism and said that the rich judged all of life in terms of price and were condemnable from an economic point of view since they reveled in waste. Conspicuous consumption, itself, had to do with the "buying of expensive things to impress the neighbors," [Barzun] which was also the genesis of the label "status symbol," in describing purchases such as luxury cars or a yacht. Sources: "Democracy in America," Alexis de Tocqueville, ed. by Mansfield and Winthrop "Growth of the American Republic," Morison, Commager, Leuchtenburg "From Dawn to Decadence: 500 Years of Western Cultural Life," Jacques Barzun Wall Street History returns next week. Brian Trumbore

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