Econ resilient

If there’s one lesson we’ve learned from delving into Barron’s archives in our centennial year, it is this: Don’t underestimate the resilience of the U.S. economy and stock market. We saw that theme time and again as we published a series of retrospective pieces during 2021—and the resilience is strikingly evident still.

When the Covid-ravaged economy contracted in 2020, it was just the 19th time since 1920 in which real gross domestic product had declined, year over year. And nine of those years came between 1930 and 1949, a result of the Great Depression or post–World War II demobilization.

Even 2020 seems like an outlier, with growth expected in 2021 and 2022, despite recent downgrades prompted by the Omicron outbreak.

Big GDP jumps also were limited to the volatile ’30s and ’40s. Mostly, it has been a steady rise in GDP, from an estimated $670 billion in 1920 to a record $21.43 trillion in 2020. That’s a 30-fold increase, meaning that U.S. GDP has grown about 10 times as fast as the population, which has tripled from 106 million in 1920 to 331 million a century later.

America was a smaller, poorer, and very different place 100 years ago. Most folks lived on farms, without electricity or indoor plumbing. Horses outnumbered automobiles. Business and politics were the sole province of white men. Women had the vote but were still second-class citizens. Jim Crow laws made sure that Blacks weren’t fully emancipated.

The country also was in the grip of the Depression of 1920-21, the nation’s worst economic downturn to that point. It was a heck of a time for Clarence W. Barron to start a financial newsweekly. But he had seen the U.S. change from an agrarian to an industrial nation, and he felt there was no stopping the American business spirit.

He was right. Entrepreneurs from Henry Ford and Thomas Edison to Elon Musk and Mark Zuckerberg have, to paraphrase Facebook’s founder, moved fast and broken things, turning new technologies into life-changing new industries.

They’ve also created companies that have lasted. General Electric , AT&T, Macy’s , DuPont , Sherwin-Williams, and many other of today’s household names date to the 19th century or earlier. These companies are the backbone of the economy, the force that gives it such resilience.

Barron’s did have doubts from time to time. We once worried that modern leaders “seem puny figures beside the speculative kings of the last century,” but that was in 1936, and since then, plenty of worthy successors have arisen to challenge the titans of old.

Here are some who helped keep the economy churning over the past 100 years.

Automobiles were dangerous, open-air affairs until the late 1920s, and there weren’t many passable roads. They were novelties, playthings for the rich, and few saw that changing.

Henry Ford perceived greater possibilities. He perfected mass-production techniques that let him build the Model T faster and cheaper than the handmade competition. Ford “put the motor within the reach of the ordinary wage-earning family and the cost is half that of a horse,” Barron wrote in 1924.

While most Americans still depended on actual horsepower for conveyance and labor, “peak horse” had been reached. Ford’s automobiles and tractors were putting equines out to pasture. Railroads’ best days were past, too.

Road-building would catch up with car buying, culminating in the Interstate Highway System, which set loose America’s car culture—along with its suburbs, sprawl, and pollution.

Ford’s company now is heading strong into the age of the electric vehicle. Yet, his legacy is complicated: He was a vocal anti-Semite who hired strikebreaking goons and saw conspiracies everywhere. “Moral grandeur,” as Barron’s wrote in 1923, doesn’t always accompany industrial genius.

This magazine has rarely reviewed movies, but Fantasia— Disney ’s feature-length 1940 cartoon starring a famous mouse—caught our attention.

The “greatest change in the motion picture art since the coming of sound,” Barron’s wrote, was “the new sound-production technique” in Fantasia. A major reason that the audience felt it was because “sitting directly in the pit with the orchestra” was Disney’s use of eight, state-of-the-art audio oscillators bought from a new company, Hewlett-Packard .

Bill Hewlett and David Packard famously started work in a rented Palo Alto garage, now a landmark billed as the “Birthplace of ‘Silicon Valley.’ ”

Oscillators were the start of a very fruitful partnership. By 1976, Hewlett-Packard was among those rare companies that “combine technological excellence, crackerjack marketing, and financial soundness,” wrote Alan Abelson, Barron’s celebrated columnist and editor.

The founders stepped away from active management in the late ’70s, and some big names followed, including Carly Fiorina. She pulled off the 1999 merger with Compaq that made H-P the No. 1 PC producer—and cost her the job.

Many mergers and acquisitions later, HP Inc. is the legal descendant of the Palo Alto start-up. And the work begun in that garage helped turn an analog world digital.

Muriel Siebert had to announce the news herself.

“First lady member of the New York Stock Exchange!” read the ad, featuring Siebert’s smiling face, which ran in Barron’s on Jan. 8, 1968, and in The Wall Street Journal four days earlier.

Siebert started as a $65-a-week equity-research trainee at Bache & Co. in the 1950s, eventually becoming the first woman to head one of the NYSE’s member firms. Siebert Financial was among the first to offer discounted trades, and was also a leader in moving to online trading.

Siebert, who went on to become New York state’s first female superintendent of banks, was lionized upon her 2013 death, by which time workplaces across the country had done more to improve their record on hiring and promoting women and people of color.

In finance, the capital managed by retail investors is known as dumb money. That’s opposed to the smart money of large financial institutions, whose resources and influence enable greater returns.

In creating the index fund, Jack Bogle made dumb money a lot smarter. The concept is simple: Since the S&P 500 index routinely outperforms managed mutual funds, a passive fund composed of S&P 500 shares also would beat managed funds. And with no fees, to boot.

“This is a new and unique concept in investing whose time has come,” Bogle told Barron’s in 1978, two years after launching the precursor to the Vanguard 500 Index fund.

Indexing wouldn’t take off until the ’90s. But by 2019, index funds had surpassed actively managed funds in assets, having “trounced active funds for a decade.” Yet, passive investing brought critics, who “warn of market meltdowns,” we wrote in 2018, noting that one analyst “went so far as to call index investing ‘worse than Marxism.’ ”

Bogle, who died in 2019, was clear that he didn’t want everyone indexing. But he did democratize the once-exclusive club of Wall Street. Upon his death, we wrote, “If one man can be held responsible for today’s market—for better or worse—it’s Jack Bogle.”

It didn’t take long for Clarence Barron’s bet on the American business spirit to prove prescient. Just months after his magazine’s debut, on May 9, 1921, the depression ended and the Roaring ’20s began. By 1927, Barron’s circulation had reached 30,000.

Barron made the connection between public information and markets. Wall Street profits on opacity; the job of the financial press is to shed light into the murk, giving “the thoughtful investor” a chance “to budge the world of wealth,” as he put it.

As Barron’s embarks on its second century, the U.S. economy shows little signs of slowing. It’s impossible to minimize the pandemic’s damage, with 800,000 U.S. deaths and Omicron causing new waves of cases. Yet, the economy seems to be shrugging it off, with today’s business leaders and workers finding a way to keep things running. The economy churns on.