The Haitian taxi driver spoke Creole, the wonderful language of former French colonies. He was chatting to his wife. We were bouncing – as New York cabs do – towards the Lower East Side’s Tenement Museum. He was one of the latest line of immigrants to come to America and he was dropping me, the distant relation of a previous wave of immigrants, to a museum which gives us a sense of how many of our ancestors lived when they first went to the States.
The Tenement Museum is a building that housed mainly Irish, Jewish and Italian families – the three old tribes of New York – cheek by jowl in the sprawling metropolis from about 1860 to 1930.
One of the tours details the experience of the Moore family, Irish immigrants in the 1860s who were among the first families to move into this overcrowded tenement.
Threading together census and parish records, we get a sense of the extraordinarily harsh life these people had, and yet it was obviously better than living in Ireland.
One of the Moore’s children – they had eight – died here from malnutrition, which was most likely caused by what was termed “swill milk”. Swill milk was a major cause of infant mortality in New York at the time, and this killer was immortalised in a popular Irish song which warned mothers about a substance that, ‘Like poison, ’tis sure to kill/As a thousand tongues can tell.’
Swill milk was a killer masquerading as a saviour. As the population of New York skyrocketed in the second half of the 19th century, before refrigeration, mothers couldn’t get their hands on fresh milk for their children. Breast-feeding was not encouraged, and many of the poor mothers might not have been strong enough to breastfeed anyway. The milk had to come from farms outside the city and, by the time it got to Manhattan, it had curdled in the heat.
Owners of the city’s many breweries came up with a scam, which allowed them to get rid of the waste from breweries and get the poor of New York to pay for it. Swill is the product of brewing. Huge amounts of corn and rye are cooked into a mash and then distilled. The swill is what is left over.
Unscrupulous brewers knew they could feed this to cows and, thus, swill herds became common. These were herds of cows kept in atrocious conditions which were fed only swill. As cows are supposed to eat grass, they became sick quickly but they were milked to the end. The resulting milk from swill herds was blueish and watery.
To deceive the mothers of New York, milk sellers added starch, chalks, flour and plaster to the swill milk. The result was contaminated milk full of bacteria, which often killed the children who drank it. By 1860, five million gallons of swill milk was produced a year and the rate of infant mortality tripled.
Mothers thought they were buying real milk, but they were in fact poisoning their own children. What was being sold as a panacea was in fact a killer. Although swill milk looked like the real thing, it wasn’t; it was debased.
Looking at the various reactions to the mass printing of money announced by central banks all around the world in the past two weeks, the story of swill milk seemed appropriate – particularly in Europe, where printing money now is going hand in hand with fiscal contractions.
The central banks are printing money, and therefore debasing it. When the value of paper money is adulterated in such fashion, many people believe that it will only lead to inflation. I am not one of these, but I could well be wrong.
If it leads to hyperinflation – not now, but in the coming years – it could well destroy the economic growth it was supposed to foster. The risk of the monetary expansion being the financial equivalent of swill milk is increased dramatically if there is no commensurate increase in productivity.
Apart from the nasty side of humanity, the Tenement Museum also reveals the huge increases in productivity experienced by the rush of invention in the US in the latter half of the 1800s and into the first few years of the 1900s.
It was this productivity, this surge in output per head, that drove up living standards in America. The surge in living standards drove huge improvements in public health standards, among which was the outlawing of swill milk.
The innovations of the time included pasteurisation, electricity and, ultimately, management and production techniques such as Henry Ford’s moving assembly line. Some argue – like entrepreneur Andy Kessler in the Wall Street Journal last week – that these innovations created the American middle-class.
The reason Ford was able to pay his workers $5 a day – doubling their salary from 1910 to 1914 – was, as Kessler said, because “the year before, Ford revolutionised manufacturing with the moving assembly line, slashing automobile build times to just 90 minutes from 14 hours. That’s productivity. It allowed Ford to reduce the price over time of his Model T to $290 from $950. Demand took off because it was far cheaper than the cars made by his 88 competitors.”
Rising wages and living standards were the by-products of the innovation and demand, not the cause.
Here is the rub. The huge increases in living standards come from productivity, not from printing money. Printing money can be used to shock the system into a different type of short-term growth path, but it can only be maintained by innovation because only innovation increases output per head. This in turn facilitates increases in both wages and profits, and the increased wages encourage further demand.
Printing money without innovation will only lead to the illusion of a healthy economy. Like swill milk, the economy might look healthier and satisfy a short-term need, but if the currency is debased without a concomitant increase in productivity, the paper money will lose its value, lead to inflation and make the economy sicker.
This is the big risk now with all this printing of money because, the more money you print, the more the essence or value of paper money is debased. We might rejoice right now at the miraculous fall in interest rates, engineered by the central banks in the same way as the poor Irish immigrant mothers rejoiced at the appearance of what seemed like good, cheap, fresh milk on the streets of New York.
But we know now that the milk killed their children. Will all this money, without productivity, kill the economy?