Fraud: An American History from Barnum to Madoff by Edward J. Balleisen (review)

This is not a book about P. T. Barnum or Bernie Madoff, and that is a good thing. Fraud: An American History from Barnum to Madoff offers much more than colorful vignettes of corrupt corporate characters. Edward J. Balleisen, professor of history at Duke University, draws on interdisciplinary techniques, including cutting-edge psychological research, in this dense but informative book that should become standard reading for anyone interested in understanding the strengths and shortcomings of public and private American regulatory mechanisms that target duplicity in the marketplace.

Balleisen covers a lot of ground in this book, starting in the years after the War of 1812 and ending with the financial crashes of the early twenty-first century. P. T. Barnum and other key figures serve as placeholders for specific periods throughout the book. In Barnum's day, caveat emptor—"let the buyer beware"—was the rule. In the nineteenth century, unflattering newspaper write-ups, grain inspection commissions, and post office antifraud campaigns served as limited checks on dishonest business behavior, but for the most part, consumers faced a "'dog-eat-dog' world" with few official regulatory networks to curb fraud (p. 43).

The national economy's expansion during the nineteenth century, which was driven by the construction of new technological and communication networks, created an increasingly impersonal commercial environment that stood in contrast to the "face-to-face economic world" that came before (p. 45). This transformation led consumers to question the limits of caveat emptor as the primary means of dealing with corporate chicanery during the mid-nineteenth century. Progressive reformers, entranced by the promise of "association alism," supported a push for nonprofit organizations, such as Better Business Bureaus (BBBs), that began policing the American economy in earnest in the 1910s and 1920s (p. 175). The problem was that BBBs were often run by elites with close connections to the very businesses they were supposed to be overseeing, which led to cries of corruption from those less connected to captains of industry.

Black Tuesday and the Great Depression that followed pushed fraud regulation in a new direction, as Americans began to accept government agencies taking on a larger role in rooting out fraud. To be sure, older, nongovernment oversight organizations such as BBBs and Progressive state agencies like the Federal Trade Commission survived, but new government institutions, including the National Recovery Administration and the Securities and Exchange Commission, augmented these watchdogs and were given broad powers to regulate American industry and finance. As Balleisen explains, Americans were moving away from caveat emptor and toward a philosophy of caveat venditor, "let the seller also beware"—a shift that continued into the post–World War II years (p. 246).

While the American public experimented with caveat venditor in the mid-twentieth century, a new conservative political coalition that was committed to deregulation emerged in the 1970s and began to roll back government antifraud efforts. Economic crises in the years ahead spawned new cries for regulation, but the strengths of these movements tended to wane as Americans moved away from the immediate economic pains of a particular crash.

Southern historians may want more out of this book. Balleisen does not spend enough time discussing regional differences in antifraud regulation. The reader travels to Georgia, Kentucky, Louisiana, and other southern states, but there is very little discussion about how commercial duplicity was understood in different regions of the country. In Balleisen's telling, when it comes to fraud, America appears quite homogeneous.

But this shortcoming does not undermine the book's many strengths. It is a monumental text that is well worth assigning in a course on the history of American capitalism. It would sit well alongside classics such as Gabriel Kolko's The Triumph of Conservatism: A Reinterpretation of American History, 1900–1916 (New York, 1963) and Martin J. Sklar's The Corporate Reconstruction of American Capitalism, 1890...