The Economics of Joseph P. Kennedy, the Kennedy Family's Patriarch

Story Stream
recent articles

Though never terribly fascinated by the Kennedy family political dynasty, stories about Joseph P. Kennedy (JPK) always interested me from an economic angle. It's said that Kennedy properly told his son Jack (JFK) that "wars are bad for business", and then the late Jude Wanniski used to write that JFK's unyielding support for the gold standard ("the foundation stone of the world's payments system") was a function of his father having drummed it into his head from early childhood.

With the above in mind, I read David Nasaw's excellent new biography of the business titan and statesman, The Patriarch: The Remarkable Life and Turbulent Times of Joseph P. Kennedy. Neither of the previously mentioned anecdotes was confirmed in the book, but that doesn't detract from an illuminating story about one of the 20th century's foremost businessmen whose insights extended well into the economic and foreign policy spheres. Readers will very much enjoy this book.

Before getting into to the economics of Kennedy, it's perhaps worthwhile to point out what surprised me within. First off, though he was certainly self-made, his early life story was hardly one marked by poverty. Kennedy's father was by most standards very well-to-do (as was wife Rose's family: William Randolph Hearst attended her debut) such that he attended Boston Latin, followed by Harvard. Kennedy was not a "bootlegger" as is often assumed, though he did start a liquor importing business as Prohibition ended, and after having made a great deal of money in banking, investing, and in movies. And while it's long been a known quantity that he was very rich, it surprised me to learn that by the 1950s he was one of the 15 richest Americans.

Back to the economics, the broad story of the Kennedy family is yet another reminder of how very much immigrants add to our culture. Kennedy's ancestors arrived in Boston from impoverished Ireland in the late 1840s.

They reached the U.S. in what Nasaw referred to as a "coffin" ship for it being the final resting place for so many. The latter was the case given the conditions on board. As Nasaw writes, "With little edible food and a minimum of potable water, hundreds of men, women, infants, and the elderly were locked together in darkened, unventilated ships' holds for weeks on end, hatches battened, with no room to stretch, no decent air to breathe...." You get the picture. Without defending the suffering endured by 19th century U.S. immigrants, the simple truth is that the conditions they survived spoke to very ambitious people willing to go through a lot just to make it here. Immigrants are treasures for what their sacrifices say about their ambition. We need more of them.

The response from some readers on the immigration issue might be that we can't have open borders today given the cost of the welfare state, not to mention how the arrival of the unwashed will alter electoral dynamics. To these objections I would answer that the objections themselves point to a problem of welfare being offered by government at all, along with a government that does too much such that individuals irrespective of nationality feel the need to shape it.

Taking the issue of ethnic influence further, Nasaw makes clear ("Their fear was that the Irish, with political control of the city government and the school committee, would funnel money from public to private schools") that in the late 19th century, Protestants in Boston feared the rising influence of Irish immigrants. And then as readers doubtless know, a century later it was Mexican immigrants whose influence some natives feared. It was overdone then, and presumably is overdone today. From this writer's perspective, immigrants remain a source of ambitious renewal in a country that desperately needs just that. After that, anyone who spends any time in Las Vegas might agree that there's often nothing very special about natives....

Of course as a striver from a well-to-do but very Irish family, his father's wealth didn't shield Kennedy himself from discrimination. He described Boston as a "bigoted place", and evidence supports the latter contention. While at Harvard Kennedy already exhibited an entrepreneurial streak (he and a friend offered tours of the city on a bus they'd purchased), but the largely Protestant-run banks in Boston chose not to hire him such that he started out as an assistant bank examiner. Boston has been revived modernly by the rise of a technology industry fed by MIT and the rest of the city's top schools, but in Kennedy's era its decline relative to the meritocracy (Kennedy's own family, including JFK, mostly lived in New York, not Boston) that was and is New York was very real. Discrimination shouldn't be against the law with individual freedom in mind, but as Kennedy's story reveals, it's very expensive, and as such, likely wouldn't exist even in the absence of superflous laws against it.

As for Kennedy's politics, it might surprise readers to learn that they were Republican. Going back to the 1920s, Kennedy wrote to a colleague "Unless your friends in New York strong-arm this market and elect Calvin Coolidge president, I think we are in for it." Kennedy's membership in the Democratic Party was more a function of it being seemingly more hospitable to someone of his Irish Catholic background, plus Nasaw makes it apparent that Kennedy gravely feared the Great Depression would end capitalism as we know it.

Even though Kennedy was not a big fan of FDR's economic policies, and truly loathed his decision to enter what became World War II (more on that later), as Arthur Schlesinger (eerily foretelling a similar utterance by Rahm Emmanuel in 2008) wrote about the Great Depression, it offered "radicalism its long awaited chance." Lost on Schlesinger, and apparently Kennedy too was that Herbert Hoover's, then Roosevelt's anti-Depression policies were the certain causes of same, yet Kennedy (wrongly in this writer's estimation) felt FDR's shackling of the capitalist system was necessary in order to save it.

To read Nasaw's description of FDR's agenda is to be very much reminded how history at the very least rhymes. As Nasaw put it, under FDR "Any solution to the crisis involved some combination of increasing farmer purchasing power, assisting homeowners in preventing mortgage foreclosures, stimulating the sale of goods overseas, and expanding government planning and regulation. Only government action from the top down was going to get the economy moving again..." Early in his own administration President Obama asserted that "The federal government is the only entity left with the resources to jolt our economy back to life." You decide....

Also, and this doesn't speak well of Kennedy, it was apparent that having made a lot of money he sought the power and influence that could be his for thriving in government, and for his kids making politics their life's work. Though he had libertarian leanings, JPK wasn't pure, but also was in no way a lefty or a communist sympathizer. Nasaw notes that upon return from his gap year, Joseph P. Kennedy Jr. was "full of these ideas about the superiority of the communist system...over the capitalist system." Joseph Kennedy Sr.'s response to his naïve son was "When you sell your car, and sell your boat, and sell your house, you can talk to me about that, but otherwise I don't want to hear any more about it in this house!"

After that, there are a few times in Nasaw's book where he alludes to Kennedy losing faith in the capitalist system, plus in Michael Knox Beran's The Last Patrician the reader is exposed to a particularly objectionable comment from him about the wonder's of planning from the Commanding Heights, but it's apparent that overall Kennedy was a free marketeer; his public lurches toward state intervention driven once again by his Bismarckian belief that the anti-capitalist crazies needed to be thrown a few bones so that capitalism could be saved. Kennedy's God beyond success and political power for his kids was the preservation of the fortune he'd made, and that he wanted to pass on to future generations of Kennedys.

Kennedy as mentioned made a lot of money in the movie business, and it's notable that his frequent journey's out west took over three days by train. Those who should know better, including Obama, often decry economic progress for it supposedly driving up unemployment, but they're wrong. No doubt many more Americans were employed in shuttling Americans like Kennedy back and forth from Hollywood way back when, but far from an economic positive, this waste of labor was an economic weight thankfully erased eventually by airplanes. Though most economists and most every politician is loath to admit it, economic growth is about relentless job destruction, not job creation.

Where The Patriarch really flies in an economic sense concerns World War II. Ultimately to great ridicule Kennedy was against it, but it says here he was correct.

Seeing much of life through an economic prism he wrote that "I can't see any use in everybody in Europe going busted and having communism run riot." The perhaps logical response to the latter is that absent war, Germany would have conquered much of the continent. That's an easy assumption, but Kennedy persuasively argued that "the economics of Germany would have taken care of Hitler long before this if he didn't have a chance to wave that flag every once in a while. " Kennedy further noted that "Hitler and the Nazis could not last forever and that there was bound to be a change in regime in Germany one day if we had only let it alone.

It was called appeasement at the time, and still is today, but Kennedy and ex-President Hoover wanted a negotiated peace before "Europe's great cities were reduced ‘to rubble heaps.'" In short, quite unlike the very unwise Paul Krugman (and the economics profession more broadly) which horrifyingly sees the death, destruction and semi-autarky that is war as economically stimulative, Kennedy knew otherwise. Wars were once again "bad for business", during which men were "killed in airplanes" and businesses "were shot to pieces."

War itself was tautologically recessionary for men killing each other rather than enriching one another through trade. It was said by many, including Roosevelt, that Kennedy only cared about protecting his family's fortune from the horrors of war, but the mere fact that this very successful investor understood that fighting was anti-growth and anti-portfolio once again exposes the horrifying illogic of the modern mindset which obtusely presumes that WWII ended the Great Depression. Kennedy knew otherwise, and when he observed about war that the ones who really suffer "are the parents", he knew well of what he spoke. Indeed, Kennedy nearly lost his son Jack, his firstborn and favorite son Joe Jr. died in the European conflict (Kennedy clearly never recovered from this loss), then his daughter Kick (she later died in a plane crash in 1947) lost her husband Billy Hartington to the war in France.

Kennedy's appeasement is once again mocked to this day, but from his perspective it gave England time to re-arm somewhat for a war it wasn't prepared for. Right or wrong, and the reality is that we'll never know, Kennedy felt that Neville Chamberlain's mistake was in drawing the line on Poland. Kennedy felt that if Germany's annexation of it had been allowed that Hitler would have turned toward Russia rather than invade England.

Considering the elevation of democracy, there Kennedy revealed perhaps a libertarian streak. He believed that the U.S. should stop "minding other people's business" and cease trying to "establish liberal democracy" around the world. Kennedy would have felt right at home with libertarians, American style liberals and some conservatives who similarly felt that the pains taken since 2001 to democratize the Middle East were foolish. As for foreign aid, he correctly observed in a way that would cheer many on the right that "the ALLY YOU HAVE TO BUY WILL NOT STAY BOUGHT."

Regarding communism, it should be stressed yet again that Kennedy was intent on expanding his and his children's net worth such that he was very much against it. At the same time, he had what appears at least in retrospect a very reasoned opinion. What's impressive here is that Kennedy believed his rhetoric. Having made his money in the free markets (the notion that "inside information" could have enriched him or any investor in a major way vastly overrated), and having seen the comforts that came his way thanks to the profit motive, Kennedy knew that communism was doomed to fail.

Because Kennedy intuitively knew it would fail, he felt the U.S. should "back off and ‘permit communism to have its trial.'" Furthermore, he knew that people weren't demanding communism in the post-war world as much as they were "discontented, insecure and unsettled and they embrace anything that looks like it might be better than what they have to endure....It is very easy for anybody who has a job and is getting along all right to cry for democracy...but if you cannot feed your children and you do not know where the next meal is coming from, nobody knows what kind of freak you will follow." After that, Kennedy arguably saw very correctly that "Communism was neither monolithic nor eternal", that leaders like Mao and Tito would not long take orders from Stalin, so let the horror run its course rather than quixotically tax Americans heavily to at best contain what would eventually disappear on its own.

And then straight from the libertarian camp, Kennedy understood that small government wasn't consistent with a global military presence. As he put it, "To fight dictatorship, even in a ‘cold' war, democratic governments had to employ the tools of dictatorship." Though history says he was an idealistic appeaser, it's hard not to conclude with hindsight that Kennedy was a realist who'd lost loved ones to war, didn't want others to suffer as he did, and who knew like Ronald Reagan ultimately did that communism would die of its contradictions. The response to the latter is that Reagan built up the military to fight communism, but Kennedy himself wasn't against a strong military to protect the U.S.; rather he was against the global military presence that we became, and that brought with it a cruel body count in Korea, Vietnam, and now arguably, the Middle East.

Considering Kennedy's investments that made him one of the world's richest men, Nasaw notes that the patriarch "looked at the tax implications before investing in anything." Sorry Warren Buffett. And while some politicians believe that tax rates don't change behavior, Nasaw made it apparent that with the imposition of 91% income tax rates in the ‘50s that the ever clever Kennedy moved "large amounts of capital into oil and gas production to take advantage of generous depletion allowances and tax benefits." Though his stance on the gold standard was never made clear, post WWII Kennedy feared inflation, and with the latter in mind, his "spare capital" went "into real estate and oil, the soundest of investments in an inflationary economy." Worshippers of CPI to this day say there's no inflation to speak of, but screaming back at them is the fact that land and oil are once again popular investments amid a rising gold price....

About the work ethic that yielded such a grand fortune (by the '50s Fortune said he was worth $200-$400 million), Nasaw wrote that "those who had worked with him in the past marveled at the energy he expended, the impossibly long hours he kept, his ability to concentrate on several matters at once, and his capacity for juggling numbers, accounts, personalities, staffs, employees, and contracts as he flitted back and forth from office to office, city to city, coast to coast." Success is a choice when talented people work very hard. The successful don't owe us the fruits of their Herculean labor.

Joseph P. Kennedy was a remarkable man, and easily the greatest member of a family that historians will continue to analyze long after readers of David Nasaw's excellent book exit the earth. If there's a shame about the book, not to mention the life of a man marked by so much tragedy (he outlived 4 of his 9 children), it was the patriarch's view that since he'd made a fortune for his kids and future Kennedy generations, that they should, according to Nasaw, "devote themselves not to making money - he had done that for them - but to the greater good of the larger community." Total nonsense. The making of money is a near certain sign that an individual is doing something incredibly worthwhile. Kennedy earned lots of money, his life was very worthwhile as a result, and so is a read of Nasaw's highly interesting book.


John Tamny is editor of RealClearMarkets, Political Economy editor at Forbes, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading ( He's the author of Who Needs the Fed?: What Taylor Swift, Uber and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank (Encounter Books, 2016), along with Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You About Economics (Regnery, 2015). 

Show commentsHide Comments

Related Articles