Today in History: The Chernobyl Disaster and the Old Scourge of Long-Term Unemployment


On this day in economic and business history...


The word and the place will be forever associated with the dangers of nuclear energy. More than any other event, including America's Three Mile Island, Chernobyl slowed global adoption of nuclear power to a crawl and changed the world's view of nuclear power to one of fear and distrust. But what really happened at this remote Ukrainian nuclear reactor on April 26, 1986? More importantly, could it happen again?

Chernobyl's disaster was set in motion on April 25, during the most ironic situation possible: a safety test. To test the power-regulating and emergency systems, Chernobyl's engineers -- lacking the necessary knowledge of nuclear physics to understand the consequences -- removed control rods (designed to stop catastrophic meltdowns) from one of four nuclear cores while reducing power output to nearly nothing. Their aim was to see whether inertial motion in the reactor turbine would be enough to drive emergency systems.

Unfortunately, Chernobyl's inept and hurried engineers reduced power levels far too quickly. Inadequate water flow caused the remaining coolant water to boil. In a panic, Chernobyl's engineers tried to reinsert the control rods, but a flawed design caused the system to jam at the worst possible time. Power levels surged far beyond the threshold of safety early in the morning on April 26, and a steam explosion set off a massive chemical blast that tore the 1,000-ton steel roof off the radioactive reactor core. Vast quantities of radioactive debris were ejected into the atmosphere, and the plant and its surroundings caught fire, with great jets of flame leaping 1,000 feet into the air.

During the hours in which outmatched and underinformed Ukrainian firefighters battled the fires, many were exposed to fatal levels of radiation. These doomed first responders thus became some of the first humans ever to suffer death by radiation poisoning as a result of a nuclear power accident. However, they also deserve high praise for averting the far more serious disaster that would have resulted if Chernobyl's three other reactors had also caught fire.

Richard Rhodes writes of the serious deficiencies in Chernobyl's design in his book Nuclear Renewal:

All the Chernobyl reactors were of a design that the Russians call the RBMK -- natural uranium-fueled, water-cooled, graphite-moderated -- a design that American physicist and Nobel laureate Hans Bethe has called "fundamentally faulty, having a built-in instability." Because of the instability, an RBMK reactor that loses its coolant can under certain circumstances increase in reactivity and run progressively faster and hotter rather than shut itself down. Nor were the Chernobyl reactors protected by containment structures like those required for U.S. reactors, though they were shielded with heavy concrete covers.

Without question, the accident at Chernobyl was the result of a fatal combination of ignorance and complacency. "As members of a select scientific panel convened immediately after the...accident," writes Bethe, "my colleagues and I established that the Chernobyl disaster tells us about the deficiencies of the Soviet political and administrative system rather than about problems with nuclear power."

It took two days for the Russian government to inform the world of the disaster, and it took roughly two weeks to encase the exposed reactor in a 20,000-ton concrete tomb. By then, there was nothing anyone could do to blunt the effects of a radioactive cloud that had spread across the globe. The health effects, beyond a reported 56 directly attributable fatalities, are difficult to quantify. The rate of new cancer cases in the United States experienced a statistically significant multiyear spike for several years following Chernobyl, rising from 458 per 100,000 people to 511 per 100,000 in 1992 before declining in more recent years. A comprehensive Russian analysis of medical records published by the New York Academy of Sciences estimated that nearly a million premature deaths occurred around the world as a result of the accident -- although this estimate is not without its detractors.

By the start of the 21st century, many nations were again willing to explore the potential of nuclear power. Reactor designs have been enhanced since Chernobyl, but it remains highly unlikely that any other reactor could suffer such a man-made catastrophe -- the serious flaws of Chernobyl's design have not been adopted elsewhere, as you might expect. Of the 427 nuclear reactors commissioned before Chernobyl, 287 remain operational today.

Today, 435 nuclear reactors operate around the world, and another 67 are under construction. The majority of nuclear energy is generated in just three countries: the U.S., Japan, and France. France's EDF is the world's largest producer of nuclear energy -- or, indeed, any type of energy -- followed by Exelon in the U.S. and TEPCO in Japan. TEPCO's Fukushima plant provided the world with a more recent example of the potential dangers of nuclear power in the aftermath of a devastating 2011 earthquake. This, however, can't be blamed on human error -- though it may have worse long-term effects on the growth of nuclear power than Chernobyl.

Old-school email
Email without the Internet? The idea seems strange, but when you think about it, why shouldn't email have existed long before the Internet? After all, the "E" stands for "electronic," and we've had electronic communications since the days of the telegraph. And the first truly electronic mail can trace its origins all the way back to April 26, 1884. That day, The New York Times reported on "Mails by Electricity," a proposed postal-service telegraph initiative. The Times supported the proposal that the post office contract with private providers -- in this case, most likely Western Union , which was already a leader in the field -- to avoid the high costs of building its own infrastructure:

The proposed alternative is supported by strong analogies. The Post Office is now popularly said to carry the mails. As a matter of fact and practice it merely hires them to be carried. The Post Office, to its credit, does not own one of the gorgeous ramshackle vans which carry the mails ... nor does it own the horses or employ the drivers. All is done by contract. So it is with the star service, and so it is with the carriage of mails by steam power. ... It does not appear why there should be any difference of principle because of the substitution of electricity for steam.

Such a system was never implemented, but it provides an early look at ideas that might have radically reshaped the notion of email more than a century before the term ever entered popular use.

The long-term unemployment
"What is the cause of our huge unemployment?"

New York Times columnist Henry Hazlitt posed this question to his readers on April 26, 1936. The argument over unemployment then echoes much of the sentiment surrounding unemployment in America after the financial crisis. Very little about today's economic climate is unique, which makes it worthwhile to study the crises that have come before. For one thing, economists and pundits of the Great Depression era disagreed just as vehemently over the number of unemployed people as they did over how to solve the unemployment problem:

Figures recently published by the International Labor Office, for example, indicated that the total unemployment in the world is still about 22 million, and that out of this total more than 12.5 million is chargeable to the United States alone.

What is the cause of our huge unemployment? How does it happen that the total unemployed in Great Britain, for example, equal only 4% of the population, while our own figure reaches close to 10% of our population? Why has our own unemployment figure shown so little reduction in the last year, in spite of the increase reported in business activity?

There is no simple answer to these questions. The questions, in fact, take for granted figures which on further examination turn out to be very doubtful. The American figures are merely private estimates.

The discrepancy, according to Hazlitt, came down to the source: The American Federation of Labor provided an estimate of 12.5 million unemployed, but the National Industrial Conference Board saw a figure closer to 9.9 million -- just under that magical 10 million mark. Whatever the number, it was certainly too high for a country supposedly years into a roaring recovery. The Dow Jones Industrial Average , for example, had soared throughout President Franklin D. Roosevelt's first term to a level more than 250% higher than its post-crash low at the time Hazlitt's article was published, and real corporate earnings had nearly recaptured their 1929 highs. Yet unemployment remained stubbornly high, and four primary reasons were given as to why that might be so. They should all be familiar to you:

  • Businesses had not actually recovered so well as the numbers showed.

  • New technology had reduced businesses' need for workers.

  • Wages were inadequate to attract adequate levels of employment.

  • Social-assistance programs were reducing everyone's desire to work.

Over the preceding two years, factory production had grown 26%, compared to employment gains of 14%. However, Hazlitt found that by 1936, production was at 78% of its 1929 levels, while employment was at 80%! The technological argument didn't hold much water in the 1930s. Even a simple comparison of U.S. Steel's production against its employee headcount showed a greater loss of production than of employment: The bellwether steelmaker had rolled out less than half as much steel in 1935 as it had in 1929, but total employment was a mere 13% lower from the peak of the boom to 1935. Perhaps the first argument was more valid than the second.

Relief payments, also blamed for persistent unemployment, were in some cases unusually high. Hazlitt quoted Sir Josiah Stamp as saying, "I heard recently of a man contrasting $15 in dole payments with $18 for private work, and figuring, 'What's the use of working for $3?'" Average hourly earnings were a penny higher at the time than they had been in 1929, but by 1936 deflation had reduced the cost of living by 15%. The problem seemed intractable, as higher wages would result in fewer available jobs, but lower wages would merely push more to continue collecting unemployment payments.

The problems of unemployment in 1936 were ultimately very similar -- though not quite identical -- to those of 2012. Ultimately, it would take a World War to return the United States to full employment. Will it take a similar event to fix America's current unemployment problems? Let's hope not.

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