Why Is America So Rich?|5 Minute Video
Why is America the world’s wealthiest country? Is it mostly because of the federal government, or is it thanks to business people and business owners? Historian Burt Folsom of Hillsdale College describes.
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Script:
The United States is the world’s most prosperous economy. It’s been that way for so long– over a century– that we take it for given.
But how did it happen?
There are numerous answers, obviously. One is that the United States values the free market over government control of the economy.
However here’s a point that is seldom made:
It didn’t begin that way
Before the nation put its trust in the free enterprise, it trusted the federal government to make crucial business choices. Or to put it another way, just after the federal government stopped working repeatedly to promote economic growth and only after personal business succeeded where the federal government failed did the United States start to establish a world beating economy.
Let’s take a look at three telling examples:
In 1808 John Jacob Astor formed the American Fur Company and marketed American furs all over the world. Europeans loved beaver hats for their peerless warmth and resilience. Astor gave them what they wanted.
Instead of leaving the fur service to capable business owners like Astor, the government chose it wanted to be in on the action.
So, it supported its own fur business run by a self-promoting federal government official named Thomas McKenney. McKenney should have won the competition. After all, he had the federal government backing him.
However while Astor utilized numerous individuals and still made a neat earnings, McKenney’s company lost money every year. Lastly, Congress in 1822, pertained to its senses and ended the aids for McKenney and his partners.
A comparable situation established in the 1840’s around the telegraph.
The telegraph was the primary step toward the instant interaction we have today. Invented by Samuel Morse, the telegraph transferred noise– as dots and dashes representing letters of the alphabet.
Morse constructed his very first telegraph wire in between Washington, D.C. and Baltimore with the help of a government grant. Morse, more of an idealist than business person, agreed to let the government own and run the telegraph “in the national interest.”
However the government steadily lost money every month it operated the telegraph. Throughout 1845, expenditures for the telegraph surpassed income by six-to-one and often by ten-to-one. Seeing no value in the invention, Congress turned the money-loser over to private enterprise.
In the hands of entrepreneurs, business took off. Telegraph promoters revealed journalism how it might immediately report stories taking place numerous miles away. Bankers, stock brokers and insurance provider saw how they might instantly keep track of investments near and far. And dozens of other valuable uses were quickly discovered.
As the quality of service improved, telegraph lines were strung across the nation– from 40 miles of wire in 1846 to 23,000 miles in 1852. By the 1860s, the U.S. had a transcontinental telegraph wire. And by the end of that years business owners had strung a telegraph cable television throughout the Atlantic Ocean.
Why didn’t the United States government beneficially utilize what Morse had invented? Part of the answer is that the rewards for bureaucrats differ greatly from those of business owners. When government operated the telegraph, Washington bureaucrats received no benefit from the messages they sent out, and the cash they lost was the taxpayers’, not their own. Federal government authorities had no incentive to enhance service, to find brand-new consumers, or to expand to more cities.
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source
Is it primarily because of the government, or is it thanks to entrepreneurs and business owners? It supported its own fur business run by a self-promoting federal government official named Thomas McKenney. The government progressively lost cash each month it ran the telegraph. Why didn’t the US government profitably use what Morse had invented? When government ran the telegraph, Washington bureaucrats got no revenues from the messages they sent, and the money they lost was the taxpayers’, not their own.
