Over the past 150 years, starting with post-Civil War Reconstruction, America has delivered to the world the largest improvement in quality of life in history. Capitalism, free enterprise, and individual rights were the ideological columns that allowed the edifice of the human condition to rise.
As you sit in your climate controlled home, streaming movies, using Door Dash for dinner, and waiting for your vaccine of choice, you might ascribe all this technological innovation and progress to the behemoths of big tech: Apple, Google, Amazon, and so on. Certainly, these modern-day FAANG titans sit at the fore of the idea economy.
Yet our modern economy of services and ideas consists of tiered levels, with the prior tier serving as a necessary and supporting base to the next tier. No internet, no digital streaming. No electricity, no internet. No carbon, no electricity. And so on, back to the most fundamental building blocks of an economy.
Americans have lost sight of this fundamental economic truth, blinded by the mesmerizing clicks and taps of apps. Add to the mix fabricated mistruths about the demise of the “old economy” spewed by the elite and the Left in academia, government, and monied foundations, and many of us today are transitioned from uninformed to misinformed when it comes to drivers of the economy and our lives.
A historical refresher is in order.
Our modern economy is built upon five successive pillars, each one rests atop predecessor pillars and supports subsequent pillars. Lose one pillar and you lose the pillars above it. Let’s meet the new bosses, same as the old bosses.
Pillar #1: Don’t Call Them Robber Barons
Everything we enjoy in our modern life traces its roots back to, and continues to depend on, the founding fathers of our economy. Most of them rose to prominence in the period of American history after the Civil War and before World War I; a time where industry rebuilt and then drove America to global prominence.
The three faces that sit on this pillar’s Mount Rushmore are Cornelius Vanderbilt, John Rockefeller, and Andrew Carnegie. Vanderbilt built, integrated, and consolidated the transportation network, specifically rail, that allowed a nation to grow and its industry to thrive. Rockefeller took the fragmented and disorganized industries of oil and refineries and brought order that spurred the innovation of new products, including gasoline. Carnegie was the visionary who saw the need for a new product to build our cities and structures: steel.
Innovating from their home bases of New York, Cleveland, and Pittsburgh, these three men along with others fused a backbone of the American economy that we depend upon to this day. They were far from perfect, as incidents like the Homestead Strike painfully illustrated. But they were great, and we owe them a debt of gratitude.
Most importantly, they set the stage for Pillar #2 of our modern economy.
Pillar #2: Finance Powers Innovation
As railroads, steel mills, and refineries grew into industrial titans, finance evolved into a powerful catalyst to accelerate progress and spur more innovation.
J.P. Morgan revolutionized finance as an instrument to optimize commerce, and he was not afraid to get in between Rockefeller and Carnegie where he saw opportunity to create value (for example, Morgan bought out Carnegie and created U.S. Steel). Morgan showed how the purse could be a force to be reckoned with, even for the world’s most powerful industrialists.
J.P. Morgan also funded new innovators and innovations, playing Thomas Edison and George Westinghouse against each other as they demonstrated and commercialized electricity generation. Edison brought us light, he and his competitor Westinghouse established electricity generation at scale, and Morgan provided the capital to enable all of it (Morgan eventually took control of Edison’s company and recast it as General Electric).
But if no rail, oil, or steel, then no modern finance and electricity. Once these two pillars were in place, it set the stage for the next pillar that would fundamentally reshape the world.
Pillar #3: The Societal Impact of the Modern Assembly Line
Thankfully, at about the time politicians and bureaucrats were working to take down the Standard Oils of the world, a new breed of creators appeared on the scene to keep progress moving. Henry Ford took the recipe ingredients of steel, gasoline, finance, and electricity to revolutionize manufacturing with the modern assembly line.
Ford’s assembly line made automobiles affordable. His manufacturing innovations also established an eight-hour workday and a living wage for workers, who would then have both the time and money to purchase and enjoy cars. That drove up the demand for cars, making Ford more profitable. Policy makers have been trying to replicate this virtuous circle ever since.
Others took note of what Ford was doing in autos and looked to copy it for other products. Hershey figured it out for candy while others applied it across a spectrum of industries. The worker and consumer both benefitted, with increasingly worker and consumer being one in the same. In many ways, the American middle class was the most impactful innovation of this pillar.
All of Ford’s necessary ingredients came from predecessor pillars. Without them, there would be no assembly line, all the consumer benefits that derived from it, or a middle class. Nor would there be the benefits of the next pillar that Ford and his peers made possible.
Pillar #4: Rise of the Service Economy
The prior three pillars of the economy provided the feedstocks to efficiently manufacture consumer goods. Workers increasingly were able to enjoy and afford these products, driving up demand. And technology expanded the gameboard of what and when things could be enjoyed.
All of this birthed what we know today as the service sector of the economy. Mechanics were in demand to repair cars. Beauticians were wanted to assist with application of makeup and hair care products. Entertainment became a massive industry as movie theaters and television became ubiquitous.
Before you knew it, the service economy was as big, or perhaps bigger than, the manufacturing sector of the economy. But without a strong manufacturing base, there would be no service economy. If you don’t build it, you won’t service it. If you lose the large number of high paying jobs in manufacturing, people won’t be able to afford services. Obvious to most, but frustratingly foreign to many politicians and policy makers today.
Everything was now in place for the fifth and final pillar.
Pillar #5: The Idea Economy
The prior four pillars set the stage for increased specialization, innovation, and widespread technology diffusion. Suddenly everyone had computers, cell phones, and internet access. Entrepreneurship blossomed and the largest corporations in history were created by thinkers tinkering in garages.
Big tech and the idea economy are awesome innovators and innovations. Yes, at times their power needs to be checked when impeding individual rights such as free speech. And these entities must be constantly reminded that their initial and ongoing success hinge on the underlying pillars they rest upon. But like Rockefeller and Carnegie before them, we are much better off with today’s tech titans than without them.
Donald Rumsfeld famously referenced “known knowns” (things we know that we know) and “known unknowns” (we know there are some things we do not know). Our 150-year American economic journey of prosperity has definitively proven Rumsfeld’s two axioms true.
Our “known knowns” are that if you sabotage any of the underlying economic pillars, you will unleash the widespread collateral damage of ruining the subsequent pillars. That’s true even when the aspiring destroyers are trumpeting the need to do so under the banner of the public good or saving the planet.
The “known unknowns” are the future pillars to be created and brought to society. We don’t know what they are or when they will appear. But we do know the frequency and timeliness of them will hinge on our ability to protect the current pillars and nurture the ideological columns that made them possible: capitalism, free enterprise, and individual rights.
Post that in your app and stream it.