Entrepreneurs and innovators have been creating jobs and opportunities in America for over 200 years. Their innovations, hard work and investments have driven prosperity, provided pay and benefits that helped create a large middle class and a social safety net.
Occasionally, their innovations reshaped the economy: Such transforming innovations include, among others, the steamboat, telephone, internal combustion engine and the automobile, and the personal computer. Other entrepreneurs and investors moved these innovations into the economy and improved them over the years.
All this opened up new markets and created new ways of doing business, working and living life.
In our time, innovators include companies such as Intel, Microsoft and Apple, all small at the start. (In 1975, Microsoft had three employees — Paul Allen, Bill Gates and Ric Weiland — and $16,500, in revenue. Today, it has 94,000 employees and revenues over $70 billion.)
Today, Microsoft’s software shapes computing around the world.
Robert Fulton’s steamboat is a metaphor for how entrepreneurs and innovators benefit us. It also illustrates what cost, higher or lower, means to businesses and the resulting price to consumers and other businesses. (This basic eludes too many lawmakers accustomed to spending in millions and billions while casually piling new costs on business.)
In 1810, it cost $5 — $70 in today’s dollars — to move 100 pounds of freight downriver by flat boat from Louisville to New Orleans. By 1850, that cost had dropped to 25 cents — $3.50 in today’s dollars, a 20th the cost of 40 years earlier — courtesy of the steamboat.
Over time, entrepreneurs invested in roughly 1,000 steamboats, a risky investment.
New opportunism were everywhere up and down the rivers. New businesses opened; existing ones expanded.
Manufacturers had to hire more employees to keep up with increasing demand for furniture, clothing, plows and planters, all now less expensive.
Farmers could plant more crops since they could afford to ship them to cities; lower transportation costs made corn and wheat and other basics more affordable to people around the rivers.
The government eventually provided navigation lights and buoys along rivers, a much-needed improvement in navigation and safety. This was “infrastructure” of the kind that Americans continue to expect from government.
But the steamboat and entrepreneurs who invested in them were the drivers of cheaper transportation and the growth in jobs and trade it prompted.
Steel, the heart of the industrial economy, is another example of what innovation does. Entrepreneur Andrew Carnegie’s innovations were essential to dropping the cost of steel needed for railroads, and new kinds of construction. The price of steel rails, for instance, dropped from $190 a ton in 1875 to $17 a ton in 1898. This sped the building of a network of railroads across the country, another catalyst for greater commerce wherever the railroads went. It also allowed improvements in infrastructure: bridges, roads and dams.
Infrastructure like bridges and roads has long been necessary to our prosperity, as informed voters know. They also know that the “government” money for such projects is our money, taxes paid by businesses and individuals.
And here is a basic truth overlooked by too many leaders today: To make the most of infrastructure — and to prosper more generally — government must also:
(B) Maintain our ordered liberty, the freedom to pursue our individual aims without undue interference from the government. (Government dictates touching the economy — sometimes hammering large sectors of it — reduce that freedom. )
(B) The government must also provide a tax system that encourages investment and innovation, risk-taking. This does not require special incentives or tax breaks. But it does require that individuals and businesses get to keep more of what they earn: tax rates should be lower instead of higher, especially on capital gains.
A growing economy will produce more tax revenue.
Prudent tax policy will create the jobs Americans need today. And, yes, this will be delivered by hard-working people, innovators and investors, not the government.
Unemployment remains high. Those in need of work suffer, as do those losing their homes. Small businesses continue to close. Most businesses face so much uncertainty over the costs of new and pending government policy that they are hiring fewer people.
After three years of policies that have drained the life out of the economy, what government needs to do now is clear:
Get out of the way.
Tack Cornelius is a writer and Gainesville resident. His columns appear monthly and on gainesvilletimes.com/viewpoint.