In his new book Land of Promise, Michael Lind examines how the American economy has been transformed by wave after wave of innovations—from the invention of the steam engine in the 1770s to Internet-based enterprise in the 21st century—as well as how emerging technologies strain governmental institutions and serve as catalysts for often caustic political debate.
What are the roots of the partisan divide over economic policy?
The real debate over political economy in the United States is not between the small government right and the big government left. That’s a recent pattern. The historic debate has been between champions of developmental capitalism, who you might call Hamiltonians, and champions of producerism, who you might call Jeffersonians. Both of these schools are willing to intervene in markets, but for different goals. Hamiltonians favor collaboration between big government and big business to exploit economies of scale and develop industrial potential. Jeffersonians favor rigging markets in goods or credit to support various small producers.
Which school was more prescient?
I think Alexander Hamilton and his successors, including Abraham Lincoln, would be very pleased with how the United States developed as a nation of big cities and giant factories, transcontinental railroads and later highways, a major military power. Thomas Jefferson’s producer utopia was limited in its original form to a society of small farmers, but in the 21st century only a few percent of Americans are in the farming sector. You can still be a Jeffersonian in an industrialized urban society, but it means generalizing this emphasis on small producers to include small businesses, banks and cooperatives.
What made America prosperous?
The United States has benefited from combining a superior system with sheer physical scale of population and resources. There were other countries from which the U.S. derived its institutional advantages—Great Britain and the Netherlands. But they lacked scale. On the other hand giant countries, like Russia, had the population scale but lacked a dynamic, constitutional, pro-market system. It was the combination that ensured the U.S. became the dominant world economic power in the late 20th century.
What policies foster innovation?
To begin with, you have to have a society that values the rule of law. We learned from the failed experiments of state socialism and communism that you need a system of incentives that rewards people for effort and creativity. We also know from history that innovation and commerce can’t flourish unless government provides goods ranging from infrastructure— roads, canals, Internet connection, satellites—to R&D and scientific research. The days when a lone inventor could make major scientific breakthroughs are long gone. With contemporary, cutting-edge R&D— like biotech or supercomputing— generally you find governments are involved, often in partnership with universities or business. That’s because the amount of capital needed for breakthrough R&D, science and technology is so enormous.
What kind of activist role has government played in the past?
It has sometimes created whole industries from scratch. During and after World War II it created the synthetic rubber industry, invented nuclear energy and the nuclear power industry, and fostered the airline industry. Anything related to space, from satellites to rockets, or the computer industry, began as military or scientific projects that were later privatized. You shouldn’t view the public and private sectors as rivals, but rather as playing different roles at different stages of a particular technology or industry. What you see in advanced societies is that government creates a new technology or industry, then hands it off to venture capitalists and private entrepreneurs who develop it in innovative ways civil servants could never have dreamed of.
How did government get so big?
Big government in the U.S. arose primarily for domestic reasons, and was the result of growth in the scale of corporations. Railroad companies were the first big businesses in the U.S. Toward the end of the 19th century, national firms created enormous private bureaucracies, which in some cases dwarfed federal and state governments. During the Progressive Era there was an attempt to beef up government at all levels in order to deal with these new private sector leviathans. The large-scale military sector came later, temporarily during World War I but permanently only after World War II.
Should U.S. industries be protected from foreign competition?
No industrial country at present favors high tariffs. However, the vast majority of industrial countries practice more subtle forms of mercantilism, most commonly with favorable loans to their industrial sectors. The U.S. has been hoping since the end of the Cold War that it could persuade the entire planet to adopt a smaller government, laissez faire, free market vision. But there’s no evidence that the Continental Europeans or the East Asians are going to convert to this view. So we have to ask ourselves: If we are going to compete with other industrial nations that foster their own targeted industries, should we do the same? If we don’t, we may find our industrial policy is made in foreign capitals, not Washington.
How can economic prospects for the middle class be improved?
The challenge is upgrading jobs in the service sector—particularly services that cannot be automated or offshored to other countries. There are some well-paying knowledge sector jobs out there. But the majority of jobs being created now require no more than a high school education and a little on-the-job training. We need to have a national conversation about how to upgrade domestic service jobs—janitorial work, health aides, child care—so that they can be the basis of a new middle class, instead of a greatly expanded population of the working poor.
What will our emerging Information Technology Republic look like?
If you asked Abraham Lincoln what a Steam Era Republic would look like, he would have thought it would be like ordinary rural America, with the occasional railroad and steam-powered factory. What none of Lincoln’s contemporaries realized was that new technologies transform an existing economic and social landscape. The same is true of the Information Technology revolution, of which we are in the early stages. There’s going to be wave after wave of increasingly radical change, which is filtering through the economy and society more slowly. One example is automated vehicles. Here again the military is leading the way in industrial innovation. There is already a debate in the United States about licensing drones for civilian use. So we’re going from drones being used only to kill people to drones being used in commerce. You don’t just add robot cars and civilian drones to an otherwise unchanged landscape— you will transform business models based on these technologies.
Originally published in the April 2013 issue of American History. To subscribe, click here.