[This post is the last in a series on American Exceptionalism. I’ve written on this subject elsewhere, so some of you may want to skip this one.]
In my last five posts I’ve argued that American exceptionalism resulted more than anything else from our attitude toward private wealth – private capital – an attitude that happened because America and the Industrial Revolution occurred at the same moment in human history.
I gave only a few of the many examples I could have cited, those few being these:
* Private capital’s crucial support for entrepreneurialism, which led in turn to America’s dominance globally in the founding and nurturing of innumerable startup companies, some of which grew to be gigantic corporations.
* Private capital’s role in the development of private philanthropy and the building of the American charitable foundations.
* Private capital’s contribution to the building of the great American universities, which dominate higher education worldwide.
* Private capital’s role in nurturing the ideas that stopped socialism in its tracks in the latter part of the 20th century.
What is common to all these examples is that ideas matter – it is ideas that drive human civilization forward. But ideas aren’t self-executing. As Michael Dell once remarked, “An idea that never got executed was probably an hallucination.
Whether an idea is a for-profit idea, a not-for-profit idea, or a notion arising in the realm of pure ideas, it is primarily private capital that powers them, that allows them to move out of the mind of one human being and into the broader world where they can make a difference. Note that this isn’t an anti-government diatribe – governments perform many essential tasks and a lot of useful ones as well. But ideas always start small, and governments simply can’t do small things. Once a government gets behind an idea, it no longer matters whether the idea is a good or bad one – it’s going to happen and it’s going to keep happening because it will develop powerful constituencies that won’t let it stop happening. When an individual or foundation decides that an idea isn’t working, they simply stop funding it and it’s over. Killing off bad ideas is every bit as important as backing good ones.
And keep in mind that, as I’ve mentioned before (post of 5/2/13), where private capital is in short supply, ideas don’t just not get implemented – they don’t happen at all. If we look around the world we find that the overwhelming majority of societies are free riders (see my post of 4/25/13), simply latching on to the ideas generated by more creative societies. This has been true as long as there have been human societies. If every society had to live only on the ideas it generated internally (that would be an ill world, indeed), most societies would still be hunter-gatherers.
The Industrial Revolution unleashed an explosion in human wealth, and where that wealth was allowed to remain in private hands, it also unleashed an extraordinary expansion of the human mind. As capital became available to back ideas, more ideas came along. Thus, while ideas power civilization, it is private capital that powers ideas. No private capital, no ideas; no ideas, human civilization gradually implodes.
Next up: Much Ado About Bonds (or, What the Fed Taketh Away, the Fed Also Giveth)
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