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4.0 out of 5 stars Interesting vignettes of economic history, November 20, 2012
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This review is from: The Dawn of Innovation: The First American Industrial Revolution (Kindle Edition)
This book is written in two parts. The first 90% explores that remarkable period of economic growth in the 19th Century when the United States transformed itself from a nation of stone-fenced farms and backwoods log cabins into a continent-spanning urban/industrial economy almost as large as the rest of the world's economies combined. The final 10% is an analysis on how the lessons learned from our early economic rise might help us to manage our trading relations with China, which is currently in the same stage of explosive economic growth as we were then.

This book isn't an organized scholarly history of America's early economic growth (many books of that type have already been written). Rather it is a series of colorful vignettes exploring the development of various machine technologies intertwined with insights into the remarkable character of early Americans that expedited our rise as an economic powerhouse. Author Charles Morris weaves his vignettes into an interesting and comprehensive whole.

The starting point to understanding this book is that America might well have evolved into a poorer country with a less developed economy. Our richness in land, natural resources, and a benevolent climate might have lulled us into contented indolence. Instead our free economy and democratic ideals attracted some of the most talented mechanics, inventors, industrial engineers, and businesspeople from Great Britain and northern Europe.

Morris then explains how an early test of our industrial prowess occurred during the War of 1812, which began with the economic and political fortunes of the fledgling United States at low ebb. He explains how we obtained a satisfactory peace from a difficult war by creating a shipyard employing 5,000 workers on the remote wilderness of Lake Ontario. This early "military/industrial complex" created a first-class fleet complete with heavy cannon and early prototypes of machine guns. If this fleet had not won control of the Great Lakes the peace may have concluded with the British flag flying over its old pre-Revolutionary border along the Ohio River.

Other vignettes explain how Americans inherited the entrepreneurial character of the British and then intensified it. Others explain how complex machines and instruments for precision manufacturing were developed then scaled up to industrial strength. Watch-makers working in cottages learned how to build steam engines for boats and locomotives. He explains how entrepreneurial-minded British visitors to the United States were impressed by the business savvy of America's "democratic rabble." They were astounded to see Americans investing their money in every type of business from small stores on the frontier to great factories and large networks of canals and railroads. He explains that America was the first country whose people started out middle class and then aspired to become wealthy.

Although I knew the outlines of this history I enjoyed Morris' micro-focus on some of the key inventions and personalities of the era. Among other things, a colorful picture of how people lived and did business in the emergent metropolis of Cincinnati (our third-largest city in the early 1800s) is presented.

The book is not quite complete because it leaves out any discussion of the PLANNED aspects our economic development. Many of our leaders in government from Alexander Hamilton to William Seward dedicated themselves to shaping America into the world's preimenent industrial and commercial power. They made sure that the tailwinds of government were behind every business enterprise from manufactories to canals and railroads. Our economy grew much faster than it would have if government had been hostile or merely indifferent to the development of an industrial economy.

However, Morris does conclude the book with an interesting analysis of how Great Britain fared in the face of competition from America's emerging industries. He seeks out lessons from the experience of established British industries competing with their upstart American cousins that might now be applied to managing trade with our emerging competitors in China. Morris explains that Great Britain was actually a gentle giant of an economic empire. In the late 1800s its political leaders were wedded to Adam Smith's laissez-faire concept of free trade. They kept their markets open to American-made products at a time when our protectionist tariffs shut most of their products out of our market.

Morris explains that the British leadership believed, as do most of our current politicians, that free trade forces domestic industry to compete globally and therefore hones its competitive edge. Britain's industries WERE saddled with hide-bound management and militant labor unions that resisted productivity-enhancing innovation. But instead of becoming more productive they were obliterated by competition from the U.S. and especially by the predatory "dumping" by Germany's rising industries. Instead of making British industries more competitive, free trade with non-reciprocating trading partners may have hastened Britain's economic decline.

Morris points out that today the U.S. is in a similar position vis-à-vis China. He says that while China is not particularly discriminatory with its tariffs, there is nevertheless a government-planned scheme of harvesting foreign investment. He says foreign companies are invited to set up shop in China for the express purpose of stealing their technologies then building an industrial base to export knock-off products back to the rest of the world. Of course promoting "free trade" with a predatory trading partner has the potential to impoverish us the way Britain's industrial economy was demolished a century ago.

My takeaway is that there may be better ways to keep our industries competitive than giving them away to China. One way to increase competition would be to bust up the oligarchies that currently stifle competition in many of our industrial, technology, and financial sectors. This could be done either by vigorous enforcement of Anti-Trust laws or better yet by imposing a progressive corporate income tax starting at zero for small companies and scaling up to 100% on the profits of gargantuan monopolistic companies.

This would cause the consolidated behemoths to disband into more productive and more competitive smaller units. That would in turn cause an increase in R&D spending and would began a process of re-employing American scientists, engineers, and industrial managers instead of continuing to export their jobs and their knowledge base to China.

Perhaps the important revelation is that it doesn't pay to be a "Gentle Giant" when your predatory trading partners are determined not just to move your cheese but to eat it.
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Initial post: Jun 9, 2014 4:47:25 AM PDT
Steve Paul says:
"progressive corporate income tax starting at zero for small companies and scaling up to 100% on the profits of gargantuan monopolistic companies." Huh? Seems misguided. Otherwise, enjoyed your review.
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