Innovators and Adapters
Joseph Marie Jacquard (born July 7, 1752) revolutionized the textile industry by perfecting a loom that used punch cards to automate the weaving of patterned fabric. One lesson of Jacquard's invention is the all-too-frequent fate of new technology: Jacquard's looms were burned and the inventor himself beaten by weavers who feared their skills were being outmoded.
Another lesson of the Jacquard loom, obviously, is how inventions can be adapted in ways that allow them to leap across technological divides. The mechanism of punch cards was picked up by Charles Babbage for his analytical engine, and then by the American scientist Herman Hollerith for a machine that tabulated the 1890 census. Hollerith's Tabulating Machine Company went on to become International Business Machines.
But perhaps the most instructive lessons about capitalism to arise from the Jacquard loom is that the greatest wealth and honor often fall on the improver of a technology, even though he merely stands in a line of improvers and even though no reason for his special good fortune is obvious. If the punch-card loom may be said to have a true originator, it is probably a man who lived nearly two generations before Jacquard: Jacques de Vaucanson (1709-82). In the history of technology, however, Vaucanson's fame rests mainly on his automata—above all on a mechanical duck that quacked, swam, flapped its wings, ate, drank, and (though this was faked) digested food. Said Voltaire, acerbically: "Without the shitting duck, there would be nothing to remind us of the glory of France."
Elias Howe (born July 9, 1819) was an inventor like Vaucanson: he stood in a line of those who worked on an invention—in Howe's case, the sewing machine. Fortunately, by the late nineteenth century capitalism had developed legal adjunct in the patent system through which early and partial contributions to a final invention are rewarded. Howe's contribution to the sewing machine was the lock stitch, which uses two threads to replace the pattern of hand-sewing. When Isaac Singer and others took this invention and added others (such as the up-and-down needle), they quickly created a new industry. But by winning a patent case, Howe was able to profit from his early work, obtaining royalties of some two million dollars.
Engineers and Inventors
Thomas Telford (born August 9, 1757) and Henry Maudslay (born August 22, 1771) were engineers who participated in completing the first state of the Industrial Revolution in England. Telford was a civil engineer who connected the regions of Great Britain through hundreds of miles of road and hundreds of bridges. Maudslay was a machinist who developed both a precision lathe and the micrometer, two necessary steps toward interchangeable parts and thus toward mass production. Later steps along that path were taken by the gun manufacturer Samuel Colt (born July 19, 1814) and by the automobile maker Henry Ford (born July 30, 1863). Thus was the circle, from Telford to Ford, neatly completed when automobiles such as Ford's used the roads and bridges of civil engineers like Telford to bind the world together even more tightly.
Among the many myths of capitalism, one of the more innocent is the myth of the better mousetrap. In a typical American success story, Elisha Otis (born August 3, 1811) left the family farm at age nineteen to participate in the country's commercial and technological revolution. While working at a bedstead factory in Yonkers, New York, Otis designed a "safety hoist" to lift loads, and, in 1853, he set up a small freight-elevator business. Although his invention would one day make skyscrapers possible, it found little acceptance at first. So, to drum up business, Otis undertook a stunning bit of salesmanship. In 1854, he took his product to the American Institute Fair in New York City (staged, appropriately enough, by P.T. Barnum). There, he explained his safety mechanism while standing on a platform that was raised by a rope to a height of thirty or forty feet. At the conclusion of his speech, he slashed the supporting rope, and on-lookers gasped as the platform remained in place thanks to Otis's safety brake. Solemnly sweeping off his hat, Otis declared: "All safe, gentlemen, all safe."
The career of George Eastman (born July 12, 1854) was yet another in which invention did not bring success. After Eastman read of British photographers whose plates remained sensitive when dry, he undertook three years of experimenting to perfect the process of making dry plates. Five years later, in 1885, he was producing sensitive film. "We expected that everybody who used glass plates would take up films," he said. "But we found that the number which did so was relatively small." Rather than complain about stupid people who did not know enough to buy a superior product when it was offered to them, Eastman advertised relentlessly. He invented the name Kodak for his film-using camera; he coined slogans ("You press the button, we do the rest"); and he spread his message everywhere: in newspapers, magazines, and billboards—even an electric sign in Trafalgar Square.
Entrepreneurs and Retailers
John Jacob Astor (born July 17, 1763) offers a model of entrepreneurship to anyone who would celebrate capitalism. By seizing opportunities in the fur trade, he was able to trounce a government-subsidized operation run through the Bureau of Indian Affairs and, by 1822, drive it out of business. Yet Astor himself quit the fur trade when he saw that the Industrial Revolution was creating fabrics people preferred to animal skins. For the last fourteen years of his life, he pursued a business opportunity that he had spotted early on: Manhattan real estate. By the time of his death in 1848, he had created America's largest fortune: $10 million.
John Wanamaker (born July 11, 1838) and Marshall Field (born August 18, 1834) were two of the greatest retailers in American history, reigning dominant in Philadelphia and Chicago, respectively. But what exactly did they accomplish? The roles of the inventor, the engineer, the entrepreneur, and the banker are fairly well understood, and so we realize why free markets reward them. Yet the greatest fortunes often accrue to men who simply sell products created by others. When Field died in 1910, he left an estate valued at $125 million, which as a percentage of GDP equals Bill Gates's fortune today. Justifying capitalism to the world will mean explaining what value Field created to earn such wealth.
Magnates and Muckrakers
The names of Jay Cooke (born August 10, 1821) and Milton Friedman (born July 31, 1912) remind us that advocates of capitalism must clearly explain the causes of recessions and depressions, for nothing brings out the critics of capitalism more quickly. Cooke is one of the leading bankers in American history, but his investment in the Northern Pacific railroad led to his firm's failure and to the financial panic of 1873. That, muckrakers say, produced the massive five-year depression that followed. As it happens, the source of Cooke's bankruptcy was a federal industrial-policy that encouraged uneconomic railroad-building by providing vast land grants that could be sold off as the road progressed. As a result, the Northern Pacific sank its capital into pushing westward, while neglecting the connections that would have made the railroad profitable. But whatever brought Cooke down, the collapse of one large bank could not alone have caused the depression of 1873-78. Surely, if we put any credence in the work of Milton Friedman, we must also look to problems in the money supply. One theory indicts a long postwar deflation that followed the inflation of the Civil War.
Another cites the redirection of European money to finance the Franco-Prussian War. Here is an area where a museum of capitalism could usefully commission research.
With John D. Rockefeller (born July 8, 1839), we come to a capitalist so great that almost any issue could be studied through his life and work. The obvious issue, however, is the way that Standard Oil's success exposed confusions about the nature of competition. Advocates of capitalism must show that economic competition does not mean dog-eat-dog warfare but only competition for the privilege of cooperating with a customer—by producing the goods he most desires. A second lesson might involve the irrational hatred of large businesses that replace small ones by means no more sinister than providing customers with superior products and services. And a third lesson would surely be devoted to the origins and evils of antitrust law.
Given all the ignorance and misinformation that a museum of capitalism could usefully dispel and fight, the only surprise is that our economy remains as free as it does. Unfortunately, if the truth about capitalism goes untaught, there will not long be cause for surprise.
This article was originally published in the July/August 2003 issue of Navigator magazine, The Atlas Society precursor to The New Individualist.