How Did We Get Here

Why is the US in the mess that it seems to find itself?

That is the nagging question that caused me to start digging into how we got here. I am a product of an earlier time, an engineer from the second half of the 20th Century when anything was possible. The view at the time was that the impossible just took a little longer.  We were forward thinking and optimistic, we had to be if we were to go to the moon. I was working at Cape Kennedy  on the Apollo Program and never doubted we could achieve our goal.

Then something took hold of the country and we lost confidence and started turning inward. Instead of making a bigger pie we chose to try to carve the existing pie with the rent seekers grabbing more and more. Government became the enemy. Politics became very polarized and conflict the norm. The science and technology that had created great wealth and prosperity was attacked. While everyone seemed to want the ‘free lunch’ that technology provided there were many that opposed the ‘reason based thinking’ that it required.

I had a nagging question from 50 years of being in the front lines of aerospace technology. If the government was the enemy why was it that my personal experience was that the government was the technology facilitator? That government had been there to nurture the technology before it was strong enough to stand on its own two feet. The more I listened to the anti-government platitudes the more confused I became.  When I retired I started looking at the issue through the eyes of a working engineer.  The more I dug into reality the more the pontificating around me seemed nonsense.

As I followed what I remembered and researched the various technologies I kept going back farther and farther trying to determine when the government had started to facilitate technology. It turned out that the government was a leader, a sponsor or a critical supporter of most of the key technologies of the last 200 years.

Back in 1830’s the government funded several companies to develop the techniques for replaceable parts. At the time precision devices, in this case rifles, were made by hand. A set of parts were given to a person known as a ‘filer’. He filed and fit the rough parts until they fit together into the final product. This process meant that if any part needed to be replaced it had to be hand fitted. The government armories could not have armies in the field dependent on skilled workmen far away to maintain their weapons.  The solution was make each part so precisely that any part could replace any similar part. This of course was considered unnecessary by the standards of the day and there was little interest.  At the time the precision needed was very difficult, new tools, precision measuring devices and new work methods were needed. Government funding over a period of years lead to the final process. This key process for modern mass production became known in the 19th Century as ‘the American Method’.  Some of the machines from the original government contracts can still be seen at the American Precision Museum in Winsor, Vermont.

The first use was in the manufacture of government weapons but the government insisted that the information on the process and how it was done should be distributed openly. The result was a large number of new industries  making consumer products like typewriters, bicycles and alarm clocks. These new industries made a major positive impact on the wealth of the New England states and changed the face of America.

The replacement parts concept was critical for the development of the auto industry. Bill Knudsen, auto pioneer for Ford and GM was said to have taken every file and hammer from the auto production lines in the early 1900’s to enforce the standardization of parts. Today ‘the American method’ of production is the global standard process.

So even back in the early days of the country the government was funding the critical technologies that we depend on.  Through the years much of the invisible infrastructure that we depend on was developed by the government. One of the problems with infrastructure is that it is ‘invisible’ and so it’s ‘out of sight out of mind’. Those attacking government can ignore  almost invisible government efforts knowing that most people will not even realize they are there. Take air travel for instance. When the Wright Brothers flew the first airplane the second thing they did was to go to Washington to try to interest the government in their airplane. But that is another story of government support and innovation.

 

If the US Government Were a Corporation

Introduction
It has become popular to cast the United States government as the foolish, bungling bureaucracy that has no vision and that only unfettered free enterprise can efficiently run things. Of course, the government cannot defend itself, it stands mute. It can’t waste our tax dollars defending itself from attacks no matter how biased, while private groups can spend millions on the attacks.
What happens if we look at the real story? Has government done anything right? How inefficient is the government? Has the government shown any vision? Has the government ever effectively helped? Is it true that the most frightening words are “I’m here from the government and I’m here to help”. Could the government be as worthless as represented? Perhaps we should take a page from the critics and evaluate the government as a business. We want to know about the history, corporate vision, prospects, financial position and growth. What is the real track record of Government USA, Inc.? Would you rate the stock a buy?
Corporation USA
The company USA started as a forced breakup from the ‘parent corporation’, Great Britain in 1781. At that time the company consisted of 13 largely independent divisions (colonies) clinging to the Atlantic Coast. It was of a new, untried organizational structure that even the Board of Directors (Founding Fathers) called “an experiment in democracy” and it had significant debit and no defined income. This was truly a ‘penny stock’ in the high risk category. Since then Government USA, Inc. has invested in land, people, businesses and technology.
Land Investment
The young ‘company’ invested by purchasing Louisiana, Alaska and Gadsden. (The Gadsden Purchase was solely for the southern route of the transcontinental railroad.) It acquired land from Mexico and Spain through hostile takeovers known in international circles as war. It has grown from the original 13 colonies of less than 360,000 square miles to 2,959,064 square miles stretching from the Atlantic to the Pacific and beyond. It produces great agricultural and mineral wealth. Just the ten major crops produced $77.2 billion and last year mineral output was $64 billion. The gas and oil wells supplied 70 Billion cubic feet per day of gas and 7.5 Million Barrels per day of oil and that was before fracking.
People Investment
America Inc. invested in people through education. Consider universal education and the land grant colleges in the 19th Century and the GI Bill in the 20th Century among other programs. It supported individuals with Unemployment Insurance, Social Security, Medicare, and housing programs. The Tennessee Valley Authority, National Park System, and the Interstate Highway System show the variety of programs aimed at making peoples’ lives better. In the past, the Homestead Act and Rural Free Delivery had a significant impact on peoples’ lives and helped open up the West. Rural Free Delivery also provided the delivery infrastructure making the early mail order companies like Sears and Montgomery Ward possible and created the model for the modern mail order industry.
Business and Agriculture Investment
The government invested in business directly through contracts, subsidies, special grants, and tax breaks. The Department of Agriculture provided research, support and outreach to farmers creating an agricultural surplus beyond anything seen before. The Commerce Department and the Small Business Administration provided services directly to business at home and abroad. The government has supported the development of whole new industries through infrastructure programs like the Federal Airways System and the Interstate Highway System. These infrastructure projects laid the foundation for trucking, air freight and airline industries. Competition in the private sector was made possible by the ‘level playing field’ of government infrastructure. The transcontinental railroads were created using government subsidy and the automobile is only practical because the government provides the roads. The government lead space programs for the many years before space became profitable for private corporations. Most of the early communications and TV satellites went into space on refurbished US military rockets launched using government facilities.
Technology Investment
In terms of innovation, Government USA, Inc is the leading supplier of technology to the world. In spite of all the current propaganda to the contrary, most current technology depends on, or has depended on, the government to get started or is dependent on the government for infrastructure. The government has been in the technology business going all the way back to the 1830’s. The critical core process of the machine age, interchangeable parts, came from the government. The process was transferred to private companies that went on to make things for the civilian market like bicycles, typewriters, sewing machines and clocks. Without the replaceable parts concept, the automobile as we know it would not be possible. The process, called the American Method, is now universally used for making the mechanical things we see around us.
The government organization, Defence Advanced Projects Agency (DARPA) invented the internet and GPS among many others. Either of those would provide major bragging rights for any private company. Many of today’s drugs came from government laboratories and supported university research. Fracking which may make the US independent of mid-East oil was the result of many years of government led development.
While many of these programs are old and some discontinued, it is important to see that the government has been investing in the people, private business and technology since the beginning. In these ‘giveaway’ programs the government invested in people and industries by giving them opportunity and providing the infrastructure for new industries.
Looking at the record, it is clear that the government has gotten excellent pay back for its investment. In terms of vision, the government has supported new technologies like aviation and electronics for years until the risk was reduced to the point that free enterprise was willing to support final development and create the products we enjoy.
Insurance
The government has come to the rescue when the private corporations got in trouble in 1929 and 2008. By pouring money into the collapsing economic system the government managed to stabilize key industries and get the economy going again. Like when your child falls off his bike, Uncle Sam picked up the private sector and got it back on its bike and moving again. (Just like the kid, the private sector never said thank you.)
When the nuclear power industry was starting up and no private insurance company would provide insurance because it was too risky they went to Uncle Sam for insurance. (Without government indemnification there could be no industry.) Then the industry promptly accused the government of making it hard on them with too much regulation.
Summary
Government USA Inc is now the bluest of blue chip ‘companies. While the debit load is large from the first decade of the 21st Century due to war and bad judgement, the debit ratio is manageable. Even with the current debit load its bonds are in demand, its interest rates are low. With income last year of $2.9 trillion and a gross domestic product of $15 trillion it is a far cry from 1781. For well over 200 years Government USA has grown larger and stronger. Looking at the record, it is easy to see that stock in Government USA Inc. should be in any prudent portfolio. Certainly the rest of the world thinks so.

Blog #1 Why This Blog

I have watched what is now the history of the second half of the Twentieth Century unwind, searching for the reality behind the facade of bluster and bullshit that was the ‘official’ reason for things.

As a teenager I was trying to understand the world around me. I found that, particularly where money and power are involved, things are rarely what they seemed. I am still trying to make sense out of the world and this blog is my attempt to pass on what I see. I hope that you will find something useful whether you agree with my conclusions or not.

My area of interest revolves around technology and its impact on economics and the role of government and free markets in technology. My ideas are not from being an economist but someone on the inside, living and working as an engineer in the chaos of electronics development between the 1950’s and 2000. It was a ring side seat as technology created the new world we now inhabit.

Today’s world is so different from the world of post WWII! So indulge me now as I make some observations on how it happened and what we need to learn from that post WWII time of great dreams.

One of my primary themes is the impact that technology has had. Most people acknowledge that technology has had an impact but economists still tend to minimize or ignore the impact of technology. Economists seem to be ideologues, their ideology drives them to think economic gimmicks are most important. They focus on various details while mostly ignoring the elephant in the room, technology. Currently the role of government is in focus. The ‘free market’ economists seem to think that minimizing government is the answer to all questions. Supposedly the free market will solve all problems and the government just gets in the way. That may work in an Ann Rand novel but in the real world there are few really free markets and if you want a market economy then there are many issues that must be addressed that are outside the ‘market’. While there is a long list of these issues that lie outside the market I would like to look at one that is critical to our future, technology development.  The common view is that the free market is the technology developer and that all the tech leadership the US has enjoyed is because of the free market.

I tested those ideas against the reality that I had lived with for 50 years as an engineer doing advanced technology. The evidence showed that it was the government, not ‘free enterprise’ had delivered the technology that accelerated the GDP of the US. I know that sounds blasphemous but the evidence supports it. If we look at the major technologies of the 20th Century the fingerprints of the government are all over them. The more critical the technologies the more government involvement. To understand why this is true it is necessary to look at how technology is developed.

Modern technology is a multilevel effort that typically starts with basic science. This work is done at universities, and to a limited extent in government laboratories.  The science gets translated into a technology or technologies which then are matured to provide workable solutions to needs. If the technology is an improvement or is less expensive then it will likely become a product we use or that helps the infrastructure that supports us.  The problem with this evolution from science to applied science to advanced technology to mature technology is, who is going to pay for it?  The free market is focused on the current quarter profit, if it doesn’t help the bottom line then there is little support. When you consider that maturing a technology can take a decade it is easy to see the mismatch.

So how do we get all these fabulous new technologies? It turns out the government funds development. From the time the technology is just a gleam in a scientists eye to the time that the technology is mature the government funds much if not all the work through government laboratories, university laboratories or company development. The more basic the technology the more likely the government support.  When the technology is mature then the free market starts making products.  In the second half of the 20th Century many of the super products were converted military items.

A classic example is GPS. This was military technology that morphed slowly into an indispensable commercial/consumer item.  The GPS receiver you have in your car is dependent on a constellation of satellites designed, built, flown and maintained by the US military. The government gets no compensation but was responsible for the development of all GPS technology. In addition to the satellites the government funded all the design of the electronics up to the final consumer packaging. Without constant government involvement there could have been no GPS.  GPS not only gets you to your destination but is critical to integrated logistics transportation, just in time delivery systems and a many other free market enterprises. GPS adds more than $10 billion/year to the economy yet I have never heard the free enterprise proponents mention a word about it.

In future posts I plan to prove my case with a number of other examples of government leadership in technology and why government, far from being the problem, is critical to the solution and our leadership in technology.