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By Robert J. Samuelson
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Among the great connecting threads of American history is the precariousness of social and economic standing. From the start, Americans have had the chance of elevating their status and wealth while also facing the threat of losing both. Nothing is preordained. Opportunity and insecurity have coexisted in an uneasy embrace that is, alternatively, rewarding and punishing. At moments like this, the confounding combination helps explain both the economy's strengths and its vulnerabilities.
Just 18 months ago hardly anything seemed amiss. The Nasdaq, after increasing an astounding 86 percent in 1999, was still ascending. Faith in the Internet, fiber optics and Alan Greenspan seemed almost infinite. Now the Nasdaq has plunged, dozens of dot-com and telecommunications firms have failed, and doubt--even about Greenspan's infallibility--has infected popular consciousness. The change has many causes, but one is the open-ended nature of American society. It inspires cycles of striving and disillusion.
In 1903, 57 auto companies came into being--and 27 disappeared. After gold was discovered in California (1848), 180,000 Americans raced to the West Coast in the first two years, although the trip was expensive and life-threatening (six months around Cape Horn, a few months less via the fever-ridden Isthmus of Panama or a slightly shorter overland journey through hazardous Indian territory). Of course, few got rich; many were disappointed.
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James Gordon Bennett, the legendary editor of The New York Herald, wrote in 1868: "[M]en no longer attempt to rule by the sword, but they find in money a weapon as sharp and more effective; and having lost none of the old lust for power, they seek to establish over their fellows the despotism of dollars."
There's an unrelenting contest for economic and social superiority that drives innovation, investment, migration and (to some extent) instability. Anyone who doubts this should consult John Steele Gordon's new book, "The Business of America." Gordon, a popular historian on business subjects, writes a regular column for American Heritage magazine, where the book's 47 compact essays first appeared. A common theme is how the burning desire to get ahead spurs economic creativity and destruction.
In the late 1700s, Britain had a global monopoly on textile-making machinery--the high-tech sector of its day. To preserve the monopoly, the British prohibited exports of the machines or their designs. Anyone who could build a machine couldn't emigrate. In England, clandestine advertisements offered huge bounties to set up a textile factory in America.
"One person who was surely aware of these offers was Samuel Slater of Belper, Derbyshire, in the very heart of the textile area," writes Gordon. At 14, he apprenticed to the owner of a textile mill. A mechanical genius, he improved the mill's machinery and memorized their design. Seven years later--his apprenticeship finished--Slater listed himself as a "farm laborer" and sailed for the United States. Within a year, in December 1790, the first American cotton mill opened in Pawtucket, R.I. The owners included Slater and Moses Brown (part of the family whose name adorns Brown University).
What Bennett meant by "despotism of dollars" was the ability to buy power and well-being. But it was (and is) much more. It's the obsession with moving to the front of the line, of leaving a mark on the world, of having the highest score.
The competition occasionally verges on war. In the steamboat era, the "lust for speed" often inspired "impromptu races between rival captains." Sometimes the boilers exploded. One accident in 1840 claimed 123 lives. Early in the 20th century, companies battling for the rich copper reserves in Butte, Mont., engaged in underground warfare. "Shafts were suddenly closed by dynamite," writes Gordon. "Miners would break into a disputed tunnel only to be met with steam hoses and lime poured down the hoses that supplied the tunnels with fresh air."
At other times, integrity suffers. Richard Sears started a small company that sold watches in 1886 and transformed it into a flourishing mail-catalog business that by 1892 "offered everything from wagons to baby carriages, shotguns to saddles." Indeed, Sears occasionally offered items that he didn't have (on the assumption that, if people ordered, he might find them) and vastly embellished the descriptions of some that he did. "Honesty is the best policy," he would say later. "I know because I've tried it both ways." Americans tolerate this process because, in theory, everyone has a chance to become a mogul and because many moguls--from Sears to Bill Gates--have advanced the mass market.
But the quest to accumulate can be perilous. "No man actually owns a fortune," said A. P. Giannini, founder of the Bank of America. "It owns him." The never-be-satisfied mentality sometimes leads to a cliff. In the 1970s, the Hunt brothers were among the world's richest men. They wanted more. Borrowing huge sums, they tried to corner the world's silver and then sell scarce supplies at inflated prices. The corner failed, the creditors foreclosed and the Hunts went bankrupt. Companies, too, can lose big bets. IBM misjudged the personal computer's significance and lost dominance of its industry. When many people simultaneously make similar mistakes, there are public consequences: financial panics, investment busts.
The parallels between past and present seem plain. As before, the recent high-tech boom has revised the social and economic order. It has raised some into the elite and ejected others. It has generated new markets, unsettled old habits and created new wealth. The resulting euphoria often gave way to excesses, ethical and otherwise. Investors, underwriters, stock analysts and commentators drifted into hyperbole and wishful thinking that was sometimes foolish, sometimes irresponsible and sometimes illegal. Losses occurred; hopes were dashed. Once again, opportunity and insecurity arrived together--driving us forward and, sometimes, pulling us back.
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