Far out there in the distant reaches of reality, there exists a falsehood. Someone is teaching a lie at a university near you. There’s quite likely more than one error being taught as fact at any given school but this violation is egregious. It boggles the mind that so many authorities, with so many skins upon the wall, could be so wrong. Where did these fine people who lurk in the granite and glass halls of academia ever get this idea? Somehow professors of economics have long believed that it is institutions that shape the history of a nation’s markets. “Economic history was shaped primarily by great institutions" such as Oxford and Cambridge, the Bank of England and Penn State. It has been the role of General Motors, ConEd, and the Federal Reserve Bank to essentially shape our economic future.
They are wrong.
If Jane does not decide to drive her Chevy to the Cadillac dealer, to see about a trade-in, there is no economy. People started the Industrial Revolution and fuel economic growth to this present day. They showed up for work at particular jobs for good reasons, they got tired of washing clothes by hand, and there was a genuine desire for shoes that did not quickly fall apart. Nutritious food caused their kids to grow up stronger and taller. In each case, people drove the demand for all products and services.
Industrial output grew from the late 1800s on because many people liked the results of working harder. People liked having enough extra money to afford one more shot of whiskey. They liked living in a better home and sending their kids to better schools. Whole cities liked the idea of a better bridge to Brooklyn.
The one thing that sends financial markets into downward spirals or up to new heights is consumer spending. Spending on everything from a doctor for a painkiller to a seat on a stagecoach going out West was driven more by that person’s need that any billboard by the boardwalk.
If many 17th and 18th century humans in Europe and North America did not sit down to study, invent, manufacture, and most important, spend, then you could rest assured we would all still be farmers. People figured out how to plant more acres with a better plow and some knowledge. Other people built bigger grinding wheels near deeper rivers to grind more grain. Some bank loan officer decided to take a chance on this half-deaf mad scientist named Edison. That’s how a great economy gets built.
Many institutions certainly do serve a legitimate purpose, conduct important research and cultivate latent talents in the population. Yet the people that sit in the highest office in the tallest ivory tower must never forget two things. It was little people that created that ivory tower and little people ultimately pay the salaries of all the people that work there. Contrary to at least one U.S. President's opinion, when little people change their minds, big changes can happen quickly.
Look around at all that was accomplished in every city and nation that went through an “industrial revolution” and tell me it was institutions that accomplished all that. Carnegie, Ford, Mellon, and Rockefeller paid for grand structures but they were nearly helpless if the hourly workers refused to show up for work. The extreme measures that were used in several major strikes like Homestead only prove how much Carnegie & Co. feared a walkout or any labor unrest at all.
Unfortunately or not, it is often the rich and leisurely that decide what stories get told in school history books. Historians have always sold more books to rich office workers than to the poor street worker. Nevertheless, the history common people live and witness themselves stands out in vivid relief against the backdrop of a professor’s treatise written for the rich man. Most folks only get a few years to peer at tattered textbooks before they march off to build tomorrow. It may be a good thing we keep the economists and philosophers locked away deep in granite hallways. The light-weight new bridges they design often cannot stand the test of time.
Article that sparked the above essay:
In Dusty Archives, a Theory of Affluence