From Time to Trains, Government Is No Innovator

by David Weinberger

On virtually every policy issue and in most sectors of the economy, the left’s solutions call for bigger government. The clear implication of that worldview: We should trust government bureaucrats more than private individuals to innovate, create and provide prosperity and general well-being.

President Obama argued in a recent speech on the economy, for instance, that we need to “make the investments … in things like education and research and high-tech manufacturing.”

And in his blueprint for energy for coming decades, Obama says government must fund and lead the way to new energy solutions: “We can get there by creating markets for innovative clean technologies … the Federal government needs to put words into action and lead by example [my emphasis].” Others on the left agree,  even some on the right and still others go even further, insisting that government must soup up its already pronounced role, and lead the way in medical research, transportation, education and more.

Whatever Barack Obama’s latest claims to Teddy Roosevelt’s progressive mantle, though, history dismantles the notion that without paternalistic governmental guidance, the economy would be left in a morass of confusion and stagnancy. In fact, just the opposite is the case. Government often lags, and even obstructs the ingenuity of the private sector.

Consider three historical examples:

We often are told of government’s indispensable role in forging the booming railroad industry of the 19th century. This narrative suggests that without government subsidies and loans, the railroads never would have been completed. It’s true that government poured aid into virtually all major transcontinental railroads, including the Union Pacific and Central Pacific, which crisscrossed the country and connected in Utah, culminating in a ceremonious hammering of the “golden spike.”

In fact, the more difficult the terrain upon which the railroads were built, the greater were the subsidies. Perversely, this encouraged the builders to slap together tracks in amazingly shoddy and illogical logistical fashion, resulting in corruption, frequent breakdowns, repairs and bankruptcy for nearly all of the railroads.

James J. Hill’s private transcontinental railroad, the Great Northern, however, was an exception. It traversed the nation from St. Paul, Minnesota, to Seattle, Washington, and was constructed without a penny of federal funds. Rather than build the Great Northern in a way to receive maximum subsidies, Hill focused on efficiency, cutting costs and laying sturdy rail in hopes of making a profit.

The results spoke for themselves. The Great Northern, historian Burt Folsom wrote, “was the best built, least corrupt, the most popular, and the only transcontinental never to go bankrupt.”

Similarly, governmental assistance in the early steam shipping industry only retarded progress. After Robert Fulton created the first steamship in 1807, government granted him exclusive rights to steamship traffic in New York for 30 years. However, Cornelius “Commodore” Vanderbilt relished the opportunity to challenge Fulton.

Vanderbilt defied the government-granted monopoly and enthusiastically transported customers more cheaply and quickly along the East Coast, despite having to evade the law. In 1824, after the Supreme Court voted unanimously 6-0 to overturn the monopoly in a decision written by Chief Justice John Marshall, Vanderbilt unleashed a storm of competition. The industry soared.

John Steele Gordon notes:  “Fares from New Haven to New York fell by 40 percent thanks to competition, and the number of steamboats operating in New York waters jumped in less than two years from six to forty-three.” Vanderbilt dedicated himself to ruthlessly cutting fares, improving efficiency and innovating better ways to transport customers. The steamship industry exploded as the Commodore engulfed all the federally subsidized competition, launching him to the exalted status of richest man in America.

Third, government lagged behind in creation of modern time zones. Until 1883, each U.S. city had its own time zone, resulting in an assortment of times throughout a given state –not to mention the nation at large. Since trains were a primary means of transportation, the variety of time zones caused not only frequently missed train rides but danger as trains zigzagged across tracks within minutes of each other. Any slight error in time could yield catastrophe.

Fed up with such needless complication, private railroad engineers led by William Frederick Allen held meetings and designed times zones to take place at the 75th, 90th, 105th and 130th meridians west of Greenwich, roughly located at the cities of Philadelphia, Memphis, Denverand Fresno. “Railroad time” was agreed to take effect on Nov.18, 1883. It quickly caught fire around the country, but the federal government didn’t adopt the uniform time zones until 1918.

American history is replete with examples of private ingenuity, as all but the dullest of students know. However, by incorrectly crediting government with the success of past innovations, many of our schools and politicians have fueled the perception on the left that it is government’s duty to lead the way.

The truth is, the private sector has led the way — and often in spite of government impediments, as these three examples demonstrate. Government surely has an important role in our economy, but it doesn’t include taking the lead to innovate and create.


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Posted Dec 16th 2011 at 3:02 pm in Economics, Technology | 34 Comments