When liberals make reference to U.S. economic history, they typically: 1) downplay the role of entrepreneurs, 2) suggest that bold government action has driven growth, and 3) fail to mention the scandals and screw-ups caused by federal interventions.
President’s Obama’s inaugural address reflected some of those mistakes:
Together we determined that a modern economy requires railroads and highways to speed travel and commerce….
No single person can … build the roads and networks and research labs that will bring new jobs and businesses to our shores… Now, more than ever, we must do these things together, as one nation, and one people.
It is not true that America first invested in railroads and highways because “we determined” to do it through the federal government. In the 19th century, those investments were made by thousands of entrepreneurs and businesses. My new study on infrastructure notes:
Before the 20th century, for example, more than 2,000 turnpike companies in America built more than 10,000 miles of toll roads. And up until the mid-20th century, most urban rail and bus services were private. With respect to railroads, the federal government subsidized some of the railroads to the West, but most U.S. rail mileage in the 19th century was in the East, and it was generally unsubsidized.
Railroads, streetcars, bus systems, and, to an extent, roads were financed and developed over many decades by innovative businesses taking risks and making gutsy decisions in the marketplace.
The typical pattern has been for the private sector to experiment with new technologies, and then, once certain products or types of infrastructure take off, politicians want to get in on the action by subsidizing and regulating them. In turn, those interventions have usually led to distortions, scandals, and cost inflation.
Chris Edwards is the director of tax policy studies at the Cato Institute, and editor of www.DownsizingGovernment.org. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.
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