Let’s see. We’re still reeling from a deadly pandemic, democracy is literally under attack in state capitols, many major corporations pay little or nothing in federal income taxes, wages remain stagnant and the middle class continues to get squeezed, our city leads the nation in poverty and gun violence, and…a disproportionate amount of media attention is devoted to the travails of Brittany Spears. Good times, huh?
It’s easy to get down about the state of things, even for those of us who eschew cynicism and remain committed to being a part of the solution. But then along comes Philly’s own Renaissance man, Richard Vague, to remind us of the audacious experiment that we’re all a part of.
We’ve written often of Vague, the closest thing to a modern-day Ben Franklin in our midst. He made his fortune in banking and is now a philanthropist, entrepreneur, venture capitalist, author and overall civic force who serves as the Commonwealth’s Secretary of Banking and Securities. In his spare time, he creates algorithms that can predict economic calamity, writes tomes about the history of economic collapse, sits on the Board of Penn Medicine and underwrites the groundbreaking cancer-curing work of Dr. Carl June at the University of Pennsylvania. (Full disclosure: Vague was a founding donor of The Citizen).
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Talking to Vague never fails to offer instant perspective. Who am I to flirt with disengagement, you say to yourself, when this guy who could buy his own island refuses to break away from living the values of The Enlightenment every day? His ironclad commitment to reason and science and principle is a type of balm in these days of alternative facts and sneering politics.
Vague’s latest work, An Illustrated Business History of the United States, comes at a time when that word—business—is itself under assault. When you crack open Vague’s latest book, a breezy coffee-table primer, you don’t get 325 pages of rationalization or apologia; this isn’t a plutocrats’ self-interested recasting of capitalism. No, it’s a reminder that, while corrosive crony capitalism has been with us since our founding, free enterprise has made America the egalitarian envy of the world—even with all our faults, which Vague doesn’t sugarcoat.
It’s hard to feel depressed by the current state of things while reading Vague, because he so methodically catalogues a level of ingenuity and grit and tough-mindedness in our history—all of which combine to underscore that there really was such a thing as American exceptionalism.
Vague’s history is the story of a brash, swaggering, embryonic nation, and gives us a roadmap for the very reinvention our times call for today.
“The nation matured into the world’s largest manufacturer within decades of its founding,” he writes in the introduction. “American business became the world’s greatest innovator, with inventions from telegraphs to telephones, from electric lights to power-generation plants, from plastics to the internet itself. Basic science and rigorous research were often at the very heart of business progress.”
Vague’s readable narrative zeroes in on characters too few of us know about, influential figures like Elizabeth Lucas Pinckney, the slave-owning 17-year-old who, running her father’s South Carolina plantation, discovers a blue dye from the indigo plant and eventually rescues her state’s agricultural economy. From character to character and era to era, Vague walks us through a story of growth unparalleled in human history. Within 100 years, the U.S. was larger than any European economy; by the end of World War II, the U.S. economy was larger than that of France, Germany and England—combined.
Vague’s history is the story of a brash, swaggering, embryonic nation, and gives us a roadmap for the very reinvention our times call for today. Astonishingly, until Vague put pen to paper, there had not been this type of definitive history of American business. That’s where we began when I reached him a week ago. What follows is an edited and condensed transcript of our conversation.
Larry Platt: I have to tell you, you tell a stirring, uplifting story. Why write this book?
Richard Vague: The idea came from when I was writing my last book, A Brief History of Doom: Two Hundred Years of Financial Crises. It was fundamentally a boring book about economic crisis and I was wondering what could I do to liven it up? I thought I could include a list of the wealthiest Americans from each crisis period. So I went through this exercise of putting lists together. Who were the wealthiest individuals and the biggest businesses of each period? Who had the most patents, imports and exports? I thought this would just be a simple book of lists, and I’d just whip up a little text to go with each entry.
Well, that was easy to do, post-World War II, but I was appalled that I couldn’t find this information from earlier in our history. For example, I couldn’t find the largest business in the 1830s.
Pretty soon, I was deep into it because the more I looked, the more I found that the story of American business hadn’t been told. There were some academic books, but they were mostly theoretical—they didn’t just tell the story.
LP: I’m shocked by that, because there is no shortage of political, military or social histories of the United States. Why is there a dearth of economic histories?
RV: I will tell you that this is the biggest sin of most histories—the authors won’t touch the economic dimension of that history. Take the 100 Years War, England versus France. I must have read 10 books about the Hundred Years’ War, and without fail they ignored or minimized the economic dimension. That was a war over the control of the vineyards of Bordeaux—essentially an economic conflict. You can’t understand that history without the economic context, but it’s virtually ignored in history.
LP: The other thing that strikes me is that this book can be seen to be out of step with the zeitgeist right now. I often cite the World Bank study that found that free enterprise has lifted one billion people out of poverty over the last decade worldwide, and we regularly report on the business for good movement, profiling B Corps and Triple Bottom Line businesses. But in the political realm, it seems like anything that is profit-driven is seen as toxic. Were you wary of that?
RV: I knew the book would have that problem. Even in our publicity, we’re mainly targeting graduates and students of business schools rather than the general population. But when you dive into the research, you see that the lines between business and government have always been blurry. The Erie Canal was funded by the government, and so was the transcontinental railroad and the first telegraph. The Manhattan Project, the U.S. Highway system, and the internet wouldn’t have happened without the government. The idea that we were ever this laissez faire “just leave business alone” country is just wrong—it ain’t true in the United States.
Before the Chamber of Commerce, there was The National Negro Business League, founded by Booker T. Washington, who argued that the answer to racial discrimination was primarily economic and that African American entrepreneurship could change the country and the world.
LP: Like I said, I found myself beaming with pride at how this runaway Republic became an economic juggernaut in no time—even with the flaws you touch on, like the original sin of slavery. Is there a prescription in this history for what ails us today?
RV: Oh, absolutely. One of the things most relevant to today is that you must have an industrial policy. You have to look into the future and make investments to take the country in such and such a direction. And we are on the precipice of making such a historic investment. President Biden has proposed an additional $250 billion to fund the National Science Foundation and the National Institute of Health. It’s barely gotten any notice but may be one of the most important things of the last generation. It would be an investment that would super charge developments around health, disease, and genetic engineering.
LP: I remember you making the case four or five years ago that 80 percent of our health care spending is essentially spent battling four diseases: Cancer, heart disease, diabetes, and Alzheimer’s. To fix health care, you said then, we should spend more on research.
RV: That’s absolutely right. We see this in our history. America always had an industrial policy. Alexander Hamilton and his associates made the decision to steal experts in industrial engineering from England and smuggled them into the United States—that’s what created Paterson, New Jersey, the first planned industrial center in the nation.
Hamilton knew we needed roads, bridges, canals. They were all government subsidized. Plenty of problems ensued, but the investments were made. Illinois Central was the biggest railroad before the Transcontinental Railroad—they tried for 10 to 15 years to scrape together the private funding for it, but the private sector was not big enough to do it on its own.
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LP: In that way, for all those who lambaste business, you make the case that business and government are not only inextricably linked, they’re often one and the same.
RV: Absolutely. Now China is kicking our ass in terms of investing in industrial policy.
LP: I was blown away at how this motley band of colonists built the most dynamic economy in the world in a matter of decades.
RV: Unbelievable, right? It was in no small part because of the size and resources of our physical geography. England had 10 million people, we had 3 million. But we had the best natural rivers and abundant soil. Here’s the deal—put George Washington and Ben Franklin in Afghanistan, and nothing’s going to happen. That’s a landlocked country, with nothing but mountains and poor soil.
By 1850 our railroads were more sophisticated than England’s. We just had a better canvas for it. Our Founding Fathers knew this—Franklin in essence said, England better get busy, because no matter how many of us they kill, new babies of ours will be born and we’ll dwarf them in size. We’ve got the goods over here—we’ve not had a rival with a population size advantage over us until now with China, so none of them ever really had a chance.
LP: How much of that has to do with the value of freedom in our political and business realm? When you think about all the innovations you chronicle, I wonder if it’s really about mankind needing the freedom to create and innovate?
RV: Well, but if freedom means not investing, then it only gets you so far. But if your country is free to come up with an industrial, or economic, policy that grows the economy, you can soar.
RV: You make the case that not only have we stopped investing in R & D and research and growth, but that, from a business perspective, we’re kind of amusing ourselves to death, to channel Neil Postman. You write that we’ve entered an era where we’re “merchandising comfort, distraction and controversy.” What do you mean by that?
Look around. We’ve got video games, virtual reality, and TV shows that are about who can yell the loudest. Our wealth industries include drugs, alcohol, and Cheetos. We’re being distracted by faux controversy.
RV: Others might disagree, but when I think about it, a lot of our development until the mid-20th century was about making sure that folks had food, shelter, and sustenance. Getting from place to place drove commerce. It was a system designed to meet core needs. That’s how we became a wealthy country. But now that we’re wealthy, we’re learning there’s a lot of negatives associated with being wealthy and successful. Nutrition and health suffers—we’re now a nation eating Fruit Loops and taking Valium. For the first time ever in U.S. history, life expectancy is shrinking, thanks to poor nutrition and the opioid epidemic. This was the case even before the pandemic.
What’s the iconic business of our time? Facebook, which is about folks gossiping with each other. Either the Russians are using Facebook to screw up our elections or teens are using it to gossip. Well, the Romans pacified the population by putting on gladiator bouts in the Coliseum—so they could intentionally distract and mollify their citizens.
Look around. We’ve got video games, virtual reality, and TV shows that are about who can yell the loudest. Our wealth industries include drugs, alcohol, and Cheetos. We’re being distracted by faux controversy.
LP: Yet, despite that, by book’s end, you seem hopeful.
RV: That’s because I think we’re at the same place as almost any point along the way. We’re at the precipice of an explosion of innovation—the question is, can we manage it positively or not, and will we take everyone along as we grow?
LP: That’s the other thing you do, you tell the stories of women and Black people who were instrumental in the building of America.
RV: It was important to cover where America comes up short, but also to talk about the diversity that’s been there all along, in terms of women and Black people in business. Before the Chamber of Commerce, there was The National Negro Business League, founded by Booker T. Washington, who argued that the answer to racial discrimination was primarily economic and that African American entrepreneurship could change the country and the world. Members included small business owners, farmers, doctors, lawyers, and craftsmen, and it helped grow Black business networks. That diversity needs to be included in the American story. We should recognize it and encourage it today.
LP: Finally, Richard, the President’s budget proposes something like $6 trillion in spending. I have to say, this explosion in federal spending has me worried. You are the debt guru. Should we start worrying about digging ourselves a hole and triggering job-crippling inflation, or are you comforted by what seems to be the new consensus around Modern Monetary Theory, which holds that countries that print their own currency don’t have to worry about becoming insolvent. Doesn’t that sound too good to be true?
RV: High Treasury debt will not bring on high inflation. Milton Friedman could not have been more wrong. Just look at Japan whose Treasury debt is far higher than ours and where inflation and interest rates have hovered near zero. But high Treasury debt is not without consequence either, it’s just that the consequence will be declining interest rates, which is the very opposite consequence that economists have looked for. Though we will have short-term inflation because of major Covid-rendered supply disruption, if we look out past the next two years, rising government debt, if left on its own, will have the same consequence it has for the past forty years—declining interest rates, disinflation, and rising inequality.
LP: Well, Richard, I can’t thank you enough for telling this stirring story and once again publishing a manifesto for change.
RV: Thank you.
