There is an often quoted letter that is used to illustrate how people resist change and the creative destruction that free-enterprise can create. Enjoy this letter for the historical perspective it provides: January 21, 1829
To President Jackson,
The canal system of this country is being threatened by the spread of a new form of transportation known as "railroads." The federal government must preserve the canals for the following reasons:
One. If canal boats are supplanted by "railroads," serious unemployment will result. Captains, cooks, drivers, hostlers, repairmen and lock tenders will be left without means of livelihood, not to mention the numerous farmers now employed in growing hay for the horses.
Two. Boat builders would suffer, and towline, whip and harness makers would be left destitute.
Three. Canal boats are absolutely essential to the defense of the United States. In the event of the expected trouble with England, the Erie Canal would be the only means by which we could ever move the supplies so vital to waging modern war.
As you may well know, Mr. President, "railroad" carriages are pulled at the enormous speed of fifteen miles per hour by "engines" which, in addition to endangering life and limb of passengers, roar and snort their way through the countryside, setting fire to crops, scaring the livestock and frightening women and children. The Almighty certainly never intended that people should travel at such breakneck speed.
Martin Van Buren
Government of New York
The letter was most likely never written by Van Buren. Andrew Jackson wasn’t yet president on the stated date, and Van Buren would not have sent such a letter to the man he hoped would ask him to join his administration. No matter the source, it accurately expresses observations documented by Stewart Holbrook in The Story of American Railroads.
Holbrook writes: “The coming of the railroad, and the rapidity with which it expanded during the 1830's, found a public wholly unprepared, and pretty much confused. What, thoughtful men now asked one another, was a railroad? There had been little thinking on the subject,….The canal builders and operators, of course, simply damned the new method of transportation on every count they could think of. It was dangerous. It wouldn't work. It was merely a clever method by which smart scoundrels could steal your money more or less legally by selling you worthless stock. The canal men had something there, for a terrible amount of stock did prove worthless. The railroad was also against nature. And, finally, it was against God; and many a preacher found friends among canal and stagecoach men when he opened up full blast on this new curse that a tireless Satan had promulgated….”
In any age, the disruptive nature of creative evolution in a capitalistic economy is not easy to go through for businesses and laborers who are displaced. Economist Thomas Sowell explained J. A. Schumpeter’s concept of “creative destruction:” “It’s the replacement of businesses that have outlived their usefulness with businesses that carry technological and organizational creativity forward, raising standards of living in the process. Indeed, this is very much what happened a hundred years ago, when that new technology wonder, the automobile, wreaked havoc on all the forms of transportation built up around horses.”
Today’s economists and politicians warn that America can’t survive without the domestic auto industry and more economic stimulus packages for other failing businesses and states. They fear more job losses and more bankruptcies. Whether it’s railroads replacing canals or automobiles replacing horses, change brings winners and losers, but it also brings progress—new jobs and new companies. It’s painful progress, not chaos, that’s the most likely result if Washington would get out of the way and let capitalism with transparency work!
Tomorrow will bring the long-awaited inauguration of President Barack Obama. Now, it will be his turn to make the tough choices. He brings many promises and a new team to the Beltway, but many of his answers to our economic problems put more trust in Washington than in American workers and businesses.
Bernard Madoff will soon face trial for running a very cruel Ponzi scheme—taking from late investors to pay earlier investors without creating any real investment fund. But is not our Social Security System like a Ponzi scheme? There’s no trust fund, only IOUs, as the government taxes current workers to pay for the benefits of retired workers. Was it not Washington politicians who encouraged, even required, financial institutions to provide unwise mortgages to people who could not afford them? Do you really think printing more money, increasing taxes and micromanaging our economy will speed our recovery?
We don’t need more bailouts or micro-managing from Washington. We need a few more politicians with the backbones to say “No” and the confidence to let our free-enterprise system work! President Obama, make a real change! Let our companies and workers get back to making our economy work and keeping the rewards for the progress they create!
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