January 2011

And so, by the late 1990s, all the pieces had come together to give the United States the strongest economy not only in the world but in its own history as well. The creative destruction of the old manufacturing-based economy had resulted in the birth of a new information-based economy that was ever-increasingly globally integrated. Because we were the first nation to begin the process of converting to the new economy, we were the first to emerge from the often painful process and to enjoy the benefits it ultimately brings.

During the 1990s the Internet became the fourth major communications medium, alongside the telephone, radio, and television. Around the world, some 100 million computers are now purchased annually, and 90 percent of them have microprocessors built by Intel.

Intel got its start in 1968 with an all-star group of founders. They included Robert Noyce, a co-inventor of the integrated circuit; Gordon Moore, the author of “Moore’s Law,” which states that the number of transistors on microchips doubles every 18 months; and Andrew Grove, subsequently the company’s chairman and chief executive.

Intel scored a major coup in 1971 by introducing the first microprocessor on a chip. This device, the 4004, was a 4-bit chip; it quickly gave way to more capable 8-bit ones that became the basis for some of the first personal computers.

The nationwide Bell Telephone System’s parent company, AT&T, was the world’s largest corporation, with assets of $155 billion. It operated the Bell System as a regulated monopoly. Because this monopoly held federal sanction, the company counted as the bluest of blue chips, and its directors looked ahead to decades of dominance. Their commitment to the long term was reflected in Bell Labs, for decades the nation’s leading center for industrial research.

In the 1960s, the firm of MCI won the right to set up its own microwave network—and to link it to the Bell System. This raised questions about the continuation of AT&T’s monopoly, and about its longstanding practice of subsidizing low-cost local service through high longdistance rates.

If the 1960s were the Go-go years, the ’70s were the birth time of the Rust Belt. Across the Northeast and Midwest, important heavy industries fell into decay.

In June 1970 the Penn Central, the largest U.S. railroad, filed for bankruptcy. The company had been formed only two years earlier, through a merger of the New York Central and the Pennsylvania Railroad.

A combination of federal meddling and union work rules had laid both carriers low. Rates set in Washington had discouraged shippers, who had taken their business to trucks. Union rules enforced overmanning. Taxes took their own toll; each mile of track carried thousands of dollars in state and local levies.

The Penn Central’s trustees struggled for a few years, and then the bankruptcy judge told them in 1973 that they faced outright liquidation. Congress stepped in at the last moment and set up Conrail, which took over the bankrupt railroads of the Northeast and spent billions upgrading decrepit track and rolling stock.

The great depression and the second World War not only changed the American economy profoundly, they also changed the discipline of economics. The classical economics first developed by Adam Smith looked on government more as an obstacle to achieving and maintaining prosperity than as a means to it. But Britain’s John Maynard Keynes, the most influential economist since Smith, saw it differently. Keynes was interested in the big picture, aggregate demand and supply in an entire national economy.

The Industrial Revolution began, in the 170Os, with the mechanization of the English textile industry, and gathered strength with the steam engine, the steamship, and the locomotive. It reached the farm with the reaper, which amounted to a large horsedrawn lawn mower that could cope with tall stands of wheat or grain, putting an end to the age-old practice of having a crowd of men advance across a field swinging sickles or scythes, followed by women and children who collected the cuttings.

McCormick was not the only inventor of a reaper, but his much-improved model qualified for a patent of its own, and in 1851, in Chicago, he built the world’s largest reaper factory and produced the machines for sale. He introduced innovations in selling, recruiting hundreds of local salesmen and placing them under the command of state agents, who received a commission on every reaper sold. He also pioneered in offering credit to farmers, who needed their new reapers in time for the harvest but could pay for them only after they had sold their crop.

50 YEARS AGO

May 15, 1951: Communist forces launch a spring offensive against United Nations troops in Korea. The effort fizzles out within a week.

75 YEARS AGO

May 9, 1926: Floyd Bennett and Richard E. Byrd make the first flight over the North Pole.

May 10, 1926: U.S. Marines are dispatched to suppress a rebellion in Nicaragua. After a brief withdrawal, they will return in August and stay until 1933.

125 YEARS AGO

May 10, 1876: In Philadelphia, President Ulysses S. Grant opens the Centennial Exposition, which celebrates 100 years of progress since American independence.

June 6, 1876: Mark Twain’s novel Tom Sawyer is published in England. It will not appear in America for another six months.

On June 2, 1851, Governor John Hubbard of Maine signed an act prohibiting the sale, manufacture, or “keeping for sale” of alcoholic beverages anywhere in the state. The law’s enactment culminated two decades of tireless campaigning by Neal Dow, the mayor of Portland, and James Appleton, the author of a lurid and influential 1837 report on the effects of drinking. Five years earlier, they had persuaded the legislature to pass a first attempt at prohibition, but it was ridden with loopholes and had little enforcement machinery and weak penalties. The 1851 act was much tougher, though drink sellers still found myriad evasions, legal and illegal.

FOR YEARS, A COPY OF THIS PHOTOGRAPH HUNG IN THE HOUSE OF WENDELL C. HOLT’S grandfather, in Fairfield, Illinois. It shows Holt’s father, William, around the age of eight, and his dog Cap, a creature that to young William must have loomed as large as a horse. Mr. Holt tells us that Cap figures memorably in family lore: “Being located near the railroad tracks in southern Illinois, the Holt homestead was prey to invasion by occasional freight-hopping hoboes in pursuit of something to eat. While most of these vagrants were decent sorts who were guilty of nothing worse than being down on their luck, the bad apple sometimes appeared.

“That’s what happened one day when Grandma Holt was in her kitchen, scraping something together for the latest supplicant, whom she had left waiting on the back porch. Startled by the sound of the screen door opening, she looked up to see the transient standing inside the room. ‘What are you doing?’ Grandma asked. ‘I told you to wait outside.’