Why Is America So Rich?

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The United States is the world’s most prosperous
economy. It’s been that way for so long — over a
hundred years — that we take it for granted. But how did it happen? There are many answers, of course. One is that the United States values the free
market over government control of the economy. But here’s a point that is seldom made:
It didn’t begin that way. Before the country placed its trust in the
free market, it trusted the government to make important business decisions. Or to put it another way, only after the government
failed repeatedly to promote economic growth and only after private enterprise succeeded
where the government failed, did the United States start to develop a world beating economy. Let’s look at three telling examples:
In 1808 John Jacob Astor formed the American Fur Company and marketed American furs around
the world. Europeans adored beaver hats for their peerless
warmth and durability. Astor gave them what they wanted. Instead of leaving the fur business to capable
entrepreneurs like Astor, the government decided it wanted to be in on the action. So, it subsidized its own fur company run
by a self-promoting government official named Thomas McKenney. McKenney should have won the competition. After all, he had the federal government backing
him. But while Astor employed hundreds of people
and still made a tidy profit, McKenney’s company lost money every year. Finally, Congress in 1822, came to its senses
and ended the subsidies for McKenney and his associates. A similar situation developed in the 1840’s
around the telegraph. The telegraph was the first step toward the
instant communication we have today. Invented by Samuel Morse, the telegraph transmitted
sound – as dots and dashes representing letters of the alphabet. Morse, more of an idealist than businessman,
agreed to let the government own and operate the telegraph “in the national interest.” But the government steadily lost money each
month it operated the telegraph. During 1845, expenditures for the telegraph
exceeded revenue by six-to-one and sometimes by ten-to-one. Seeing no value in the invention, Congress
turned the money-loser over to private enterprise. In the hands of entrepreneurs, the business
took off. Telegraph promoters showed the press how it
could instantly report stories occurring hundreds of miles away. Bankers, stock brokers and insurance companies
saw how they could instantly monitor investments near and far. As the quality of service improved, telegraph
lines were strung across the country – from 40 miles of wire in 1846 to 23,000 miles in
1852. By the 1860s, the U.S. had a transcontinental
telegraph wire. And by the end of that decade entrepreneurs
had strung a telegraph cable across the Atlantic Ocean. Why didn’t the US government profitably
use what Morse had invented? Part of the answer is that the incentives
for bureaucrats differ sharply from those of entrepreneurs. When government operated the telegraph, Washington
bureaucrats received no profits from the messages they sent, and the cash they lost was the
taxpayers’, not their own. So government officials had no incentive to
improve service, to find new customers, or to expand to more cities. But entrepreneurs like Ezra Cornell, the founder
of Western Union, did. Cheaper, better service meant more customers
and more profits. Just fifteen years after Congress privatized
the telegraph, both the costs of construction and the rates for service linking the major
cities were as little as one-tenth of the original rates established by Washington. In the steamship business, we see the story
repeated yet again. During the 1840s, regular steamship travel
began between New York and England. The government placed its bets on ship owner
Edward Collins, a man more skilled at political lobbying than at business. While Congress funded Collins, Cornelius Vanderbilt
started his own steamship company. Vanderbilt cut the costs of travel, filled
his ships with eager passengers, and built a fabulously successful business, soon leaving
Collins in his wake. Collins failed because he didn’t feel a
need to improve, or even provide safe and regular service (for example, two of his four
ships sank, killing hundreds of passengers). If he lost money, there was always another
politician to appeal to. Vanderbilt, in contrast, had to serve his
customers or he would have lost his company. You’d think we would have learned our lesson
by now: economic prosperity comes from free enterprise, not from government subsidies. But it’s a lesson we have to learn every generation. I’m Burton Folsom, Professor of History
at Hillsdale College, for Prager University.

74 comments

  1. Watch one presidential debate and you will never trust a politician to run a business, certainly not one you work for.

  2. They invested in War and stealing other Countries resources. i.e Libya,Iraq, Blood,Gold …. diamond in Congo, all Africa,Use in exchange for Green Card for refugees

  3. Competition is one of the prime reasons a market economy works. As in nature, the more intelligent, the swifter , the stronger prosper and thrive. Those better able to adapt do well. A market economy does the same.

  4. Thank yo9u, Professor Burton Folsom and Praeger University. I would love to see this updated with more recent examples of government intervention, Ii.e., auto manufacturing, windmills and solar.

  5. You should come to South Africa Professor and educate the clowns running this country on economic prosperity which comes from free enterprise as you rightly pointed out, than from government subsidies which they are constantly giving to loss-making State-owned enterprises.

  6. The "free market" is so often spoken of as a hallowed American tradition that many Americans forget how new it is. For many decades after this country's winning of independence, protectionism was the rule rather than the exception. The distribution of wealth was extremely lopsided, with the rich receiving plenty of government perks on the one hand and many more Americans existing at near-subsistence level on the other. Politicians did not start to champion small businesses until the 1890s, and most tariffs were not done away with until the 1940s. Even after that, it was taken for granted that the government had an essential role to play in shaping the economy; in the early 1980s, Ronald Reagan's economic libertarianism was considered just as radical as neo-socialism is today. In short, today's "conservatives" are actually pretty left-wing compared to their 18th, 19th, and early 20th-century forebears.

  7. No they are not rich they’re stealing people’s money only America is one of the most poor land in the world history

  8. If free market works, why the USA get get an economic crisis in 1929 and 2008? The free market isn't perfect but, at least, is better than the socialism policy. Governement just need to be here to make sure that everything is ok.

  9. Such a simplistic take. How about these (just to name a few)?
    1) A strong respect for personal property rights in the law, excellent support for contracts, and a fantastic, well developed credit system and a complex financial sector;
    2) vast natural resources that private companies were ALLOWED to exploit using the tools in item #1;
    3) a fascination for basic science that was powerfully supported by large government grants (not anymore since 1992 or so when we started to abandon and demonize public funding);
    4) an open, decentralized political and economic system that (at least until 1980 or so), used government power to crush monopolies and break them apart. We've totally lost that and it's destroying our economy.
    5) our anti-union ways have given our companies the ability to compete internationally;
    6) just a ton of other things strongly linked to our democratic, market-centric system.

  10. America is not rich it’s the poorest country in my opinion. 99%of wealth in the hands of the rich and the entire population live on the 1% I should have thought twice before taking the plane to here and leave Dubai. I must be crazy

  11. The short answer is: genuine MERITOCRACY. The government does not, in general, employ the best people to perform the job while private companies , again not all the time but in general, hire the best people they can find to do the job. Having said that privatization of infrastructure and other public services is usually not beneficial to the wide public as often the quality of services is diminished and prices increased after a private company takes over.

  12. This video did not explain how the government lost money and private enterprises gained money. Very poor video explanation. Come on PragerU, what happened to your videos? They used to portray much more better explanations. Disliked.

  13. Is the free market in US healthcare proud of overcharging, over prescribing and creating the opioid crisis that kills so many of its citizens……….or is it just an unfortunate corollary that ensures that Drs, Dentists and Pharma execs can afford to buy personal aircraft?

  14. They have been robbing other nations overseas and sold weapons around the globe. And there are jews…

  15. Well they stole a native American country then stole they're gold they're oil , also stole gold from Nazi Germany

  16. The biggest drain on the economy is the unaccountable government bureaucracy. Redistributing other people’s hard earned money to feed power hungry bureaucrats. ✌???

  17. Because after ww2 literally all of the developed world except the US was brought to rubble.

    Now stop glorifying the free market and letting poor people suffer and small businesses die just because you've done it before and it used to work. Right now we Europeans are doing the exact opposite of what you are doing and undoubtedly we live much better than you, so maybe you should reconsider your strategy for success.

    And before you've asked, no, I'm not Russian and I do not want all Americans killed and I certainly do not glorify Putin.

  18. America is not so rich. If we consider GDP per capita, SEVEN countries are doing better than USA, with Luxemburg's GDP per capita being ALMOST DOUBLE compared to USA.

  19. The truth of the matter everybody should watch his videos he should be in schools colleges and universities after all they are there to make you think and give you an informed overview of how your country runs and what made it prosperous in the first place

  20. True that a lot of economic prosperity does come from the free enterprise however you are being disingenuous by using 1800s anecdotes it just seems like you are purposely ignoring modern examples to use because it wouldn't fit with your narrative. So this is exactly what most right wingers do. They love to cherry pick and people fall for their so called "evidence". Let's see what would happen if you suddenly stopped subsidizing farmers. The economy would crash that's what would happen.

  21. Wow… okay first of all haha.

    Notice how he stops before you get to 1900's? That's because American company's started to exploit 3rd world country's lack of labour laws to get cheap products which they sold in America for a great increase in profits. America became rich off the backs of poorer country's, not it's own "amazing economy values". No, we used people in hardship, people who needed any ounce of money to survive, and we used them to make ourselves rich. PragerU is bias and would not reccomend for someone who wants an open view of both sides. PragerU only looks for the good in America while leaving out the horrific parts.

  22. in a hat the u.s. is not prosperous at all half of it has a 3rd world economy status and has vast national reserves and manufacturing infrastructure owned by China no less.
    talking shite doesnt hide the facts.

  23. Extremily desapoiting. Sure, it is right, the big picture "free market = economic growth", but that is all it says. If anyone is interested in a far better explanation, check out "why some countries are rich and others poor" and "what makes a rich country" by The School Of Life

  24. Extremily desapoiting. Sure, it is right, the big picture "free market = economic growth", but that is all it says. If anyone is interested in a far better explanation, check out "why some countries are rich and others poor" and "what makes a rich country" by The School Of Life

  25. america is rich because is an imperialistic, that is maffioso, country. if other countries obey, they will be fine (like in mexico, a failed country but proud american colony), if against their will they will destroy you (like lybia). they will use international bank system ruled by same gang or use troops of brainwashed poor americans. nonetheless america is full, full of poverty, racism, poor education. i think that without all the stealing around the world, america would collapse istantly and people would rally in the street with machete.

  26. The number one reason slavery, free labor it's as simple as that don't try to wash it under the rug. It doesn't matter what country, what industry you're in if you're making money without having to pay the people who work for you or give them any benefits you will be wealthy in a short. Of time that's a fact.
    However in a fair world or a fair country America wood kill to go back to government control subsidizing, they would love socialism.

  27. America is rich because it prints money from thin air, then trades that paper money for actual goods from other countries. Inflation also robs the middle class of their savings.

  28. How is being trillions of,dollars in debt rich.
    China bailed you out after 2007/8 crash if it wasn’t for China buying huge US debt your economy would be toast.
    Your not rich your bankrupt.
    When the world stops using the $ your economy is bust.

  29. America is a socalist country.
    Big companies are in effect bailed out continually by the state or subsidised by the state?.
    Look at Boeing it’s a huge state subsidised industry primarily through military contracts.
    Look it’s incapable of competing with Airbus.

  30. Must be a joke how their turned so rich come country?? Take the natural reserve deo poor countries after their sabotaging real governments that keep their natural resources for the nation and the people..USA own all metal oil gold water power supply industry.educatinal system in the Al entire America…. AFP…rules the all system for retirement..but not the army..hmmm watra coincidence.. they get their own schools universities and hospitals…mean while the rest of the population have to live MISERABLE life so they can't make any progress..that why revols in Chile and all entire south America..and the all words Cooper mines owned by Rockefeller family in Chile water system.spain..highways Sweden.. skanska company …let them buy land like was one that almost split the country in two under a flag of preservation then sale the land for a company.. and destroy all nature animals and people together…why this happens.. governments corruption in every corner see a documentary calk economical Hitman… highly recommend…all presidents that want to give and keep the resources of their country all dying in air plane accident and he's who lead the investigation?? CIA.. PIT SOME CLOWN AN POWER AND SELL BACK THE COUNTRY TO GREEDY MULTINACIONALES CORPORATION EU OR USA…SO THISE COUNTRIES AND THEIR CITIZENS CAN LIVE A GOOD LIFE BECAUSE THE OPRECION OF POOR COUNTRIES…THE MONEY CONTROLLER… CREATING WAR DESTRUCTION.. KEEPING EVERYONE LIKE LAMBS.. AND OBEY..AND CONSUME… CAPITALISM JUST HAVE A LOOK INSIDE OF USA HOW MANY PEOPLE HAVE NO HOUSE AND MONEY IT'S JUST IN A HANDS OF A FEW…PRINTING DOLLARS OUT THIN AIR.. THERE'S NO WE WORSE BLIND THAT THE ONE THAT DONT WANT TO SEE..BEST REGARDS FOR ALL CITIZENS IF THE WORLD EXCLUDING POLITICIANS BANKERS MILITARES AND POLICE FORCE…

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