INNOVATION AND the founding of the United States were good for one another. The American Revolution and the subsequent creation of the Constitution were in part byproducts of the Scottish Enlightenment; they set the intellectual groundwork for economic achievement-then as radical an idea as a self-governing democracy. Interestingly, while the breakthroughs in political thought made by Montesquieu and Locke influenced the founders, to them the notion of growth was as yet inchoate. Prior to 1800, economic expansion was so negligible that it was hardly even imagined. From the fall of the Roman Empire to the beginning of the Industrial Revolution, annualized rates of growth are estimated to have been a mere 0.25 percent.
Yet in the eighteenth century, in the face of burgeoning world trade and bustling commerce in Europe and North America, Scotland's intellectual giant David Hume outlined the clear link between economic development and political systems. His colleague Adam Smith-who happened to publish The Wealth of Nations in 1776-suggested in no uncertain terms that state action had real implications for commerce and human welfare. These insights were imported to our shores with the prescient belief by our founders that the system they designed would bring with it economic expansion. This view was based on an innate sense that individual freedom found authentic expression in commerce: innovation and rising living standards would result from a freer political system. In turn, various economic interests competing in a market-James Madison's famous "factions"-would help guarantee political freedom.
