As the nineteenth century progressed, the United States, like all developing nations, became a high-tariff country. The average peaked at 45 percent in 1870; today it is 1.3 percent. Still, Jeffersonian idealism, though conveniently framed by self-interest, made for a commercial policy quite different from France’s in the eighteenth or China’s in the twenty-first century.
Not so fast. The commercial policy of France influenced the early United States by several channels. Alexander Hamilton, whose “Report on Manufactures” laid out the case for American import-substitution protectionism, learned much of his economics from Malachy Postlethwayt’s mid-eighteenth-century English translation of the Dictionnaire universel de commerce. It was written by the sons of the French merchant Jacques Savary, who codified French commercial law for Jean-Baptiste Colbert, the great architect of French economic reform. Hamilton’s most important successor in the early nineteenth century, Kentucky senator Henry Clay, explained to Congress that his “American System” of protectionism, infrastructure and manufacturing was inspired in part by Napoleon’s autarkic “Continental System.” As for Thomas Jefferson, he introduced a French military system for the mass production of guns to the United States, where the imported French technique helped lay the basis for America’s later industrial miracle. By 1816, Jefferson had renounced his earlier support for free trade and become reconciled to protectionism: “He . . . who is now against domestic manufacture, must be for reducing us either to dependence on that foreign nation [Britain], or to be clothed in skins, and to live like wild beasts in dens and caverns.” He continued, “I am not one of these; experience has taught me that manufactures are now as necessary to our independence as to our comfort.”
Joffe concedes that the United States pursued protectionist policies from the 1790s to the 1940s—that is, for 70 percent of its history under the Constitution. Behind their tariffs, the United States and Germany flourished at the expense of free-trading Britain, which finally abandoned free trade too late to rescue its ravaged industrial base in the 1920s. As Britain had done in the 1840s, the United States in the 1940s adopted free trade only when its national industries, developed behind tariff walls, no longer needed protection and expected to dominate foreign markets—not because of some harmony between America’s liberal political principles and free trade. If China were to achieve uncontested manufacturing dominance, it too could be expected to drop mercantilism and preach free trade to other nations, for the same selfish reasons that Britain and the United States did.
In addition to downplaying the contribution of generations of protectionism to U.S. industrial supremacy, Joffe minimizes the role of America’s native version of state capitalism in American innovation. According to Joffe, “Top-down, modernitarian states are not good at fabricating the intellectual explosives that crack old molds and break new paths.” He concedes that the U.S. federal government contributed to technological innovation through massive subsidies of higher education and research and development beginning in World War II—but he does not fully acknowledge the role of the government and large corporations in the founding of Silicon Valley, while exaggerating the role of venture capitalists and independent inventors.
As Joffe says:
Present at the creation was an academic entrepreneur—nay, a buccaneer—by the name of Frederick Terman. The engineering professor, who would later become provost, was obsessed with building “steeples of excellence” at the Farm [owned by Stanford]. As a by-product, he launched Silicon Valley, which would grow in symbiosis with Stanford, each nourishing the other. The unwitting founding act occurred in 1939 when Terman prodded two of his students, David Packard and William Hewlett, to start a little electronics company, now a very big one, in a Palo Alto garage. . . . The empire builder Terman then lured back William Shockley. The inventor of the transistor set up Shockley Semiconductors, a prototypical start-up. . . . The Shockley renegades went off to found Fairchild Semiconductors with a $1.5 million investment from New York’s Fairchild Camera, the first of the venture capitalists or “angels” who populate Sandhill Road on Stanford’s northern border today.
Note what is left out of Joffe’s rather conventional account of the tech revolution as the product of audacious inventors in garages and visionary venture capital. The U.S. military was a client of Terman’s Radio Research Laboratory at Harvard during World War II, and it remained the chief customer for most early computer technology for decades. In addition, giant corporations, many of them defense contractors like Lockheed, were early tenants of Stanford’s Industrial Park. Joffe neglects to tell his readers that Shockley, before founding Shockley Semiconductors, worked from 1936 to 1955 at Bell Labs, where he coinvented the transistor in 1947. Elsewhere he mentions the telephone company, only to disparage it: “Recall ‘Ma Bell’ in twentieth-century America, a government-sponsored monopoly that could hold back on new technology and keep long-distance rates sky-high.” But however laggard Bell might have been in switching to wireless a few decades ago, its prolonged status as a government-sponsored monopoly, by letting it recycle profits into Bell Labs’ research and development, allowed Bell to support the development of the transistor, among much other modern technology. In the same way, the near-monopoly status of the Western Union Telegraph Company helped it bankroll some of the early experiments of Thomas Edison. From the 1940s to the 1980s, staid, corporate IBM led the evolution of the computer industry, making the careers of later entrepreneurs like Bill Gates and Steve Jobs possible.
Why are these details important? To the extent that the American-bred IT revolution depended on procurement and research by big government and big corporations, and not only on geniuses in garages and venture capitalists, the contrast drawn by Joffe between the uncreative state capitalism of Japan and China and the creative, individualistic liberal capitalism of the United States is undermined. As Joseph Schumpeter observed in the middle of the twentieth century, the site of invention has moved from the labs of individual geniuses to corporate and government laboratories. Research in subjects from DNA to subatomic particles requires enormous up-front investments in equipment and teams of researchers.
So it remains today. “China trounces US in Top500 supercomputer race” was the headline of a June 17, 2013, piece in Computerworld. The author of the piece, Joab Jackson, claimed:
The supercomputing arms race is heating up again between the United States and China, as China retakes the top spot in the 41st Top500 listing of the world’s most powerful supercomputers with Tianhe-2, an updated system that was able to execute 33.86 petaflops, or 33.86 thousand trillion floating point operations per second.
According to Joffe, the Chinese can never replicate American creativity. Jackson disagrees:
Besides challenging the U.S. dominance of the Top500, the Tianhe-2 system is also notable for its use of technologies developed in China. “Most of the features of the system were developed in China, and they are only using Intel for the main compute part. The interconnect, operating system, front-end processors and software are mainly Chinese,” said Top500 editor Jack Dongarra in a statement.
Oh, well. Let “modernitarians” relying on state capitalism and national-champion corporations build supercomputers; the “liberal” United States can specialize in social-media software like Facebook.
Mid-twentieth-century Britain was extremely innovative, contributing to the development of computer technology, radar, the jet engine and television. But the lack of a modernized industrial base, large and successful industrial corporations, and government procurement on a sufficient scale doomed Britain to fall behind the United States, Germany, Japan and other rivals. Today’s deindustrialized Britain makes a mockery of Joffe’s paean to the genius of Anglo-American liberal capitalism, while providing the United States with an example of a fate it should try to avoid.
NOR IS JOFFE any more persuasive when it comes to the contentious issue of American demography. On this issue, Joffe reflects the conventional wisdom of the transatlantic elite that circulates among Aspen, Davos and the Clinton Global Initiative and opines in the prestige press. According to this conventional wisdom, America’s immigration policy gives the United States a demographic advantage over its rivals, by providing the American economy with foreign-born talent and higher fertility. But this conflates skilled and unskilled immigration. The foreign-born skilled immigrants, largely Asian and European, contribute next to nothing to American fertility rates, while the unskilled immigrants who contribute to relatively high U.S. fertility and relative youth, largely Latin American, tend to lower America’s overall educational levels and, in some cases, depress wages for low-income workers.
Indeed, as a proportion of its immigrant population, the United States gets far fewer educated immigrants than do other Western countries. The majority of American immigrants come to the United States under the “family reunification” program, which disproportionately brings in less educated Mexicans and Central Americans compared to their native-born peers. In contrast, Canada, with its “point system” that assigns points for higher education, English proficiency and other factors, tends to get more educated immigrants from many of the same countries in the Western Hemisphere that send immigrants to the United States.Pullquote: Joffe defends a version of American "triumphalism" that is as unbalanced as the very declinism he scorns.Image: Essay Types: Book Review