 I think the Constitution was designed to obstruct you know I'm a fan of the Constitution I won't criticize the Constitution but you had the United States had gained independence and had not yet brought the Constitution there was an extended period from 1776 to 1787 where we operated as a confederation and the important documents of that era were the state constitutions and the most radical of those state constitutions was in Pennsylvania it created the assembly there wasn't a governor I think it was a 15 person committee taking the role as the executive there were not two houses of Congress there was only one it was unicameral and that was to to make sure that it was responsive to the needs of the people so it was a much more shall I use the word democratic document and the the wealthy folks at that time many of which I have learned a lot about admire really set about to block that kind of thing they replaced pennsylvania's constitution with one that had two houses and a single governor and in that mechanism it was much easier to block legislation and so by the time 1787 came around they knew how to design a document that gave some democracy in terms of the election of the House of Representatives but senators as you know were elected by state legislators and the president was elected by an electoral college there there was very much the intention to construct a document that didn't let things get out of hand that that that caused change to occur slowly rather than rapidly and so you know I think that's what we still have today it's it was it was designed to make things easy to block and it's still easy to block things and so I think the more fundamental question is do we want a system where it's less easy to block something and if the answer to that question is yes we probably do need to make some very fundamental changes this is rob johnson president of the institute for new economic thinking I'm here today with Richard vake who not only is an inet board member but an author and was the secretary of banking and securities in the state of pennsylvania and just a person who I think has a tremendous amount of insight into political economy I'm very interested in this new book the illustrated business history of the United States Richard thanks for joining me and I guess we'll start with what inspired you to write this book well first I have to say thank you to you for having me here today yours is a great podcast and I've enjoyed so many of the things that you've put forward it's a privilege to be here you know with all our research on financial crisis one thing that became clear was there really wasn't a lot of data or information about early American business history we could find fragments of it here and there and I had real curiosity about how sophisticated or unsophisticated the beginnings of us business were going back to you know the constitution it's 1787 the first bank in the united states and so forth and so we confirm that not much had been put together in terms of the hard data about uh manufacturing banking and the like and we proceeded to put that together now we did a lot of fun things along the way reconstructed lists of who the wealthiest individuals were in each era and what imports and exports were uh the key inventions uh but you know we had to do a lot of digging to find your the early American business history yeah and you carried on that how they say multifaceted expression right up through 2015 so we get to see the which you might call modern incarnation of the of the tradition of innovators and leaders and even I I got to shed a tear because I watched the decline in the size of the city of Detroit where I grew up because each chapter you show the where are the largest cities and Detroit's drops right out of the top 10 and uh but uh but I thought the uh how would I say relative to many scholarly histories this was much more accessible the modes of connection that you created with with visual things with people with personalities as well as with the structure of commerce what is it that you see you know one of the things that I think is very interesting right now a lot of people obviously very concerned about climate change and there is kind of one school of thought which is talking as though we have to reset our preferences and we have to how to say govern properly part of which is it setting incentives but the other is a look into what the private sector the deliverer of these commodities and services and in this case transformation bring to bear and the acknowledgement that large business organizations are often the vehicles of change they have to work perhaps in conjunction with government or what have you but I'm curious I guess the the meta question is about the dance between the private sector in the state that you saw evolve through the chapters well that's a great question and a great subject because there's a lot of folks particularly over the last couple of decades that talk about you know laissez faire and you know get government out of the way of business and your business will seek and find the right things to do and when you look at american history it's never been that way there was never this mythical laissez faire period of american business american business has I think largely benefited from what you might call an industrial policy since the very beginning alexander hamilton you know when he wrote his famous three reports in 1790 and 91 uh one of the things he boosted as part of that was manufacturing well he was instrumental in seeking talent from the uk to bring to the united states sometimes in contravention to british law by the way to to populate a new industrial sector within the united states we see the united states government taking a huge position by the way through the federal and through the state governments huge position in cat canals the fledgling railroad industry was a huge beneficiary of government support at the illinois central railroad and the transcontinental railroad in many many other places you know we bring that all the way to today we see and i think the work of a number of economists have shown this where even the iphone all the major subcomponents of the iphone have come directly or indirectly from government sponsored research or government policy and the like that's the internet itself obviously the old arpanet that's touchscreen technology that's gps uh that's the like so the u.s government has strategically pointed business in certain directions throughout u.s history which to me means it can do it again and it can do it in relative to things like climate change and it's as daunting of an issue as that is i think there's hope if we can align government and business around that issue yeah i've seen a number of examples uh as i was listening to you had occurred a gentleman uh the late felix rollett had a book called bold endeavors which was about i think 10 or 11 i think it was 11 cases of where the state had made a difference highway systems canals among others but uh and that interface between the state is very prominent and our fellow board member bill janeways new series on the inet website about uh economics of innovation and venture capital there's uh his father wrote a book about war preparation the struggle for survival elliott janeway about the roosevelt years preparing for world war two so there's a lot of precedent but i think there's something that's very interesting right now that's that's a formidable challenge which is for many years say at the time of poliani's great transformation people are talking about more state or less state and people on the left were the more state in recent years there's been a cynicism about the role of money in politics and many people on the left in surveys show that they have no confidence that the state is any longer representative of the well-being of people that it's been captured the financial bailout uh and the great financial crisis was a lightning rod of suspicion uh in that regard and uh i don't think myself and you can you're welcome to differ with me that uh we could have stood by and not done the bailout i think everybody would have gone down with the ship and had to preserve the financial sector in order to have a chance for recovery and repair but nonetheless that cynicism whether it's in gallup polls or books like ben page writes suggesting that uh surveys where the top 10 percent of the population differs from the bottom 90 in terms of wealth or income uh that the legislature follows the top 10 percent's recommendations all the time and so how we i guess i'm asking you in a long-winded way how do we jump start trust in the state as a leader here again well you you just described one of the most difficult problems i can think of you know if folks are cynical about business if folks are cynical about government's involvement involvement in business they have a lot of justification for having that view you know from the very beginning of us business history and you know probably back as far as we can look in time there has been corruption there has been fraud you know for every great victory and great advancement that business has brought there have been you know many things that go in the other direction and for every enlightened thing that government has done there has been an equal number of areas where government has produced outcomes that aren't that desirable so you know there's there's a lot there that would create the cynicism that folks might feel nevertheless the examples of where good has been achieved are glorious and you know i think i think the burden personally i think the burden is on government uh to do some good things because that alone will create a cycle that will reinforce our ability to trust government and the cynicism is deep-seated you know you and i've discussed i spent a lot of time going around the country talking to you know folks middle americans or average americans about that and the cynicism and distrust is there and it's it's pervasive and i think it's time for government to step up and do some really profoundly good things i think that that's the kind of thing can set things right yeah i think the obviously the biden administration espoused which we call the awareness of that challenge particularly after the january sixth problems around the capital and seeing people on both sides of the aisle if you will expressing concern and cynicism i guess we've got within the legislature within the two-party system we've got to get over some of the rivalrous propensities and rally together to to realize that proof but uh there there's a lot of what you might call cocktail party cynicism even among the elites now as to whether this can be achieved but everybody's yearning for it everybody's yearning for some good news and one of the things i found refreshing about this book is that we can get a little too caught in our zoom lens what's going on now and what are we suspicious of but to see those cycles of what you might call the marvelous and the excess and how it evolves it's kind of refreshing that it's it's not necessarily all bad news yeah there's there's a lot of good there which uh you've got 14 chapters in the book different segments in time it's chronological where did you find the most excitement in who did you admire as people what sectors and their development were most positively surprising as she's conducted this study well there's a lot of obvious heroes uh you know thomas edison you know this counseled hair and his absent mindness and you know was was certainly a great example you know i look back you know one of the individuals that has become one of my favorites is thomas willing who was the first great banker in the united states uh going back all the way to the beginning so there's a lot of uh great things that have happened to me you know there's a lot of business history that we know very very well you know the the boom in the 20s and the crash in the great depression you know everybody knows that story you know the manufacturing being marshal to help will want war war two everybody knows that story so the my areas that were the favorite for me in the book were the less traveled paths you know the you know the business around circa 1900 and 1910 you know there was as much going on uh there is in any history it's just an area that folks haven't spent a lot of time in you know the the great canal area era in the 1830s you know something folks most folks aren't aware of so i think the book really my most fun in the book was exploring areas that i had less familiarity with was there ever a place that uh you discovered that you had come into it thinking it was good news and found out it really wasn't so good well i think you know i i came out of the 80s you know that was my first job in banking was in the late 1970s and i was present in the 80s you know the era of reagan and i think today folks still many folks still look back at that as you know as was expressed in his campaign the morning in america and a resurgence and this that the other that's morning without the you right well said but at any rate to go back and examine it you find that that was one of the most crisis laden periods in american history and uh so you know that was one of the obvious ones to me that that were where what i found was very different than i think the popular perception yeah i worked in the united states senate banking committee as their chief economist in the late 1980s and the in how do you say the unfolding of the savings and loan crisis 87 stock market crash and various concerns about derivatives or the integrity of the relationship between futures exchanges and the stock exchanges and all these things were were emerging and it was a brutal period yeah really was but uh and then more recently uh i saw you talked about how what you might call the commercialization of entertainment played a big role in in in recent years and i saw a picture of jz in the book and uh Oprah Winfrey and and lots of other people from that uh how do you say that sector what what helped to them accelerate is it related to technology or is it uh the advent of television which i guess is another form another phase of technology what what brought entertainment to the to the surface or to the to the leadership role well you know entertainment has obviously been there all along but it seems to me as i look at the history that let's call it the first two-thirds or the first 75 percent of american business history was about improving the daily lives and generating wealth broadly across the economy you know and i think we probably hit kind of an apex in the decades right after war war two but it was about you know fulfilling the basic needs of the population food transportation and the like and that's where the big industries were but then at some point in time we reached this very wealthy phase we really became an extraordinarily wealthy country and that was broadly experienced across the population and to me that marks a transition in business history where instead of taking care of the sustenance of life we're entertaining people and we entertain people with um uh television we entertain people with drugs and with food and we entertain people with controversy as we see on you know cable television so it's almost a period in where you know the big companies of today take facebook you know that's about folks gossiping you know that's that's not about meeting some you know basic survival need of people it's about teenagers gossiping it's about you know uh very false rumors being spread well that's just a business it was difficult to conceive of 50 or 100 or 150 years ago we've become a nation where a huge component of business is just about entertaining the populace more than anything else yeah the rise of tantalization the rise of i love that the uh i guess it's kind of interesting to bring that into focus as i'm listening to you in relation to the health care industry where people feel something is inadequate and very expensive that is essential while tantalization is almost like a diversionary tactic and uh i'm i'm very interested what what your thoughts are at the on the horizon now if if you were to forecast for me that we'll come back together in 15 years on the on the 15th chapter of your book what's at the cutting edge right now what's what's gonna blossom in this next phase well i want to pick up on something you said there the health care industry and the the growing importance of the health care industry the irony here is that much of what we've done over the last generation or so has been the result has been to uh make the health of americans worse you know big food you know we're eating fruit loops and cheetos you know that was that was the big innovation of the big food industry the pharmaceutical industry which you know we go into detail about in the book you know all of a sudden one of the the biggest selling drug out of the pharmaceutical industry is valium you know it's not a drug to take care of uh you know infections or you know to cure cancer this that it's something to take care of depression well that's that's a manifestation of i think the fact that much of what we're doing uh to provide things to well a wealthy country don't really help that country make it a less healthy and i think we've seen more recently that even before covid that the average lifespan of american citizens was declining for the first time in history part of that was the opioid epidemic well that was a function of business uh so you know we our trends on healthcare are are not to be ending we're getting less healthy the healthcare system is as we all know fairly dysfunctional there's no easy path to get from there here to there uh but when i think about the future a lot of it is around healthcare and a lot of it is around genetic engineering you know this is a this is an area that is opened up radical breakthroughs are occurring uh not only to cure diseases like cancer but perhaps eventually to alter ourselves physically maybe there's genetic re-engineering to create a desired characteristic that we don't have so i think you know a lot of the future is going to be about altering ourselves uh both as it relates to genetic engineering and also as relates to creating a digital environment where we live more and more of our lives digitally instead of physically you know the great futurist ray kerchwell talks about the fact that we are going to be you know this is a radical thought by the way and i haven't really gotten my head around this but it's about we're going to actually begin living our lives as avatars instead of in our physical bodies you know it will that be true 20 or 40 or 60 years from now ray certainly things that will be so i think altering our reality both genetically and did digitally will dominate what happens to us over the next several generations that that's fascinating and i i know there's kind of a summary statistic i see come out of the oecd with relation to health care which is that the united states is ranked 38th in terms of the quality of health care and yet its cost is almost double the oecd average and is by far on the way the most expensive so there's something not how do i say not working well and i've often i've often advocated i started my career working in the republican party under pete domenici that my my hawkish friends ought to examine things like the better models of health care to help trim the government budget it's not just about oppressing people at the lower end of the spectrum or not supporting education or other things that could help invigorate our society well i mean i you know when you look historically there was a point in time and a lot of this was at during and immediately after or two americans were the tallest people in the world more or less i mean you take out some of the smaller countries there uh but we were the tall tallest with the with the longest lifespans well it's not there now i don't know if you've traveled right lately but neither of those things is as true as it once was and you know that that would indicate something very fundamental is going the wrong direction in the united states and i know people like the nobel laureate joe stiglitz who's uh booked the price of inequality turned a lot of heads but he's been emphasizing recently how more than half of the american population now has a lower standard of living than they had in 1989 despite all the progress and the productivity that you've seen and one of the things i noticed uh that's quite vivid was the acceleration of the size of the wealth of your top ranked wealthiest people in each chapter it looks hyperbolic from say 1970 to the president it's it's extraordinary i mean when i was a young man uh ross perot i think was the wealthiest person in the united states at two billion i'm not even sure he'd make the list anymore uh and you know the other the other thing that goes along with that is the size of mergers and acquisition transaction you know they were they were very rare and then we had a couple of we had a burst of m&a and circa 1900 and we had our second burst of m&a circa night to late 1920s uh well now we have just an almost perpetual recombination of businesses and you know deals that aren't 50 or 100 billion dollars in size barely get mentioned in the wall street journal the i think that speaks to this growing inequality and this bifurcation that's going on in the country and it it also speaks to the political economy where size creates power vis-a-vis the government and uh i mean we've seen this you and i've talked in the past about the too big to fail banks i see a lot of CEOs at too big to fail banks become budget hawks because they want contingent fiscal capacity to be preserved for their next bailout they don't want to have a next bailout but they want the world to know they're not going bankrupt so their cost of funding comes down and their market share increases relative to small institutions and so you have all kinds of interactions between politics and economics but being big matters well i mean it really is becoming very much like uh the later years of the gilded age when you know companies were so big and politicians were effectively employees of some of these companies maybe we're not to that point yet uh in this era but i mean politicians really spend 80 or 90 percent of their time fundraising maybe 10 or 20 percent listening to real constituents and solving i'm over simplifying but it's it's astonishing it's it's it's astonishing how much fundraising uh i have a real i have i have a friend who uh i won't name who used to be a united states senator and i said to him the thing that shocked me when i was in my 20s and working on capitol hill was how much alcohol hall ism was a sort of a ghost in the senate and he said yeah when you spend 70 to 80 percent of your time fundraising and much of the fundraising is to do things for people that's detrimental to your constituents the emotional pain and dilemmas that you experience leads you towards drinking he said you shouldn't surprise you at all that's very interesting and uh i know a number of people have left the senate because they didn't feel like what you might call a deeper sense of purpose could be achieved given the incentive structures that it doesn't look like a fun job anymore no no and and that's troubling to me particularly as what you might call the sophistication technological sophistication of the economy increases because you need what you might call sophisticated guidance and control and if the most talented people say that's not for me how can government play the kind of leadership role that you've you know envisioned or shown us from other periods in your book but envisioned as necessary to the future there's often a discussion about how the founding documents of the united states constitution bill rights etc are no longer germane meaning they were principles around a simply an agrarian economy and now we have a very different structure lots of people are very concerned about what you might call the checks and balances across the three major you know uh the courts the legislature and the executive branch because they say it's much easier to block than it is to pass and so all kinds of entrenched interests can get in the way of the evolution in the progress we need do you think we need another constitutional convention yeah i'm sure you created created a set of principles that maps onto the structure which is so different than when the country began well it's interesting uh one of the people i admire the most is mike tamaski who is the editor of both the new republic and democracy and democracy is just put out in addition with a new constitution so if you're it's it is fascinating and if you if you're interested in that you should you should check that out but when i go back to the constitution i think i think the constitution was designed to obstruct you know i'm a i'm a fan of the constitution i won't criticize the constitution but you had the united states had gained independence and um had not yet brought the constitution there was an extended period from 1776 to 1717 87 where we operated as a confederation and the important documents of that era were the state constitutions and the most radical of those state constitutions was in pennsylvania it created the assembly there wasn't a governor i think it was a 15 person committee taking the role as the executive there were not two houses of congress there was only one it was unicameral and that was to to make sure that it was responsive to the needs of the people so it was a much more shall i use the word democratic document and the the wealthy folks at that time many of which i have learned a lot about admire really set about to block that kind of thing they replaced pennsylvania's constitution with one that had two houses and a single governor and in that mechanism it was much easier to block legislation and so by the time 1787 came around they knew how to design a document that gave some democracy in terms of the election of the house of representatives but senators as you know were elected by state legislators and the president was elected by an electoral college there there was very much the intention to construct a document that didn't let things get out of hand that that that caused change to occur slowly rather than rapidly and so you know i think that's what we still have today it's it was it was designed to make things easy to block and it's still easy to block things and so i think the more fundamental question is do we want a system where it's less easy to block something and if the answer to that question is yes we probably do need to make some very fundamental changes mm-hmm i'm uh reminded i was recently involved in a seminar related to moral and moral and ethical design and my role was to contribute uh the perspective of adam smith and adam smith was a fascinating man because he didn't really espouse principles he described in the theory of moral sentiment how people come to believe what they do right through watching someone suffering that could happen to me or seeing someone thrive and saying that's virtuous and so that which might call your uh your values are a learning by doing yep but then he said now we should get forward to the wealth of nations when you look at a system and it's not acting right you don't want to what you might call repair it with a lightning bolt you want it to evolve you want it to evolve in a continuous way that inspires trust you want it to evolve towards what you might call the ethical asymptotes or or you know vision that's evolving in the society but the but the human society can lurch backward out of fear of the unfamiliar created a whole lot of harm and and this was fascinating because he had spent some time in France just after around the time of the french revolution and he loved the culture of France and the arts and how these emotional values evolved but was a little bit terrified by the intensity that the french revolution brought to the surface without question without question and so i i've never until preparing for that talk had so much uh we might call deep regard for adam smith's wisdom he had always been fascinating is when you read the wealth of nations and i read a beautiful book by james buckin called the authentic adam smith you find out that he's been to use by what you might call free market libertarianism in in great contradiction to what he actually was saying absolutely absolutely so i think which i guess what i come back to then is grounding our perceptions in history that's thorough and deep not selective interpretation of the evidence helps us to evolve a vision of what is good or what is the right kind of trajectory given the challenges of today and i think your book plays a very very strong and constructive role and it's fun i i expect people to want to read the next chapter after i know i i know how it caught me like a like a magnetic field and where did you get the notion to do these portraits of people these rankings these the storytelling and the pictures and things such where did that vision come from that not a lot of books are written like this well well you know the um the book actually almost evolved in the opposite way that a book normally would be i originally conceived of it as a book of lists that wouldn't have narrative and um so you know we have the list that you've been kind enough to point out you know the wealthiest americans with the largest banks the largest businesses the the most important inventions so we had all these lists that we were pulling together for every era many of which took a lot of homework and then we said well you know we can't just have lists why don't we have pin yet some of the important personalities of that age so the second stage was to come in and by the way there's there's heroes the the heroes in the united states were very diverse throughout history and i think that's one of the unexpected things we we find african-american entrepreneurs going far far back we find uh important and successful women far far back in america's history and so it was fun and important we felt to tell some of those stories and so by the time we kind of laid all that out well then we said well hell we might go ahead and write the history too so that's interesting that i did i did notice that uh what you might call excavation of the diversity of success and uh i think that's very nourishing for the present uh meeting the present challenges lots of brilliant created folks folks from all walks of life yeah well i knew that from my work in music and arts uh but in many many aspects of business uh i remember what was the woman's name that worked with disney world for a while and then went into uh garment and other things and sylvie what's her name uh i just enjoyed all of these all of these what i'll call the good news about people and their capability yeah a lot a lot of great a lot of great women and up to today we have uh the ceo of spanks is his profile there oprah winfrey uh there's yeah there there's the ceo of spanks is the lady i was referring to she had worked at disney world for a while as a pregnant i believe but uh became a billionaire yeah and the and the gentleman uh whose last name johnson african-american in chicago john johnson i believe absolutely built a media empire it's very impressive people well that's how'd i say the uh you brought a lot of good news to the table well thank you thank you in a dark time and uh i'm not surprised knowing you but i am grateful that this book is uh how do you say enlivened our sense of hope and of possibility well you're very kind to say that what's your what's your vision of your next book well i actually have several books uh in the works one of them is uh going to be the the great uh publishing house polity press out of cambridge england approached me to write a book on debt jubilee which will come out before the end of the year uh we're working on two books beyond that one of them is just going to be an overall treatise of debt just to really explicate the entire subject in a comprehensive way that has not been done previously and i'm very excited about that and then another one the other one we're working on and maybe i'll quit after that with this one is a biography of thomas willing who i think was the most important financial executive in the united states uh he was the across the street neighbor of alexander hamilton uh he was the president of the first bank of the united states president of the very first chartered bank in the united states which was called the bank of north america and just this dynamic presence at the inception of the u.s financial system um and uh we're trying to put a biography together with him yeah excellent well i do hope you'll uh agree to come back and uh share with this podcast each of those works as you're as they unfold and uh i think how would i say i'd encourage people to look at your earlier books uh that brief was a brief history of doom uh was absolutely fantastic and in this new book as i've been uttering throughout this last 40 minutes brought a great deal of joy and a big smile to me so thank you for your work richard thank you for your service on the board of india and uh thank you for your concern about our society at this critical juncture well it's an honor to be with you thank you