“What I did, when I did it, was honest. Now, through changed conditions, what I did may or may not be called honest. Politics demand, therefore, that I be brought to trial. But what is really being brought to trial is the system I represent.”
- Mr. Samuel Insull, Co-founder of Edison General Electric.
In 1881, a young English man named Samuel Insull sailed from England to America and took a low paying job as a private secretary for an inventor named Thomas Edison. Insull worked hard, damn hard, coming in before his boss in the early morning and staying until long after Edison, who wasn’t exactly lazy himself, had gone home at night.
Over time, Insull’s hard work and loyalty did not go unnoticed. He was promoted several times, eventually winding up in charge of Edison’s business affairs. After twelve years absorbing as much knowledge as he could, Insull finally left to pursue his own American dream. He moved to Chicago, took out a personal loan for $250,000 and built the largest power plant in the world. Had he been alive today he’d no doubt be on President Obama’s Carbon hit list.
At the time, electricity was like private jets are today – grossly expensive and available only to those who don’t spend much time worrying about their bank account. But Insull had a dream that electricity could be produced on a much larger scale and used by the masses. By developing revolutionary ideas, like variable pricing and inexpensive home wiring, he turned electricity from a luxury into a commodity.
Before long, Insull’s new company was servicing over ten million customers in 32 States and had a market capitalisation of over $3 billion (somewhere north of $70 billion in today’s money). Insull benefited personally. At one point, his net worth was estimated to be $100 million (about $3 billion in today’s dollars). Time magazine even celebrated his success by putting him on their cover in 1929. He was a true American success story – a foreigner with virtually nothing to his name who had made it big through hard work and innovation.
Then the world changed.
As the Roaring Twenties morphed into the Great Depression, Insull’s business struggled. The debt and equity he’d financed his company’s growth with had become virtually worthless, leaving over a million middle-class Americans who’d invested in his stock in financial ruin. The public outrage was palpable.
In the matter of a few short years Insull had gone from hero to villain, from poster boy for everything great about America capitalism to the poster boy for everything wrong with it.
The Government at the time, seizing on the public’s fury over their lost wealth, charged him with fraud and though he was acquitted at trial, it didn’t matter, the damage was done. Insull was the most hated man in America and all he’d done to deserve it was to build a remarkable company that, like so many others, suffered during the Depression.
In 1938, Samuel Insull, who’ fled America for France (oh the irony), died of a heart attack in a Paris subway. He died with eight cents in his pocket. It was a sad and lonely ending for a man who exemplified the American (and Australian) Dream by bringing affordable electricity to millions.
Like Paul Hogan, our free market system seems to be put on trial at regular intervals. People love it until it stops working the way they think it should. Then it becomes the villain.
Wall Street was loved, then it was hated because of the GFC and now it is loved again. People envied those who flew in private jets and then they despised them. It’s amazing how quickly opinions can change, especially when people are looking to blame someone else for their problems.
The truth is that capitalism is neither good nor evil, it just is. Capitalism can’t get you a job, a bigger house, a luxury car or a better retirement – you have to do all of those things for yourself. But what capitalism can do is foster an environment where those with the will to succeed have a better chance of achieving their dreams.
Do hardworking people still fall through the cracks? Absolutely. Are there peaks and valleys as excesses in markets are worked out over time? No doubt. But I defy anyone to show me another system that has done as much to quickly raise the standard of living and quality of life of a country as capitalism has for Australia.
You can’t because it doesn’t exist.
In 1949, someone who worked minimum wage over the summer would have enough money to buy a 3 speed phonograph, an AM-FM table radio and a 35mm camera.
In 2011, that same person, working the same number of hours at minimum wage would now be able to purchase: an Apple ipad, Canon 12 megapixel digital camera, 40” HD LCD flat screen TV, Sony Playstation 3 and about nine other things, but I think you get the point:
Capitalism promotes innovation and competition – two ingredients necessary for producing things that get progressively better even as they also get progressively cheaper.
The truth is that a minimum-wage worker in Australia is still one of the wealthiest people in the world – hence why boat loads are flocking here.
Does that preclude us from trying to make things even better? Absolutely not – but those who favour throwing away the system that made us the envy of the world are either dangerously naïve or they have an agenda.
You can probably identify which group they belong to by whether they make idiotic arguments like…
“Your precious Free Market Capitalism has Failed.”
Capitalism hasn’t failed, greed has failed.
Andy Semple is Stockbroker, novelist and general antagonist. He is a contributing Editor here at Menzies House and his personal motto is "Speak without Fear. Question with Boldness."
