INNOVATION—A PRINCIPAL SOURCE OF BETTERMENT OF HUMAN LIFE
The general well-being of vast tracts of humanity has substantially improved from the “Solitary, poor, nasty, brutish, and short” existence described by the philosopher Thomas Hobbes in the 17th century.
Worldwide, life expectancy has increased considerably, involuntary servitude (i.e., slavery) has faded or been abolished on every continent, and physical comfort and convenience have advanced to levels that could scarcely have been imagined prior to this stage of civilization.
The exponential proliferation of scientific discovery and technological innovation since the end of the 18th century is primarily responsible for the development of our modern world and improved quality of life. Advances in countless varieties of labor-saving devices have continually enabled fewer people to produce more, ultimately freeing up entire populations from basic subsistence-level work to engage in highly productive, complex economies that are common as of the early 21st century.
INNOVATORS—A FEW BENEFIT THE MANY
“Never before in the field of human conflict was so much owed by so many to so few.” This quote from a 1940 Winston Churchill speech about the successful defense of the British homeland by the RAF against the Nazi German air force is illustrative of the idea that throughout human history, of the billions of people that have lived and are alive today, a tiny fraction are responsible for advances that improved the lives of the rest.
Three innovations at the top in terms of their positive impact on humanity are the controlled use of fire, the wheel (and axle), and the number zero. Though the identities of the innovators are unknown, the benefits of their ingenuity are still enjoyed today, and have made possible countless other innovations.
THE IDEOLOGICAL PROGRAM FOR PRODUCT DEVELOPMENT
The process whereby innovations and discoveries are disseminated is outlined in a graph by Andrew Galambos, entitled “The Ideological Program.”
The graph depicts the letters “IEAM”, which stand for Innovation, Education, Advertising, and Maintenance, respectively. First is the Innovation itself, followed by Educating others about it, then Advertising to those who may find it valuable, and finally, Maintenance, which are all of the activities that sustain the innovation for continued use.
Between “I” and “E” is a bar representing what Galambos called the “disclosure barrier”, a term he coined to describe obstacles facing innovators as they disclose their work. A well-known example of this concept was the Roman Catholic Church’s hostility to ideas that challenged its doctrines. Italian scientist Galileo Galilei was to be put to death by the Roman Catholic Inquisition for advancing such views. He was later sentenced to a lifetime of house arrest after recanting.
ENTERPRISE AND ENTREPRENEURS
John D. Rockefeller, Thomas Edison, Henry Ford, Bill Gates, Steve Jobs…The entrepreneurial activities of these famous American magnates are prime examples of the innovation, planning, establishment, and organization of business ventures that operate in hopes of earning a profit. Without profit seeking entrepreneurs, the products and services based on their innovations (or the innovations of others) could not exist.
It is important to note that Galambos developed a broader meaning for the term “profit”, defining it as “any increase in happiness acquired by moral means.”
Every business, from small startups with a single proprietor to large multinational corporations, begins with one or two entrepreneurs taking risks to bring innovative products or services to a market. Keeping in mind Galambos’ definition of profit, it makes little difference whether the entrepreneur seeks monetary gain or the sense of satisfaction attained from philanthropic activity.
INNOVATION IN FINANCING HEALTH CARE
Innovations developed in medical insurance (but not yet available for sale by insurance companies) can help solve two major problems in healthcare: paying for chronic medical conditions and caring for individuals born with severe birth defects.
The majority of Americans are provided health insurance by their employer. If individuals become chronically ill and lose their employment, they will also lose their insurance with it. While suffering from a chronic condition, finding new insurance to pay for medical expenses is essentially impossible as insurance carriers will not accept new policies of individuals with pre-existing conditions.
Health Status Insurance was designed to protect people from this scenario. The concept is simple enough: purchase a Health Status Insurance policy while healthy that stays with the insured independently of employer provided insurance. If a chronic illness develops, a health status policy enables the insured to remain insured for the duration of the illness, whether temporary or permanent.
Birth Defect insurance was innovated by Galambos in the 1960’s to protect parents of children born with severe disabilities. If purchased prior to conception, this insurance innovation will enable families to provide long-term care, an expense which may be far beyond the financial means of most.
THE SPIRIT OF ENTERPRISE AND THE WAY OUT OF POVERTY
Despite widespread and well-entrenched institutions that stifle economic prosperity in poor countries around the world, examples can be found of enterprising individuals and groups that find ways to advance themselves and others, even in the most deplorable of circumstances.
In the former Soviet Union, which was run by a political philosophy that rejects private property, peasants were eventually allowed to cultivate small plots of land for their own use, rather than working exclusively on state-owned farms as essentially slave labor. These private plots came to generate at least 20% of the country’s total food production.
To the southeast of Russia, Japan was in a desperate state following World War II. Its major cities were destroyed, it lacked the natural resources to fuel its manufacturing capacity, and numerous countries would not trade with it due to its previous military aggression and brutality.
But even with a ruined country and economy, the entrepreneurs of companies like Honda, Toyota, Sony, Mitsubishi, and Hitachi began to create quality products that are enjoyed the world over in the early 21st century.
In Bangladesh, a financial innovation known as “micro-lending” was developed to assist the poorest people in one of the poorest countries in the world. These small loans, sometimes less than US $1.00, helped makers of various hand-made items purchase the materials needed to produce their goods and to increase their ability to work and save, which is, and has always been, the only way out of poverty.
In neighboring India, and in poor countries around Asia and Africa, low-cost private schools in urban slums have proliferated as a response to the poor instruction students often receive in free public schools, where teachers frequently don’t bother teaching, or simply don’t show up. The impoverished parents, despite low income, say they prefer to pay for private schools where they feel their children can receive a better education.
The spirit of free-enterprise is also evident in some of Latin America’s poorest countries. Peru’s inhabitants, for example, have developed a large informal economy that operates outside of the purview of the state. It is estimated that this informal economy accounts for up to 60% of the country’s total production. Excessive regulation, high taxes, corruption and other problems have made it nearly impossible to establish new businesses in compliance with the government’s laws.
SECURITY, GOVERNANCE AND FREEDOM
People look to their governments to provide security, a basic human need. Security of life and property is the basis for the justification for the type of government imbued with the power to regulate and police its population.
As of the early 21st century, examples abound of governments that not only fail to protect its citizens, they are in fact the biggest threat to life and property. These governments maintain power through violent, forceful tactics designed to eradicate dissent.
All national governments as of this writing display some or all of the pathologies that ultimately threaten the security of its people, and there is one element that links every political regime in power today. It is the fundamental reason that all are on a similar path to failure: rule by coercion.
The alternative to rule by coercion is governmental service provided on a contractual, voluntary basis by private entities. As political regimes, particularly in developed countries, fail to adequately provide security and other services, entrepreneurs will do so in a free market.
ENTERPRISE DURING AND AFTER FAILURE OF THE STATE
Violence in Mexico stemming from the War on Drugs waged by authorities there and in the U.S. have claimed the lives of many. The official murder count there for the year 2017 totals 29,168 and is attributed largely to the drug war.
Mexican politicians and security forces, often corrupt or outright criminally involved, are generally not seen as protective elements in Mexican society. Many communities have banded together to create their own defense forces to combat the drug gangs that inflict violence with impunity.
The conclusion this chapter introduces, and that is explored more fully in a later chapter, is that security can be provided by groups, property owners, operators of public attractions, and other entities to provide protective services where government authorities either fail to do so or do not exist.
Money is another service provided by governments that is subject to corrupt misuse. In places such as Zimbabwe and Venezuela, inflationary policy erodes or destroys the value of the money supply, forcing people to find alternatives. Currently, the US dollar is a preferred currency in unstable countries, but historically, privately issued money has been circulated widely and effectively, without the need for government control.
Matthew Boulton, a British manufacturer, issued his own copper coins that were eventually accepted into circulation in England and in other countries after the British government abandoned its minting operations due to widespread counterfeiting in 1773 (it later re-established control over the money supply in 1821).
FREEDOM AS A PRODUCT AND AS AN EVOLUTIONARY OUTCOME
Galambos described freedom as a product, and although the concept doesn’t lend itself to the creation of a tangible product, his ideas augur a rejection of coercive political government in favor of governmental services provided on a voluntary, contractual basis.
As weapons of mass destruction are obtained by aggressive political regimes, their deployment seems likely in some future war unless innovative, proprietary security services are developed that fully protect life, liberty, and property. So far, no political government has achieved that goal. If the history of the failure and collapse of past political states is any indication, they are unlikely to do so.
TRANSITION TO NON-COERCIVE GOVERNANCE
The development of civilization was an evolutionary process, much the same way that language, culture, scientific discovery, and law were developed to facilitate human interaction and cooperation. It is not a creation of political governments or coercion.
Freedom, as defined by Galambos, emerges in a similar fashion. Innovative products and services designed to provide security develop in response to demand for protection of life, liberty and property. As political governments decline and are no longer able to provide security, private companies will fill the void, and do so for all segments of society, not just the wealthiest.
Monetary systems are another state-controlled function that will be handled by private institutions during and after the collapse of political governments. In fact, the only thing stopping the issuance and adoption of private sources of money is the coercive control exercised over money by government and their ability manipulate and extract wealth by taxation or currency devaluation. These characteristics would not be present with privately issued monies.