So while major industries like steelmaking staggered under the new reality, the enterprises that made the small and light thrived—most especially those associated with the computer industry. The daily output of an automobile factory required trains to haul away—the daily output of a microchip factory could probably be packed in a van. And then there was software—a vital requirement for computers that was actually weightless.
In short, there was a real economy reason why the steel mills of Reading Pennsylvania were shut down and left to rust while companies like Microsoft became the darlings of the financial press. But these changes were about to be accelerated by that ultimate in weightless enterprise—financial "services."
So what? you say. Out with the old—in with the new. Creative Destruction is a good thing according to various economic gurus and replacing steel mills with traders in the various manifestations of weightless electronic money is probably an environmental benefit. What's not to love? Well two things actually.
- Just because there was a more reliable way to make money in the weightless enterprises, nothing had eliminated the need for doing heavy things like growing food and shipping it to cities or manufacturing vehicles to get all those people in sprawled out burbs to work.
- Even though financial 'services' might be clean and weightless, they are also pointless unless they can extract wealth from the heavyweight industries. The whole point of lending is to provide 'services' that are worth but a tiny fraction of what is charged. Unfortunately, most of the money spent on finance in this new era became nothing more than another drag on industries already struggling to cope with a new energy environment.
Why ideas are important!
One of the most annoying things about a religious upbringing is that you get to meet people who live to split hairs over the most trivial subjects imaginable. Calling such people "unpleasant" is about a charitable as I get. But knowing how passionate people can get over ideas has proved to be a valuable bit of insight over the years. It is especially useful when it comes to describing economics because ideas are the only currency a practicing economist has. Of course, no one will ever top Keynes' classic observation.
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. (Ch. 24 "Concluding Notes" pg.383. more quotes)Milton Friedman was a general in the new war of ideas. He had been preaching about the evils of the New Deal for most of his adult life and in 1963 published his magnum opus on monetary theory entitled A Monetary History of the United States, 1867–1960. In 1970, I had a distinguished economics professor describe Friedman as an "ignorant crank." John Kenneth Galbraith famously remarked "Milton Friedman’s misfortune is that his economic policies have been tried." Which was true enough. Unfortunately for the likes of Galbraith, being wrong never harmed anyone's reputation when the crackpot ideology is in the service of the moneychangers.
In 1973, Milton Friedman's "brilliance" is taken on a road tour into Chile courtesy of a CIA-engineered coup . Friedman's ideas would be implemented by folks willing to torture their political opponents to death. Under such circumstances, the fact that Friedman's theories were demonstrably insane didn't matter all that much.
During the 1980s, there was spectacular growth in well-funded right-wing think tanks. Perhaps the most important was the Democratic Leadership Council formed in 1985. A guy named Al Frum came up with the idea that he could hit up Wall Street for big contributions and then fund Democratic candidates willing to sell out the economic principles of the New Deal.