Adonis Diaries

Part two: Two main factors discriminating stable developed Capitalist economies; (Jan. 10, 2010)

Election law systems and the political decision of the winning coalition in election that generates State’s initiatives programs constitute the two main factors that differentiate among the capitalist economies in developed nations. The first part discussed the election voting system which determines the type of capitalist economy.  This part analyses the second main factors for economic capitalist development: State’s economic initiatives and financing.

The story goes that at the start of WWII, the US government had already decided to join the war in order to join in the spoil of the after war political conditions.  The US was preparing to enter the war at the proper time:   The Pacific Front (directed toward Japan) was the scene of heavy Federal investment in shipyard construction and fighter planes.

Frederick Terman of Stanford University capitalized on this influx of money to position the civil engineering and research infrastructure of the university.  The university set up programs to connect with businesses and encouraged professors and students to establishing joint private enterprises. Consequently, Hewlett Packard started with $70,000 in venture capital and 9 employees in 1939.  By 1943, Hewlett Packard had 100 employees and enjoyed sales of one million, mostly from the Federal government purchases.

In the 50’s, the electronic enterprise of Variant Associates was selling over 90% of its products to the US military.  By the end of the decade, Hewlett Packard, Variant Associates, Lockheed, and Fairchild Semi-conductor were selling almost exclusively to the Defense Department guided missiles, airplane fighters, and space vehicles.  Many important cadres quit establishing their own enterprises; Intel was one of them in Silicon Valley.

Timothy Bresnahan estimates that, even today, over 70% of research grants are provided by the various departments in US government. Over 50% OF STUDENT GRANTS AND TUITION WAVERS ARE DEPENDENT ON GOVERNMENT FUNDING. Over 50% of professional published articles acknowledge the financial support of the Federal government.

Congress frequently enact laws to serve industries that are cared for by the Federal government.  The current Telecommunication Act of 1996 was meant to encourage intellectual rights and properties.

There were four waves to Information and communication technologies.  The first wave started before WWII, the second at the onset of the cold war with the advent of integrated circuits and semi-conductors for guided missiles and performing radars. The third wave was related to micro-computer in the 70’s.  The fourth wave was the development of Internet network.  In all these periods, the US Federal government was the prime initiator, mover, and financier via many makeshift “venture capital” enterprises.

The Advanced Research Project Agency (ARPA) was created in 1960 and it financed the network ARPANET to link researchers in various universities receiving research grants from the Federal government for fast transfer of files and messages.

The technology centers in Seattle, Austin, Washington, Boston, and Ann Arbor are the creation of the US Federal government via grants to their corresponding universities. In every developed nation, it was the central government that initiated, financed, and motivated technological development and key economical branches.

This is the trend since before the “industrial revolution”.  Entrepreneurial motivating drive and private venture capital support are mostly myths to hide State interventions and fair global market trade agreements.

Germany economic power started a decade before WWI.  The US basically emulated the German economic Federally initiated and supported key industries:  The US economic system was over half a century late in adopting the German system.  Before WWI, Germany was the second industrial and economic power behind rich US.

France during President De Gaulle initiated and backed key industrial sectors.  The problem was that France missed the proper timing to privatize a few productive sectors, as the US did in the 70’s.