By Arnold Kling
From David Halberstam’s The Fifties, p. 174:
Everyone in this country, he thought, had a car and a family, and sooner or later everyone had to go somewhere. Dorothy Wilson listened to him with growing trepidation–when Kemmons Wilson said he was going to do something he did it. “How many of these motels are you going to build?” she asked nervously. “Oh, about four hundred,” he answered. “That ought to cover the country.” “And,” he added, “if I never do anything else worth remembering in my life, children are going to stay free at my motels.”
At that point, Kemmons Wilson had never done anything with a motel other than stay in one. He was angry enough about having to pay extra for his kids that he decided to disrupt the entire industry. He built the Holiday Inn franchise.
Holiday Inn is one of four businesses that Halberstam chronicles (although the book overall is more concerned with political and cultural developments). The others are Levittown, E.J. Korvettes, and McDonalds. The motel, the suburban tract home, the suburban discount store, and the fast food franchise were part of a growth cluster. They catered to families with young children and cars. Part of my view of modern U.S. economic history is that the pre-automobile economy died in the 1930’s and the automobile-oriented economy emerged in the 1950’s. Halberstam’s description of those four businesses, which I read years ago and am now re-reading (boy, does the book suffer from horrible editing–many paragraphs have two versions of the same sentence, slightly reworded), is what put the idea into my head.
I am inclined to view what is happening today as the death of the pre-Internet economy. One scenario for the future is an Internet-adapted economy with growth clusters in alternative approaches to education and health care. Entrepreneurs face some major challenges in these clusters, however. Credential issues represent strong roadblocks. Moreover, government support for incumbents creates huge barriers to entry. But at some point, the government is going to run out of the money needed to prop up the education and health care cartels.