A Brief History of Wealth Creation
The ancients aggregated wealth. America was built by creating it. Socialists are blind to all this.
By John Steele Gordon
Chad CroweThe grandeur of the Roman Empire was built on the aggregation of wealth.
Using its superior military organization, Rome conquered its neighbors, took their gold and silver and sold their populations into slavery.
When the empire ran out of neighbors, the Roman economy began to falter.
Today America is in the midst of the greatest epoch of wealth creation the world has ever known.
Our history is one of innovation, and we are all richer because of it.
In 1982, the first year of the Forbes 400, it took $100 million to make the list, and the wealthiest American was Daniel Keith Ludwig, worth $2 billion.
In today’s dollars, those figures are approximately $346 million and $6.9 billion.
In 2025 it took $3.8 billion to make the list, and the man at the top was Elon Musk, worth $428 billion as calculated on Sept. 1.
How did this rapid increase in wealth come to be?
Simple: the microprocessor and the internet.
Whenever a new technology greatly reduces the cost of a major input into the economy, the cost of goods and services drops and an influx of new fortunes quickly follows.
Before the Industrial Revolution, fortunes were based on land or trade.
Energy was provided by muscle power, windmills and water wheels.
Then in 1781 James Watt patented a rotary steam engine that could turn a shaft and thus power a factory.
Unlike water wheels, steam engines could be scaled to almost any size.
The Industrial Revolution moved into high gear because energy was suddenly cheap.
That reduced the price of industrial goods for everyone while increasing profit for the owners.
In 1826, young Benjamin Disraeli popularized the word “millionaire” to describe the new industrial barons in his novel “Vivian Grey.”
In the early 19th century, factories were limited in size by the area to which their products could be economically delivered.
Freight moved by water or it didn’t move at all.
When the steam engine was adapted to power locomotives, the cost of overland shipping dropped precipitously.
Whereas once every town had its own cobbler, suddenly a shoe factory in, say, Worcester, Mass., could make better—and much cheaper—shoes for the whole country.
Within a few decades, railroad fortunes like those of Jay Gould, E. H. Harriman, James J. Hill and Cornelius Vanderbilt were among the largest in the country.
Almost simultaneously the sewing machine reduced the time needed to make a shirt from 16 hours to two, greatly reducing clothing costs.
Isaac Singer died very wealthy.
Gaslight became common in cities in the early 19th century, but people living beyond the reach of a gasworks still had to use expensive candles or whale oil.
Whales were being overhunted, and the price of whale oil rose alarmingly.
Then Yale chemist Benjamin Silliman Jr. showed how crude oil could be fractionated into various liquids, one of which was kerosene, an excellent illuminant that was much cheaper than whale oil.
In 1859 the first oil well was drilled.
By 1900 the names Rockefeller and Flager were legendary, and the price of kerosene had dropped continuously thanks to economies of scale.
The ancients knew about steel, but it was so expensive to produce for most of history that it was almost a semiprecious metal.
In 1856 the British engineer Henry Bessemer invented a process for the mass-production of steel, and the material became cheap.
Its use in railroad rails—now cheaper, safer and longer-lasting than wrought iron—greatly increased.
Steel-framed buildings could soar to the sky.
The word “skyscraper” came into usage around 1891, and Carnegie, Frick, Phipps and Schwab were soon household names.
In 1946 the first programmable computer, Eniac, came online.
It was far faster and more versatile than the electromechanical devices it replaced.
It was also the size of a school bus, had more than 17,000 vacuum tubes and sucked up 150 kilowatts of electricity an hour.
Computing remained very expensive despite the new technology, owing to what mathematicians call the tyranny of numbers.
Computing power is a function both of the number of nodes and the number of connections between them.
Two nodes require one connection, four nodes need six, six need 15 and so on.
As long as those connections had to be made, essentially, by hand, computers were confined to governments and big businesses, tended by men in white coats.
The microprocessor, a computer on a chip of silicon, came to the market in 1971, thanks to Texas Instruments and Intel.
The cost of the storage, retrieval and manipulation of data began to collapse.
It was the most consequential technology since the steam engine made energy cheap.
Steve Jobs and Steve Wozniak soon founded Apple and developed the first mass-market personal computer to reach consumers.
Microsoft provided software to IBM, and Bill Gates became, for a time, the wealthiest man in the world.
Thanks to these men, school kids today carry around more computing power in their backpacks than the Pentagon could have afforded in the 1950s.
Sam Walton understood that cheap computing made very close inventory control possible.
That, along with vast wholesale purchasing power, allowed lower prices for customers.
Walmart today has 1.6 million U.S. employees.
When the PC was wedded to the Internet, the world changed profoundly in only a couple of decades.
Jeff Bezos saw how the new technology could revolutionize retailing again.
Amazon today has 1.1 million American employees, second only to Walmart.
Its American customer base is about 255 million, about 75% of the country’s population.
In recent years, Elon Musk’s SpaceX has greatly reduced the cost of using outer space, thanks to the reusable rocket.
We can expect more fortunes—and cheaper goods and services—as a result of this innovation.
Artificial intelligence is profoundly altering the digital universe, with the promise of ever greater computing power.
All this wealth creation is ultimately capital formation.
Billionaires don’t keep their wealth locked in Scrooge McDuck-style money bins.
They invest it in ever more wealth-creating enterprises.
Capital and labor are the two fundamental inputs into an economy.
Many on the left, unable to distinguish between wealth aggregation and wealth creation, want to tax wealth heavily, which would reduce the available capital needed to make the economy grow.
If there was ever a prime example of ideology blinding people to reality, this is it.
Mr. Gordon is author of “An Empire of Wealth: The Epic History of American Economic Power.”
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