Few professional economists will say that the market shapes the economy to the exclusion of the government. But many op-ed writers, newspaper editorial page editors and columnists, and think-tank myrmidons will say it. Perhaps they will put it in this way: All government ever does is mess things up. Whatever the government does to shape the economy will go badly awry.
It really should not be necessary, here and now in the twenty-first century, to demonstrate the propositions that the unregulated market does not always get it right, that a well-functioning government is an essential support for a prosperous economy, and that a great deal of the difference between different countries' levels of prosperity comes from whether their governments have made wise or foolish strategic choices. But, here in America at least, it is necessary to demonstrate these propositions.
Thus we need to rebut the nihilistic presumption about the role of government. This task is best accomplished by a look back at our history, for the common stock of knowledge about American history provides enough common ground to make the demonstration convincing. Not only has government made a difference in the history of the development of the American economy, but the pattern is that the government made a large, positive difference--that, historically, the way to bet is that any piece of large-scale intelligent design of the American economy made by the government has turned out, in retrospect, to look pretty smart.
The very first place that government made a difference is that the financial and commercial capital of the United States today is not New Orleans but New York, and the political capital of the United States is not Mobile or Memphis or St. Louis but Washington, DC.
If government did not make a big--and positive--difference, it would not have been so.
Any geographer looking at North America sees an enormous concentration of natural resources--fertile agricultural land and rich ores located near both the surface and navigable water--in the upper reaches of the great Missouri-Mississippi-Ohio watershed and around the Great Lakes. This pattern is still very visible in the geographic concentration of agriculture in the United States today:
The Appalachian Mountains bar access to this heartland from the east and the southeast. Seasonal ice and Niagara Falls block access to this heartland from the northeast. But the entire area is wide-open to easy water transport from the south, up the Mississippi, and even up to the northern shores of the Great Lakes via the South Bend, Chicago, or Fox Portages. Any geographer, therefore, would locate the commercial--and hence industrial, and hence financial--capital of the United-States-to-be at the mouth of the Mississippi, near New Orleans, with the political capital either there or somewhere up the Mississippi to be near the centers of agricultural production.
The land area that was to become the United States was discovered by sailors and conquistadores from western Europe around 1500. Four European nations attempted conquest and settlement--Spain, France, England, and Holland (which was quickly swallowed up by the neighboring English settlements, as New Amsterdam became New York).
The Spanish and French built at least some of their port-forts on the proper, southern, Gulf Coast of America, from which broad slow rivers allowed rapid, cheap, and easy movement inland. They thus had for free what in the end New York, Pennsylvania, and other states of the United States would have to make enormous investments, like the Erie Canal, the ill-fated Allegheny Portage Railroad, and the even worse-fated Chesapeake and Ohio Canal, to gain: a water route to the resource-rich midwestern heartland.
The English (and the Dutch) built their port-forts on the wrong, eastern, Atlantic Coast of America, on which ships probing upward along the rivers soon encountered rapids, and beyond the rapids came the mountains: the great Appalachian Range. If the game is to get settlers to a place where the land is rich and fertile, the game is to get settlers to Ohio, Indiana, Illinois, Kentucky, Tennessee, Missouri, Iowa, Nebraska, Kansas, Louisiana, Mississippi, and Alabama. And here Gulf Coast settlement provides a major advantage. The settler agricultural economies possible in the seventeenth, eighteenth, and nineteenth centuries were far from self-sufficient. Their spearheads required the weight of full spearshafts behind them, in the form of a steady supply of largely hand-made manufactured goods--high-tech for their time--from Eurasia.
Thus the logic of geography suggests that the largest city of colonial America really ought to have been New Orleans. Outside of California's Central and Oregon's Willamette Valleys, America’s agriculture is Midwestern agricuture. The slow-moving Mississippi, Missouri, and Ohio Rivers offer extraordinary highways into the enormous regions that are among the best agricultural regions of the world. Even turn-of-the-20th-century railroads could offer little additional in terms of ease of transportation: that was the point of Robert Fogel's Nobel Prize-winning Railroads and American Economic Growth.
Yet settlement from the Gulf Coast was not the way it happened.
But the Spanish and French governments ignored their potential colonists outside the fort-ports they established--St. Augustine, Mobile, New Orleans, and so forth. The English crown in London, and then the Engish colonial governments in North American ports, and then the government of the United States, by contrast, provided a very visible hand in support of colonial settlement--and, of course, a mailed fist directed against the North American continent's thirteen-millennia-in-possession Amerindian inhabitants. Spain and France bet on "extractive" modes: treasure theft and forced-labor mining and plantation agriculture and long-distance trade of valuables (beaver fur, for example). England and Holland bet on "developmental" modes: populating the Atlantic seaboard with colonies based on staple agriculture and yeoman settlement (with the United States south, as is often the case, special and deviant). And the pattern of government policy trumped geography and place of initial settlement.
Spain's Council of the Indies knew about the Mississippi Valley since Hernando de Soto's thousand-man expedition of 1540. But the Spanish authorities in charge in the sixteenth, seventeenth, and second half of the eighteenth centuries and the French authorities in charge in the first half of the eighteenth century followed policies that did not design a settler economy. Thus better agricultural land and better water transportation than was available east of the Appalachians did not lead to more settlement: New Orleans in 1800 did have 10,000 people, but St. Louis had only 1000, Chicago did not exist. Cincinnati, Pittsburgh, and Nashville were then villages--and being settled not by French- or Spanish-speakers from the southwest but from the east by English-speakers treking over the Alleghany Mountains and through the Cumberland Gap.
By contrast, New York in 1800 had 80,000 people, Philadelphia 40,000, Boston 25,000, and Charleston, SC 20,000.
There were thus 165,000 people in cities of 10,000 or more east of the Appalachians in 1800. All of them were then cut off from what was to become America’s productive heartland. There were only 10,000 people in cities with easy access to what would become the farmbelt.
The overall population mix disparity in 1800 was the same. That year saw 5.0 million people of recent European and African descent settled in the original thirteen states, with only 300,000 in the Missouri-Mississippi-Ohio Valleys. That this slow population growth in the Mississippi-Ohio-Missouri was the result of policy rather than geographic constraint is made clear by the speed with which it changed once the pro-development United States government asserted its right to govern the trans-Appalachian west. As the United States took control of the formerly French and Spanish claims, it re-designed their economies, and America's Old Midwest and Old Southwest flourished. By 1860 New Orleans had 170,000 people, St. Louis 160,000, and Chicago 110.000. Cincinnati had 160,000. Pittsburgh had 80,000. Cleveland had 40,000. Of the 31 million people of recent European and African descent in the United States in 1860, 14 million--45%--lived west of the Appalachians.
There is no geographic reason why that relative population distribution could not have been not the distribution of 1800. It was the contrast. The British deciders in the thirteen colonies and their successors in the United States believed in and acted to make Manifest Destiny via agricultural settlement a reality. The Spanish and French deciders who controlled the mouth of the Mississippi up to 1803 did not. They did not support exploration, infrastructure port development--and they supported peaceful coexistence with the Amerindians, rather than war and removal. Their focus was on ruling and exploiting the agricultural populations of Mexico and Peru, seizing gold and silver, developing sugar colonies on the islands, and engaging in high-value trade with indigenous peoples, not in building a yeoman settler-based economy.
All of this is elementary history, yes. All of this is obvious and trivial, in one sense. But in another, it is not. Whenever anyone tells you that government is not an essential part of successful economic prosperity, remind them of St. Louis: 1000 people in 1800, 160,000 people in 1860.
1503 words
What about malaria? Wasn't that a major barrier to European settlement in the South? Could this have played a role in shaping French settlement policy in the Mississippi valley?
Posted by: Ian Ramjohn | 08/17/2013 at 07:03 AM