We Built It

November 14, 2012 § Leave a comment

Introduction and Excutive Summary

For the past few weeks I have been thinking about the slogan war that raged during the last part of the presidential election contest between the Republican Convention’s mocking cri de coeur, “We built it” and Obama’s matter-of-fact comment about the highway system, “You didn’t build that.”  Like many political cat-fights, this one was based on a simple-minded distortion of rhetorical context.

As I watched it play out, however, I thought it hinted at a more interesting idea.  It seems to me that our culture has perpetuated a myth, nurtured and promoted by corporate business leaders and retainers;  transplanted from our frontier past; that financial success in America is a product of “rugged individualism”. That capitalism, if left unfettered by government, frees the creativity and effort of individuals to thrive and create a just and desirable society.  Ayn Rand and acolytes like Paul Ryan profess a pure version of this myth, without relating it to our specific history.

I think Obama’s comment about the highway system merely scratched the surface of the reasons why this “we built it” claim is nonsense.   Without government, neither capitalism nor any other orderly economic system could function.  In the following post I will offer the proposition that capitalism in the United States was, from the beginning of our country, launched and periodically nourished with government money.   Every aspect of its strength depends and has, from its inception, depended upon support and protection by and from the government.   Its ability to survive has only been threatened by its own self-destructive inclination to implode when insufficiently regulated and restrained by government.  In other words, for better or worse, the “we’ in the GOP’s slogan, when properly understood, is “we, the people”, not “we”  the capitalists.

Professor Webb and The Frontier

My thinking about all this has been informed, in large part, by a little book published in 1937, by Walter P. Webb, a history professor at the University of Texas.  In “Divided We Stand”, Webb began a discussion of the effect of the Western Frontier on America’s economic system.  In a later, longer book, The Great Frontier”, he expanded that analysis to include the impact of our Frontier on the entire industrialized world.  In a later post, if I find the energy, I will enlarge on some of the ideas in this post based on that later book.

In “Divided We Stand”, Webb reminded us that the vast expanse of the North American continent west of the original thirteen colonies belonged to the American government,  acquired by purchase and conquest.  He wrote that, although Alexander Hamilton initially proposed to sell it, piece by piece, to those who sought  to occupy and use it, that idea never caught on.  So, the government’s backup position was to apportion its ownership by essentially giving it  to anyone who claimed it and offered some evidence of an intention to use it except for huge parts that were granted to people and entities chosen because of some perceived purpose beneficial to the citizens who made up the government.

The Railroads

Some of these latter grantees were the companies who built the transcontinental railroads, owned by  a group of wealthy people whose fortunes became seed money for American industrial capitalism.   Those railroad builders were given twenty sections [a section is 640 acres]  favorably situated along each mile of track.  In addition, the government paid $16,000 for each mile of track through the plains; $32,000 for each mile through the foothills; and $48,000 for each mile through the mountains.  The Union-Pacific and the Central Pacific received land grants greater in size than the state of New York, 33,000,000 acres.  The amount of land granted to all of the railroads equaled an area greater than France.  Sure, they “built it”, but “we, the people” paid for it.  And, by the way, Irish, Eastern European and Chinese immigrants  really built it.

The Cattle Empire

Here’s another example of how the largesse of the American frontier acted as a giant stimulus for the creation of a significant part of American capitalism.  The myth of “rugged individualism” is nowhere so proudly claimed and widely admired as in West Texas.   The great cattle empires flourished there.  Hundreds of Hollywood movies taught us how the tough ranchers fought off the Indians, hung the rustlers and built legendary herds of Longhorn and, later,Herefords and Santa Gertrudis cattle.  But Webb points out that they were able to build that empire because they got the land for nothing.   The Great Plains were a “sea of grass” when those nineteenth century cattle ranches were established, before the plow and the tractor, based on questionable judgment about the best use of the land, turned the area into farms.  So, those early cattle barons got free land and free food for their cattle.  Again, “we, the people” had an important hand in launching that part of American capitalism.

Land Titles and Land Values

Hernando de Soto wrote a book, “The Mystery of Capital.  Why Capitalism Triumphs in the West and Fails Everywhere Else”.   He offers persuasive evidence that capitalism only works when the government furnishes a basis for trustworthy land titles.  Capitalism depends on capital; i.e. money available for starting a business and , after it is launched, expanding it.  When capitalism was taking root and beginning to flourish in America,  money was based on land.  But land was of limited use if it could not be used as security for borrowing money.   A small farm might afford a family sustenance in exchange for work, but if it could not serve as a basis for borrowing money, it could not serve as a launching pad for a business.

De Soto uses the history of North American statutory land law as a basis for his thesis.  He describes how the parceling out of the American frontier resulted in the creation of huge amounts of wealth because it was accompanied by federal legislation that enabled those who acquired land and mineral rights from the government, to get formal, written evidence of title to that property from the government so that it could be pledged as security for borrowed money and could be transferred to other owners based on its market value.

With government-designed systems of land titles, land is convertible into money.  Without it, land is merely a job for those occupy it.

TheWindfall

In Professor Webb’s later book,  “The Great Frontier” he relates the origin of term “windfall”.  In Britain and Continental Europe, when land was closely held in fiefs owned by feudal lords, the peasants who lived on it depended on the protection and support of those owners for their lives and sustenance.  They had no right to the game that inhabited the land, nor did they have the right to cut down the trees that grew there.

But, from time to time, strong winds would blow across the land, causing branches to fall from the trees.  The peasants and their families could then repair to the forest and gather that “windfall” to stoke their fires.

The American frontier was a vast windfall, laden with coal, iron ore, gold,  and silver, there for the taking by immigrants from Europe and refugees from the East Coast colonial settlements.   Feudalism could  not compete or coexist with such a bounty.   Our government simply gave it to all comers.   It is strange to me that this historical sequence of events, which only ended about 1890, when the frontier’s windfall was finally exhausted, has been so forgotten and ignored that, during a presidential election,  journalists and politicians could trade arguments about whether American capitalism is an amalgam of individual efforts by individual citizens, rather than the result of shared efforts of millions of Americans, acting individually, but also collectively  through their self-created government.

Epilog

The foregoing post only refers to one part of Professor Webb’s argument in “Divided We Stand”.   I intend to to offer some thoughts about the additional ideas in his book in a later effort.

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