An Empire Of Wealth

PrintPrintEmailEmailI have now been writing about the American economy and American business in this column for 15 years and enjoying every column inch of the job. One might think it would be a rather narrow subject, or even dismal, to use Thomas Carlyle’s famous descriptive. In fact it is just the opposite, for economics, properly considered, goes to the heart of what it means to be human. If our species only occasionally deserves its formal Latin name, Homo sapiens , we are always—rich and poor, smart and dumb —members of the species Homo economicus . Getting and spending are as necessary to life as breathing and sleeping.

Thus, under the rubric of the history of the American economy, I have been able to write columns on such diverse subjects as Liederkranz cheese, Rodgers and Hammerstein, clipper ships, the Puritan settlement of New England, J. P. Morgan’s librarian, “I Love Lucy,” diet fads, major-league baseball, wampum-counterfeiting machines, wooden-navy boondoggles, and Jerome Kern’s book collection. But perhaps what is most remarkable about the American economy is the fact that 400 years ago it didn’t even exist. How, in a historical eye-blink, did a wilderness lightly populated with mostly hunter-gatherers turn into an engine of wealth such as the world has never seen? That is a subject far too vast to be tackled in a column, of course, but I have tried to cover it in a new book, just now out from HarperCollins. It’s called An Empire of Wealth: The Epic History of American Economic Power.

The “empire” in the title comes from the fact that while the United States is, by far, the most powerful country in the world, it has no empire and never has had. The United States, after all, has only 6 percent of the world’s land area and 6 percent of its people, almost all of whom speak English and regard themselves as American. However, we conquered the world economically and have about 30 percent of the global gross product. While it was the Roman legions who Romanized the Mediterranean basin 2,000 years ago by force of arms, it has been U.S. entrepreneurs who have Americanized the modern world, through such means as blue jeans, Hollywood movies, Coca-Cola, rock ’n’ roll, automobile assembly lines, and computer chatrooms.

To be sure, we began with enormous advantages, especially a vast, temperate, and largely well-watered land rich in natural resources. Still, Argentina has those advantages (and hasn’t fought a protracted war since 1870), yet it has struggled through most of the last century just to avoid utter economic disaster. Its gross domestic product is less than a third that of the United States per capita.

The reason for much of the difference between Argentina and the United States, I think, is the two very different European countries we are the children of. Spain’s government, which was nearly constantly at war with Muslims for more than 500 years, was very hierarchical. Power was concentrated at the top in the person of the king. He granted little, if any, self-government to the New World colonies. Spanish society, meanwhile, was rigid with largely uncrossable class lines.

On the other hand, in the early seven-teenth century Britain, protected from invasion by the English Channel, did not have a standing army. Further, it could afford the luxury of decentralized government. The running of local affairs had always been left largely in the hands of local people, with little interference from the king unless there was serious trouble. British society was also the most fluid in Western Europe. Marriage alliances between bourgeois and gentry families were far more common in Britain than in other countries. Thus talent could more easily rise to the top.

Britons became used to this state of affairs and deeply antagonistic to attempts to change it. The British who settled what would become the United States brought these ideas with them and applied them to the new situation in which they found themselves. That situation, to a remarkable extent, resembled Britain’s, only on a much grander scale. In addition, until the second half of the twentieth century, North America was largely immune from foreign attack. Thus the hand of government (and therefore the taxman) could lay very lightly indeed upon it. That is always a powerful plus for economic development.

THE NORTH AMERICAN COLONIES WERE FOUNDED NOT BY THE BRITISH STATE BUT BY PROFIT-SEEKING CORPORATIONS.
 

Furthermore, while France and Spain tightly controlled emigration to their New World colonies to ensure both political and religious orthodoxy, Britain took a different approach entirely. In fact, the British state did not even found the various North American colonies. They were established by profit-seeking corporations such as the Virginia Company and proprietors such as Lord Baltimore and William Penn. There were often other motives besides profit, of course, but profit was always part of the picture. As William Penn himself explained, regarding his “holy experiment” in Pennsylvania, “Though I desire to extend Religious freedom, yet I want some recompense for my trouble.”