Free States, Free Enterprise

“America; where people do not inquire concerning a stranger ‘who is he,’ but ‘what can he do?’” Benjamin Franklin

Last week’s post included quotes from several college history textbooks, all of which claim that America’s fantastic economic growth was achieved, during the nation’s first few decades, by the ruthless exploitation of slave labor. While it is certainly true that slaves were ruthlessly exploited in our nation’s early history; it is not at all true that the slaves, their white exploiters, or the lands they farmed were the real drivers of America’s economic growth.

From the time the nation was founded the real wealth creation happened almost exclusively in the Northern states, where slavery was never very common, and where it was made illegal early. The rapid growth in productivity and prosperity that made America the envy of the rest of the world was made possible by legal and cultural conditions unique to the Northern “free” states. The Southern states lagged behind (as did the rest of the world) because Southern culture was hostile to all the things that made the North thrive. It also happens to be true that many of the North’s leading entrepreneurs were passionate abolitionists.

A Clash of Cultures

In the anti-bellum South, the aspiration of every white man was to “be somebody.” Being somebody, as it was defined in that culture, meant having the power to command other people to work on your behalf. In the North, as Ben Franklin tells us above, the emphasis was on doing, not on being.

Franklin, who lived in Philadelphia, summed up the philosophy that drove American entrepreneurs like himself with a few well-chosen words in his unfinished but invaluable Autobiography:

My father having, among his instructions to me when I was a boy, frequently repeated a proverb of Solomon “Seest thou a man diligent in his calling, he shall stand before kings, he shall not stand before mean men,” I from thence considered industry as a means of obtaining wealth and distinction, which encouraged me, though I did not think that should ever literally stand before kings, which, however, has since happened; for I have stood before five, and have even had the honor of sitting down with one, the King of Denmark, to dinner. (Italics in the original)

By 1861, the year the Civil War started, the North was not only far wealthier than the South, it was much more densely populated. The greater productivity of Northern farmers made it possible for fewer acres of land to feed more people, while the rapid expansion of industry created jobs and attracted workers. The population of the eleven Confederate states in 1961 was nine million people, of whom over a third were slaves. The Union states, with only a slightly larger total land mass, had a population that had, by this time, swelled to some twenty-two million. The disparity in population would not be the only advantage the Union gained from its free enterprise culture, but it was a significant advantage.

The Confederate army was able to fight a defensive war on Confederate soil, with the advantages of familiar territory, sympathetic civilian population, and shorter supply lines; yet it was the Union invaders that were always better armed, better fed, and better equipped than the home team. The Union army had huge advantages in transportation, communications, and weapons technology; and funding from wealthier and more numerous taxpayers. Agricultural technologies allowed Northern farmers to produce more food with fewer men, leaving more men available for military service. The affluence, technologies, and productivity of the Northern states allowed the invasion of the South to be successful, and those advantages all derived from free enterprise.

Free States, Free Enterprise

Businesses in America’s free states have always been able to create jobs and generate wealth at a world-beating pace. (Most of the Southern states did not fully join the ranks of “free” states until around 1970; but that will be the topic of a future post.) The real story of wealth creation in America is a story of entrepreneurial enterprise, and the most enterprising Americans were usually men who grew up in poverty and set out to build something better by their own efforts.

John Jacob Astor, for example, was the son of a hard drinking and less-than-prosperous German butcher. He immigrated to the United States in 1784, at the age of twenty, with the fifteen English guineas (about $2,000 of today’s money) that he’d been able to save up in the four years since he left his parents’ home.1 He worked at odd jobs in New York for about a year, they set off into the wilderness to trade with the Indians for furs. By his thirtieth birthday he had a fleet of trading ships carrying his goods across both oceans, and he had established the first United States outpost on the West Coast (called, appropriately enough, Astoria). When he died in 1848 he was one of the richest men in the world.

Robert Fulton was born in 1765 on a small farm in Pennsylvania. When he was six years old creditors foreclosed on his family’s farm, and his father, penniless, moved the family to a small town and worked as a tailor.2 In 1794 Fulton started working on designs for a steam-powered boat. In August of 1807 he put his first boat into commercial service. Like many other innovations in transportation and communications developed in the North, the steamboat made both its inventor and the nation richer.

Cornelius Vanderbilt was born in rural New York in 1794 to a family of modest means. In 1810, at the age of sixteen, he borrowed a hundred dollars from his mother, bought a small sailboat, and started a ferry service on the Hudson River. By 1818 he owned a fleet of boats, and was making the transition from sail power to the steam technology Robert Fulton had introduced. By the start of the Civil War Vanderbilt had a fortune of many millions, which he was using to buy and build railroads.3

John Deere was born in 1804 in Vermont. His father died when he was five years old, and he had to go to work at age eleven to help support his family. At seventeen he became a blacksmith’s apprentice. In 1837, while working as a blacksmith, he invented the steel plow that would, along with Cyrus McCormick’s harvester, vastly improve the productivity of American agriculture. He died in 1886, but the company he founded is still with us.

Most of the entrepreneurs who built this nation had similar rags-to-riches biographies. Samuel Morse was the son of a Calvinist minister; he was making his living as a painter before he changed the world by inventing the electric telegraph. Samuel Colt was an indentured servant as a child; he went on to become a millionaire after inventing the famous Colt Revolver. Andrew Carnegie had to work in a sweatshop at thirteen to help his parents put food on the table. He made his fortune in railroads, bridges, and then steel. John D. Rockefeller grew up in poverty and had to drop out of high school to go to work when his father abandoned the family; Rockefeller eventually replaced Carnegie as the “richest man in the world.” The list could go on for many pages.

Slave State Entrepreneurs

Very few of America’s great entrepreneurs started their careers in the anti-bellum South, only two come to mind; and both Cyrus McCormick and Eli Whitney Jr. had to move to the North to really prosper.  Amusingly, both of them ended up making major contributions to the Union side during the civil war.

Cyrus McCormick was born in Virginia, the son of a struggling farmer. After he invented his McCormick harvester he moved to Illinois to take advantage of a better business climate. His machine so revolutionized agriculture that Abraham Lincoln’s Secretary of War credited the McCormick harvester with making an indispensible contribution to the Union war effort.4

Eli Whitney Jr. invented and patented his famous cotton gin in Georgia in 1793, while working as a tutor. The cotton gin was a machine that separated cotton fibers from the cotton seeds, something that had always been so labor intensive as to make cotton cloth too expensive for widespread use. By making cotton a viable cash crop, Whitney gave Southern plantation owners a source of income they would depend on for decades. Unfortunately for Whitney, patent rights were hard to enforce in Dixie. Rather than using gins built by Whitney’s company, plantation owners would simply copy his design and process their cotton in home-made cotton gins operated in windowless factories, using slave labor. Because the Southern states did not allow slaves to testify in court, Whitney was generally unable to prove in court that plantation owners were violating his patent rights.5

Disgusted, Whitney moved up North to work on his next big idea. In Connecticut he developed machine tools that enabled him to mass-produce a product from interchangeable parts; something the world had never seen before. He called his company the Connecticut Arms Company, and the product he manufactured was military muskets. Eli Whitney Jr. was gone by the time the Civil War started, but by that time his machine tools and interchangeable parts concept had revolutionized manufacturing in the free states. And his arms company, under the direction of his nephew Eli Whitney Blake, was supplying the Union Army with mass-produced weapons.

When left-leaning scholars portray slavery as the basis of America’s economic power they are very far off the mark. To borrow a phrase from Tallyrand, slavery was “worse than a crime, it was a blunder.” The slavery system de-motivated the black population of the South by denying black people the right to enjoy the fruits of their own labors, and kept the slaves ignorant by denying them access to education. It de-motivated the white population via a perverse social code that made indolence prestigious and hard work degrading.

Pay no attention to what tendentious teachers say about it. The real foundation of America’s greatness has always been free people and free enterprise.

1John Upton Terrell, Furs by Astor, Morrow & Company 1963 hardcover, p. 22
2Kirkpatrick Sale, The Fire of His Genius, The Free Press, 2001 hardcover, p. 42
3Edward J. Renehan, Dark Genious of Wall Street, 2005 hardcover, pp. 100-102
4Ruby L. Radford, Inventors in Industry, pp. 45, 46
5Constance McL. Green, Eli Whitney, Harper Collins 1956, p. 80

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One thought on “Free States, Free Enterprise

  • last few days our class held a similar discussion on this topic and you illustrate something we have not covered yet, appreciate that.

    – Kris

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