Why Not Up the Mississippi?: Outtake from Cohen and DeLong, Concrete Economics

The conventional–pioneer–wisdom in American history is, still, that independent, entrepreneurial people settled the continent in small farms and established this civilization, pulling themselves up by their own bootstraps and building things through their own energy and enterprise, aided by democracy and the legal infrastructure of the free market.

This, of course, misses three big and immediate things:

• First, the Amerindians who had been 12000 years in residence rightly objected–both to the plagues the European settlers brought that decimated their populations and then to the form the civilization being built took. Behind small-farm settlement stood conquest–and conquest requires governments and armies, not free-market association and catallaxy.

• Second, a great deal of the surplus generated by the American economy–and used to finance its development–up to and beyond 1865 came from slavery–once again, not a free-market institution by any means.

• Third, conquest and slavery do not by themselves build a prosperous economy, let alone an economy as prosperous as that of America today. Behind small-farm settlement stands an enormous public-sector governmental framework of institutions, infrastructure, and incentives necessary for an economy to be truly developmental.

As we have argued elsewhere, to a truly remarkable degree all United States citizens today owe that framework to the one single individual who may have made a significant difference in American political economic history, Alexander Hamilton—although even he needed his followers and successors to make a durable impact.

But, before there was a Hamilton, before there was a United States of America, there were earlier deliberate shapings of the economy of North America-to-be. These shaping were carried out by the colonial powers who ruled North American: Spain, France and Britain–and, in the end, especially by the British politicians who decided on the form that the British colonizing effort in the Americas would take.. Their plans and powers resulted in a pre-revolutionary American economy that was quite different in where it was located and how it was organized from what nature–also known as economic geography—-would appear to have intended.

Back in the 17th century the British government made the decision that its colonial policy would be to bet on populating the Atlantic seaboard–at least the Atlantic seaboard north of Virginia–with colonies based on staple agriculture and yeoman settlement, rather than with colonies based on treasure theft, on forced-labor mining, on slave-plantation agriculture, or on long-distance trade:

• To some degree, this was a matter of necessity: Britain being late to the American colonial enterprise, It had to take what was left over.

• To some degree, this was because the British government was not an absolutist one with Bastilles available, and it seemed wise to try to diminish domestic tensions by subsidizing the emigration of especially-vocal malcontents–whether Puritan, Quaker, or Catholic.

• But mostly this was a matter of policy: from the days of Francis Drake on British expeditions to the Americas carried colonists rather than plantation owners and conquistadores, or rather than missionaries and coureurs du bois.

Thus Spanish and French, governments largely ignored their potential colonists outside the forts, ports, and trading posts they established–St. Augustine, Mobile, New Orleans, etc. They largely eschewed support for yeoman settlement and staple small-farm agriculture. They pushed for resource exploitation via long-distance trade, treasure-theft, extractive and exploitative plantation agriculture, and mining. And these industries were accompanied by extractive political-economic institutions. They were tuned to maximize the short-run financial flow to the metropole and the chances of proconsuls being able to return to the European capital with their fortunes in a decade or less. This did not provide a large incentive for French and Spanish subjects to migrate and large numbers. This did not provide a large incentive for those who did migrate to stay.

The English governments, by contrast, provided a very visible hand in support of colonial settlement–and, of course, provided a mailed fist directed against the North American continent’s Amerindian inhabitants. This mattered enormously.

The English settled the wrong, eastern, Atlantic coast. Ships probing upward along the rivers soon encountered rapids, and beyond the rapids came the mountains: the great Appalachian Range. The Spanish and French built their port-forts on the proper, southern, Gulf coast of America. From that base broad navigable rivers allowed rapid, cheap, and easy movement inland; culminating, of course, in the unique Mississippi-Missouri-Ohio River. Spain had, of course, known about the Mississippi Valley since Hernando de Soto’s thousand-man expedition of 1540.

Gulf of Mexico-based settlement provided 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 Europe.

Thus the southern, water road to the most fertile and valuable parts of agricultural America was the obvious and optimal one. A simple glance at the map of where U.S. agriculture is today tells the story. America’s prime agricultural resources are in the watersheds of the St. Lawrence, Mississippi-Missouri-Ohio, Sacramento-San Joaquin, and Columbia Rivers–not east of the Appalachians:

Expansion up the Mississippi from the south seemed natural. Expansion from the east across the Appalachians seemed not. And those who crossed the Appalachians would do so without a sound logistical tail. And without secure transport links behind them, such migrants could be, at best, itinerant trappers and woodsmen–not agricultural settlers.

However, the Spanish authorities in charge along the coast of the Gulf of Mexico 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, did not design a settler economy. Thus the initial British governmental decisions to design their version of colonial America by yeoman settlement made New York City rather than New Orleans or St. Louis the economic capital of America. It changed the destiny of the continent. Government trumped geography. And government trumped geography because the British colonial government made it so, while the French and Spanish colonial governments did not.

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. Thus while the logic of geography strongly suggests that the largest city of colonial America really ought to have been New Orleans, that was not the way it happened. Better agricultural land and better water transportation than was available east of the Appalachians did not lead to mass settlement: New Orleans in 1800 did have 10,000 people, but St. Louis had only 1000, Chicago did not exist, and Cincinnati, Pittsburgh, and Nashville were then villages being settled not from the southwest but from the east by people trecking 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: 165,000 people in cities of 10,000 or more east of the Appalachians, and so (then) cut off from what was to become America’s productive heartland, with only 10,000 people in cities with easy access to what would become the farmbelt. The overall population mix disparity was the same: 1800 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.

As of 1800, the European colonization and settlement of North America had, from the perspective of matching colonists to where the resources and the logistic and transportation avenues were, completely wrong.