As the Twig is Bent; So Grows the Tree: A Bottoms-Up History of American State and Local Economic Development

Among our Founding Fathers, George Washington is often cited as being. “First in War, First in Peace and First in the Hearts of our Countrymen”. To this I would add “First in American Economic Development”

Picture this!

George Washington, just retired commander-in-chief of the American army, three years after his Yorktown victory, a year after the Treaty of Paris that created our new American republic, the master of Mount Vernon, struggling in the early winter blasts of wind, frost, and a threat of snow on the top of a isolated Appalachian mountain peak, walking his horse, clambering over rocky uphill terrain  or pathless bramble full wind-swept flats, alone for three days after a wilderness expedition that had already lasted nearly two months?

What was he doing up there in this unseasonable October bleak period, in one of the most isolated places that existed in his young new republic–when he should have been harvested his plantation’s crop, or sitting in well-deserved retirement at its warm fireplace? The answer, revealed in this chapter, may be the best evidence I can cite to support my contention that Washington is the Father of American economic development.

What Washington found on that bleak, likely never traversed by a human, mountain top was his Holy Grail. He had successfully, in his mind at least, found a short portage route that connected his beloved Potomac River to the Ohio River watershed river system on the western slope of the Appalachians. From this mountain top his Potomac Canal could access the Ohio River straight to the Mississippi, and also to the Great Lakes. His dream of transforming coastal Virginia into America’s entry port into the vast hinterland of the new republic he had just created militarily could be implemented. With that spot identified in his map and plans, his investors and political supporters could begin construction.

The strategy they were backing–his dream in development for more than fifteen years– is presented in the next four statements below. Those statements, the first uttered a year before his mountain top climb (1783), to his final speech before Congress at his retirement from his second term as President in 1796, reveal the essentials of his economic development strategy-policy paradigm that dominated American economic development through the entirety of the 19th century.

I could not help taking a more extensive view of the vast inland navigation in these United States, and could not but be struck by the immense extend and importance of it, and the greatness of that providence which has dealt it favors to us with so … profuse a hand. Would to God we may have the wisdom enough to improve them. I shall not rest contented until I have explored the western country, and traversed those lines or a great part of them, which have given bounds to a new empire. [General Washington, Commander-in-chief Continental Army, Letter to Chevalier de Chastellux (Chief of Staff to French Expeditionary Army to America), October 1783 [written on an expedition exploring a Upstate New York immediately before Treaty of Paris]

I need not remark to you, Sir, that the flanks and rear of the United States are possessed by other powers–and formidable ones too …–nor need I press the necessity of applying the cement of interest to bind all parts of the Union together by indissoluble bonds–especially of bind that part of it which lies immediately west of us, to the Middle States. For what ties let me ask, should we have upon these people [western settlers], how entirely unconnected with them shall we be, and what troubles may we not apprehend, if the Spaniards … and Great Britain should hold out lures for their trade and alliance? What will be the consequences of their having formed close commercial connections with both, or either, of those powers? The western settlers (I speak now from my own observations) stand, as it were, upon a pivot. The touch of a feather would turn them either way. [George Washington: Letter to Virginia’s Governor, Jan 1785 [in support of Patowmack Canal appropriation]

Every portion of our country finds the most commanding motives for carefully guarding and preserving the Union of the whole. The North, in an unrestrained intercourse with the South, protected by the equal laws of a common government, finds the productions of the latter great additional resources of maritime and commercial enterprise and precious materials of manufacturing industry. The South in the same intercourse, benefiting by the agency of the North, sees its agriculture grows and commerce expand… The East, in a like intercourse with the West, and in the progressive improvement of interior communications by land and water, will more and more find a valuable vent for the commodities which it brings from abroad, or manufactures at home. The West derives from the East supplies requisite to its growth, and what is perhaps of still greater consequence, it must of necessity owe the secure enjoyment of indispensable outlets for its own productions to the weight, influence, and the future maritime strength of the Atlantic side of the Union, directed by an indissoluble community of interest as one nation. Any other tenure by which the West can hold this essential advantage, whether derived from its own separate strengths, or from an apostate and unnatural connection with any foreign power, must be intrinsically precarious. [President Washington, Farewell Address to Congress, 1796]

In a nutshell Washington’s economic development strategy: establish communication and access to promote commerce, which would bind the thirteen colonies  together–and more importantly cement western settlers into the frontier hinterland to the commerce and political union of the United States and thereby prevent their being used to set up independent and subordinate “states” to the European powers ranged on our western and southern borders.

Written during the Revolutionary War and Articles of Confederation period, they would become in the post-1789 Early Republic, headed by Washington, as the compelling need for a strong national Government, and a commitment to America’s first endorsed economic development paradigm: Settlement of the trans-Appalachian interior, transportation infrastructure to encourage such settlement, the promotion of manufacture and to sustained commerce between it and the coastal states in the Union, and land development to facilitate town/city-building sufficient to sustain this settlement and commerce and connect it to domestic trade and international commerce.

What Washington proposed was an economic and political ‘big bang” and “great leap forward” that settled a continent and point the American economy toward a new capitalist economic system based on trade, finance and manufacturing.

This economic development strategy nexus-paradigm, a national defense strategy using the soft power of economic development, to best preserve our newly-acquired independence from Great Britain and Spain and to bind together a young and divided nation with little history or identity as a nation.

Welcome to Our History:

As the Twig is Bent; So Grows the Tree: A Bottoms-Up History of American State and Local Economic Development

Let’s start with the obvious: I begin a long and complicated alternative history of the United States with George Washington. Ours is a bottoms-up, that is we look at the path of American history not from the vantage point of the American nation, but from each of the thirteen colonies-states and their family of children, their sub-regions, cities, town and rural areas. Throughout this entire history, when I refer to “bottoms up”, I am really calling attention to federalism, and its centrality in understanding our national history. My bottom line in this history hardly ever deviates from my central perspective that our continental nation is, and hopefully always will be, a federal union.

In this volume we examine how the heritage and experience of British colonial America was incorporated into the the formation of American states, their constitutions, their economic bases, and state and local policy-making systems.

When we discuss the Articles and the Early Republic we first focus on how these thirteen colonies forged a national government, and how they transformed themselves into thirteen states. I will argue they did so through in large–but not complete–measure, through the formation and implementation of the United States first “modern” economic development paradigm–a nexus of economic development strategies that little known to most of us was assembled by none other than our first president. How and why Washington constructed this strategy paradigm is our introduction to a more complex story of how American federalism evolved to the present day.

George Washington, that marble statute, stoic, humorless non-personality with wooden teeth (Not!), that “dead President that peaks at us from the dollar bill was not just the commander-in-chief of the American Continental Army. He was also the Army commander that retired to private life in 1783 after the Paris Peace Treaty with Great Britain, not to farm at Mount Vernon, but to complete the formulation of an economic development strategy.

That strategy (succinctly captured in the three quotes that open this module), he hoped, would unify the disparate sections and peoples of our very new nation, but would also combine their isolated and segmented economies into a more coherent growth machine that would trigger and sustain the settlement the interior of our continent, until stopped by nature and oceans. He wanted this, he said, because it was best possible program for national defense against hostile European powers on our borders, but in the back of his mind the hope that in so doing it would make him a fortune. In one sense it did.

On his death the Library of Congress estimated from 1747 to 1799, Washington had personally surveyed more than 200 tracts of land of varying size, and held title to sixty-five thousand acres in thirty-seven different locations.

Bernard Bailyn noted that George Washington ‘wrote enthusiastically in 1767 about an opening prospect in the back country for adventurers, where numbers resort to, and where an enterprising man with very little money may lay the foundation of a noble estate. Anyone, he declared, who neglected the present opportunity of hunting out good lands and in some measure marking and distinguishing them for himself (in order to keep others from settling them) will never regain it'” [1]

But the desire for private profit even in those early years was also infused with a public purpose. Whatever private motivations underscored his 1754 mission, that mission was at the behest and advantage of his home state. his post-Revolutionary War mission meant to bring to completion a dream he first articulated exactly thirty years previously (1753), to Virginia’s Governor Dinwiddie who had hired him to enter into the wilderness to negotiate with the French and secure Virginia’s right to the trans-Appalachian North American continent. So began the French & Indian War.

That early story, the prequel to the story told our opening modules is detailed in a module in chapter one (George Washington Crosses Over the Proclamation Line). Our opening story picks up that tale upon Washington’s retirement as commander of the Continental Army in 1783. The story ends with a whining Washington complaining to James Madison about the inability of the states, and the Articles of Confederation to devise and implement a comprehensive and effective cooperation to implement his mission, to bind together the new nation, create economic growth, settle the interior of the nation–as the best, probably the only strategy that would preserve its independence and relapse into subsidiary subordinate association with the none-to-happy British and their Spanish allies. His economic development strategy was also the best defense policy the new nation could pursue–a economic and defense strategy the Articles simply did not have the capacity to carry out. From that whining, Madison and a fellow from the North, Alexander Hamilton, former aide-de-camp to Washington set up a series of meetings that led to the Constitutional Convention that wrote our Constitution, a convention BTW which was presided over by our Father of American Economic Development.

George Washington: Father of American Economic Development

A Man with a Mission that Morphed into the Midwife of the American Constitution and an Economic Development Paradigm that Dominated America for over a Hundred Years

This is a story not usually told in textbooks, and it is likely new to most who read this history. It is not new to historians, nor is it a story that was unknown to Americans of that time period. Washington’s impact on economic development did not go unrecognized back then. Washington strongly and consistently advocated for what they then called “internal improvements”–which encapsulized a number of ED strategies, programs and goals (today we narrow it to roads, canals, and railroad). The Early Republic “think tank” devoted to “internal improvements, “America’s foremost bastion of intellectualism as well the Pennsylvania Society for the Promotion of Internal Improvements [2] looking back over the past history of American internal improvements attributed the “internal improvement movement” founder to be none other than “in the states of Virginia and Maryland upon the Potomac under the auspices of the illustrious Washington,” “with noble emulation of the public spirit [spread] to other states according to their natural advantages” [3].

What has been lost in the fogs of history was that much of Washington’s strategy paradigm was the economic gazelle of the day: land development. We were in our first hundred years one land bubble after another. Land development was America’s first popular stock market. The commodity in question was not company ownership (companies did not exist as we know them today), it was land ownership–and it was the key to our multi-class American Dream. Everybody, and I mean everybody, speculated in land. George Washington was arguably the richest man in America; but his wealth was based on land ownership, lots of it. To be rich in our terms, he needed to sell it to someone so he could profit from it. To sell the land, his clients had to get to it, and hope that once built upon someone wouldn’t burn it down. But let’s not get ahead of ourselves–this is a complicated paradigm with many moving parts, not all of them pretty to look at. The point is Washington’s story which we shall start shortly brings to light an unappreciated importance and a critical role in the development of the Early Republic. If he had not been president, we could have easily chosen a vastly different path, with remarkably different consequences. We were never foreordained to be “exceptional”.

It is sad to say a story that was eclipsed in the last hundred years or so by a history of our founding dominated by political rights (or their lack) and legal issues, and the personalities that meaningfully impacted the writing of our Constitution. They are our Founding Fathers, you know the ones who wrote the Federalist Papers, and the ones that populate our present popular histories and Broadway plays. Washington did not participate in writing the Constitution; that was not in his skill set. He was a “businessman” of the day, what we today would call a real estate developer and secondly he was a Virginia plantation owner; he was our first businessman as president–certainly not the last–but his businessman background now takes second place to his role as commander-in-chief.

Since politics was never his forte, he was a terrible public speaker, who relied on his own experience and skill set to embrace programs and strategies that he delegated to others to secure approval and implementation. So it is Hamilton’s National Bank, although in this history the reader will discover that image is more myth than fact. In any case, in 1783 few Americans had any real concrete sense of what lay beyond the Appalachians and between the Pacific Coast. One of the few exceptions was Washington who in his life had already upon assuming the Presidency had traveled to each of the states in existence and at least three not yet approved. George Washington was not only a businessman, he was a frontiersmen as well.

[Washington] was obsessed with the idea of amassing land in the West, tremendous amounts of it, putting it all under cultivation and brimming commerce and people there. This cycle of acquisition and development began very much as the expression of a ‘private’ self, of private ambition and private interest. He was fully determined that it should bring him wealth, possessions and status. He would, in fact, expend much time and effort on this, revealing considerable executive capacities … while some of his dealings–especially with men who seemed to get in his way of his projects and ambitions were exceedingly sharp and even ruthless. … Meanwhile his mind brimmed with designs of access and transportation y land and water [which] … would require an ever-widening network of cooperation from neighboring communities for opening up the western country [4]

That he could sense what the United States could be far exceeded that of his Founding Father compatriots–he saw in from the ground in real time. That was the basis and source for his policy and strategy-making. The core of that was to become our first economic development strategy paradigm–which Washington brought to New York and Philadelphia in the new Early Republic. As part of that strategy he created a new coastal port, which BTW was also to function as the nation’s new capitol. He hoped his home state, Virginia, would draw prosperity and national preeminence from that coastal port, current day Alexandria. We shall discover in later chapter that was not to be.

Immensity of the Task–What should we look for in our post-1783 Tale of George Washington?

I suspect most of us would easily concede that our independence in 1783 was fragile indeed. We had outlasted the British in a war of independence, during a period of volatile British politics in its own transition. And we didn’t do it on our own. The French navy actually beat the British off Yorktown, a rare naval victory for France. But hostile global politics and vulnerable new nation aside, there was an even larger change: the “old world” was ending, and the modern one, at least the early modern age was beginning. The developed world was shifting political, economic, and even social systems away from the thousand year old medieval world to something else.

Capitalism and democracy were both new and incrementally laying the foundations for a new order; the Enlightenment did the same for both the rule of law and scientific intellectual “rationality”; the rise of the individual emerged from the combination of these dynamics. We don’t much give Washington credit for he was a creature of the old world, that saw the new one coming and as Bob Dylan advised in his song, he recognized the “first would be last”, and was determined to find his own path so he was part of the former.

He didn’t just step out of the way; he led the way into the new world. His form of agricultural capitalism could tap into the more radical features of the immigrant American dream and. partially, channel them into the capitalist system through land ownership. Washington’s version of Jefferson’ yeoman husbandry, the silent end-user of his economic development paradigm created a middle class from the horde of western immigrants that in 1789 did not exist.

That a slave-owning Virginian plantation owner, not the shipping magnate John Hancock, or the budding J.P. Morgan, Robert Morris from Philadelphia, defined American capitalism in the Early Republic would prove crucial in the politics, policy-making and economic development for America’s seventy-five years. It would lay the foundation for what followed after that. Yankee Doodle became the song we identify with the American Revolution, not the “Marchons, Marchons” of the Les Marseillaise.

Say it another way, new political policy systems, economic bases, and social-political cultures were evolving. The American Revolution was the most moderate of the British, French and later Russian Revolutions–arguably because it was “interrupted”. Washington was the symbolic and formal leader of those forces that inserted a pause button on the revolutionary process. That pause he inserted lasted little more than a decade, but it tempered the more egalitarian revolutionary dynamics and diverted them into a vast and sustained “diversion”: the settlement of the trans-Appalachian west and at least partial fulfillment of the immigrant American Dream.

The Constitution also inserted a checks and balances and separation of powers–along with a rule of law–and most important a conception of federalism that prevented subsequent accumulation of, a massing of power sufficient to resume the interrupted revolution. In the meantime, the transition from the old to the new orders proceeded less violently, more slowly, and played” within the rules” of the system established in 1789. The key, but not the only factor, in this peaceful evolution was the adoption of Washington’s economic development paradigm. What follows below is a story about an ill-fated canal–but it is much more than a canal, as I hope the reader will agree.

One last thought. Washington’s contribution to American economic development was profound, if incredibly subtle. He was in my mind the “founder”, the father of one wing of American ED, Mainstream ED (MED). What he never embraced was a nation-dominated economic development. His was a decentralized version with states the dominant core actors. the role of the “feds” was to facilitate interstate commerce of the states: legal system, centralized financial institutions, and regulation of state extremes–not a national economic development plan.

In 1820, Henry Clay, the founder of Washington’s successor political party, the Whigs, would tack to the left and propose national leadership in economic development. He ran five times for president–and lost, even though through most of this period he was arguably America’s most powerful political leader. A system of state-led American economic development never embraced the nation-dominant system–and it still stands in the way. If “all politics is local” than we owe an awful lot to George Washington. France turned out to be the opposite–so did Britain. We won’t even mention Russia. That silly canal, Washington’s obsession, did it opposite–it built Washington D.C., the nation’s capitol as the final outlet for his canal–a canal meant to cement Virginia as the dominant economic force in the trans-Appalachian West.

The implication of a decentralized economic development is what today we call “place-based” economic development. In place-based ED there is likely to be winners and losers, and that prospect means competition between states and cities–and all that entails, like subsidies, spreading, duplication/cost, inefficiency, and perhaps needless inequality. It also means all those that seek a nation-led economic development must first overcome a pre-existing system with an established set of winners and losers. That over the last two-hundred and fifty years has proven easier said than done.

The immediate consequence of Washington’s economic development paradigm was to commence a “race” between the states/cities on building roads, bridges, canals, and by the 1820’s railroads. The next implication was its adoption of the dominant economic development strategies of the Early Republic (if not the 19th century): developmental transportation infrastructure, developmental transportation financing, population attraction–western settlement, homesteading, city/town-building, and the incremental development (or not) of manufacturing and industrialization in state and local economic bases. In this period, the key “tools” of mainstream ED (MED), tax abatement, eminent domain, and the key economic development organization (EDO), the state-chartered corporation, our first public-private partnership rose to ascendancy.

The object was to open up the trans-Appalachian west to settlers and to control the movement of population, the building of urban centers, and the two-way transport of the goods and services of that western settlement to the “right” port city and the world beyond. New York eventually won that race, and it was a railroad whose largest shareholder was New York’s-Tammany Hall’s Jay Gould Union Pacific that first rolled into San Francisco. Washington’s hope that it would be Alexandria (in 1789 part of Washington D.C.) was behind the politics of the city-building of the nation’s capitol. Oh well, so much of the plans of mice and men. Washington’s Patowmack Canal is what started it all off. And did we mention the combustion engine on a boat that was to make it all happen? Let’s be patient–that is in the story too. So is the the initial American patent law, i.e. the law that regulates innovation. But like Dickens’s Christmas ghosts, each will come in its own time.

Whatever else we see in the five modules introducing our candidate for America’s Father of Mainstream Economic Development we see consistence in his evolution from plantation farmer to land development and then post-war to something much larger and comprehensive: the composition, framing and hammering out in  his mind what I call America’s first major economic development paradigm. More than that he forged a coalition-team who shared his view in varying degrees, with their help secured state-level public support, and then sat down and began to implement a grand vision, almost-technically hopeless, in real time with his own EDO. He walked the walk, not just talked the talk.

In the five modules we can see a human being emerge from this marble sculpture of a personality that has been passed down to us. He is flawed, much more of a visionary than most seem to credit him, a man of action that also can delegate and lead behind the scenes. We see a businessman in politics, with all that virtues and flaws. His vision is remarkable because he sees two compelling needs of the 1783 America, to protect its independence, and to grow and develop. He sees they are inherently related and then devises a strategy to bring them together in a coherent fashion employing an amazing number of sub-strategies intertwined to serve the two main goals. He concluded, quite logically, these twin goals, and the economic development paradigm stood zero chance of success in the existing Articles government framework, and directly and indirectly assembled a coalition to reform it. Events, personalities and public and private expectations took over after that. He placed himself in the middle of the coalition that assumed the responsibility to devise a new political (and by implication , social and economic) system.

Washington, the man with a mission, had stumbled into a perfect storm, a witches brew of drivers of change which he proposed to harness into one overarching national defense, western settlement and nation-building. The glue that held these drivers together was economic development. The bottoms-up historical approach, by starting with states (and local) we ask different questions, see different relationship, and arrive at different “conclusions” than we do using our approach to history. Most historians, certainly most textbook on which American citizenship rely, stress political and individual rights dynamics, dynamics that are reflected in an “American” Revolution and the development of our Constitution and unique (for the time) version of a democratic republic.

The great dilemma-shame inherent to the conventional historical approach is that when economics–and economic self-interest–obviously entered into that development and debate, it was seen, to a considerable degree, as a bit of a scandal, or at least an undesirable conflict of interest. Currently a derivative of economic self-interest, slavery, which created a moral original sin on our soul, the American character and its subsequent history has entered into how we think of ourselves and has become a major feature in our approach to citizen-education. Over the years, several important approaches to American history (Charles Beard for one) have stressed the dubious contribution of economic self-interest into the Early Republic and the making of the Constitution itself. By starting with Washington’s Virginia-based effort to open up the West and make a buck out of it, we have suggested, rather strongly, that not only did economics and self-interest enter into the making of the Constitution and the formation of the Early Republic United States, it, along with other economic self-interests (not mentioned in the case study) caused it. Using the Washington case study we flirt around the idea that political freedom, individual rights, and the formation of America’s governmental system was a by-product of a movement generated primarily, never exclusively, by economic self-interest.

All this rather profound and probably controversial thought was not our original intention by any means. I wanted a history that used state and local economic development as a filter policy area to understand why American states differ and how and why they practice their own versions of economic development. My history was more a history of American Federalism or a history of American State and Local Economic Development than a new (or old) approach to understanding our nation’s history, culture and character. But here we are.

Let’s capture from Washington and the modules lessons and observations of dynamics, factors, structures, and strategies-goals that will populate the future chapters and modules of our bottoms-up state and local economic development history. Once that is in place, we will be armed to go forward with a peak, a glimmer of insight into some of the larger dynamics, factors, drivers, structures and strategies that we will turn to in Part 1 of this volume. A Simplified Big Picture of what lies ahead.

Footnotes

[1] The Founders and the Pursuit of Land (Lehrman Institute] https://lehrmaninstitute.org/history/founders-land.html

[2] Founded in 1824-1825, included in its members individuals such as Nicholas Biddle, (President of the Second National Bank)

[3]  Carter Goodrich, Government Promotion of American Canals and Railroads 1800-1890 (Greenwood Press Publishers, 1960), p. 21

[4] Stanley Elkins & Eric McKitrick, the Age of Federalism (Oxford University Press, 1993, p. 36

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