Posted: May 6, 2013
s surveys of the American economic experience go, Michael Lind's Land of Promise is distinctly eccentric. For example, the typical survey of American economic history devotes dozens of pages to western expansion, and the Westward Movement is considered one of the defining characteristics of America's story. Westward expansion gets no explicit treatment by Lind, and from reading his book one only vaguely senses the importance of westward migration in the nation's development. Although the railroads do get a good deal of attention, there is no mention of the assessments by major scholars of their importance to U.S. economic growth, no mention, for example, of Robert Fogel, Albert Fishlow, or Jeffrey Williamson (though Williamson gets name-checked in a footnote). A book that invokes John Kenneth Galbraith on eight pages but Nobel prize-winning economic historians like Bob Fogel and Douglass North not at all is decidedly behind the times. Lind is a journalist and novelist, the policy director of the Economic Growth Program at the New America Foundation, of which he is co-founder. His book is long on anecdotes, marginally relevant quotations, and leftish ideological arguments and short on the integration of scholarly research, probably because much of the research is inconsistent with the author's view of the driving force in economic change.
Land of Promise has a disconcerting number of factual errors, as well, and flagrant contradictions. Within a single paragraph, Lind claims wages increased 8% from 1923 to 1929 and that they increased 11%. We learn on page 255 that in 1928 there were 18 million stockholders (at least 40% of the number of households and 15% of the total population), and 7 pages later that "[o]nly 8 percent of the population owned stocks." On page 294, the author talks about "the minimum wage created by the National Labor Relations Act of 1935"; on the next page he says, correctly, that "The Fair Labor Standards Act (FLSA) of 1938 created a national minimum wage."
Then there is the tendency to make highly dubious statements with little or no factual support. Two examples: we learn on page 8 that, "[a]ppeased by the cotton-mill capitalists of New England, the southern planters used their domination of the federal government to thwart plans for the state-sponsored industrialization and modernization of the United States." Did the early 19th-century Southern planters truly dominate the government? Would there likely have been large state-sponsored industrialization were it not for them? Was economic growth thwarted because the federal government was weak? I suspect for every economic historian believing these conclusions, there are five who would at least partly demur. Another claim: "frequently swindled, middle-class shareholders contributed to the rapid evolution of the stock market...before 1929." How frequently were shareholders actually "swindled"? No evidence is presented supporting the claim. If repeatedly swindled, why did they keep investing?
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In its account of the modern era, the lack of balance is particularly pronounced. It appears that Lind thinks the greatest hero of modern American economic advance is Vannevar Bush, an engineer and inventor who promoted government investment in science. He is mentioned on over 10 pages in the book. Steve Jobs and Bill Gates, by contrast, are casually confined to a single page, and Sam Walton is derided briefly for embodying "the reactionary southern version of American capitalism that survived the New Deal and the civil rights revolution below the Mason-Dixon Line." Lind does not like it that Wal-Mart sells lots of Chinese-made goods—and probably likes it less that Americans eagerly buy them.
The book's ideological blinders show up in other ways, too. The typical overview of American economic history, for example, devotes at least twice as many pages to the economy up to World War I (over 300 years), as to the century since. Lind, by contrast, spends more pages on post-1914 developments than on the earlier period. This allows him to opine at length about the modern economic milieu that so concerns him (including 60 pages on what he calls the "bubble economy" and "the next American economy").
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The basic thesis of the book is that government involvement/direction/investment has been critical to American economic growth, along with a small number of transformative inventions, such as the steam engine, electric power, the internal combustion engine, and the computer. American public policymakers from the time of the Founding Fathers have divided themselves into two groups: the Good Guys (my term)—strong visionaries who used the strength of collectivist action, their superior intellect, and political skills to advance the economy—and the Bad Guys—small-minded agrarians, individualists, and populists who failed to see the importance of private-public partnerships. To quote Lind: "What is good about the American economy is largely the result of the Hamiltonian developmental tradition, and what is bad about it is largely the result of the Jeffersonian producerist school." The Good Guys include George Washington, Alexander Hamilton, Henry Clay, Abraham Lincoln, Franklin Roosevelt, and Lyndon Johnson (non-politicians need not apply); the Bad Guys include Thomas Jefferson, Andrew Jackson, and Ronald Reagan. (It appears from a brief passage that Barack Obama is a Good Guy, though flawed because he didn't insist on a stimulus package big enough to revive the economy.)
In the 19th century, the Good Guys promoted high tariffs (which Lind loves), a central bank, federally-funded internal improvements, and, of course, higher federal taxation. In the 20th century, the Good Guys advocated pro-labor legislation to promote high wages, more equal income distribution, massive Keynesian-style stimulus packages, government-directed industrial policy, and the like. Lind seems, on balance, to love the way Europeans do things.
Of the 20th century Lind writes that "on the foundations laid by New Deal liberals from Roosevelt to Lyndon Johnson, the American middle class experienced its greatest expansion in numbers and growth in prosperity." The Great Depression was not caused by the Smoot-Hawley Tariff (which Lind thinks had a modestly positive effect, making him, I believe, unique in that opinion) or the Fed's actions (although it played a supporting role), and certainly not by the Hoover/Roosevelt High Wage policy (which Lind regards as visionary and inspired). It was caused by an excessively unequal income distribution, and excessively conservative programs to promote aggregate demand.
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Lind writes well, and some of his numerous anecdotes and quotations (as opposed to hard statistical evidence) are entertaining and new to me. On the whole, however, this is the worst survey of the American economy I have ever read, suffering from numerous errors of both omission and commission, reflecting a single-minded ideological perspective, and an abysmal ignorance of basic economic principles. Here is an alternative scenario of how America became a truly exceptional economy, which I think is empirically more defensible, and is the antithesis of Lind's narrative.
From its beginning, America has been a collection of individualists, suspicious and resentful of others telling them what to do. That is one reason they fled England, and declared their independence. The physical environment of the frontier promoted self-reliance, strong associational ties to families and small voluntary groups, and hostility towards big government. The Enlightenment provided great thinkers like John Locke and Adam Smith, whose writings furnished an intellectual infrastructure justifying a meritocracy based on private entrepreneurship and democratic ideals.
The British common law tradition combined with the Constitution of 1787 provided a legal environment conducive to private property ownership with minimal risks from regulation, taxation, or confiscation. An appreciation of sound financial principles, including Hamilton's decision to honor the Revolutionary War debts, increased America's standing in the world economy and enhanced needed foreign investment. The amazing fact (now almost forgotten) that prices in America in, say, 1940, were not dramatically different from those in 1800 pointed to the kind of salutary price stability that stimulated private investment in paper assets representing ownership and debt interest in emerging corporations.
As Lind correctly notes, by the 1870s the U.S. was the largest economy in the world, and the country's 19th-century ascension to economic leadership was accompanied by very low levels of government spending (excepting wartime), essentially no income taxation, and very few regulatory restraints on individual economic freedom. The government's most constructive actions were actually privatization initiatives, especially the federal land grants that facilitated millions of individual private businesses (farms) and jumpstarted the railroads.
America began to abandon its small government orientation after 1914, putting in place an income tax, central bank, and the rudiments of a welfare state. The initial surge in government involvement (1914-1935) was followed by a second in the Great Society programs of the 1960s, and arguably a third after 2000, especially under President Obama. And the partial abandonment of the private enterprise orientation led to a slowing of economic growth and a decline of economic leadership. American output growth from 1970 to 2012 was lower than for earlier, comparable periods, say 1870 to 1912, or even 1923 to 1965.
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Yet everything is relative. America adopted the welfare state in a smaller form than in Europe. The growth in government size (relative to output) was far greater in the Old World than in the New, for example, and although American growth slowed a bit, a Europe hobbled by the excesses of the welfare state and Keynesian-style fiscal irresponsibility saw its economic growth decline every decade from 1960 to 2010. Thus America's potential economic decline has been muted, maybe eliminated, by the even greater relative decline of others.
In my scenario, the heroes are not so much politicians like Henry Clay or Franklin D. Roosevelt, nor government bureaucrats like Vannevar Bush, but individual entrepreneurs whose vision, hard work, and risk-taking propelled the nation forward—great entrepreneurs like Cornelius Vanderbilt, John D. Rockefeller, and, more recently, Sam Walton, Steve Jobs, and Sergey Brin. And countless smaller, less well-known entrepreneurs who contributed to the nation's rising affluence. Politicians like Ronald Reagan who appreciated the true causes of American economic exceptionalism played a vital secondary role, but as heroes, not villains as portrayed by Michael Lind, whose Land of Promise strikes me more as fiction than reality.