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”

 

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. 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.

We first must focus on how these thirteen colonies forged a national government, and how formed into thirteen states they “handled” and reacted to a national government with a national mission. I will argue they did so through in large–but not complete–measure through the formation and implementation of the United States first 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.

Washington’s 1783 Mohawk Valley Tour

In July 1783, two months before the 1883 Treaty of Paris that ended the Revolutionary War was signed, General Washington toured the Mohawk Valley. His official intentions concerned his legitimate concern for “what was out there” and to supervise the series of military forts in central New York and the British forts on and near the Great Lakes. The Treaty of Paris, it was hoped (but not known due to communication issues) was to remove them, and Washington wanted a look-see as to what that meant. The truth is evident, however, that in Washington’s mind, and in the mind of several that accompanied him on his tour, Washington had already begun his pivot back to his previous land development paradigm. It is not unlikely this tour would play a major role in “the new George Washington’s” evolving economic development paradigm.

The tour initially focused on military matters, particularly around Fort Schuyler, whose namesake, the “real” Gen Schuyler–commander of the New York district– was a member of the tour. BTW also on the trip were an Italian Count (cultivated by Washington as a potential investor), Alexander Hamilton, who was to be Schuyler’s son-in-law and former Washington aide-de-camp/protege–and about 35 others notably including  a certain George Clinton (who named two of his children, George and Martha Washington Clinton), who later became New York’s first Governor and Senator, and incidentally the fourth Vice-President of the United States (Jefferson and Madison’s), and a founder of the Democratic-Republican Party–opponent of one Alexander Hamilton. George Clinton’s future personal secretary was his nephew, the son of his brother General James Clinton who rode with Washington in the Army’s final NYC victory parade, the future Governor Dewitt Clinton–builder of the Erie Canal–but that is a separate story to be told later. Dewitt Clinton did not go on the tour; he was fourteen at the time.

 

Starting at Albany and proceeding on to Lake Erie by July, overawed by its vastness and raw economic potential, he recorded in his diary to “view a tract of the country which is so celebrated for the fertility of its soil, and the beauty of its situation“.  The latter quickly bought the land the fort was on, and area around it–lending credence that the Mohawk tour also included non-military agendas. An additional original intent seems to have been to purchase a mineral springs near present-day Saratoga–which General Schuyler acquired after Washington demurred. Washington also bought land as well in partnership with George Clinton around Oriskany, near Fort Stanwix. The trip lasted 19 days and ended around Buffalo. On Aug 1, they reached Otsego Lake (Cooperstown) where he no doubt slept at the Baseball Hall of Fame. Anyway, there he wrote a letter to the Marquis de Chastellux (general/liaison of the French Army) in which he admitted what was really on the back of his mind during the trip. The letter sets the stage for the tour as an important input into a more sophisticated and robust economic development paradigm, but also one in which bolstered his personal enthusiasm and commitment to it importance. Washington noted:

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. [5]

Washington stressed in his letter to the Marquis, that he was fearful the nation would not embrace his passion to open up the western territories and realize their immense economic potential. Washington finished the tour convinced the newly independent United States, and its  Articles of Confederation, were directly threatened by the still open and vast expanse of America’s continental hinterlands-almost all, save the present day east of the Mississippi Mid-West and South Central territories, were held by foreign powers. Unless and until that land was secured, and economic prosperity generated from it, the United States was politically vulnerable.

So in his mind it was imperative that these territories should be quickly settled, and that required access to migrating populations, and transportation of goods and produce to and from these territories from coastal port-cities. The raw power of the rugged Appalachian Mountains stood In the way of this access and made transportation of  goods and produce and overcoming that became in his mind a matter not only of personal profit and economic growth, but of national survival. In 1784 roads and turnpikes could provide access to migrating populations, but goods and produce was another matter.

These heavy bulk products would never make across the mountains unless an affordable and cost effective mode of transportation into the interior were available. Already truly committed to canals and rivers, Washington almost became obsessed by it in the subsequent several years. But very evident from this tour was that New York enjoyed an advantage in this canal construction across the Appalachians. New York had the easiest, lowest set of elevations than that found in any state to the South–especially western Virginia on down to South Carolina. In regards to river potential, however, Washington fervently believed the Potomac River was superior “to open and make easy” access to the west. “The navigation of this river is equal, if not superior to any in the nation. This will become the great avenue into the Western Country” [6]. 

The Treaty of Paris was signed in mid-September, 1783-in Paris, of course. The core draft was agreed to in November 1782, and so the unofficial terms of the treaty were known by Washington previous to his western tour. The Articles of Confederation signed/ratified the agreement in January 1784, Britain in April and took effect May 2, 1784. Perhaps unexpectedly, the British conceded the vast expanse of the east of the Mississippi trans-Appalachian west, but not Florida which remained a controversy until its actual purchase in 1819. In the interim, Spain acquired control of land in Louisiana, Alabama, and Florida. Later much of it would be transferred to France. The Articles of Confederation Congress attempted to digest this new and huge volume of contested and unsettled land through a series of ordinances that commenced in 1784, 1785, and climaxed in the Northwest Ordinances of 1787 and 1789.

In this debate much of the old issues engendered by the 1763 Proclamation Act, in particular the ill-defined colony, now state boundaries–and the unwillingness of the states to negotiate boundaries in good faith–greatly affected Washington’s economic development paradigm, in its smaller Virginia-based version, and its newly-enlarged national version. Major rivers were a clear boundary, and so as the boundaries were resolved–Virginia transferring its western claims to the Article in 1785, for example, the unfortunate consequence for those with a vision to use canals to cross the Appalachians, was that a different, and rival, state was on each bank of the river. Say it another way, river travel and trade became inter-state. The same could be said of the Mississippi–with Britain, Spain, later France on the other bank. New Orleans, the entrepot, and the cork in the Mississippi River bottle, remained in “European” control. That a consider number of none-to-happy Native Americans lie in residence added yet another dimension to the Peace Treaty and trans-Appalachian settlement.

George Washington upon the expedition’s return to Albany in September, joined by Martha, began his transition as commander-in-chief to civilian. He appeared before the Articles Congress to appeal they approve forts in the new trans-Appalachian west. He wadded through one military pay controversy after another, one a very serious near-mutiny. Another appearance before Congress he urged it to construct a sort of “West New Country” regional system that encouraged its settlement and the advance of “civilization”, a civilization which neither the Scots-Irish squatter nor the Native American were much in agreement. The core of that early western settlement program nexus was:

Peace in that region was essential … common decency also dictated policies that might prevent another blood bath, while common sense suggested that prudent restraint would more rapidly open the area for settlement. Washington hinted at something like a federal territorial policy … that would control the flow of population into this region, making it conform to the national interest. In addition, he proposed the return of all Indian prisoners and the creation of an office to supervise trade with the Native Americans [7] 

On Friday, November 25th 1783, the last British soldier left the United States, to celebrate which a parade followed the British unit to the dock. On December 4th, a good-bye affair was held at Fraunces’s Tavern, a collection of officers, led by Henry Knox, the only officer remaining who had been with Washington when he first arrived in Boston in 1775, and bade him adieu. Washington left the affair, after notable comments, in tears. He and Martha left for the final trip back home. On December 23, he reached Annapolis where the Articles Congress was in residence. There he read before Congress his final address and surrendered him command officially. At twilight on Christmas Eve, he arrived at the door of Mount Vernon–a gentleman farmer once again.

 

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

[5] http://threerivershms.com/washington.htm, also cited in John Seelye, Beautiful Machine: Rivers and the Republican Plan, 1755-1825 (Oxford University Press, 1991), pp. 59-60

[6] [5] Quoted from Washington and Jefferson correspondence by Peter Bernstein, Wedding of the Waters: Erie Canal and the Making of a Great Nation (W. W. Norton, 2005), p. 69

[7] John Ferling, The First of Men: a Life of George Washington (University of Tennessee Press, 1988), p. 316

 

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