The Promise of Free Enterprise
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MIT Press Open Architecture and Urban Studies • American Design Ethic The Promise of Free Enterprise Arthur J. Pulos Published on: Apr 22, 2021 License: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC-BY-NC-ND 4.0) MIT Press Open Architecture and Urban Studies • American Design Ethic The Promise of Free Enterprise There is in the genius of the people of this country a peculiar aptitude for mechanical improvements.… it would operate as a forcible reason for giving opportunities to the exercise of that species of talent by the propagation of manufactures. Alexander Hamilton, 1791 ([84], 21) The citizens of the young nation were anxious to take advantage of the economic freedom that their struggle for political independence had promised. As heirs to the concept of laissez-faire, originally propounded by French social philosophers and later transformed into the principle of freedom of trade by Adam Smith in The Wealth of Nations, they eagerly embraced the concept of individual enterprise as one of the rewards of a free society. The Americans found it easy to associate the pursuit of happiness with the acquisition of property, and thus the solemn oath of the Constitution established a unique economy in which the puritan ethic of individual enterprise and economy of means could generate the capital upon which an industrial state could be constructed. (A century later, Arnold Toynbee would confirm Adam Smith’s respect for barter as the connection between personal enterprise and a healthy economy: “If we once grant the principle of division of labor, then it follows that one man can live by finding out what other men want… ([87], 56)) Thus, competition between men, each seeking to serve the needs of others, emerged as the most logical means of mutual survival and established in the young American mind a practical as well as philosophic rationale for creating products that would vie with one another in an open market to satisfy consumer needs. Adam Smith declared that it is in the best interest of a proud and responsible producer to provide those who have faith in him with products of the best quality, and that the consumer is most certain of being served well when he is intelligent and well-informed enough to select and value the better product. Thus, free enterprise may be described as dependent upon an equitable pact between a responsible manufacturer and a knowledgeable consumer. Experience has occasionally proved this to be a puristic theory because productive and promotional energy may, under the press of competition, be misdirected toward those elements of a product that emphasize its apparent quality at the expense of its real quality. And the public, sometimes naively willing to let appearances speak for quality, may prefer to reward promise over performance with its purchase. Nevertheless, the principle of free enterprise has 2 MIT Press Open Architecture and Urban Studies • American Design Ethic The Promise of Free Enterprise played an indispensible role in the economic development of the United States, resulting in a high standard of living for its citizens. In the early years of the American republic, many Europeans were convinced that its future would depend upon the development of an agrarian economy drawing upon the seemingly endless natural resources and virgin farmlands. They believed that this economy would be supported by thriving household industries in which collective industrialization would be of little value, agreeing in general with Adam Smith’s admonition that “were the Americans, either by combination or any other sort of violence, to stop the importation of European manufactures, and by thus giving a monopoly to such of their own countrymen as could manufacture the live goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase of their annual produce, and would obstruct instead of promoting the progress of their country.” ([81], 347) Smith did not conceive that the vast territory of America would encourage regional specialization that would seek to balance agrarian with industrial growth. He noted that capital earned by manufacturers was used by them to buy uncultivated land for exploitation, and concluded that the advantage did not lie with the “artificer (who) is the servant of his customers, from whom he derives his subsistence” but rather with the “planter who cultivates his own land and derives his necessary subsistence from the labour of his own family (and) is really a master and independent of all the world.” ([81], 359) It was generally agreed that the development of American industry would be no threat to other countries because its inexhaustible resources would serve as an economic inducement far beyond that promised by its manufactures. The premise and perhaps the intent of the Europeans was that the Americans would be convinced that independence would be best ensured by sending raw materials abroad to be processed by their superiors and then resold to them at a higher price. These observations were not without justification. The amount of land that was available for clearing, cultivation, and settling exceeded the demand and capacity of the population of the United States, so the promise of a quick profit from the wilderness provided an inducement beyond the risk of investing capital in manufactures. Moreover, with nine out of ten persons living in rural areas, the people were too scattered to provide the concentration of labor that is essential for industry. In addition, there was as yet a shortage of machines and of the technical knowledge to build and operate them. 3 MIT Press Open Architecture and Urban Studies • American Design Ethic The Promise of Free Enterprise The leaders of the young republic were therefore divided between those who wanted the United States to remain an edenic paradise and those who believed that economic stability and political independence would depend upon a balance of agrarian and industrial enterprise. John Adams was not at all confident in the ability of the Americans to manufacture. “I say,” he wrote to Benjamin Franklin in 1780, “that America will not make manufactures enough for her own consumption these thousand years.” ([52], 148) Thomas Jefferson was an outspoken champion of those who held to a pastoral ideal as the proper course for the new nation. In his Notes on Virginia (1785), he expressed the hope that America would become the home of an agrarian “Golden Age.” Jefferson warned that the chief danger to this ideal was the development of machinery, and advised his countrymen to return to their former balance of trade with European industry by exchanging their natural resources and farm products for finished manufactured products from abroad. Jefferson was convinced that the Europeans were obliged to manufacture and export because there was insufficient land for agriculture to sustain them. Therefore he proposed “for the general operations of manufacture, let our workshops remain in Europe,” noting that “it is better to carry provisions and materials to workmen there, than bring them to provisions and materials, and with them their manners and principles.” ([34], VIII, 405) Jefferson dreamed of a rural republic built upon the honest labor of the free farmer in the sun rather than the synthetic drudgery of the captive worker in the factory. In 1786, though he had returned from England to report in glowing terms on the progress of the British and his own passion for utilitarian improvements and labor- saving products, Jefferson was still convinced that the future of the United States must depend upon an agrarian economy supported by household manufactures. However, after the War of 1812 with the British, in which American industry played an important part, Jefferson was obliged to come full circle and acknowledge that, although he still preferred the rural life, he realized that “to be independent for the comforts of life, we must fabricate them ourselves,” and that “we must now place the manufacturer by the side of the agriculturalist.” ([32], 745) The transformation of manufacturing in the United States from a scattered and erratic system of home manufactories into industries coincides to a remarkable degree with the end of the Revolution and the adoption of the Constitution. The Constitution’s unified approach to commerce and trade regulations created an atmosphere for equal enterprise that had been all but forgotten in the first scramble for economic advantage by the liberated but not yet joined colonies. At first each state attempted to set its own trade regulations, with the result that other nations (notably England) were able to 4 MIT Press Open Architecture and Urban Studies • American Design Ethic The Promise of Free Enterprise play one colony against another and to set up trade rules of their own with no fear of concerted American retaliation. In addition, their individual issuance of paper money that proved to be irredeemable had made a shambles out of the fiscal policy of the colonies. However, now, under a common Constitution by which the colonies surrendered their sovereignty to become member states in a republic, a new sense of common economic adventure began to emerge. The passionate will for the success of the union made every citizen aware of his commitment to the whole, and in turn the government acknowledged its dependence upon the ingenuity and industry of its citizens. Until the Revolution, political and economic circumstances in the colonies did not encourage collaborative industry. Each freeman looked to his own security by way of independent farming, home manufactures, or artisanal activity. However, the spirit that led to revolution and independence now began to stimulate investment in common enterprises such as manufacturing essential commodities in quantities larger than the sum of individual efforts could have produced.