It’s always good to know your roots, to know what you’re up against, to know what to keep and what to change.
The saying was, land speculators “produce more poverty than potatoes and consume more midnight oil in playing poker than of God’s sunshine in the game of raising wheat and corn.” —Prof. Benjamin Hibbard, the earliest land scholar, 1924 (or even earlier).
Ever wonder where those names for towns and downtown streets come from? The names of US universities? Even the names of some military bases?
“The successful land dealer of one generation became the banker, the local political oracle and office holder, or the county squire of the next. Scarcely a city or country town in the West but had its first family whose fortune had been made by shrewd selection of lands and their subsequent sale or rental to later comers.”— 1942, Historian Paul W. Gates (1901–1999), widely considered to be the foremost authority on US land policy who wrote 10 books and 75 academic articles.
“America has always been a nation of real estate speculators… Real estate speculation was an integral part of the winning of the west, the construction of our cities, and the transformation of American home life, from tenements to mini-mansions.” — 2013, Economist Edward L. Glaeser of Harvard University and NBER
The original US Constitution, the Articles of Confederation, funded the new, federal US Government with a tax on land. About a decade later, some Founding Fathers met again, yet without Congressional authority and in secret, to replace the land tax with tariffs, at the behest of land speculators, which most of them were. Ben Franklin lost a bundle speculating in land— which may be what motivated him later in life to support the physiocrats, the thinkers who advocated a single tax on land value instead of on people’s labor or capital goods, like houses. (Daniel Friedenberg’s Life, Liberty, and the Pursuit of Land, 1992)
Soon after the colonies protested the taxes that the British levied on them, the farmers of western Pennsylvania protested the tax on their product — whiskey. As a replacement tax, the frontier sodbusters advocated a levy on land. Back then, people clearly saw that a tax on the value of land would collect much more revenue in cities like Philadelphia, where locations were very spendy (still are), than in the countryside like backwoods Pennsy, where land is dirt cheap. To quell the Whiskey Rebellion, president George Washington — the nation’s richest man and biggest landowner — put into the field four times as many soldiers as he ever led against the British (Nathan Miller’s Stealing From America, 1992).
For the first decades of its existence, the young US government supported itself not only with tariffs but also by selling western lands. Most of the sales of prime land were not to settlers but to speculators who eventually sold the fertile land to settlers. If the US had cut out the middle man, it could have directed all those sale proceeds into the public treasury. However, most often the employees of the government’s land office were in cahoots with the speculators; everybody knew what was going on (Everett Dick, The Lure of the Land, 1970). Further, the government did not have to sell the land but could have leased it, just as the modern state of Israel does today. Or, if selling, government could tax or otherwise levy land at its annual rental value (functionally, no different from leasing it).
One of the favorite places to found a city is by the mouth of a river: London on the Thames. New York on the Hudson. New Orleans on the Mississippi. On the Pacific Coast, the major river that drains the western half of North America is the Columbia. Near it’s mouth sits Portland, yet that city is not the region’s premier city. That title belongs to rival Seattle. How did that happen? Recognizing their natural advantage, the founders of Portland kept their prices for land high. The city fathers of Seattle undercut them—and soon outgrew the city to their south, by leaps and bounds. It’d be as if Philadelphia outgrew New York (which did not happen).
The hierarchy of cities was flipped again elsewhere by speculator greed. The natural pass thru the Rocky Mountains is by Cheyenne Wyoming. When railroads started extending westward, speculators figured the iron horse had no choice but to pass through Cheyenne so they kept the price for land high. To their south, the city fathers of Denver undercut them, attracted the railroad, and outgrew their rival to the north. Today, Cheyenne remains a town while Denver is a major American city.
Such is the counterproductive power of land speculation. Conversely, there is a potent, productive stimulant: the public recovery of land value. When Johannesburg South Africa was dying after the nearby mines played out, the city fathers shifted their property tax to fall only on land, not on buildings. So owners developed vacant lots and kept their parcels at highest and best use. Johannesburg grew to become the financial capital of Africa. Its rival city to the south, Cape Town, situated on one of the most strategic ports on the planet, lagged behind. It was as if Albany New York had eclipsed New York City—unfathomable.
“History is bunk,” Henry Ford said. Many Americans have expressed anti-intellectual sentiments. Yet it is good to know one’s roots, what one is up against, and what to keep and what to change. To his credit. Ford also said,“We ought to tax all idle land the way Henry George said—tax it heavily, so that its owners would have to make it productive.”
Will academia tell this tale? One of the major business schools in the US is Wharton’s at the University of Pennsylvania in Philadelphia. The Whartons were one of the early major land speculators. So were the Roosevelts. Later, so was Leland Stanford. And more recently James Irvine (University of California at Irvine). So don’t hold your breath. Instead, for more on the link between speculators and universities, see Dr. Mason Gaffney’s Corruption of Economics. Information such as this won’t be fed to you, You have to look for it.
Speculators Are Us. This is a brief, partial History of the United States from the POV of those who benefited the most from it.
In 1752 Washington made his first land purchase, 1,459 acres along Bullskin Creek in Frederick County, Virginia. This act inaugurated the second and more profitable phase of his cartographic career, in which he assumed the role of land speculator. Over the next half century Washington would continue to seek out, purchase, patent, and eventually settle numerous properties. His will, executed in 1800, lists 52,194 acres to be sold or distributed in Virginia, Pennsylvania, Maryland, New York, Kentucky, and the Ohio Valley. In addition to these properties, Washington also held title to lots in the Virginia cities of Winchester, Bath (now Berkeley Springs, West Virginia), and Alexandria, and in the newly formed City of Washington.
In 1758 Washington left military service and returned to civilian life and in January 1759 married Martha Custis, a wealthy widow. No sooner had the couple settled at Mount Vernon, which had become Washington’s home, than he begin to expand the estate. In 1760 a neighbor, William Clifton, approached Washington with an offer to sell a 1,806-acre tract on the northern border of the estate, and the two men settled on a price of £1,150 sterling. Shortly afterwards, however, Clifton agreed to sell the same tract of land to another neighbor, Thomson Mason, for a slightly higher price. Despite Clifton’s original agreement and a series of angry letters, Washington eventually paid £1,250 sterling to secure the land for himself.11 The area became the Washingtons’ River Farm.
Western Lands and the Bounty of War
Washington’s lifelong interest in land speculation is illustrated in the fight over bounty lands promised to the veterans of the Virginia Regiment who fought with him in the French and Indian War. In this episode Washington acted on behalf of his fellow veterans as well as vigorously, sometimes aggressively, in staking out his own land claims.
In 1754, Lieutenant Governor Dinwiddie issued a proclamation designed to encourage enlistment in the local militia for the war against the French. In addition to their pay, those who enlisted in Lieutenant Colonel George Washington’s fledgling Virginia Regiment were offered a share in two hundred thousand acres west of the Ohio River. Unfortunately for the men who fought under Washington in the Braddock and Forbes expeditions against the enemy at Fort Duquesne, they were not to see these bounty lands until more than twenty years had passed, during which time Washington led the struggle to secure their title.
At first, the formal conclusion in 1763 of the worldwide war between Britain and France, of which the French and Indian War had been a part, aroused hope that the land would be quickly granted. These expectations were overshadowed by the Royal Proclamation of 1763 which (among other provisions) forbade colonial governors from issuing land grants west of the Allegheny Mountains. Yet Washington chose to forge ahead, as evinced by a September 1767 letter to William Crawford, a Pennsylvania surveyor:
. . . I can never look upon the Proclamation in any other light (but this I say between ourselves) than as a temporary expedient to quiet the minds of the Indians. It must fall, of course, in a few years, especially when those Indians consent to our occupying those lands. Any person who neglects hunting out good lands, and in some measure marking and distinguishing them for his own, in order to keep others from settling them will never regain it. If you will be at the trouble of seeking out the lands, I will take upon me the part of securing them, as soon as there is a possibility of doing it and will, moreover, be at all the cost and charges surveying and patenting the same . . . . By this time it be easy for you to discover that my plan is to secure a good deal of land. You will consequently come in for a handsome quantity.12
Washington was clearly willing to take considerable risks in seeking out choice land for himself. In the same letter, however, he warned Crawford “to keep the whole matter a secret, rather than give the alarm to others or allow himself to be censured for the opinion I have given in respect to the King’s Proclamation.” He concluded by offering Crawford an alibi should his behavior be called into question. “All of this can be carried on by silent management and can be carried out by you under the guise of hunting game, which you may, I presume, effectually do, at the same time you are in pursuit of land. When this is fully discovered advise me of it, and if there appears a possibility of succeeding, I will have the land surveyed to keep others off and leave the rest to time and my own assiduity.” In fact, the letter marked the beginning of a very profitable fifteen-year partnership. Less than two weeks after he had received it, Crawford informed Washington about several tracts in the vicinity of Fort Pitt, and the two men continued to collaborate until Crawford’s death in 1782.
It’s hard to make plans when the rules keep changing.
With each passing week it becomes ever clearer that Donald Trump’s trade war, far from being “good, and easy to win,” is damaging large parts of the U.S. economy.
- Farmers are facing financial disaster; manufacturing, which Trump’s policies were supposed to revive, is contracting;
- consumer confidence is plunging, largely because the public (rightly) fears that tariffs will raise prices.
But Trump has an answer to his critics: It’s not me, it’s you. Last week he declared that businesses claiming to have been hurt by his tariffs should blame themselves, because they’re “badly run and weak.”
As with many Trump statements, one immediate thought that comes to mind is, how would Republicans have reacted if a Democratic president said something like that? In this case, however, we don’t have to speculate.
As some readers may recall, back in 2012 Barack Obama made the obvious and true point that businesses depend on public investments in things like roads and education as well as on their own efforts. Referring to those public investments, he said, “You didn’t build that.” The usual suspects pounced, taking the line out of context and claiming that he was disrespecting entrepreneurs; Mitt Romney made this claim a centerpiece of his presidential campaign.
Attacks on Obama as being anti-business were, of course, made in bad faith. Trump, however, really is denouncing businesses and blaming them for the problems his policies have created. And tariffs aren’t the only policy area where Trump and American business are now at odds.
Some of Trump’s most consequential actions involve his frantic efforts to dismantle environmental regulation. Unlike tariffs, this may at first sound like something business would want.
It turns out, however, that many businesses want to keep those regulations in place. Major oil and gas producers oppose Trump’s relaxation of rules on emissions of methane, a potent greenhouse gas. Major auto producers have come out against Trump’s attempt to roll back fuel efficiency standards. In fact, in a move that has reportedly enraged Trump, several companies have reached an agreement with the state of California to stick with Obama-era rules despite the change in federal policy.
When Trump won his upset victory in 2016, many investors assumed that his rule would be good for business. And he did indeed give corporations a huge tax cut — which has almost entirely been used for higher dividends and stock buybacks, with workers getting essentially nothing.
Aside from the tax cut, however, it’s becoming increasingly clear that Trumpism is bad for business. Or more precisely, it’s bad for productive business.
Imagine yourself as the head of a business that plans and expects to be around for a long time. Sure, you’d like to pay less in taxes and not have to comply with costly regulations. But you also want to invest in your company’s future. And to do that, you need some assurance that the rules of the game will be stable, so that whatever investments you make now aren’t suddenly made worthless by future shifts in policy.
The big complaint business has about Trump’s trade war isn’t just that tariffs raise costs and prices, while foreign retaliation is cutting off access to important markets. It is that businesses can’t make plans when policy zigzags in response to the president’s whims. They don’t want to invest in anything that relies on a global supply chain, because that supply chain might unravel with Trump’s next tweet. But they can’t invest on the assumption that Trump’s tariffs will be permanent, either; you never know when or whether he’ll declare victory and surrender.
Environmental policy, it turns out, is similar. Business leaders aren’t do-gooders, but they are realists. Most of them understand that climate change is happening, that it’s dangerous, and that we’ll eventually have to transition to a low-emissions economy. They want to spend now to secure their place in that future economy; they know that investments that worsen climate change are bound to be long-run losers. But they’ll hold off on investing in our energy future as long as conspiracy theorists who consider global warming a gigantic hoax — and/or vindictive politicians determined to erase Obama’s achievements — keep rewriting the rules.
To be fair, however, some kinds of business do thrive under Trumpism — namely, businesses that aren’t in it for the long run, operations whose strategy is to take the money and run. These are good times for
- mining companies that rush in to extract whatever they can, leaving a poisoned landscape behind; for
- real estate speculators sponsoring dubious ventures that take advantage of newly created tax loopholes;
- for for-profit colleges that leave their students with worthless degrees and crippling debt.
In other words, under Trump it’s springtime for grifters.
But to say the obvious, these smash-and-grab operations aren’t the kinds of business we want to thrive. Put it this way: Remaking the U.S. economy in the image of Trump University isn’t exactly making America great again.