Lincoln's Industrial Policy

Paul Kedrosky has a good essay in the most recent Washington Monthly, the provocative thesis of which is: "So while it's true that our best hope for future growth is riding on America's entrepreneurs, the best hope for our entrepreneurs may be riding on government."

In describing how economic crises can often produce rather enlightened public policy, Paul highlights an oft-overlooked characteristic of President Abraham Lincoln--his economic policies. Understandably, Lincoln is usually remembered in the context of war and slavery and political philosophy, but his Second Annual Message to Congress was basically a far-sighted industrial policy that helped lay the foundation for an era of inspired entrepreneurial capitalism. (Lincoln's economic insight has not gone completely unremarked upon, of course; Michael Novak provided a brilliant meditation on it in The Fire of Invention.)

Atlantic and Pacific telegraphs; the Pacific Railway Act for the construction of a transcontinental railroad; uniform currency; development of the West's mineral resources; canals--all were at the heart of Lincoln and the Republicans' economic policy. Granted, the South's secession played no small part in opening up the legislative road--before the Civil War, the future Confederate states had basically acted like a gigantic reactionary obstacle to everything from economic development to women's rights. With Confederate legislators gone, the new Republican party helped boost the American industrial revolution. 

Paul also mentions the Morrill Act, which Lincoln signed in 1862 and is one of the most frequently cited Congressional achievements of the nineteenth century. To a certain extent this is true, but it is also overblown. The Morrill Act helped put many of the existing small-time state schools on the road to national importance, but its effect was limited by a shortage of resources. It was really the Hatch Act of 1887, establishing the agriculture extension system, and the Second Morrill Act of 1890, providing money for the first Act and adding discrimination clauses, that pulled higher education and industry into a tight and enduring embrace. As higher education historian Frederick Rudolph wrote several decades ago:

"[T]he growth of a body of applied agricultural science, the experiment stations, farmer approval, and federal and state financial assistance all fed upon one another."

One of professors summed all this up with what I still think is one of the best phrases used to describe what government economic policy should (ideally) do: releasing the energy of people to create. Things like the Hatch Act and the Bayh-Dole Act cannot anticipate the nature and scope of the far-reaching effect they will eventually have since they're usually passed in response to a discrete issue. (In the latter case, university-industry linkages had increased markedly in the 1970s and companies like IBM were constantly pushing against the cumbersome commercialization process. In a historical analogy to general incorporation in the 1800s, Congress finally created a general platform for university commercialization. Incidentally, "platform" is another wonderful term for describing what economic policy should be about.) Likewise, the gradual separation of military and civil government in Europe helped, as John Keegan has written, free up the energies of people to create and innovate, resulting in the Industrial Revolution.

So the question for policymakers, always and particularly in times of crisis, should be: where are the points at which a specific policy or repeal of policy can release individual energy? This need not presume any particular knowledge on the part of policymakers, but it should prompt a more nuanced understanding of economic complexity. 

Comments

[Michael F. Martin]

Lincoln was that rare kind of genius who could always find the right way to connect with his audience. If you go back and read his "fire of invention" speech, you will find all sorts of brilliant insights into the way that inventors work and innovation fosters growth in society. Had he lived, we would be much farther along than we are now in our economic policy.

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Tim: As I wrote on my blog, Truth on the Market, I think Tyler is pretty far off base with this one. See http://www.truthonthemarket.com/2009/04/28/what-does-tyler-know-about-law-and-economics-anyway/

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