By John Steele Gordon
The following is adapted from a speech delivered in San Diego, California, on November 15, 2013, at a Hillsdale College Free Market Forum on the topic “Markets, Government, and the Common Good.”
The word “entrepreneur”—one who undertakes, manages, and assumes the risk of a new enterprise—comes from the French, where it literally means “undertaker.”
— perhaps the golden age when the number of new economic niches was exploding and the hand of government was at its lightest in history. The activity of entrepreneurship, of course, is much older, going back to ancient times. As for America, our nation was founded, quite literally, by entrepreneurs.
stock company, a relatively new invention that allowed people to invest in enterprises without running the risk of losing everything if the business did not succeed. By limiting liability, corporations greatly increased the number of people who could dare to become entrepreneurs by pooling their resources while avoiding the possibility of ruin. Thus the corporation was one of the great inventions of the Renaissance, along with printing, double entry bookkeeping, and the full-rigged ship. Allowing incorporation as a matter of law, rather than requiring an act of the executive or of the legislature, began in the United States as early as 1811, when New York State passed a general incorporation law for certain businesses, including I suspect an anchor manufacturer had a friend in Albany. Soon enlarged in scope, the ability to incorporate simply by filling out the right forms freed the process from politics, and the number of corporations exploded. There had been only seven companies incorporated in British North America, but the state of Pennsylvania alone incorporated more than 2,000 between 1800 and 1860.
Unfortunately for the stockholders of the Virginia Company, the business of American plantations was a very new — a curve that would be encountered again and again as the American economy developed and new industries were born. It is a curve all would-be entrepreneurs must climb to be successful. The Virginia Company did not climb that curve quickly enough, and made just about every mistake that it could make: It tried to run Jamestown as a company town; it searched for gold, of which Virginia has none, instead of planting crops; and it failed at establishing a glass-making industry. Eventually Jamestown was nearly abandoned. Only when John Rolfe introduced West Indian tobacco in 1612 did Virginia find an export that had a market in Europe—indeed a market that grew explosively and made Virginia rich. But by that time it was far too late for the Virginia Company, which went broke. In fact, of course, most entrepreneurs do fail.
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It has not been nearly well enough noted that the American colonies, while many ended up in royal hands, were not founded by the English state. Several, such as Massachusetts Bay, Plymouth, and Virginia, were founded by profit-seeking corporations. Others, such as Pennsylvania and Maryland, were founded by proprietors. To be sure, many of these enterprises had non-entrepreneurial motives, such as providing a refuge for religious dissenters. John Winthrop wanted the Puritans to William Holy where Quakers could live in peace. But Plymouth, Massachusetts Bay, and Pennsylvania were also expected to show a Though I desire ” yet I want some recompense ”
New York, of course, was founded by the Dutch, not the English, and profit was the sole reason for settling on Manhattan. Indeed, so bent on money making were the Dutch that they did not get around to building a church for 17 years, worshiping instead in the fort. When they did finally build a church, they named it for St. Nicholas, and Santa Claus has been the patron saint of New York ever since.
Even after the British took the colony in 1664, the Dutch devotion to commerce remained. Harking back to the early source of its economic success, the fur trade, the city’s seal remains a beaver surrounded by wampum. Even today, that little hustly-bustly Dutch village lies at the heart of the world’s most important and powerful city, and making money is still New York’s chief business.
Even in the theocracy that was early New England, the entrepreneurial spirit burned bright. Unlike the colonies on the Chesapeake, there was no cash crop that could be grown in New England’s stony soil and short growing season.
Perhaps the closest thing to a cash crop was that singular beast, the Atlantic cod. Pulled from the great fishing waters off New England in prodigious numbers, it was salted, dried, and shipped to Europe to provide cheap protein for the masses. Even today, there is a carving of a codfish hanging in the Massachusetts State House. Perhaps because New England lacked a true cash crop, its economy became much more diverse than those of the Southern colonies.
Shipping and shipbuilding, lumber, fishing, slaving, and rum distilling became mainstays of the New England economy and produced its earliest fortunes. Also very important to the evolving New England economy was iron, a commodity that had by then been indispensable for 3,000 years. At first this iron had to be imported at vast expense from foundries in England. John Winthrop the younger—son of the man who coined the phrase “shining city on a hill”—saw opportunity and, a born entrepreneur, he seized it. There was plenty of iron ore available, but to make iron he needed something America did not then have—capital. So he sailed to England in 1641 to get it. Why, one might well wonder, would English capitalists invest in a major industrial enterprise located in a wilderness 3,000 miles away? The answer lay in something America did have in indescribable abundance—wood. Charcoal was as indispensable as ore to iron smelting, and whereas England’s ……
