Entrepreneurs built the United States of America, as historian John Steele Gordon recounts in the speech adapted for the latest issue of Hillsdale College’s Imprimis. Gordon explains that this nation’s unique position in history enabled entrepreneurs to fare better here than in late 18th-century Europe.
Adam Smith’s The Wealth of Nations was published the same year as independence was declared. Being very young, America did not have the burden of hundreds of years of economic cronyism. There were no aristocrats, no guilds, no ancient monopolies or hereditary tariffs as there were in continental Europe. And therefore Karl Marx was wrong, at least about America, when he wrote, “Men make their own history, but they do not make it as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly encountered and transmitted from the past.” We had less past than any other country, and therefore we could make our own history, creating the most Smithian economy in the western world. To be sure, it was not purely Smithian. People in government will always try to help those who are powerful at the expense of those who might become so. But the U.S. has consistently come closer to the Smithian ideal, over a longer period of time, than any other major nation.
Nothing encourages entrepreneurial activity more than the freedom to take risk. Consider one of my favorite early American entrepreneurs, Frederic Tudor. In 1806, he decided to sell ice. He wanted to get it where it was cheap, New England, and sell it where it was dear, the Southern states and the West Indies. Everyone laughed. But his secret was a waste product that a great New England industry was more than happy to supply him with for free—sawdust, an excellent insulator. So Tudor combined two cheap things and made them valuable simply by moving their location. By 1820 he was shipping 2,000 tons of ice a year to as far away as Calcutta, getting as much as 25 cents a pound. By 1850, ice was one of New England’s largest exports. By 1900, of course, the trade was dead, thanks to the invention of refrigeration. We call that creative destruction.
A second great spur to entrepreneurship is the freedom to fail. And no country in the world has been as consistently tolerant of economic failure as the United States. While bankruptcy in Europe has always been regarded as a moral as well as a financial failure, this has not been the case here—possibly because we are descendants of people who sought a second chance by immigrating.