Friday, August 2, 2013

Was West Virginia a Victim of the Free Market?

And now a rare first person commentary!

I have wrestled with the idea of the "robber baron" theory of West Virginia economic development since I was in college.  Historians such as John Alexander Williams taught for decades that a once pristine and functional society fell victim to greedy and rapacious seizers of land and resources.  They squeezed the land and people dry of wealth, then abandoned the state for greener pastures in the 20th century.  This left the state with little to show for the sacrifices made.

Taking another look at this time is vital.  Historians and the books they write almost uniformly blame the free market for all the evils that took place.  This mainly comes from the fact that many of them fail to see that a truly competitive free market defended by rule of law is not synonymous with doing business.  Many of the abuses done by business and described by historians are the opposite of the free market.

Williams grafted a colonial-periphery theory from studies of the Third World.  In his explanation, West Virginia was a "colony" of New York based business interests.  They recruited and used a comprador class of local lawyers and other professionals to advance their interests and to get the people behind them.  This theory, advanced by many, portrays a naïve population duped, used, and left behind.  They made little intellectual contribution, so they bear little responsibility.

Others, such as West Virginia University's Ron Lewis, have described more moderate ideas that do not reduce either the businessmen nor the state's people to caricatures.  Lewis' works focus as much on the environmental sacrifices as well as the social and economic ones.

One cannot argue away the fact that West Virginia's environment was drastically changed by industrialization.  Lewis in Transformation of the Appalachian Countryside describes how practices of getting timber to market caused eroded hillsides, made vast areas more vulnerable to both floods and fire, and annihilated river life.  He also points out that the clear cutting actually worked to the economic detriment of the logging companies because the land could not renew its forests quickly.

So there was environmental sacrifice on the same lines as the rest of a country untutored in best practices.  Interestingly, the example of West Virginia and other Appalachian states (clear cutting removed almost all of the virgin forest in the region) showed the resiliency of the environment instead of the fragility.  Forests and streams rebounded fairly quickly.

And the environmental impact did not start with the Industrial Revolution, either.  Traveling writer Anne Royall described  the stripping of forests around the Kanawha Valley salt works in the first decade of the 19th century.  She talked about the ugly, stump ridden hillsides and the black smoke hanging in the air.  Before the salt industry, Indians and frontier farmers used rather wasteful methods to remove trees, farm a plot until the land wore out, then move on. 

The crux of the economic argument discussed by historians (but rebutted by economists such as Russ Sobel) is that wealth was "stolen" from West Virginia.

Did greed and hatred for humanity cause businessmen to swindle the people from their land, then force them into unhealthy jobs that paid nothing?  And did the state get nothing in return?

The record is mixed.  Some focus on the amount of money paid to landowners for their property.  Owners received a pittance compared to the value of resources removed.  In many cases, this is true.  The true market value of land isolated from centers of transportation and unsuitable for farming was very low.  Company agents looking for coal lands offered market value.  Some recognized the eagerness in the eyes of the agents and negotiated for more.  Others savored the idea of getting more cash than they had likely ever seen in their lives for what they thought was worth very little and took the offer without question or counterproposal. 

But other owners refused to sell.  Companies then brought in the lawyers.  Land claims in the mountains of what was once Virginia were a tangled mess.  People established claims with boundaries marked by trees or moss covered rocks, laid out in paces.  Different land offices granted the same land to separate people.  Residents lived on the land they thought was theirs.  Companies in Philadelphia, New York, and elsewhere bought competing claims.

So naturally many cases ended up in court.  With no clear ownership of the land established, judges had to fall back on legal principle.  Here is yet another example where government meddling in the private sector creates social problems. Before the Industrial Revolution, courts in Western Virginia used natural rights and common law principles.  The rights of the individual were more important than those of collective society.  With all else equal, a court would usually use the maxim "possession is 9/10 of the law."  The person living on the land, all else being equal, gets to keep the land. 

After industrialism took hold, courts moved to a collectivist social justice approach.  The maxim now was to advance the common good.  In any era, the common good is usually defined by entities trying to take resources from the less powerful individual for some other purpose.  Collectivism was on the side of big business.  So instead of advising the companies to make better offers or go elsewhere, courts ruled in favor of the companies "for the common good."

The common good was also supposedly advanced by a law allowing railroads to be built without permission on private land if the owners did not notice the construction of the rail line. 

Common good arguments are just as nefarious when done in favor of modern causes as they were when done to advance crony capitalist interests.  Every time used, the common good argument hurts the common individual man. They are rarely appropriate in a free society, even if the common good is advanced.

And the common good did advance.  It could have advanced just as far, if not farther, had the rights of individuals remained respected. But advance, it did.  Railroads connected most towns and county seats.  Mind you, sometimes the county seats were moved by force to the rail lines in some cases.  But it happened.

Satellite industries grew up around timber and coal extraction.  Paper mills, coke ovens, glassware, and other products were churned out of towns and cities across the state.  Trains and river traffic carried products to domestic markets and port cities.  The free public school system advanced farther and faster after the Civil War than nearly anywhere else south of the Potomac and Ohio Rivers.

At the time of the industrial revolution, dredged rivers, expanding rail networks, and establishment of free schools were all marks of progress.  West Virginia got those and a government weather station.

The argument that naïve or greedy natives sold out to big city interests falls flat.  Henry Gassaway Davis of Piedmont was a mover in politics and business, not one who was moved.  Elkins, who politically advised presidents and would-be presidents, chose to move to the state.  Johnson Camden did sell out his oil and gas interests to John Rockefeller in a Godfather-like "offer you can't refuse." But that was under pressure of riches or ruin and was the aberration instead of the rule.

Employment of the people also created a mixed result.  Abuses did happen, particularly in the southern counties.  Some companies took advantage of the isolation, using debt and low wages to create near serfdom style conditions in company towns.  The company owned the houses, stores, schools, and even churches.  Running afoul of the company meant a blacklisting from almost any job in the region.

Again, government and business worked too closely in unison in these areas.  Many sheriff's deputies worked double duty as law enforcement and company guards.  Law enforcement broke up the free association of union organizers and workers while also intimidating journalists.  The stifling hand of government allied with business perpetuated these abuses.  It is a sin of business, but not one of the free market.

On the other hand, those now working for cash money had more access to the benefits of industrialism.  Historians bemoan the move from self-sufficiency to the market economy.  But they do not consider the price of items compared to the value of the time spent in making them oneself.  Factory made clothes could be bought for cash earned in less time than it took mom or grandma to make homespun.  Food was cheaper when considered in this way. People also had access to medicine, newspapers, and other products rarely seen in some areas prior to the coming of industrialization.  Standards of living rose for most people.

Of course the downside lay in the fact that a cash paying job provided less security.  What happened to people laid off, too old, or too injured to work was a real social problem.

Overall, it is hard to see how one could find that business as a collective whole abused or stole from the state and people of West Virginia.  Then, as before and later, individual malefactors took advantage of people and the laxity of the laws.  But they do as much or more harm now by lobbying to use the power of government to eliminate competitors, or infringe on the rights of the people. 

Revisiting the interpretation of industrial history in West Virginia is necessary.  The perceived sins of the past are used against those trying to develop for the future.  We have all been raised to wrongly blame the free market system when many of the real problems stemmed from government help.  Except for the environmental destruction, which a more educated society and legal system has addressed adequately, the free market ideal is just not responsible

The lesson of West Virginia's past is not that the free market failed, it is that the failure to maintain a free market hurt the people.

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