Americans who prefer communism or socialism to free markets have long vilified successful entrepreneurs. To them, American entrepreneurs are oppressors in an inherently oppressive economic system. But things have rapidly gotten worse. To tout their antagonism toward America’s free market economy, we just saw an unprecedented number of Congressional candidates vilify entrepreneurs on the stump, often by name.
For example, Sarah Trone Garriott, James Talarico, and Abdul Al-Sayed have repeatedly vilified Elon Musk. Talarico has also vilified Jeff Bezos and Mark Zuckerberg, neither of whom can be accused of being either conservative or Republican or of having inherited their great wealth. Their great offense is being very successful entrepreneurs.
This reflects a woefully underappreciated part of America’s story: entrepreneurship. Entrepreneurs produced faster economic growth and development than anywhere else in the world while preserving and reinforcing critical elements of the American ethic such as individualism, freedom, and extraordinary creativity.
It’s time to make entrepreneurship a prominent part of the civics curriculum. Cultural inertia that sustained widespread respect for entrepreneurship is now played out. But by preparing young minds to understand how America’s uniquely entrepreneurial culture best promotes the common good, we can help future voters to be able to decide for themselves that America is a good country worth persevering.
How America Got Its Uniquely Entrepreneurial Culture
Life on the American farm is frequently credited with inculcating many of our most cherished beliefs, values, and virtues. But life on the farm, per se, was not what drove the rise of our uniquely entrepreneurial culture.
According to the United Nations, today over 90% of farms in the world are family owned. According to the World Bank, today about 1.6% of Americans work in agriculture. But for almost 300 years after Europeans first settled America, the vast majority of Americans lived on farms they or their families owned.
Meanwhile, over most of that same period most farmers in Europe were tenants, sharecroppers, or outright employees.
Rachel Laudan, for example, noted that “The aristocracy, the Crown, the Church of England, and the Oxford and Cambridge colleges owned about 90% of the land in England until the end of the nineteenth century.” Since much of what remained was not arable, far less than 10 percent were yeoman farms.
So for a very long time most Americans grew up on farms. But unlike Europe, their families owned those farms. Since farms are firms, this meant the vast majority of Americans, during America’s ascendance, were either firm owners or the children of firm owners, which meant that America was filled with citizens ensconced in the life of firm ownership.
The Rise of Profit Maximization
Unlike their counterparts in Europe, farmers in America had to make all the big decisions. They were painfully aware that their families would have to live with the consequences of those decisions. So most Americans at the time knew they had no choice but to make as much money as possible in good years to survive bad years. Everyone understood that wasn’t greed. It was common sense.
They also knew they couldn’t know how well they’d have to perform in good years to survive bad years. So, paradoxically, their natural aversion to risk produced extreme pressure to be entrepreneurial, to do their very best. Making a profit ensured they wouldn’t lose the farm that year. But by maximizing profit each year, farm owners minimized the chance that they or their descendants would lose the farm for years to come.
This combination of autonomy and fear of hard times, bankruptcy, and even starvation created pressure to make the best decisions even if it deviated from the herd. Going against the herd might look foolish to everyone else, but failing to make the best possible decision to avoid ridicule might leave your family starving like everyone else. Since farmers cared more about the welfare of their families than appearing foolish, this nurtured in them an independent-mindedness and individualism, both hallmarks of genuine entrepreneurship.
The Rise of Innovativeness
American farmers who wanted guarantees that something new would prove profitable before acting often ended up changing just to keep up rather than to get ahead. In the 19th century especially, technological change came so fast that failure to act quickly courted almost certain failure. Over time, the timid lost farm acreage, and the bold gained it.
Successful American farmers therefore taught their children that a willingness to take risks was necessary to survive in an ever-changing environment. Adhering strongly to tradition might have worked well for serfs in medieval Europe, but not in America. Choosing the less risky path was therefore not automatically seen as wise prudence. It might very well be short-sighted cowardice that avoids any chance of failure now by making failure more likely later.
In short, until the mid-19th century, most young adults in America were raised on family farms or by parents who were, so they learned things needed to make the tough decisions required to run a family farm profitably. This was very different from being raised to be a good employee by staying in your lane. The “Can Do” attitude of the American farm-owning farmer became the “Can Do” attitude of America’s entrepreneurs.
But this didn’t mean that family farmers in America could afford to be reckless. They had to carefully weigh the expected costs and benefits involved in decision-making. Unlike most estate owners in Europe who had sufficient capital to weather bad years, American farm owners could go from prosperity to bust in a single season. The American farm therefore grew more than crops. It also grew serious people who were also serious citizens.
Ownership Changes Everything
All large economic systems today were originally agriculturally based. So if farm life per se produced America’s exceptionally entrepreneurial culture, then all large societies today would be highly entrepreneurial. But they aren’t.
Consider Argentina, which in 1895 had the highest GDP per capita in the world. This resulted from an explosion of agricultural exports made possible by high agricultural productivity. If America derived its exceptionally entrepreneurial culture from agriculture per se, Argentina should have produced such a culture, too. But while Argentina has many excellent entrepreneurs today, that did not translate into an entrepreneurial culture.
Why the difference? Argentina’s farm economy was much more like Europe’s than America’s. Economic historians have documented an incredible concentration of land ownership in Argentina, making most farmers not owners but tenants, sharecroppers, or direct employees. For example, only 300 families owned all the farmland in the Pampas.
In his book, Civilization: The West and the Rest, Niall Ferguson compared North and South America to document how strong property rights in the North cultivated institutions that lead to stronger entrepreneurship and citizenship than in the South. In the North, effort was put toward supporting small landowners. But in the South, powerful elites held vast tracts of land.
So while most people were farmers on both continents until the end of the 19th century, in North America most of the population were also farm owners with a strong incentive to engage civically to ensure the government upheld their property rights. Such concern was rational only for a small elite in South America, so most citizens there were largely indifferent to civic matters.
Some might argue that tenants and sharecroppers also have incentives to be entrepreneurial. But when they invest resources to increase productivity, it’s the landowner who enjoys any gain that might be capitalized in the value of the land. Conversely, America’s farmers had ample reason to improve their farms over time so they could leave them in good condition to their descendants.
Why Is America’s Entrepreneurial Culture So Important?
Economists have shown why that, under a number of plausible assumptions, profit maximization best promotes the common good. This is because maximizing profit, by producing every unit of output that creates net value, is the first step to maximizing social welfare. Although how output is distributed also matters, it matters only if there is output to distribute. America’s economic dynamism is driven by the creativity of our entrepreneurs, and the social benefits produced by that creativity inspire others to be creative and to value creativity. Evidence of the esteem Americans afford those who strive to be creative appears wherever an American child is publicly lauded even after failing, because he was courageous enough to try.
Abundant theoretical and empirical research suggests that continuously improving living standards is impossible without continuous innovation made possible by relentless creativity. More than anywhere else, America produced the innovations that Nobel prize- winning economists Robert Solow, Douglass North, Paul Romer, Joel Mokyr, Philippe Aghion, and Peter Howitt demonstrated are what ultimately make possible an ever-improving quality of life for virtually all citizens.
In his personal notes taken during his tour of America before writing Democracy in America, Tocqueville wrote that “almost all [Americans] are entrepreneurs.” He further alluded that good entrepreneurs tend to be good citizens, the kind that could sustain a democracy. He documented Americans’ tendency to view collective problems as best addressed by private citizens working together voluntarily rather than waiting for government.
This reflected the “Can Do” spirit of entrepreneurs, and led to the common sense view that social problems do not always call for government solutions. Our collective entrepreneurial personality helped to ensure that “civil society” was not automatically equated to “government.”
When the efforts of entrepreneurs are appreciated by most people, it is obvious to them that without strong property rights and honest contract enforcement, entrepreneurs will not bother to take risks that often end up benefiting society greatly. This inevitably helps people see the importance of strong property rights and contract enforcement more generally, which strengthens political support for these vitally important institutional pillars of the free society.
When citizens understand what entrepreneurs do and why, they can see that, when conducted within the guardrails of ethical conduct, market competition is not morally negative. Their goal is to make a profit, not to harm competitors. Although maximizing profit might cause harm, all parties voluntarily enter into such competition knowing they might lose. But the process of competition still benefits society because we are all better off when firms compete for our dollars to survive.
Note that it was not by farmers becoming entrepreneurs outside of agriculture over time that made the economy grow so quickly by filling it with entrepreneurs. Most farmers who left the farm became employees, not self-employed shop owners or corporate CEOs. But America continued to enjoy the benefits of entrepreneurship because having lots of entrepreneurs is not nearly as important as having a culture of entrepreneurship.
An entrepreneurial culture arises from the transmission of beliefs, values, and virtues that enable citizens to understand how important entrepreneurship is for producing mass flourishing. Without adequately appreciating how entrepreneurial culture has driven America’s successes, American citizens might unwittingly vote to overturn the very economic system that has produced so much good in America and around the world. For these and other reasons, the spirit of entrepreneurship is a bulwark for preserving the cultural and institutional foundations of our free market democracy and constitutional republic. America would not exist without our strong culture of entrepreneurship.
How Can We Preserve America’s Entrepreneurial Culture?
Very few Americans now work on, or grew up on, their family’s farm. The family farm used to sustain our entrepreneurial culture automatically; it no longer does. The survival of America depends on finding a way to replace it.
Civics curricula (CCs) should therefore begin teaching students why America’s entrepreneurial culture arose from America’s unusually high proportion of family-owned farms. This ensures they will understand an overlooked part of our amazing story. It will also ensure that they will connect property ownership with entrepreneurship, and therefore property ownership with the ability to have a free, creative, and prosperous society.
CCs should also teach students why entrepreneurs don’t prosper by oppressing the less powerful. They prosper by doing things that ultimately benefit everyone by being creative in ways that ultimately increase output per capita. When an entrepreneur makes an abnormally high profit, in a free market society others rush in so they can make more money, too. But that increases the demand for labor, which drives up wages and thereby benefits workers, too.
CCs should also add to the pantheon of American heroes America’s greatest entrepreneurs. Their bold visions produced technological and institutional innovations that made us all richer and also transformed America’s social, political, economic, and cultural landscape.
CCs should teach students that the more entrepreneurial a society is, the scarier the process of change will be. But America’s ride has never been a calm one. It has been a wild roller coaster that is both exhilarating and terrifying. But that wild ride is what has allowed humans most fully overcome the fear of starvation, to most dramatically reduce disease, and to best ensure that Americans are the freest people on earth at the same time.
If our civics curricula fail to ensure that students understand how important our culture of entrepreneurship is, our students will be receptive to foolish ideas that can kill our free market economy, which amounts to killing the goose that lays the golden eggs. Short-sighted citizens can choose to end the drama generated by entrepreneurially driven creative disruption. But in doing so they will destroy what made America the greatest force for good the world has ever known.
David C. Rose (@DCRose1776) is CEO of The American Civics Academy, Professor Emeritus of Economics at the University of Missouri-St. Louis, author of The Moral Foundation of Economic Behavior and Why Culture Matters Most, both from Oxford University Press.
