Throughout most of human history, commerce and government have been intricately linked, at least geographically. Hubs of trade and business have almost always also been the seats of government. As cities grew and flourished, as commerce grew and flourished, and as both expanded into surrounding areas, governance became necessary and, thus, inevitable. And as cities preceded “countries” or empires by decades, if not centuries, those cities that tended to fare the best at enduring and growing were also the ones that were most successful at enabling commerce, creating wealth, conquering neighbors and their lands, etc. All of which is to say that the governments of the richest and most productive cities evolved into regional governments and into imperial governments and national governments, etc. From Ur, the principal city of Sumer, to Jerusalem, the capital of ancient Israel; from Athens and Sparta, the leading cities of the most famous Greek leagues, to Rome, Constantinople, Paris, and London, centers of commerce have almost always been seats of government as well.
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But not in the United States. Unlike almost anyplace else in the world, the United States was built differently. On the one hand, it was built consciously and purposefully, with suitability for commercial activity being the fundamental consideration in expansion. On the other hand, it was built accidentally and haphazardly, with governance being an afterthought, largely because it could be, because most governance was locally managed and that which wasn’t was managed thousands of miles away.
To that end, in 1607, the Virginia Company of London founded the first permanent British settlement in the Americas at Jamestown (in Virginia, naturally). Over the course of the next 50 years, the British crown granted various commercial charters for settlements up and down the American East Coast. By 1660, the Southern Department of the English government and the Board of Trade and Plantations (a committee of the Privy Council) officially shared general governance of the American colonies. In other words, from its inception, the seat of government for America was located halfway around the world from its various hubs of commerce.
Over the period during which the colonists declared and fought for their independence and then created and ratified two different constitutions, the major commercial cities in the newly formed nation were all of similar size: Philadelphia, New York, Boston, Baltimore, and Charles Town (Charleston). All were commercial centers, and all were vital to the economy of the United States. But none was inarguably dominant, and none would become the nation’s permanent seat of government.
Article I, Section 8 of the Constitution gave Congress the right (and responsibility) to “exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States.” In other words, to avoid choosing one near-equal city over the others and to keep the federal government from being influenced by the needs or desires of any one state, the Founders mandated the creation of an entirely new city to serve as the seat of government. The Residence Act of 1790 established such a city on the east bank of the Potomac River—a city that would be built from scratch with no prior political or commercial allegiances.
It is nigh impossible to convey just how important a role this “unique” development scheme played in the economic and political evolution of the nation. During its formative decades—and then for several decades afterward—the American commercial economy grew and matured, largely free from the interference of politics. Certainly, Washington understood, in general terms, what was occurring in the nation at large, but it wasn’t involved on a day-to-day basis in commercial and economic activity. As is always the case, some of the players in the two spheres were the same, as the political and commercial classes overlapped, but even they saw their roles as distinct and mostly unrelated. Politics was a narrow endeavor, and it remained mostly confined to a handful of perfunctory tasks, which intersected only occasionally. All of this left the economic and commercial domains to develop without first having to account for and address political relationships and ramifications. Markets were as free and unfettered in the young nation as they had ever been or would ever be anywhere in the world. The Great American story is a tale chock full of hard work, wisdom, and just plain dumb luck. Its commercial and economic development is highly dependent on all three.
This de facto separation of commerce and state largely ended with the Civil War. To be clear, historians and economists almost universally acknowledge that the development of the American South was stifled badly by the slave economy. As even contemporary observers noted, the South lagged behind the North in terms of wealth, population growth, industrialization, urbanization, infrastructure, commerce, and innovation. Its true economic capacity could only be unleashed after slavery’s economic and moral depravities were remedied. Slavery was a stain on the nation in more ways than one.
All of that notwithstanding, the mingling of commercial, economic, political, and moral arguments used to explain and justify the Civil War also altered the relationship between political and commercial considerations in the American governance structure. The intersection between commerce and politics became an accepted feature of the burgeoning nation-state. Even as the American economy continued to innovate and grow at an historically unprecedented pace, the seeds of consolidation and political influence had been sown, and it was only a matter of time before Washington took a more active and heavy-handed role in commercial and economic matters.
The Interstate Commerce Act of 1887 established the federal role in railroads and created the Interstate Commerce Commission. The Hepburn Act strengthened the ICC considerably and was called “the most amazing program of centralization that any president of the United States has ever recommended” by the New York World. The Mann-Elkins Act expanded the power of the federal government to regulate interstate commerce even further and, more or less, put the final nail in the proverbial coffin of the exceptional American economic separation of commerce and state.
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Today, of course, politics dominates virtually every aspect of American society—including commerce. There is no respite from politics anywhere. Most of this occurs at the federal level, but really, it’s a problem throughout the system. Even state governments tend to get involved in commercial matters specifically to remedy deficiencies they see in the federal regulatory regime. California may be the most grievous offender here, but it is hardly alone. Forty-four years ago, the late Speaker of the House, Thomas “Tip” O’Neill, famously planned the Democratic Party’s midterm elections strategy around the aphorism that “all politics is local.” Whether that was true even then is debatable, but the opposite is far more likely the case now. All politics is national. Moreover, everything is political—or, at least, almost everything.
Sadly—maddeningly—there is no way to go back. Bells cannot be unrung, after all, and politics, once embedded in a society, is impossible to eradicate.
That doesn’t mean, however, that all is lost and that the nation’s exceptionalism cannot be salvaged.
The good news here is that the quirks of American history that enabled commerce and politics to be separated for so long still largely exist, at least nominally. Washington and Wall Street are still distinctive spheres of activity, even if they intersect considerably and even if they are subject to the same forces of consolidation. Governance in commercial and economic terms remains at least superficially distinct from political governance. It is inarguable that an entire economic identity has grown up in and around Washington, taking advantage of the largesse of the federal government (with the same thing occurring in state capitals), but the mechanisms that enable these government-dependent economic communities to function are still generally maintained elsewhere. A distinction still exists.
Obviously, Wall Street has consolidated power in finance, and, in turn, the commercial world has largely become financialized, meaning that centralization is a seemingly intractable problem here as well. But again, history shows it doesn’t have to be this way. Technology—communications, cryptocurrency, and AI—all suggest that commerce’s American decentralization may be reinvigorated to some extent. And that should be the goal.
It is fantastical nonsense to suggest that a great economic utopia existed at some point in the past and that, simply by reworking the construction of our institutions, we can achieve utopia again. Nevertheless, documented history is far more powerful than the mythological variety, and the successes of the early American experience can be harvested to provide insights and a roadmap for resisting the ongoing concentration of power and capital.
The United States likely would never have become what it is today (and what it could be tomorrow) if the Founders had simply decided to make Philadelphia the capital. The wisdom of creating a new capital city, distinct from the existing seats of power, is largely overlooked in the lore of the American nation, but it shouldn’t be.
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