Government has Always Picked Winners and LosersRoundup
tags: economic history, infrastructure, Economic Policy
David M.P. Freund, associate professor of history at the University of Maryland, College Park, is author of the award-winning Colored Property: State Policy and White Racial Politics in Suburban America (Chicago, 2007) and The Modern American Metropolis: A Documentary Reader (Wiley-Blackwell, 2015).
With the American Rescue Plan, the Biden administration has not only witnessed the passage of the most sweeping federal relief effort in recent history, but also advanced an argument about the role of public policy as a force for good in our economy. Polling shows that the legislation is broadly popular, but critics on the right and among centrist Democrats are sounding familiar alarms about “activist” government, warning that overreach will stifle economic activity and distort natural market processes, thus hindering growth. Pundits and experts echo these warnings and insist government should limit itself to protecting unfettered — or free — markets.
But such arguments erase a fundamental reality: Throughout American history, public power has been a precondition of our markets, essential to their design and operations. Acts of governance and the exercise of public authority have always structured growth — and shaped the allocation of its rewards. More simply put, public power made our markets and regularly picks winners and losers. In fact, many of the goals being pursued by the Biden administration and promoted by the left aim to redress inequities created in no small part by past government action — government action that defenders of the status quo and critics of redistributive efforts would rather remain invisible.
Control of property has always been key to building wealth in the United States. Yet, the government’s choices dating to before the Constitution have determined who can claim land and share in its benefits. In 1787, Congress enacted the Northwest Ordinance, setting the terms of governance and settlement in newly conquered and purchased Western territories. It carved land into one-mile square lots, then tasked federal officials with granting or selling it. Affluent and, often, politically connected Americans quickly monopolized markets for property.
Subsequent policy interventions — land grants and management, forced removal of Indigenous populations, support for slavery — continued to privilege speculative property markets and this narrow class of investors at the expense of established communities and small landholders focused on self-sufficiency, family independence or communal provision.
Even government investments in infrastructure — which theoretically benefited all Americans — concentrated benefits on the economic elite. In 1862, President Abraham Lincoln signed the Pacific Railway Act, facilitating completion of the Transcontinental Railroad in just seven years and setting the stage for decades of commercial and industrial expansion. Yet it did so by gifting millions of acres of federal land, including much of the prime real estate along the new transport corridors, to favored corporate entities and speculators. In exchange, recipients committed to building and operating the rail network and catering, for the war’s duration, to the Union’s transport needs.