By Robert E. Wright, Nef Family Chair of Political Economy, Augustana University
For West River History Conference, Rapid City, So. Dak., 13 October 2017
My book about the history of entrepreneurship in South Dakota, Little Business on the Prairie, has two themes relevant to this conference. The first is that South Dakota has an unusually strong record of entrepreneurship, proprietorship, and self-employment in part because it always has. The second is that taking the Indian’s land was not the worst thing that Euroamericans did to them, stripping them of their entrepreneurial heritage was.
History tells me that I better talk a bit about entrepreneurship. Specifically, last year at the annual South Dakota book doohickey held in Brookings a woman straight up asked me how the word was pronounced and what it meant, pointing at it in the subtitle of my book. “No wonder it has only sold a few dozen copies,” I thought to myself. Will Baumol, my good, now deceased friend from New York University’s Stern School of Business, where I used to teach courses in business history, always said there were three types of entrepreneurship: innovative, replicative, and exploitative.
The first type is what people usually think of as entrepreneurship: inventors, business innovators, and what not. You know Thomas Edison and Elon Musk types. South Dakota has had its fair share of inventors and business innovators. A good way for history buffs to while away an afternoon is to look through the old patent records by using Google’s advanced patent search engine and the names of inventors mentioned in my book. Unfortunately, researchers still cannot systematically search patent applications by state for patents filed before the mid-1970s. I found the ones in my book the old fashioned way, by digging around.
South Dakota has also had its fair share of exploitative entrepreneurs, though perhaps none as famous as the fictional Tony Soprano, the most recognizable exploitative entrepreneur, who make a living by raid instead of by trade, by taking rather than making. The so-called Wild West was full of sundry bank robbers, desperadoes, gunslingers, and so forth. Some Indians were exploitative entrepreneurs, too. The most well-known example is the massacre and slave raid at Crow Creek circa 1350 AD.
But most entrepreneurial activity in South Dakota, both before and after Columbus, was replicative. Replicative entrepreneurs extend existing techniques and technologies to new geographical areas, so almost all agriculturalists, butchers, dentists and doctors, fishers and hunters, photographers, shopkeepers, and all other proprietors engage in replicative entrepreneurship. Their employees and government workers are the non-entrepreneurs according to Baumol’s typology, which is the one I use because it’s the best.
Previous typologies made lame distinctions between, for example, legal and illegal enterprises. Well, a gambling establishment or a brothel in Deadwood, though illegal, is just replicative entrepreneurship because the patrons willingly pay for the services offered. A legal monopoly, by contrast, Baumol rightly categorizes as exploitative because it has the power to set prices or quantities to maximize its profits at the expense of buyers.
So we can now turn to the proposition that South Dakota has always been very entrepreneurial. We know that because big businesses were few and far between in the state from its inception as a territory to the present. Eventually mining companies like Homestake supplanted individual placer miners and the timber and food processing industries spawned or attracted companies that employed hundreds of people. Nevertheless, more of South Dakota’s income comes from proprietors than any other state. Throughout history, relatively few South Dakotans were employees and most of them were employed by very small businesses, from ranchers to small retailers to professionals.
The relatively strong entrepreneurial presence in early South Dakota attracted yet more entrepreneurial types, whose very example helped to spur even more to form their own businesses. A few entrepreneur-driven companies, like Raven, became very successful and relatively large but many entrepreneurs were happy just to make a living and moved on to new endeavors as the economy transformed away from extractive industries like mining and ag and into trade, light manufacturing, and professional services. Those people, called serial entrepreneurs, that is S E R I A L not C E R E A L entrepreneurs, sometimes became public or private sector employees for awhile before growing tired of bosses or co-workers and struck off on their own once again.
In most states, economic recessions led to high rates of unemployment but in South Dakota laid off workers tended to simply go into business for themselves. An exception was during the Great Depression and that was because there was no money to start up a new business as most banks that hadn’t failed during the agricultural recession of the 1920s failed during the great bank failure waves of the early 1930s. And the remaining banks were not about to finance new businesses that would not be able to find paying customers.
As I already mentioned, the book makes a big point about Indians. If you believe in the theory of conquest, the big crime was not taking their land, it was denuding them of their entrepreneurial heritage to the point that today some Indians themselves believe that their ancestors were somehow non-economic entities. In fact, Indians, including the Lakota, had a long history of entrepreneurship well before Columbus sailed the ocean blue, so the kids in South Park could have a day off “skoo.” In addition to exploitative entrepreneurship like that at Crow Creek, Indians were innovative and replicative entrepreneurs as well. From the time they arrived in the New World some 12,000 or more years ago until incarcerated on Reservations in the late nineteenth century, Indians were thriving. One piece of evidence of that is that they populated both North and South America lickety-split. And their bones look good, better than those of Europeans over most time periods.
Innovative and replicative entrepreneurial activities include the Mitchell site, which apparently was a factory that produced pemmican from bison and prairie berries that was then shipped down the Big Jim and Mighty Mo rivers in bull boats to Cahokia, near present day St. Louis, where it was traded for pottery. Other evidence of long distance trade also abounds. It turns out that those trading meets held throughout the West were not the idea of Euroamerican trappers, as once assumed, but long-standing and purely native institutions analogous to European trade fairs.
‘Tis true that Indian technology lagged behind that of the Europeans in some ways but that does not mean that it was stagnant. Atlatls, for example, eventually gave way to bows and arrows. Moreover, Indian medical technology was well ahead of its European counterpart in many ways. It was the Europeans, after all, who didn’t bathe very often and who thought everything could be cured with a good dose of mercury and a blood-letting.
As Jared Diamond pointed out some 20 years ago now, the Europeans were able to conquer the Indians due to guns, germs, and steel. The germs were pure luck of the draw, the steel due to Eurasia’s relatively huge market area and hence relatively more advanced division of labor, and the guns due to the European’s proclivity for warfare, which was in turn a function, Diamond explained, of its funky geography, which lent itself to the creation of numerous competitive polities and hence lots of warfare.
The point of all this is to show that Indians were not unusually dumb or lazy, or uninterested in technology or entrepreneurship, they simply found themselves on a part of the planet that was not the best suited to inventing guns or steel first. For that, they suffered the loss of their land. As I mentioned before, that taking is somewhat justified by human history. The Lakota themselves drove off other indigenous peoples, for example.
But what is unconscionable, and the second theme of Little Business on the Prairie, is stripping Indians of their willingness and ability to engage in entrepreneurial activities. The Bureau of Indian Affairs is the main culprit here as it has essentially created socialist enclaves throughout the U.S. in the form of Indian Reservations. It created a system of socialized medicine and education and denied Reservation Indians the right to own land in fee simple, which is the way most Americans do. It even mandates acceptable signage, which is why most of the few native-owned businesses on Reservations do not have appropriate signs to indicate their existence.
To make matters worse, various Left-leaning anthropologists in the 1950s and 1960s managed to convince some Indians, particularly Lakota, that their ancestors were eco-friendly communists. Yeah, they often used all of the bison but do you think that any part of cattle or hogs or chickens go to waste today? Heck no! Does that make Morrell’s an eco-friendly communist? Heck no! In fact, individual Lakota were extremely entrepreneurial, until that spirit was sucked out of them by generations of welfare programs deliberately designed to infantilize them. Of course such policies all began, in the Dakotas anyway, in the late nineteenth century. The problem is that we allow them to persist and then blame the Indians themselves, or their culture, for the extreme poverty still found throughout much of Indian Country.
When Tom Isern, a North Dakotan scholar, reviewed my book, he chastised me for asserting that all the Indians need to thrive is the ability to borrow money to form small businesses and otherwise to be left alone. I really do not understand his criticism as Indians have always taken advantage of economic opportunities until they are snatched away, usually by the BIA. From natural resource exploitation to tax-free smokes and gas to casinos, Indians know how to make a buck or two, or two billion in the case of some well-placed casinos. Leave them alone, let them borrow money when their ideas merit it, and they will do just fine, just like all other South Dakotans will, from immigrant Norwegians to immigrant Germans to immigrant Ethiopians. South Dakotans don’t need fossil fuel fracking to thrive, as they can summon corn from the ground, balloon companies out of thin air, and tourism out of Chinese birds, old bones, and just about anything else you can think of!
Thank you.Any questions?