Forging the Peninsulas

David McConnell

Forging the Peninsulas

Rating: ***

The textbook is usually informative, clear, well organized, and unbiased. Students who read this text should do occasional outside reading to get a more balanced view of Michigan history.

The first and most substantial text to be reviewed is David McConnell’s Forging the Peninsulas.3 There is much good to be said about this book. Eighth graders—and high schoolers, too—can learn much from it because McConnell’s coverage of Michigan history ranges from adequate to excellent. He devotes six of his 14 chapters to the pre-statehood period in Michigan. Two other chapters describe Michigan from statehood to the Civil War. Some may think this too much coverage of the early period, but McConnell does build a strong foundation for understanding Michigan’s past. The different Indian tribes, the French settlement, the British conquest, and the American triumph are essential ingredients in Michigan history and all get strong attention from McConnell. Also, his detail on the Yankee exodus to Michigan helps him explain the strong anti-slavery sentiment that made Michigan a center of the underground railroad that gave freedom to so many blacks. After this, three full chapters develop the entrepreneurial period of Michigan’s growth from the Civil War to World War I. The two chapters on Michigan from the 1930s to the present are adequate.

Railroad
Railroads. Michigan's early railroads were built by the state government. They were run so poorly that the legislature finally sold them to private entrepreneurs. Most Michigan textbooks neglect to tell this story.
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McConnell’s coverage of key social groups and individuals is also strong. The fur trade brought Indians and French (later British) together and their customs and differences are well developed. Later, McConnell uses the stories of Sojourner Truth, Adam Crosswhite, Laura Haviland, and Pamela Thomas to describe the anti-slavery campaign and the cooperation between whites (usually Quakers) and blacks that prevailed in Michigan. After the Civil War, industry—and later entertainment—were avenues of upward mobility for many in Michigan. McConnell cites inventor Elijah McCoy and musician Berry Gordy as examples of successful blacks.

McConnell’s analysis of Michigan’s economic development yields mixed results. His description of the fur trade, the dominant industry in Michigan until the 1830s, is excellent. He also does a good job explaining Michigan’s use of its natural resources—lumber, iron, copper, and salt. The furniture and carriage industries, by-products of lumber, are nicely covered. The rise of the auto gets a whole chapter.

McConnell could improve his text, however, by explaining more clearly why Michigan prospered. Furs, white pines, iron, copper, and brine all gave Michigan the potential for economic growth. But the environment for investment had to be right, too. Before 1850, Michigan had a strong state government that sometimes discouraged entrepreneurs and private enterprise. After 1850, the state quit the business of economic development and many entrepreneurs came in and flourished. McConnell needs to describe how this happened.

In the fur trade, for example, a government-operated fur company, with a $300,000 federal subsidy, competed in Michigan with John Jacob Astor’s American Fur Company. Astor’s firm, with a major depot on Mackinac Island, crushed the inefficient government company. Astor ran a more efficient business. For example, he sent agents to live with the different Indian tribes. His axes, blankets, muskets, and kettles were better quality items than those sold by the government’s fur company. While the Indians avoided the government trading posts, Astor dominated worldwide fur markets and became a multimillionaire.4

After the government fur company was disbanded, many of Michigan’s leaders still believed that strong state involvement was necessary for Michigan’s prosperity. Michigan was isolated, cold, swampy, and too far north of the westward migration routes that went through Pennsylvania, Ohio, Indiana, and Illinois. The Tiffin Report, which McConnell describes, was released in 1816 and claimed that less than one percent of Michigan land was good for farming. This document also retarded settlement.5

With few people coming to Michigan, its leaders became committed to a plan of state supported canals and railroads. Good transportation, the state’s leaders argued, was essential to attracting settlers. The state government, therefore, needed to build canals and railroads with citizens’ tax dollars. In fact, the Constitution of 1835 mandated state-funded internal improvements: "internal improvements shall be encouraged by the government of this state," the constitution read.

When Michigan entered the Union in 1837, the legislature met and approved a $5 million bond issue to fund the railroads and canals. The result was a disaster. The bonds were sold to the wrong group; the money that came in was misspent; the canals were poorly built and lost hundreds of thousands of dollars; and the two railroads constructed were also poorly built and lost even more.6

Michiganians were shocked at the incompetence of these state-run enterprises and wondered why this happened. Here is where a text can help explain to students some benefits of private enterprise and limited government.

When the state builds a project, the incentives are different from those of private enterprise. Satisfying political interests is often more important to legislators than building a railroad that is financially sound and well constructed. State builders use taxpayers’ money, not their own. If the road fails, it’s the state, not the builders, with empty pockets. The Michigan story is full of accounts of padded vouchers, illegal bidding, cost overruns, and the stealing of materials by contractors and even by the citizens themselves. Since no one actually owned the railroads, no one felt the responsibility to take care of them.

Judge Thomas Cooley, Michigan’s most famous 19th-century lawyer and a president of the American Bar Association, observed this waste firsthand. He wrote about it later and said, "By common consent it came to be considered that the State in entering upon these works had made a serious mistake." The people of Michigan, Cooley reported, became convinced "that the management of railroads was in its nature essentially a private business, and ought to be in the hands of individuals." In 1846, therefore, the state of Michigan abandoned all the canals and sold the Central and Southern Railroads, which were only partly completed, to private investors. The new owners promised to do some rebuilding and to expand the lines to the Chicago area. From this distress sale, the state recovered one-half of its $5 million investment and ended its headaches from being in the railroad business.7

Once the railroads had been privatized, they were rebuilt with care and extended across the state. At last, Michigan citizens had the roads they needed to trade and thrive. This turnaround was so startling that its implications were not lost on Michigan voters. They learned from history.

In 1850, Michigan threw out its old constitution and wrote a new one. It read, "the State shall not subscribe to or be interested in the stock of any company, association, or corporation." Furthermore, "the State shall not be a party to or interested in any work of internal improvement, nor engaged in carrying on any such work" except to provide land.8 The heavily taxed voters were determined to learn from their mistakes and chart a better future for the state. In the years of laissez-faire that followed, Michigan’s entrepreneurs developed the state’s natural resources—lumber and iron ore—so effectively that Michigan soon became a major industrial state.

McConnell missed the chance to tell the railroad story, but he does describe Michigan’s industrial history after the Constitution of 1850 opened the state for free trade. In the open environment from 1850 to 1910, Michigan rose to become a national leader in producing lumber, furniture, iron, copper, salt, and bromides. McConnell describes many of these developments in detail. In the lumber industry, Michigan inventors and entrepreneurs made their state the leading timber exporter in the nation. McConnell describes Silas Overpack’s invention of big wheels, used to haul logs to rivers, and Scott Gerrish’s invention of the logging locomotive as central to Michigan’s success. McConnell also shows how logging was a means of rapid upward mobility for many; and also an area of mismanagement when forest fires and erosion prevailed.9

Students need to understand the importance of lumber to Michigan’s prosperity. A booming lumber industry led to a strong furniture industry, centered in Grand Rapids. Cheap lumber was also central to the flourishing carriage industry, centered in Detroit and Flint. And, of course, the expertise needed to make carriages was later transferred to the making of autos. The triumphs of Henry Ford and Billy Durant made Michigan the heart of U. S. car production. McConnell does a fine job describing Henry Ford—his genius, his stubbornness, his mastery of car sales, and his fall from the top.

McConnell’s final two chapters, covering the last 65 years, need some improvement. McConnell starts by connecting the stock market crash of 1929 to bank closings, and the bank closings to the Great Depression in the 1930s. This connection is valid, but recent scholarship has shown that poor government policies helped start the chain of problems. The Federal Reserve, for example, created artificially low interest rates in the 1920s, and artificially high rates in the 1930s. In the last case, this retarded investment during the economic collapse.10

McConnell needs to mention other government policies that plagued Michigan during the Great Depression. For example, in 1930 Congress passed, and President Hoover signed, the Smoot-Hawley Tariff, the highest tariff in U. S. history. This law hit Michigan and the auto industry especially hard. Over 800 items used to make cars were taxed by Smoot-Hawley. Not only did this raise the cost of producing cars, but foreign countries retaliated against our high tariff by refusing to buy U. S. cars. General Motors, Ford, and the other automakers saw vehicle sales plummet from 5.3 million in 1929 to 1.8 million in 1933. Michigan’s economy was in ruins. McConnell notes that the number of workers at the Ford Rouge plant dropped from 98,337 to 28,915 from 1929 to 1933, but he never mentions how the Smoot-Hawley Tariff helped lead to this fiasco.11

Once we recognize that poor government policies helped get us into the Depression, we can question whether more government was really needed to get us out. McConnell implies that it was, and he presents only the positive side of Franklin D. Roosevelt’s New Deal. "Once Roosevelt was in office," he writes, "the federal government started a number of programs to help the jobless. The new idea was to create jobs and pay the workers with federal money." He cites the Works Projects Administration (WPA), which employed 200,000 Michiganians by 1938, and the Civilian Conservation Corps (CCC), which hired 100,000 young men in Michigan to plant trees, build parks, and restore campgrounds.12

McConnell omits a description of the tax hikes and deficit spending that were needed to support these programs. If we don’t describe how the money was raised for the New Deal programs, we risk giving students a false sense of how an economy works. Many students will think, "If we have a depression and lose, say, 300,000 jobs in the auto industry, we can have the federal government come along and hire 300,000 people for the WPA and the CCC and thereby cancel the effects of the depression." This tactic, however, didn’t work then and doesn’t work now. Unemployment in 1938 was still in double digits. Jobs "created" by the government had to be funded by taxes, and these taxes siphoned capital out of industrial markets.

Roughly speaking, those jobs we "create" by government programs are offset by losses in the taxpaying private sector. As Alan Reynolds points out, "a family earning $10,000 with four exemptions paid $40 in 1929, $416 in 1932." Roosevelt raised the rates even more: corporate taxes almost doubled; inheritance taxes reached 70 percent on large estates, and top incomes had to pay 90 percent. In 1929, two percent of Americans paid income tax; fifteen years later this increased to 65 percent of Americans.13 These new tax dollars helped fund the WPA, the CCC, and other federal programs. A textbook would be helpful if it explained some of this to students.

Unions are important in Michigan history and also in any study of economics. McConnell has a seven-page section entitled, "Unions: A New Friend at the Factory." As the chapter title implies, McConnell sees unions as an unmixed blessing for Michigan. "Companies had a hard time making profits," he writes, "so they put pressure on their employees to do more with no increase in pay. Many workers thought unions could help them." McConnell also says, "Thousands of Michigan workers joined unions after the strike in Flint. Unions became an important way to protect workers’ rights for fair pay and safe working conditions."14

McConnell’s coverage is one-sided. Certainly unions benefited those members who used their collective force to raise their wages. But there is more to the story. Higher wages mean less capital is available for the auto companies to expand or improve their product. Also, if wages are raised, then the increased costs of the finished product are passed on to consumers. Farmers near Muskegon, clerks in Lansing, and bellhops in Grand Rapids had to pay more for cars so that auto workers could earn more. The higher costs for cars put pressure on the auto companies to be competitive. Auto sales, as we have seen, dropped from about 5.3 to 1.8 million from 1929 to 1933. When the United Auto Workers (UAW) secured higher wages during the 1930s, those costs had to be passed on to customers, many of whom could not afford new cars. Also, new employees could not be hired and cheaper foreign cars became more competitive.

McConnell’s analysis of unions would be more balanced if he had made three other points. First, unions usually promote a system of rewards tied to seniority, not merit. Younger, talented workers can lose out in this system, and so does the company that loses full use of their labor.

Second, many unions have tended to be racist. The UAW has not been this way, but others have. As late as 1969, for example, 1.9 percent of the members of the International Brotherhood of Electrical Workers (IBEW) were black; only 0.6 percent of the members of the International Plumbers and Pipefitters were black. Other unions had no blacks or Hispanics. In 1972, one study found that 58 percent of local unions of boilermakers, electrical workers, elevator constructors, iron workers, plumbers and pipefitters, and sheet metal workers had no blacks or Hispanics. John Stephen Durham, who has studied the rise of unions, concluded, "in the last decades of the nineteenth century the process of Negro displacement had begun, and trade unions were a most important part of this development."15

Third, states with right-to-work laws often have better records of creating jobs and higher standards of living than in forced-unionism states. Dr. James T. Bennett, of the National Institute for Labor Relations Research, showed in a recent study that "after adjusting for state and local taxes and inflation, the average family in a right-to-work state has $2,852 more in purchasing power than a family in a forced-unionism state."16

Unions can protect their members and get them more pay, but many others lose in the process. McConnell is right to show the gains of autoworkers, and the unsavory efforts of Ford and General Motors to stop them. But his text would be stronger if he showed the negative effects of unions, too.

McConnell’s last chapter is on "Michigan as We See It Today." This chapter is too brief on recent political and economic history. In the last 30 years, federal, state, and local governments have grown enormously. From food stamps to federal aid to education, an expansive federal government has become so significant that it requires special coverage.

McConnell says little about the growth of government in Michigan, but he does describe the building of the Mackinac Bridge, a state project, and the construction of highways across the state, which are often federal projects. Whether state or federally funded, these programs mean taxes, and the tax issues have dominated Michigan politics since the 1960s. The state income tax, the single business tax, the intangibles tax, a progressive inheritance tax, and the Headlee Amendment (which limits taxes) are central to political discussions in Michigan in the 1990s. McConnell does not mention these issues; perhaps he thinks that students would be bored by them. If so, he may be right, but as future taxpayers, Michigan’s students ought to learn how much they are paying and what they are getting for their money.17

In 1850, Michigan threw out its old constitution and wrote a new one. It read, "the State shall not subscribe to or be interested in the stock of any company, association, or corporation." Furthermore, "the State shall not be a party to or interested in any work of internal improvement, nor engaged in carrying on any such work" except to provide land.

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