How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present by Thomas J. DiLorenzo Crown Publishing * 2004/2005 * 295 pages * $25.95 hardcover; $14.95 paperback
Professor Thomas DiLorenzo of Loyola College, Maryland, has managed to pack two books into the volume titled How Capitalism Saved America. The first is the work promised in the title, the inspiring story about the creative power of that nexus of voluntary exchanges known as capitalism. The second, more sobering, book inhabiting these same pages tells the tawdry tale of those who through venality, envy, or simple ignorance have acted to stifle capitalism and deprive us of its benefits. Unfortunately, this second is as necessary as the first.
The "first book" is replete with unsung heroes, such as industrialist Thomas Weston and nobleman Thomas Dale. These two Englishmen observed, diagnosed, and treated the free-rider problem that subjected the Jamestown and Plymouth Bay colonies to impoverishment, famine, and death. Their prescription was not, as today's conventional economic wisdom would have it, enlisting the government to provide food, but rather replacing communal property rights with private property rights. Within a year, poverty was succeeded by plenty, initiating a process that would make America the wealthiest country the world had ever known.
The "second book" shows that identity theft has been a problem since long before the Internet, credit cards, and Social security numbers. The culprit here is mercantilism and the victim capitalism. Few who have not studied the history of economic thought even know what mercantilism is, a problem that wide readership of this book would remedy. Yet this system, in which the state extracts large amounts of resources from the populace to subsidize favored corporate interests, is what most people think capitalism is. This deception has led to a double injustice: the vilification of market entrepreneurs whose wealth came from solving the problems of millions within the capitalist system and the hailing as the "saviors of capitalism" politicians who conjure up phony problems or phony solutions to real problems.
DiLorenzo sets this out clearly and provides many historical examples. For instance, he contrasts the private road systems that sprang up throughout the United States in the early 1800s with the "public improvements" subsidized by state governments that were so corrupt and inefficient that by 1860 most states had banned such boondoggles. Unfortunately, after the Civil War the newly empowered central government picked up where the states left off by subsidizing railroads. …