States, Not Nation: The Sources of Political and Economic Development in the Early United States

General histories of the United States focus almost exclusively on developments at the national level.   Yet it is well known that most of the important changes that propelled political democratization and economic modernization in the nineteenth century occurred at the state level.  The purpose of this paper is to shift the focus attention to states without losing sight of the larger story of which they were a part.  We accomplish this goal by reexamining aspects of economic development that the states are conventionally acknowledged to have led—the creation of a banking system, the construction of transportation infrastructure, the promotion of corporations—and show that these developments were part and parcel of a more fundamental institutional shift from a “limited access” to an “open access” social order, to borrow the terminology that Douglass North, John Wallis, and Barry Weingast developed for their book Violence and Social Orders (2009).  The United States was not born modern at the time of the American Revolution or even the Constitution.  Rather, we contend, the institutional prerequisites for political and economic modernization took shape over the course of the first half of the nineteenth century through a series of mutually reinforcing political and economic changes that occurred at the state level. These prerequisites emerged first in a small handful of states where, for highly contingent reasons, the seemingly insurmountable problems that had stood in their way were overcome.  As subsequent events highlighted the benefits of the new institutional configuration for economic development, it not only persisted but began to spread rapidly, though never completely, across the various United States.  The federal government played essentially no role in this process until the Civil War, and even then it played only a bit part.