Tag Archives: jamestown

Be thankful for…Capitalism

In May 1607 the first American settlers from England arrived in North America and established a colony at Jamestown, Virginia. It was a veritable Eden: rich, fertile soil, abundant fish, game (deer and turkey),fruits, and nuts. By November 1607, 66 of the 104 colonists were dead (due mostly to starvation). In 1609 the Virginia Company attempted to “reboot” the colony with another 500 settlers. Within 6 months 440 of them were dead, again due to starvation.* How was this possible? How could so many perish among such abundant natural resources? Were they unprepared? How could the same things happen two years apart? The answer lies in the words of an eyewitness, who stated that the famine was the result of a “want of providence, industry and government, and not the barenenesse and defect of the Countrie, as is generally supposed.” Translated into modern English: it was the result of a lack of work ethic, effort and self-discipline and not due to any problem with the environment.But how is this possible? Surely the Virginia Company (the entity contracted by the British aristocracy to establish the colony) would not recruit a bunch of lazy slobs to run their very costly endeavor in the New World? No, the fault did not lie with the settlers per se but rather with the Virginia Company itself. The settlers were (willing) indentured servants. They agreed that if the Virginia Company would pay their way to the New World (a not inconsiderable sum at that time) then they would labor for the benefit of the Virginia Company for the next 7 years. The fatal error the company made was in heeding the words of Plato (who advocated collective ownership of land). They decided that all land and production therefrom would be held in common, the colonists would take from that stock what they needed and the remainder would be for the company. The company feared that if each colonist owned his land he would farm just enough for himself.

The failure of this collective ownership arrangement was a result of human nature,which leads to the “free rider” problem. Humans are inherently lazy. When given a choice between more work and less work to accomplish the same goal we will choose less work (why use a hammer if you can use an air-nailer?) In a communal system it is easy to hide indolence behind the work of others. For example, if 10 men produce 100 bushels of corn per month (total of 1000 bushels) and from that they are allotted 1% of the total output for themselves each month (10 bushels), then if one man slacks off and only produces 50 bushels then what he gets back is not cut in half, rather it is only cut by 5% as he gets 1% of 950 bushels or 9.5 bushels. Once everyone realizes they can “free ride” on the work of the more industrious (as some might increase output in a noble but futile effort to make up for the slackers) total output will decline. Or stated differently, if something is Everyone’s responsibility, then Nobody will do it.

How was the starvation problem finally solved? In 1611 Sir Thomas Dale was sent to serve as the “high marshal” of the colony. He recognized the problem and instituted a system in which each man was given 3 acres of land that he would own and farm.* All that was asked in return for ownership of the acreage was a lump sum tax for the colony of 2.5 barrels of corn (note, it was not a percentage of his output but rather a lump sum headtax!) The colony immediately began to flourish. Now rather than an incentive to decrease output and slack, each man had an incentive to produce as much as possible because he could keep the excess. He could now use the excess to trade with the Indians for furs and other goods. Trade also had the side benefit of helping to maintain peaceful relations with the Indians (why risk life and limb in warfare to get something when you can just trade for it).

This conversion from a communal property system with rampant starvation to a private property (capitalist) system with abundance was not a fluke. The same thing happened again at Plymouth, Massachusetts in 1620. After three years of starvation and death the governor of the colony, William Bradford, finally realized the problem and ordered that they “should set corn every man for his own particular, and in that regard trust to themselves…”* In other words, private plots of land were established for each family to farm themselves.
Why does this notion of communal property keep appearing throughout history? Why does it intuitively seem like it should just “work”?Perhaps because we are already familiar with the one and only place it can work: the family. A family is the ideal setting for a communal system because it is (a) small and (b) members are bound to each other by love. There is no incentive to free ride because (a) you’ll be caught and (b) you’ll harm those you love. The fatal error is in assuming that what works in a small group can work in a large group. This can never be due to an alteration of the incentive structure as the group size and character changes. No one will ever love their neighbor to the same degree as they love their own family.

* “How Capitalism Saved America”,DiLorenzo, Thomas J., 2004, Chapter 3.

FOLLOW UP: I received two Letters to the editor in the Morgan County Citizen, here and here, and my response is below:

In response to Bill Scholly (Dec 7, 14): Bill, would that I could opine on your version of events, but alas I cannot, as you have provided no citation source. Is the reader simply to believe your version is infallible and therefore requires no substantiation? I provided only one source (DiLorenzo) due to length limits on editorial articles. There are several other sources that I have added to my blog version of the article that substantiate the version I presented. However I find it curious that rather than question the specifics of the events, you instead chose to attempt to discredit the source by way of name-calling (“delusional”) and innuendo (the “hang with” comment). But I’m afraid you have us all at a disadvantage. Without knowing your source it is impossible for anyone to question you. How convenient.


Tom Bethell, TheNoblest Triumph: Property and Prosperity Through (New York: St.Martins’ Press, 1998).

Warren M. Billings, ed., “George Percy’s Accountof the Voyage to Virginia and the Colony’s First Days,” in The Old Dominion in the Seventeenth Century: A Documentary History of Virginia,1606-1689 (Chapel Hill: University of North Carolina Press, 1975), 22-26.
Philip A Bruce, Economic History of Virginia in the Seventeenth Century (New York:Macmillan, 1907).
Gary M. Walton and Hugh Rockoff, History of the American Economy, 9thed. (New York: Dryden Press, 1998), 30.
Mathew Page Andrews, Virginia, The Old Dominion, vol 1 (Richmond, VA: Dietz Press,1949), 59.
William Bradford, Of Plymouth Plantation, 1620-1647, with an introduction by SamuelEliot Morison (New York: Knopf, 2002), 116.
Samule Eliot Morison, The Story of the “Old Colony” of New Plymouth (New York: Knopf,1960).
Larry Scweikart, The Entrepreneurial Adventure: A History of Business in the UnitedStates (New York: Harcourt Brace, 2000), 37.
Jeremy Atack and Peter Passell, A New Economic View of American History,2nd ed. (New York: Norton, 1994), 50