6. What is Right with Kansas?

“As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market.”

Adam Smith, The Wealth of Nations

The state of North Dakota produces nearly half the wheat grown in the United States. Despite having a climate that provides only a limited amount of rainfall, a short growing season, and a harsh arctic winter, North Dakota is one of America’s great agricultural assets.

While North Dakota is an American garden, if it existed under a different political system, it would be a remote steppe, thinly populated by nomadic shepherds and herdsmen. North Dakota is one of the world’s great breadbaskets because it is a part of that capitalistic paradise called the United States of America.

Having been born in North Dakota and raised in nearby Montana, I have nothing but respect for the hardy wheat farmers of North Dakota. Much of the state’s agricultural success must be credited to their talent, hard work, and resourcefulness. Yet, if their state (along with its harsh climate) was located in central Asia, these great bread makers of the world would be sleeping in tents and chasing sheep and goats on horseback. They are the world’s greatest wheat farmers because they live in the land of free trade.

The North Dakota success story begins with the American constitutional convention. At the end of the American Revolution, the thirteen colonies became thirteen little nations, united only for a common defense from threatening European nations. Each state (that is, each governing nation) had powerful claims of sovereignty over its territory and the unsettled territory beyond the Appalachian Mountains.

Unsatisfied by the existing arrangement, the states replaced their weak union with a constitution that would reunite them together under a federal system of government. An unheralded part of this new arrangement was a clause that prohibited any state from interfering with commerce between the states. Known as the “Interstate Commerce Clause,” this part of our constitution was effectively the first NAFTA (North American Free Trade Agreement), denying the individual states the ability to protect their local businesses by issuing tariffs against competition from other states.

The Interstate Commerce Clause is the primary reason why America became the “land of opportunity” and the greatest commercial success the world has ever known. How the Interstate Commerce Clause worked its magic can be illustrated by the success of North Dakota wheat (as well as Kansas soybeans, hence the title of this post).

If North Dakota was a more sovereign state, not limited by the Interstate Commerce Clause, its power-seeking politicians would do what all politicians do – they would increase their personal power by performing favors for the people who keep them in power. In particular, they would pass laws that would protect their local apple growers, their steel foundries, and the state’s small but significant rutabaga producers. All of these protective measures, of course, would save inefficient local businesses, but at the cost of reducing the amount of acreage used to do what North Dakota does best – grow wheat.

Not to be outdone in their villainy, the politicians of the other states would pass measures to protect their local wheat farmers, reducing the market for North Dakota’s best product. The result of politicians in the various states being politicians is that North Dakota wheat farmers would have less income from wheat and a greater cost of living because they would have to buy their rutabagas, lettuce, and fruit from cold places like Grand Forks instead of warm places like Fresno and Bakersfield. Their farm machinery would need to be constructed from the steel foundries of Fargo and Bismarck. Politicians doing what politicians do would reduce the hard working citizens of North Dakota to a state of grinding poverty.

However, because we have a free trade arrangement among all of the political subdivisions within our economy of 300 million consumers, the hard working farmers of North Dakota have the advantage of an immense wheat consuming market. In addition, they also have the advantage of being able to buy farm equipment produced “back east” where farm equipment is best produced. And, most of all, they belong to a society of consumers that are free to buy their fruit from California, their cottons from Mississippi, and their engineering from MIT.

The great middle classes of North Dakota, Kansas, and the other states of America are the products of individual human ingenuity unleashed by the first great free trade agreement, the Interstate Commerce Clause.