Reviewing Jeff Madrick’s The Case for Big Government in The New York Review [“Government Beyond Obama?“], Richard Parker writes that the influence of government’s share of GDP from the American Revolution to the Great Depression was “quite small,” but had a “disproportionately large” influence on the economy. [NYR, 12 March 2009, 38]

Parker’s analysis of the federal role in this period is that

…upon organization of the Northwest Territory in 1789, the federal government became the nation’s largest landowner—a fact not reflected in conventional GDP calculations. And over the next century and a half the federal government was able to shape economic growth through its land distribution policies: for example, it used sales and leases of its land to foster small-scale farming, promote free primary (and later higher) education, encourage forestry and mining, and finance the nation’s vast transportation network.

When we recall a fact not reflected in conventional history — that the lands over which the federal government asserted control were Indian lands, not public domain — we get a sharper and less pleasing view of the federal role in boosting the economy in that 150 years. It was land theft.

For example, Lincoln’s economic policies resulted in huge areas of Indian land being opened to colonization. States were granted 71 million acres. Another 85 million acres were awarded to homesteaders under the 1862 Homestead Act. Yet another 155 million acres of Indian lands, including “rights of way and alternate sections of non-mineral bearing lands,” were “granted outright” to “corporate interests which undertook to finance the construction of the transcontinental railroad.” [Jennings C. Wise, The Red Man in the New World Drama (1971), New York: Macmillan, 260].

Parker criticizes Madrick for ignoring “effects of American foreign and military policies on economic growth. Between 1945 and 1975—the period Madrick cites so approvingly in contrast to the decades that followed—half of all federal spending was for the military, and significant parts of the rest (including for education, roads, science, and technology) were justified as military preparedness.” [NYR 41]

Putting these two historical periods together — 1789-1939 and 1945-1975 — a truthful observer would say that U.S. economic strength derived from big government was based on theft and war. If we take into account how much war was involved in the early land thefts, we might conclude that the only thing big federal government has done to boost the economy in the entire 220 years since 1789 has been to wage war. Not so pretty a picture of American political economy after all.

Strangely enough, Parker concludes his review with a call for the federal government “first to save Wall Street and restore credit, and then to begin rebuilding the devastation Wall Street’s failure has left behind.” [41] Since credit cannot be conjured out of thin air, does this mean more land theft and more war? And what then for the devastation that financial success leaves behind?

Parker’s final sentence, “The challenge of creating a new era for government as long-term guarantor of our security and well-being lies ahead.” One wishes that “our security and well-being” could be founded on some new political economy, not the same old, same old, which, after all, is looking increasingly problematic on a global scale.