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The 21st Century Jeffersonian Yeoman Farmer

(November 24, 2011)

Dear Subscribers and Readers,

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For all of Thomas Jefferson's ideals of the independent “Yeoman Farmer” and its accompanying social and civic benefits, general farming life in 18th and early 19th century America was, shall we say, “brutish.”  The independent Yeoman Farmer was anything but independent or self-sufficient.  He usually has to barter or trade for everyday products, such as butter, clothing, farming tools, etc.  His livelihood was not only dependent on weather or other “acts of God,” but on (international) market prices for his commodities.  Because of the unpredictability and volatility of weather patterns, uniformity of products, and the lack of storage facilities 200 years ago, the agrarian sector was the most “cyclical” of all.  Bankruptcies (or even debtors' prison) always loomed, and of course, there were no farming subsidies at the time.  After all, who could ever forget the farmers' support for bimetallism and William Jennings Bryan's “Cross of Gold” speech?  This and today's calls for the Gold Standard by Americans who don't understand its depressionary implications make this deliciously ironic.

The brutish life notwithstanding, there is some truth/benefit behind the ideals of the independent Yeoman Farmer.  In Jefferson's mind, the Yeoman Farmer represented a small-scale property owner, and the commensurate social and civic values that this person brings.  Indeed, the modern day homeowner and entrepreneur didn't necessarily derive any virtue from their endeavors, but they all have a great desire in making strong and safe local communities and being a leader in their communities.  On the other hand, folks who rent or reside in public housing generally do not adopt these virtues, primarily because they have no tangible stake to speak of.  Jefferson and other supporters also believed that the individual proprietor exhibits other virtues, such as a commitment to hard work, a belief in the future, and raising a family in a wholesome environment—traits that are exclusively middle class and lacking in the idle rich or the very poor.

Quoting the New America Foundation's “Yeoman's Return: Small-scale Ownership and the Next Progression Era”:

The yeoman ideal thus reflects a perceived golden mean in society, comprising citizens unmoved by demagogues, naturally opposed to despots, engaged in productive labor, and also quick to defend their land and wholesome families from any threat. It is an argument at least as old as Aristotle, who distrusted both the very rich and the very poor, and who concluded that “the middle class is least likely to shrink from rule, or to be over-ambitious for it.””

The yeoman ideals peaked in the early 19th century—immediately before the rise of the railroads, the rapid industrialization of America, and the rise of the oil, food, and steel trusts.  Subscribers should recall that the modern definition of the “corporation” did not emerge until the development of the railroads—when immense amounts of capital (usually foreign) were needed to build the American railroad infrastructure.  With the proliferation of the modern corporation, a top-down management hierarchy emerged.  Local storeowners became workers of the A&P grocery chain.  Independent refiners and pipeline operators sold out to John D. Rockefeller.  Hundreds of thousands of farm workers, displaced by modern machines, flocked to the cities and other urban areas.  To gain back its power, U.S. labor banded together and formed unions.  Post World War II, defined benefits pension plans experienced a boom and became a source of security for corporate workers.  A more sophisticated form of protection—and implied independence—was the obtainment of a four-year college degree.  With the centralization and consolidation of power in the power, telecom, financial, industrial, and consumer industries—along with Big Government and the micromanagement of monetary policy—the American ideals of the “Yeoman Farmer” was all but dead by the 1950s to 1960s.

From the 1970s and well into the late 1990s, Big Business and Big Government dominated, although there were “flashes” of entrepreneurism/yeoman ideals during that time.  Bill Gates, a college dropout, started Microsoft in 1974, although in due time it also monopolized the PC software industry (and at one time was the largest corporation by market capitalization).  Still others followed, including Dell, Oracle, and Cisco—whose company structures more or less resembled the old hierarchy structure of the Rockefeller era.  However, the late 1990s also ushered in two new trends that would bring back the American Yeoman ideals once again: 1) the displacement of existing market power by upstarts with relatively little capital: Google, eBay, Amazon, along with the proliferation of big hedge funds, all come to mind; 2) the rise of instant communications and the proliferation of the internet as a connection/productivity tool that would reach the masses.

The proliferation of broadband across the globe, the rise of China and India, and the proliferation of smart phones (China has just surpassed the U.S. as the number one smart phone market) over the last several years accelerated this trend further.  At the same time, the financial crisis revealed the fundamental flaws of the OECD economies—whether it is an outdated infrastructure, the reliance on fossil fuels, the unsustainable entitlement programs, or economics overly based on material consumption (the proliferation of McMansions was certainly one of them).  No longer is a four-year college degree good enough for a secure career; combined with the secular decline of defined benefits pension plans, it seems like the American Yeoman ideals are all but lost.  And yet, a small number of Americans inevitably are taking advantage of the structural shifts in the global economy to start their own businesses.  Aided by cheap technology, the educated American worker is more powerful than ever—whether it's building her own consulting practice, starting her own clothing lines, or becoming an independent journalist—it is now easier than ever to start one's own business and be rewarded for it.  At the same time, power is being decentralized.  Newspapers and traditional media outlets are losing control.  This is only the beginning.  Upcoming technologies, such as 3-D printing, would localize manufacturing once again—empowering the small/individual designer/manufacturer who simply wants to make 500 T-shirts and 100 pairs of shoes to sell in her local community.  With the advent of alternative energies and home-based solar panels, power production would eventually be decentralized—further empowering the individual and literally bringing back the ideals of the self-sufficient Yeoman farmer (one who produces her own power, makes her own clothing, and possibly has her own organic garden!).  Going forward, it will all be about lateral power instead of top-down, hierarchal power.  Each one of us will need to learn to build our own brands, and network as much as possible.  For the first time in history, the American ideals of the Yeoman Farmer will finally be realized—aided by technology, education, decentralization, and access to a global market.

In this “Brave New World,” what will become of the modern-day corporation, whose existence only dates back to just 150 years (the British East India Company notwithstanding)?  Surely, the hierarchal, conformist, creativity-choking, monstrosity still has its place, especially managing a large/global infrastructure and areas of significant capital requirements (although note that the development of SpaceShipOne—which began the space race for the private sector—costs Paul Allen only $20 million).  Otherwise, it is going the way of the dinosaur.  For the history of the dinosaur, look no further than Wikipedia, an open-source encyclopedia that is significantly more robust/dynamic than the old, stoic Encyclopedia Britannica—the encyclopedia of choice when I was growing up.

Signing off,

Henry To, CFA, CAIA

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