Warpreneurship on the Prairie During the Great War
By Robert E. Wright, Nef Family Chair of Political Economy, Augustana University for the Center for Western Studies Dakota Conference, Sioux Falls, S.D., 23 April 2016.
As I argued in Little Business on the Prairie, which was published by the Center for Western Studies this time last year, South Dakota was from its inception a very innovative place. Necessity birthed creativity, and living in this beautiful but isolated and dangerous land, South Dakotans needed a lot. Much of what South Dakotans needed they purchased from innovators in other states or countries but because of their state’s unique climate and geology, low population density, and distance from major urban centers, South Dakotans enjoyed a comparative advantage in some areas, including farming and ranching, of course, but also air travel, military bases, mining, telephonics, tourism, and wholesale distribution.
As I showed conferees at the 2014 Dakota conference, already by 1910 South Dakota was home to 2,165 corporations taxed by the federal government. Almost a third were the tiny branchless banks mandated by federal and state banking regulations, but the other largest sectors comported with the state’s comparative advantage as show in slide 2.[i] So even before World War I, the first of the two Great Wars of the twentieth century, South Dakota’s economy showed signs of sectoral diversification and development on a scale recommending the use of the corporate form. In short, the state wasn’t all cornfields and cattle pastures. But economic diversification was not a linear process. The Second World War, in particular, made the state’s economy more dependent on agriculture.
The two Great Wars stimulated much war-related entrepreneurship, or warpreneurship, but, aided by ample rain, it mostly took the form of replicative agricultural entrepreneurship.[ii] In other words, more farming and ranching rather than more mining, manufacturing, or service. To see this, let’s look at a couple of slides. The first, slide 3, shows non-farm proprietary income -- that’s basically the profits of South Dakotans running their own non-agricultural businesses -- as a percentage of total income. Note that during World War II, non-farm proprietary income remained relatively stagnant and slightly below its average for the 1929 to 1961 period. Slide 4 shows why: farm proprietary income as a percentage of total income was extremely high during World War II, a major turnaround from the losses of the Depression decade and well above the average of the 1929 to 1961 period.
Slide 5 illustrates the change in sources of income for South Dakotans between 1940 and 1946. During that period, farm income increased its share of total income by over 15 percent. Miscellaneous income, which was inconsequential anyway, increased its share slightly and construction was able to hold its own, largely due to military construction in Sioux Falls, Rapid City,[iii] and some smaller communities like Edgemont.[iv] Every other major sector, from mining to government, lost some of their share of the percentage of total income. In other words, they shrank in absolute terms or grew less slowly than the agricultural sector and hence became less important components of the state’s economy during the war.
Of course the state’s economy grew quickly during World War II so almost every sector saw an increase in its absolute dollar size, from blue to red in slide 6. The sole exception was mining because the War Production Board shuttered the prodigious Homestake gold mine.[v] So some room for warpreneurship outside of agriculture existed, there just was not much of it because the smart money went into farming and ranching.
That World War II did not stimulate much manufacturing in South Dakota makes sense once one realizes that most of the state’s prewar manufacturing base was concentrated in food processing, printing, lumber and wood, and stone products, none of which were as important to the war effort as heavy manufacturing. Manufacturing enterprises of all other types numbered just 40 in 1939 and 51 in 1947 and manufacturers employed just 360 people before the war and 878 people after it, less than 10 percent of the state’s manufacturing workforce in both cases.[vi]
Moreover, companies in South Dakota’s core manufacturing areas faced new obstacles during the war. Valley Queen Cheese in Milbank, for example, began to produce both butter and cheese during the war but the government slapped ration controls on both, rendering further innovation impractical.[vii] The war also trashed the state’s burgeoning hunting tourism industry to such an extent that farmers hired young boys to walk their fields and stomp on the eggs of pheasants, a game bird introduced to the state by warpreneurs during the Great War.[viii]
Both World Wars stimulated postwar non-agriculture related entrepreneurship in South Dakota by increasing human capital or know-how. The number of licensed pilots in both states jumped after each war, for example, and the new pilots soon put their talents to work in a variety of ways including entertainment, transportation, crop dusting, and photography.[ix] The human capital of the state’s Amerindians also increased greatly during the World Wars but unfortunately federal policies and bureaucracies continued to limit their incentives to put their new skills and experience to work on the state’s numerous, large, and impoverished Reservations.[x] The strong desire on the part of many Lakota to work for themselves therefore manifested itself in nano, or extremely small scale, entrepreneurship.[xi]
South Dakota’s economy eventually diversified away from agriculture, most dramatically in the 1980s and no thanks to either of the World Wars. One could imagine another world war, global climate change, or a large natural catastrophe once again driving the state’s economy back towards a large reliance on agriculture but for the foreseeable future the state’s growth drivers will remain in human capital intensive service sectors like healthcare, research, and higher education.Endnotes
[i] Corporate Assessment Lists, 1909-1915, Volume 29, Records of the Internal Revenue Service, Record Group 58, National Archives and Records Administration, Washington, DC.
[ii] Harry Thompson, ed. A New South Dakota History 2nd ed. (Sioux Falls: Center for Western Studies, 2009), 210, 237.
[iii] Robert E. Wright, Little Business on the Prairie: Entrepreneurship, Prosperity, and Challenge in South Dakota (Sioux Falls: Center for Western Studies, 2015), 93.
[iv] Harry Thompson, ed. A New South Dakota History 2nd ed. (Sioux Falls: Center for Western Studies, 2009), 189.
[v] Robert E. Wright, Little Business on the Prairie: Entrepreneurship, Prosperity, and Challenge in South Dakota (Sioux Falls: Center for Western Studies, 2015), 57, 312-13.
[vi]W.K. Gray et al, South Dakota Economic and Business Abstract, 1939-1962 (Vermillion: University of South Dakota Business Research Bureau, 1963), 238.
[vii] Ron Robinson, Valley Queen Cheese: The Birth and Growth of an American Dream (Sioux Falls: Ex Machina Publishing Cmopany, 2006), 47.
[viii] Robert E. Wright, Little Business on the Prairie: Entrepreneurship, Prosperity, and Challenge in South Dakota (Sioux Falls: Center for Western Studies, 2015), 171-73.
[ix] Robert E. Wright, Little Business on the Prairie: Entrepreneurship, Prosperity, and Challenge in South Dakota (Sioux Falls: Center for Western Studies, 2015), 64-68.
[x] Robert E. Wright, Little Business on the Prairie: Entrepreneurship, Prosperity, and Challenge in South Dakota (Sioux Falls: Center for Western Studies, 2015), 76; Kathleen Ann Pickering, Lakota Culture, World Economy (Lincoln: University of Nebraska Press, 2000).
[xi] Kathleen Ann Pickering, Lakota Culture, World Economy (Lincoln: University of Nebraska Press, 2000), 20-21.