The Great American Land Bubble

Those who lived through the huge speculative real estate bubble of the 1990s through 2008 might have imagined that it was unprecedented. Not so. Far from it!

This definitive history of land speculation provides a well-documented but hugely entertaining look at bubbles, bailouts, and land rackets from the Colonial Age through 1932, which is the date when this wonderful book by A.M. Sakolski (Professor of Finance, City College of New York) was first published. It is republished here because it presents a history that hardly anyone would otherwise know, and Sakolski’s treatment has never been surpassed.

The pattern has always been the same. The legislature assumes control over a parcel of land. They work with the executive to auction it off to political favorites. Banking interests get involved to float the loans. Expectations spin out of control, and the boom turns to bust. The banks get in trouble and they turn to the legislature and the executive, which then try to finagle some bailout deal that requires debt and floating more bonds that then have to find a market.

It’s been going on like this since Colonial times, and every important member of the political elite has been involved at all levels. Consider George Washington, who was a land surveyor and a land speculator. Salolski writes “Had he not become a great general and the Father of his Country, he probably would have been a foremost colonial financier and landlord.” And so it was with Patrick Henry, Benjamin Franklin, and most of the rest of them.

Land speculation was not always a racket. It was a huge business throughout American history and a legitimate enterprise. But because it always involved complex relations with legislatures and protected banking interests, hardly anyone had clean hands. This was true throughout American history, and it became decisive in many political turns of events.

Sakolski covers the Georgia “yazoo” frauds, the building of Washington as a real-estate boom town, the Louisiana grants, the Texas manias, railroad land jobbery, the California gold frenzy, the pervasive marketing of “main street” and “broadway” streets, and the Florida scams and rackets.

To read this book, the reader has to prepare to let go of the romantic idea of pure homesteading of the Lockean model. At every stage, we see the intrusion of politics and the working out of debt-blown bubbles. For good and ill, America has always been a country with an unusal degree of tolerance for every manner of real-estate racketeering.