The Michigan Lesson Montana May Have Learned

"Even good governments are tempted to bend the rules, but we should all be glad when the rules are good and are there for a good reason."

The history of Montana’s state constitutions is a colorful one. Though I can’t prove it, I think Montanans may have learned an important lesson from the early history of the state in which I lived for 30 years, Michigan.

Montana’s first constitution was drafted in 1866 but according to the website of the state’s Supreme Court, it was lost on the way to the printer and never voted on by the people. A second one was ratified in 1884, to be replaced five years later by the 1889 version, which opened the door to statehood that same year. That one lasted until 1972, when a streamlined one that governs the state today was adopted.

The Michigan lesson is all about state subsidies for economic development. Upon Michigan becoming a state in 1837, its 26-year-old governor decided people wouldn’t move there unless government spent heavily on “infrastructure” first. He got it backwards. Private entrepreneurs invest in projects they think consumers will ultimately patronize but politicians prefer the pomp and circumstance of ribbon-cuttings, no matter what happens later. Where do we see the greatest waste and misallocation of resources—in the private or public sectors? Obvious, isn’t it?

Michigan’s state government dumped $350,000 (equivalent to millions today) into a canal that never generated more than $91.00 in income. Then it threw a small fortune into railroads. Legislators demanded railroad stations in their districts, so the routes ended up in zig-zag fashion instead of anything resembling a straight line. None of the subsidized railroads made any money; all were abandoned or sold off for a fraction of the government’s investments. Then in 1851, Michigan voters approved a new constitution by a wide margin. It expressly forbade the state from owning or subsidizing such projects, paving the way for private enterprise to do the job.

All three of the constitutions that earned the approval of Montana’s citizens included provisions that may have been inspired by the painful failures of activist governments like Michigan’s. It was clear that Montanans wanted a bright line between business and government.

The 1884 Montana Constitution declared that “No appropriation shall be made for charitable, industrial, educational or benevolent purposes to any person, corporation or community not under the absolute control of the State.” It also prohibited the legislature from making loans to or incurring debts for the construction of railroads. Another provision expressly forbade the legislature from making “any donation, or grant to by subsidy or otherwise” any company or corporation. Section 10 of Article XVI even made it illegal for a sitting legislator to receive a free ticket on a train. 

The Montana Constitution of 1889 said it in fewer words, but the sentiment was clear. Article V, Section 26 declared that the legislature “shall not pass local or special laws” that would grant any individual or group or company any “exclusive privilege, immunity or franchise whatever.” Section 35 outlawed any appropriation for such purposes.

Fifty years ago—in 1972—Montanans sent delegates to a convention to write a new Constitution. They created a document of half the verbiage of the previous Constitution, but one familiar line shows up in Article V, Section 11: “No appropriation shall be made for religious, charitable, industrial, educational, or benevolent purposes to any private individual, private association, or private corporation not under control of the state.”

I’ve always believed that the biggest dangers of government are mission creep and creeps on a mission. Even good governments are tempted to bend the rules, but we should all be glad when the rules are good and are there for a good reason. 

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Lawrence W. Reed writes a monthly column for the Frontier Institute in Helena, on whose board he serves. He is president emeritus of the Foundation for Economic Education and blogs at www.lawrencewreed.com.