America’s forgotten economistJuly 26, 2021
It is often forgotten, but America’s conservative tradition was not based on free trade, but rather economic nationalism. The American System became the basis of conservative economic policy. This economic philosophy was developed by Secretary of the Treasury Alexander Hamilton and the Federalists, continued by the Whigs under the leadership of Henry Clay, and was eventually adopted by the Republican Party.
The American System called for tariffs to not only provide revenues for the government, but also to protect the American economy, as well as funding internal improvements, and a national bank. These ideas were also referred to as the American School of political economy. Today these ideas are often referred to as economic nationalism or economic patriotism.
Perhaps one of the more forgotten individuals from American history is Pennsylvania’s Henry C. Carey (1793-1879), who was an influential economist. Henry C. Carey was the son of Matthew Carey, an influential publisher, friend of Benjamin Franklin, and an economist. Matthew Carey, just as his son Henry, was influenced by the economic policies of Alexander Hamilton. In 1822, Matthew Carey published Essays on Political Economy, which reflected Hamilton’s economic philosophy.
Henry C. Carey followed his father and wrote extensively on political economy. Carey was known as the “Philadelphia high priest of the tariff.” Carey’s writings on political economy demonstrated that he was committed to the American System. Carey also defended the American tariff system against the free-trade system of England. Some of Carey’s works on political economy included Principles of Political Economy, The Harmony of Interests, Principles of Social Science, among other writings which were widely influential in 19th century America. Carey believed that the tariff was not only important for the national economy, but also for his home state of Pennsylvania.
Abraham Lincoln, a Whig supporter of Henry Clay and future Republican president, was a student of political economy and was influenced by both Matthew and Henry Carey’s ideas. In fact, Henry Carey would become an economic adviser to President Abraham Lincoln and champion the American System during Lincoln’s administration. Carey became the “apostle of protectionism,” and he believed the Morrill Tariff Act to be one of the most important pieces of economic legislation that was passed.
Protectionism in the 19th century, just as it is today, was a controversial political issue, but Carey’s influence was reflective of the political economy of the Republic Party from President Lincoln through President Herbert Hoover. During this time, the Republican Party followed the American System, which included a tariff policy. The protective tariff became a pillar of the economic policy of the Republican Party. The Democrat Party tended to support more free trade and lower tariffs.
Henry Carey, along with other economists such as Friedrich List, became well known political economists during the 19th century and their ideas influenced the political economy of the Republican Party until libertarian and classical liberal economic ideas became more popular in the aftermath of World War II. Economic theorists such as Friedrich Hayek, Ludwig Von Mises, and Milton Friedman became dominant thinkers within the post-war conservative movement and the American School of economic thought became obsolete. The Republican Party was transformed from a party that supported protectionism and economic nationalism to a party that embraced free-trade and globalization. Republicans and conservatives who were critical of the free trade ideology became almost nonexistent.
President Donald J. Trump’s victory in the 2016 presidential election brought a change to Republican economic policy by shifting back to the American School of economics. President Trump campaigned on a platform of renegotiating trade deals, and he often spoke about the dangerous loss of over five million manufacturing jobs that had a devastating impact on the middle-class.
Economic nationalism or protectionism was a centerpiece of President Trump’s America First economic agenda. President Trump utilized tariffs to protect the steel industry that was being decimated and he was the first to take on the unfair trade practices utilized by communist China. President Trump also advocated “Buy American” provisions and placed the interests of the nation before globalization.
President Trump also advocated improving our national infrastructure. The American System that Henry C. Carey supported and defended was resurrected by President Trump’s administration. Both President Trump and the COVID-19 pandemic awakened the American people that the United States has outsourced too much of our manufacturing to foreign countries.
This not only has economic consequences in terms of decimating the middle-class, but it also impacts our national security.
It is still too early to see if the Republican Party will return to the principles of the American System. Nevertheless, Henry C. Carey, America’s forgotten economist and adviser to President Lincoln, should no longer be just a footnote in history, but will once again be a presence in the great debate over economic theory and policy.
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