american school (economics)


  • The creation of a strong central government able to promote science, invention, industry and commerce, was seen as an essential means of promoting the general welfare and
    making the economy of the United States strong enough for them to determine their own destiny.

  • [30] The American System was important in the election politics for and against Grover Cleveland,[7] the first Democrat elected after the Civil War, who, by reducing tariffs
    protecting American industries in 1893, began rolling back federal involvement in economic affairs, a process that became dominant by the 1920s and continued until Herbert Hoover’s attempts to deal with the worsening Great Depression.

  • In Andrew Jackson’s first annual message to Congress in 1829, he declared that “[b]oth the constitutionality and the expediency of the law creating this bank are well questioned
    by a large portion of our fellow-citizens, and it must be admitted by all that it has failed in the great end of establishing a uniform and sound currency”.

  • [18] In a passage from his book, The Harmony of Interests, Carey wrote concerning the difference between the American System and British System of economics: Two systems are
    before the world; … One looks to increasing the necessity for commerce; the other to increasing the power to maintain it.

  • [38] In 1973, when the “Kennedy” Round concluded under President Richard Nixon, who cut U.S. tariffs to all time lows, the New Deal orientation towards reciprocity and subsidy
    ended, which moved the United States further in the free market direction, and away from its American School economic system.

  • [12] History Origins[edit] Alexander Hamilton’s ideas and three Reports to Congress formed the philosophical basis of the American School The American School of economics
    represented the legacy of Alexander Hamilton, who in his Report on Manufactures, argued that the U.S. could not become fully independent until it was self-sufficient in all necessary economic products.

  • Carey wrote: The most serious move in the retrograde direction is that one we find in the determination to prohibit the further issue of [United States Notes] … To what
    have we been indebted for [the increased economic activity]?

  • Evolution[edit] As the United States entered the 20th century, the American School was the policy of the United States under such names as American Policy, economic nationalism,
    National System,[31] Protective System, Protection Policy,[32] and protectionism, which alludes only to the tariff policy of this system of economics.

  • Advocacy[edit] Senator Henry Clay, leader of the Whig Party and advocate for the American System The “American System” was the name given by Henry Clay in a speech before
    Congress advocating an economic program[20] based on the economic philosophy derived from Alexander Hamilton’s economic theories (see Report on Manufactures, Report on Public Credit I and II).

  • The Jacksonian presidents saw key tenets of the American System, including the support for the Second Bank of the United States and advocacy of protectionist tariffs, as serving
    moneyed or special interests rather than the majority of Americans.

  • [25] Henry Clay’s American System supported the necessity for central institutions to “take an activist role in shaping and advancing the nation’s economic development”.

  • [15] A number of programs by the federal government undertaken in the period prior to the Civil War gave shape and substance to the American School.

  • Such a policy would reduce the profits of the banks, and in response to this, the banking institutions threw their support behind the British school, espousing the gold standard
    throughout the 1800s.

  • Clay’s policies called for a high tariff to support internal improvements such as road-building, and a national bank to encourage productive enterprise and to form a national
    currency as Hamilton had advocated as Secretary of the Treasury.

  • [13] Frank Bourgin’s 1989 study of the Constitutional Convention shows that direct government involvement in the economy was intended by the Founders.

  • [37] The New Deal continued infrastructure improvements through the numerous public works projects of the Works Progress Administration (WPA) as well as the creation of the
    Tennessee Valley Authority (TVA); brought massive reform to the banking system of the Federal Reserve while investing in various ways in industry to stimulate production and control speculation; but abandoned protective tariffs while embracing
    moderate tariff protection (revenue based 20–30% the normal tariff under this) through reciprocity, choosing to subsidize industry as a replacement.

  • At the close of World War II, the United States now dominant in manufacturing with little competition, the era of free trade had begun.

  • Second Bank of the United States and the Bank War[edit] The first and most well-known battle between Jacksonians and Clay focused on the struggle over renewing the charter
    of the Second Bank of the United States.

  • Jackson’s Secretary of the Treasury Roger B. Taney effectively summed up Jackson’s opposition to the Second Bank of the United States: “”It is a fixed principle of our political
    institutions to guard against the unnecessary accumulation of power over persons and property in any hands.

  • Clay first used the term “American System” in 1824, although he had been working for its specifics for many years previously.

  • The American School, also known as the National System, represents three different yet related constructs in politics, policy and philosophy.

  • [1] It is the macroeconomic philosophy that dominated United States national policies from the time of the American Civil War until the mid-20th century.

  • Abraham Lincoln, an “Old Henry Clay tariff Whig” by his own definition, enacted much of the American School’s core policies into law during his tenure as President from 1861
    through 1865 As soon as Lincoln took office, the old Whig coalition finally controlled the entire government.

  • [28] Van Buren believed very strongly that “[t]he central government, unlike the states, had no obligation to provide relief or promote the general welfare.

  • Due to the dominance of the then Democratic Party of Van Buren, Polk, and Buchanan the American School was not embraced as the economic philosophy of the United States until
    the election of Abraham Lincoln in 1860, who, with a series of laws during the American Civil War, was able to fully implement what Hamilton, Clay, List, and Carey theorized, wrote about, and advocated.

  • Carey called for the continuance of the greenback policy even after the War, while also raising the reserve requirements of the banks to 50%.

  • [25] The bank thus fit well into Clay’s worldview, and he took advantage of Biddle’s manipulation in order to pass the renewal bill through Congress, despite expecting Jackson’s
    inevitable veto.

  • President Ulysses S Grant acknowledged the perceived efficacy of tariff protection in reference to Britain’s success during the Industrial Revolution, when tariff rates on
    manufactures peaked at 57%: For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it.

  • [19] This would have allowed the US to develop its economy independent of foreign capital (primarily British gold).

  • [23] This rhetoric, portraying the supporters of the bank as privileged individuals, and claiming the opposition of “a large portion of our fellow-citizens” crystallizes Jackson’s
    majoritarian distaste for the special interest serving economic nationalism embodied in the American System.

  • [25] With battle lines set, Jackson’s majoritarian opposition to the Second Bank of the United States helped him be elected to a second term.

  • One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing
    the condition of man throughout the world.

  • [18] The government issue of fiat paper money has also been associated with the American School from the 1830s onwards.

  • The Jacksonian presidents, particularly the southern-born Jackson, had to be extremely cautious when lowering tariffs in order to maintain their support in the North.

  • [33][34][35][13][36] This continued until 1913 when the administration of Woodrow Wilson initiated his The New Freedom policy that replaced the National Bank System with the
    Federal Reserve System, and lowered tariffs to revenue-only levels with the Underwood Tariff.

  • [26] Polk, on the other hand, in his characteristically efficient way, managed to push through significant tariff reductions in the first 18 months of his term.

  • [27] Opposition to government-financed internal improvements[edit] The final bastion of Jacksonian opposition to Clay’s American System existed in relation to the use of government
    funds to conduct internal improvements.

  • Other developments included the various Army expeditions to the west, beginning with Lewis and Clark’s Corps of Discovery in 1804 and continuing into the 1870s (see for example,
    the careers of Major Stephen Harriman Long and Major General John C. Frémont), almost always under the direction of an officer from the Army Corps of Topographical Engineers, and which provided crucial information for the overland pioneers
    that followed (see, for example, the career of Brigadier General Randolph B. Marcy), the assignment of Army Engineer officers to assist or direct the surveying and construction of the early railroads and canals, and the establishment of the
    First Bank of the United States and Second Bank of the United States as well as various protectionist measures such as the Tariff of 1828.

  • The name “American System” was coined by Clay to distinguish it, as a school of thought, from the competing theory of economics at the time, the “British System” represented
    by Adam Smith in his work Wealth of Nations.

  • Jackson saw this manipulation as clear evidence of the penchant of a national bank to serve private, non-majoritarian interests.

  • It immediately tripled the average tariff, began to subsidize the construction of a transcontinental railroad in California even though a desperate war was being waged, and
    on February 25, 1862, the Legal Tender Act empowered the secretary of the treasury to issue paper money (‘greenbacks’) that were not immediately redeemable in gold or silver.

  • Upon hearing of Jackson’s distaste for his bank, Biddle immediately set about opening new branches of the bank in key political districts in hopes of manipulating Congressional

  • [2][10][11] The United States continued these policies throughout the later half of the 19th century.

  • [28] As heir to the legacy of Van Buren and Jackson, Polk was similarly hostile to internal improvement programs, and used his presidential veto to prevent such projects from
    reaching fruition.

  • As later defined by Senator Henry Clay who became known as the Father of the American System because of his impassioned support thereof, the American System was to unify the
    nation north to south, east to west, and city to farmer.

  • This commitment to the majority and to the voiceless came in direct conflict with many elements of the American System.

  • Examples: First Bank of the United States, Second Bank of the United States, and National Banking Act.

  • The policy has roots going back to the days of the American colonies, when such a type of currency called colonial scrip was the medium of exchange.

  • [citation needed] In the Civil War, a shortage of specie led to the issue of such a fiat currency, called United States Notes, or “greenbacks”.

  • In his first annual message to Congress, Jackson proclaimed that “the first principle of our system [is] that the majority govern”.


Works Cited

[‘1. “Free Trade Fallacy” New America.
2. ^ Jump up to:a b “Second Bank of the United States”
3. ^ “Republican Party Platform of 1860”
4. ^ “Republican Party Platform of 1856”
5. ^ Pacific
Railway Act (1862)
6. ^ “History of U.S. Banking” Archived 2007-12-04 at the Wayback Machine.
7. ^ Jump up to:a b ANDREWS, E. Benjamin, p. 180 of Scribner’s Magazine Volume 18 #1 (January–June 1896); “A History of the
Last Quarter-Century”.
8. ^ Lind, Michael: “Lincoln and his successors in the Republican party of 1865–1932, by presiding over the industrialization of the United States, foreclosed the option that the United States would remain a rural society
with an agrarian economy, as so many Jeffersonians had hoped.” and “… Hamiltonian side … the Federalists; the National Republicans; the Whigs, the Republicans; the Progressives.” — “Hamilton’s Republic” Introduction pp. xiv–xv. Free Press, Simon
& Schuster: 1997. ISBN 0-684-83160-0.
9. ^ Lind, Michael: “During the nineteenth century the dominant school of American political economy was the “American School” of developmental economic nationalism … The patron saint of the American School
was Alexander Hamilton, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods … The American
School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the “American System” of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican
party well into the twentieth century.” — “Hamilton’s Republic” Part III “The American School of National Economy” pp. 229–30. Free Press, Simon & Schuster: 1997. ISBN 0-684-83160-0.
10. ^ Jump up to:a b Richardson, Heather Cox: “By 1865, the Republicans
had developed a series of high tariffs and taxes that reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising the standard of living for everyone. As a Republican
concluded … “Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes … for ordinary expenses of Government.” — “The Greatest Nation of the Earth” Chapter 4,
“Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation” pp. 136–37. President and Fellows of Harvard College: 1997. ISBN 0-674-36213-6.
11. ^ Jump up to:a b Boritt, Gabor S: “Lincoln thus had the
pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leonard P. Curry, the historian of the legislation has aptly written, amounted to a “blueprint for modern America.” and
“The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate variety on economics, one whom Joseph Dorfman could even describe as ‘a good Hamiltonian, and a western progressive
of the Lincoln stamp in everything from a tariff to a national bank.'” — “Lincoln and the Economics of the American Dream” Chapter 14, “The Whig in the White House” pp. 196–97. Memphis State University Press: 1994. ISBN 0-87870-043-9.
12. ^ Howe,
Daniel Walker “The policies of tariff protection, federally sponsored internal improvements, and national banking that were later to be known as the “American System” took coherent shape in the years between 1816 and 1828 and were coherent with the
“national” wing of the Republican party.” – “The Political Culture of the American Whigs, pp. 48-49. University of Chicago Press, 1979. “J.L.M. Curry, “Confederate States and Their Constitution”, The Galaxy, New York, 1874”.
13. ^ Jump
up to:a b “George D. Prentice, “Life of Henry Clay”, The North American Review, Boston Massachusetts, 1831″.
14. ^ Bourgin, Frank (1989). The Great Challenge: The Myth of Laissez-Faire in the Early Republic. New York, NY: George Braziller Inc. ISBN
15. ^ Earle, Edward Mead: “It is one of the ironies of history that Hamilton’s political opponents Jefferson and Madison did more than Hamilton himself to give effect to his protectionist and nationalist views of economic policy.
The Embargo, which Jefferson initiated in December 1807, the Non-Intercourse Act, and the succeeding war with Great Britain, upon which Madison reluctantly embarked, had the practical result of closing virtually all avenues of foreign trade and making
the United States dependent upon its own resources for manufactures and munitions of war. The industries which were born under the stress and necessity of the years 1808 to 1815 were the infants to which the nation gave protection in 1816 and in a
succession of tariff acts thereafter…. Jefferson in January 1816 wrote an exceedingly bitter denunciation of those who cited his former free trade views as ‘a stalking horse, to cover their disloyal propensities to keep us in eternal vassalage
to a foreign and unfriendly people [the British].'” — Makers of Modern Strategy: Military Thought from Machiavelli to Hitler, Chapter 6, “Adam Smith, Alexander Hamilton, Friedrich List: The Economic Foundations of Military Power”, pp. 138–139. Princeton
University Press: 1943, 1971. ISBN 0-691-01853-7.
16. ^ “”.[full citation needed]
17. ^ “American System”. The Reader’s Companion to American History. Archived from the original on 14 April 2004. Retrieved 14 February 2006.
18. ^
Jump up to:a b Henry C. Carey, Harmony of Interests
19. ^ Carey, Henry Charles (1865). The way to outdo England without fighting her. Making of America.
20. ^ The Senate 1789–1989 Classic Speeches 1830–1993 Volume three, Bicentennial edition,
U.S. Government Printing Office, Washington
21. ^ “Ideas and Movements: American System””.
22. ^ Russell L. Riley (2000). Melvin I. Urofsky (ed.). The American Presidents. New York & London: Garland Publishing, Inc. pp. 83. ISBN
23. ^ Jump up to:a b Russell L. Riley (2000). Melvin I. Urofsky (ed.). The American Presidents. New York & London: Garland Publishing, Inc. pp. 87. ISBN 9780815321842.
24. ^ Russell L. Riley (2000). Melvin I. Urofsky (ed.). The
American Presidents. New York & London: Garland Publishing, Inc. pp. 89. ISBN 9780815321842.
25. ^ Jump up to:a b c d Russell L. Riley (2000). Melvin I. Urofsky (ed.). The American Presidents. New York & London: Garland Publishing, Inc. pp. 88.
ISBN 9780815321842.
26. ^ Jump up to:a b c Russell L. Riley (2000). Melvin I. Urofsky (ed.). The American Presidents. New York & London: Garland Publishing, Inc. pp. 92. ISBN 9780815321842.
27. ^ Wayne Cutler (2000). Melvin I. Urofsky (ed.). The
American Presidents. New York & London: Garland Publishing, Inc. pp. 125. ISBN 9780815321842.
28. ^ Jump up to:a b c David J. Bodenhamer (2000). Melvin I. Urofsky (ed.). The American Presidents. New York & London: Garland Publishing, Inc. pp. 106.
ISBN 9780815321842.
29. ^ Wayne Cutler (2000). Melvin I. Urofsky (ed.). The American Presidents. New York & London: Garland Publishing, Inc. pp. 128. ISBN 9780815321842.
30. ^ William McKinley speech, October 4, 1892, in Boston. William McKinley
Papers (Library of Congress)
31. ^ List, Friedrich (1841). The National System of Political Economy.
32. ^ “”.
33. ^ “”.
34. ^ “”.
35. ^
36. ^
37. ^ Gill, William J. Trade Wars
Against America: A History of United States Trade and Monetary Policy (1990)
38. ^ Lind, Michael: “Free Trade Fallacy” by Michael Lind, New America Foundation. “Like Britain, the U.S. protected and subsidised its industries while it was a developing
country, switching to free trade only in 1945, when most of its industrial competitors had been wiped out by the Second World War and the U.S. enjoyed a virtual monopoly in many manufacturing sectors.” New America Foundation, – “Free Trade Fallacy”
January 2003
39. ^ Dr. Ravi Batra, “The Myth of Free Trade”: “Unlike most of its trading partners, real wages in the United States have been tumbling since 1973, the first year of the country’s switch to laissez-faire.” (pp. 126–27) “Before 1973,
the U.S. economy was more or less closed and self-reliant, so that efficiency gains in industry generated only a modest price fall, and real earnings soared for all Americans.” (pp. 66–67) “Moreover, it turns out that 1973 was the first year in its
entire history when the United States became an open economy with free trade.” (p. 39)
40. ^ Lind, Michael:”The revival of Europe and Japan by the 1970s eliminated these monopoly profits, and the support for free trade of industrial-state voters
in the American midwest and northeast declined. Today, support for free-trade globalism in the U.S. comes chiefly from the commodity-exporting south and west and from U.S. multinationals which have moved their factories to low-wage countries like
Mexico and China.” New America Foundation, “Free Trade Fallacy” January 2003
41. ^ List’s influences Japan: see “(3) A contrary view: How the World Works Archived 2006-01-17 at the Wayback Machine, by James Fallows”
42. ^ “ on List
influences of Deng” (PDF). Archived from the original (PDF) on 2007-12-01.
43. ^ Frederick Clairmonte, “FRIEDRICH LIST AND THE HISTORICAL CONCEPT OF BALANCED GROWTH”, Indian Economic Review, Vol. 4, No. 3 (February 1959), pp. 24–44.
44. ^ Mauro
Boianovsky, “Friedrich List and the economic fate of tropical countries”, Universidade de Brasilia, June 2011, p. 2.
Modern books[edit]
• Batra, Ravi, Dr., The Myth of Free Trade: The pooring of America (1993)
• Boritt, Gabor S., Lincoln and
the Economics of the American Dream (1994)
• Bourgin, Frank, The Great Challenge: The Myth of Laissez-Faire in the Early Republic (George Braziller Inc., 1989; Harper & Row, 1990)
• Buchanan, Patrick J., The Great Betrayal (1998)
• Chang, Ha-Joon,
Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (Bloomsbury; 2008)
• Croly, Herbert, The Promise of American Life (2005 reprint)
• Curry, Leonard P., Blueprint for Modern America: Nonmilitary Legislation of the First
Civil War Congress (1968)
• Dobbs, Lou, Exporting America: Why Corporate Greed is Shipping American Jobs Overseas (2004)
• Dorfman, Joseph, The Economic Mind in American Civilization, 1606–1865 (1947) vol 2
• Dorfman, Joseph, The Economic Mind
in American Civilization, 1865–1918 (1949) vol 3
• Dupree, A. Hunter, Science in the Federal Government: A History of Policies and Activities to 1940 (Harvard University Press, 1957; Harper & Row, 1964)
• Foner, Eric, Free Soil, Free Labor, Free
Men: The Ideology of the Republican Party before the Civil War (1970)
• Faux, Jeff, The Global Class War (2006)
• Gardner, Stephen H., Comparative Economic Systems (1988)
• Gill, William J., Trade Wars Against America: A History of United States
Trade and Monetary Policy (1990)
• Goetzmann, William H., Army Exploration in the American West 1803–1863 (Yale University Press, 1959; University of Nebraska Press, 1979)
• Goodrich, Carter, Government Promotion of American Canals and Railroads,
1800–1890 (Greenwood Press, 1960)
o Goodrich, Carter, “American Development Policy: the Case of Internal Improvements,” Journal of Economic History, 16 (1956), 449–60. in JSTOR
o Goodrich, Carter, “National Planning of Internal Improvements,”
;;Political Science Quarterly, 63 (1948), 16–44. in JSTOR
• Hofstadter, Richard, “The Tariff Issue on the Eve of the Civil War,” American Historical Review, 64 (October 1938): 50–55, shows Northern business had little interest in tariff in 1860,
except for Pennsylvania which demanded high tariff on iron products
• Howe, Daniel Walker, The Political Culture of the American Whigs (University of Chicago Press, 1979)
• Hudson, Michael, America’s Protectionist Takeoff 1815–1914 (2010).
• Jenks,
Leland Hamilton, “Railroads as a Force in American Development,” Journal of Economic History, 4 (1944), 1–20. in JSTOR
• John Lauritz Larson, Internal Improvement: National Public Works and the Promise of Popular Government in the Early United States
• Johnson, E.A.J., The Foundations of American Economic Freedom: Government and Enterprise in the Age of Washington (University of Minnesota Press, 1973)
• Lively, Robert A., “The American System, a Review Article,” Business History Review,
XXIX (March, 1955), 81–96. Recommended starting point.
• Lauchtenburg, William E., Franklin D. Roosevelt and the New Deal 1932–40 (1963)
• Lind, Michael, Hamilton’s Republic: Readings in the American Democratic Nationalist Tradition (1997)
• Lind,
Michael, What Lincoln Believed: The Values and Convictions of America’s Greatest President (2004)
• Mazzucato, Mariana, The Entrepreneurial State: Debunking Public vs. Private Sector Myths (Anthem Press, 2013)
• Paludan, Philip S, The Presidency
of Abraham Lincoln (1994)
• Richardson, Heather Cox, The Greatest Nation of the Earth: Republican Economic Policies during the Civil War (1997)
• Remini, Robert V., Henry Clay: Statesman for the Union. New York: W. W. Norton Co., 1991
• Roosevelt,
Theodore, The New Nationalism (1961 reprint)
• Richardson, Heather Cox. The Greatest Nation of the Earth: Republican Economic Policies during the Civil War (1997)
• Stanwood, Edward, American Tariff Controversies in the Nineteenth Century (1903;
reprint 1974), 2 vols., favors protectionism
Older books[edit]
• W. Cunningham, The Rise and Decline of the Free Trade Movement (London, 1904)
• G. B. Curtiss, Protection and Prosperity; and W. H. Dawson, Protection in Germany (London, 1904)
• Alexander
Hamilton, Report on the Subject of Manufactures, communicated to the House of Representatives, 5 December 1791
• F. Bowen, American Political Economy (New York, 1875)
• J. B. Byles, Sophisms of Free Trade (London, 1903); G. Byng, Protection (London,
• H. C. Carey, Principles of Social Science (3 vols., Philadelphia, 1858–59), Harmony of Interests Agricultural, Manufacturing and Commercial (Philadelphia, 1873)
• H. M. Hoyt, Protection v. Free Trade, the scientific validity and economic
operation of defensive duties in the United States (New York, 1886)
• Friedrich List, Outlines of American Political Economy (1980 reprint)
• Friedrich List, National System of Political Economy (1994 reprint)
• A. M. Low, Protection in the
United States (London, 1904); H. 0. Meredith, Protection in France (London, 1904)
• S. N. Patten, Economic Basis of Protection (Philadelphia, 1890)
• Ugo Rabbeno, American Commercial Policy (London, 1895)
• Ellis H. Roberts, Government Revenue,
especially the American System, an argument for industrial freedom against the fallacies of free trade (Boston, 1884)
• R. E. Thompson, Protection to Home Industries (New York, 1886)
• E. E. Williams, The Case for Protection (London, 1899)
• J.
P. Young, Protection and Progress: a Study of the Economic Bases of the American Protective System (Chicago, 1900)
• Clay, Henry. The Papers of Henry Clay, 1797–1852. Edited by James Hopkins
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