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Amerinomics, Part Two: Rise of the American System

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In order to fully understand the American School, one must go back to its late eighteenth century beginnings. These are manifested in a man, Alexander Hamilton, and his manuscript, the Report of Manufactures. As a Founding Father, philosopher, and inaugural Treasury secretary, he strongly believed that the United States would never gain full socioeconomic autonomy unless comprehensive financial independence were achieved. This could come about through the presence of a strong federal government capable of promoting viable educational opportunities, incentives for domestic capitalism, and sufficient public welfare programs. Hamilton reasoned that all of these, and much more, combined would form an economy so vigorous and inherently self-promoting that the nation would never be forced to rely on another to solve its problems.

After Hamilton’s loss in his now infamous duel, the ideas he fostered were further developed by economists Friedrich List and Henry Carey. List coined the phrase “National System” and Carey described this as a “harmony of interests” between not only management and laborers, but the agricultural, manufacturing, and mercantile sectors. He also vociferously denounced class warfare with the observation that when the economy is running at sufficient speed, members of all fiscal strata benefit in one way or another. Henry Clay, the extremely powerful three term speaker of the House, agreed and brought the National System squarely into the realm of politics.

Clay replaced the word “National” with “American” and set off on a spectacular marketing campaign. Giving specifics and modernizing Hamilton’s platform to some extent, the American System ultimately consisted of three interconnected planks. The first was a perpetually high tariff rate designed to discourage foreign trade and incentivize purely domestic industrial activity. The second pertained to the establishment of a national bank in order to foster commerce by controlling currency rates. The third entailed large subsidies for an unparalleled transportation infrastructure.

Such a bold and daring plan made Clay friends just as easily as it did enemies. The North supported him due to his focus on urban industrialization.  The South and West, meanwhile, did not; their rural character created a necessity for exporting goods. Clay suggested that these goods be sent to Northern factories for processing, and mutual profits, but received a tepid response. When all was said and done, Clay did manage to get legislation favoring high tariffs and a national bank. His plans for a grand national system of transportation, however, were not generally realized due to partisan polarization.

A huge source of this was the presidency of Andrew Jackson. Fiercely brutish and unflinchingly absolutist in his political maneuverings, he opposed essentially all of the American System save its tariff policies. Holding a longstanding grudge with Clay to boot, he eliminated the national bank and scoffed at the costs of infrastructure. Jackson enjoyed almost cultlike popularity with principally rural voters, many of whom opposed the American System in the first place. With that base, Jackson was elected to two terms. Shortly after his second one, many of his administration’s aftereffects sent America into a horrid depression.

Not much attention was given to restoring the American System, though. The nation was facing a far more pressing challenge: slavery and a consortium of states chomping at the bit to secede. It is hard to imagine that this would provide the perfect opening for the System’s return through the tireless efforts of a select statesman who needs no introduction.

About Joseph F. Cotto