American School (economics)
|Part of |
The American School, also known as the National System, represents three different yet related constructs in politics, policy and philosophy. It was the American policy from the 1860s to the 1970s, waxing and waning in actual degrees and details of implementation. Historian
It is the
The American School's key elements were promoted by
The American School of economics represented the legacy of
Frank Bourgin's 1989 study of the
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. These programs included the establishment of the
Other developments included the various Army expeditions to the west, beginning with Lewis and Clark's
Leading proponents were economists
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
The American School included three cardinal policy points:
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 of commerce; the other to increasing the power to maintain it. One looks to underworking the Hindoo, and sinking the rest of the world to his level; the other to raising the standard of man throughout the world to our level. One looks to pauperism, ignorance, depopulation, and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilization. One looks towards universal war; the other towards universal peace. 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.
The government issue of fiat paper money has also been associated with the American School from the 1830s onwards. The policy has roots going back to the days of the American colonies, when such a type of currency called
In the Civil War, a shortage of specie led to the issue of such a fiat currency, called
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]? To protection and the " greenbacks"! What is it that we are now laboring to destroy? Protection and the Greenback! Let us continue on in the direction in which we now are moving, and we shall see ... not a re-establishment of the Union, but a complete and final disruption of it.
Carey's plans did not come to fruition as Lincoln was assassinated the next month and new President
Clay first used the term "American System" in 1824, although he had been working for its specifics for many years previously. Portions of the American System were enacted by Congress. The Second Bank of the United States was rechartered in 1816 for 20 years. High tariffs were maintained from the days of Hamilton until 1832. However, the national system of internal improvements was never adequately funded; the failure to do so was due in part to sectional jealousies and constitutional scruples about such expenditures.
The "American System" was supported by New England and the Mid-Atlantic, which had a large manufacturing base. It protected their new factories from foreign competition.
The South opposed the "American System" because its
Opposition to the economic nationalism embodied by Henry Clay's American System came primarily from the Democratic Party of Andrew Jackson, Martin van Buren, and James K. Polk. These three presidents styled themselves as the peoples' politicians, seeking to protect both the agrarian frontier culture and the strength of the Union. Jackson in particular, the founder of the movement, held an unflinching commitment to what he viewed as the sanctity of the majority opinion. In his first annual message to Congress, Jackson proclaimed that "the first principle of our system [is] that the majority govern". This ideology governed Jackson's actions throughout his presidency, and heavily influenced his protégé Martin van Buren as well as the final Jacksonian president, James K. Polk.
This commitment to the majority and to the voiceless came in direct conflict with many elements of the American System. 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. The Jacksonians opposed other elements of Clay's ideology, including support for internal infrastructural improvements, on the grounds that they represented governmental overstretch as well. Several key events, legislative conflicts, and presidential vetoes shaped the substantive opposition to the American System.
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. 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". He further attacked the proponents of renewing the bank's charter, scathingly referring to the "stockholders" seeking a renewal of their "privileges".
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. Jackon'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. And no hands are less worthy to be trusted with it than those of a moneyed corporation".
The two sides of the debate became even more starkly defined as a result of the actions of Second Bank President Nicholas Biddle and Henry Clay himself. 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 opinion. Although this action indeed helped acquire the votes necessary to pass the bill in Congress, it enraged Jackson. Jackson saw this manipulation as clear evidence of the penchant of a national bank to serve private, non-majoritarian interests.
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". 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. Clay hoped that when Jackson vetoed the bill, it would more clearly differentiate the two sides of the debate which Clay then sought to use to his advantage in running for president. With battle lines set, Jackson's majoritarian opposition to the Second Bank of the United States helped him be elected to a second term.
The question of protective tariffs championed by the American System proved one of the trickiest for Jacksonian presidents. Tariffs disproportionately benefited the industrial interests of the North while causing great injury to the trade-dependent agrarian South and West. As a result, the issue proved extremely divisive to the nation's unity, something Jacksonian presidents sought to protect at all costs. 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.
However, the tariffs indeed represented an economic nationalism that primarily benefited the Northern States, while increasing the cost of European imports in the South. This ran strongly contrary to Jacksonian ideals. In the end, despite Northern objections, both President Jackson and President Polk lowered tariffs. Jackson reformed the Tariff of 1828 (also known as the Tariff of Abominations) by radically reducing rates in the Tariff of 1832. This helped stave off the Southern nullification crisis, in which Southern states refused to enact the tariff, and threatened secession if faced with governmental coercion.
The bill that reduced the Tariff of 1828 was co-authored by Henry Clay in a desperate attempt to maintain national unity. 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.
The final bastion of Jacksonian opposition to Clay's American System existed in relation to the use of government funds to conduct internal improvements. The Jacksonian presidents feared that government funding of such projects as roads and canals exceeded the mandate of the federal government and should not be undertaken. Van Buren believed very strongly that "[t]he central government, unlike the states, had no obligation to provide relief or promote the general welfare.
This stance kept faith with the tenets of Jeffersonian republicanism, notably its agrarianism and strict constructionism, to which van Buren was heir". 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.
An extra session of congress was called in the summer of 1841 for a restoration of the American system. When the tariff question came up again in 1842, the compromise of 1833 was overthrown, and the protective system placed in the ascendant.
Due to the dominance of the then
As soon as Lincoln took office, the old Whig coalition finally controlled the entire government. 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.
The United States continued these policies throughout the later half of the 19th century.
For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength.
[They say] if you had not had the Protective Tariff things would be a little cheaper. Well, whether a thing is cheap or dear depends upon what we can earn by our daily labor. Free trade cheapens the product by cheapening the producer. Protection cheapens the product by elevating the producer. Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man.
[It is said] that protection is immoral ... Why, if protection builds up and elevates 63,000,000 [the U.S. population] of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefitting mankind everywhere. Well, they say, 'Buy where you can buy the cheapest' ... Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: 'Buy where you can pay the easiest.' And that spot of earth is where labor wins its highest rewards.
The American System was important in the election politics for and against
As the United States entered the 20th century, the American School was the policy of the United States under such names as American Policy,
This continued until 1913 when the administration of
The election of
In 1973 when the "Kennedy" Round concluded under President