The American School of Economics is the brainchild of Alexander Hamilton, the 1st Secretary of the Treasury of the United States of America. It was, in one way or another, the dominant economic doctrine of the country – with brief lapses – until the Crash of 1929. After President Hoover’s failure at reelection in 1932 and the rise of the FDR era, the American School was set aside. Recently however it has been revived during President Trump’s second term. While tariffs got most attention, another somewhat forgotten aspect of the School was an idea known as “Harmony of Interests“.
Hamilton’s “American School” came as a reaction to Adam Smith’s “British School”, nowadays known mostly as Classical Liberal economics. Hamilton argued against free trade and instead proposed economic nationalism, whereby government is a tool used prudently to advance the interests of the nation. While not an originally Hamiltonian idea, it was within this context of economic nationalism that Henry Charles Carey later added his input of a Harmony of Interests.
Carey, later the economic advisor of President Lincoln and essentially the economic guru of the Union during the Civil War, was originally a proponent of free trade, yet with the passage of time and especially after the Panic of 1837 and the Tariff of 1842 he changed his mind and in 1851 wrote “The Harmony of Interests: Agricultural, Manufacturing, and Commercial“. In it, he rejected class struggle in favor of class cooperation and advocated for governamental support in education through a public school system, investments, subsidies and grants.
Carey drew on Hamilton’s disdain for Smith’s theories and classical economics in general for being unrelenting and pointless;
“Protection seeks to enable the planter to save this labour and accumulate capital. It is said to be “a war upon labour and capital” but it would here certainly seem to be, what its name denotes, protection to the producer of food and wool against a system which compels him to give the use of fifteen dollars of capital in exchange for the use of one. Its object is that of promoting concentration. That of the system falsely called free-trade is to promote dispersion. The last twelve months have witnessed the expulsion of many thousands of men, and many millions of capital to California, not one-tenth of which will ever return. Hundreds of ships are now in the Pacific, doing nothing and earning nothing, when they might be carrying cotton, and we are now building other ships to replace them. The capital now invested in those ships and in California would have built mills for the conversion of half the cotton of the South, and furnaces for the production of as much iron as is produced in Great Britain. For all this waste of capital the farmer and planter pay, for the harmony of interests is so perfect that the losses of the ship-owner and manufacturer are invariably borne, in largest proportion, by them.” (p. 147, Chapter 15th – How Protection affects the Capitalist).
Carey argued that free trade brought improvements in the short term yet in the long run resulted in nothing but poverty and misery for anyone who accepted it. In other words, it annihilated the harmony of interests that an otherwise protected and guaranteed national economy, serving all stakeholders, would encompass. In Carey’s eyes, protection – meaning a policy of fair trade, not free, including tariffs and partial intervention in suppport of nascent industries – works much better than opening a country’s market to the world and the forces that occupy it;
“The object of the now dominant class in England is that of bringing about free trade with the world. Such a measure adopted by this country would close every furnace and rolling-mill, and every cotton and woollen factory in the country, and would diminish the value of both labour and land, by compelling the producer of food to seek a market in England. Similar measures adopted by the Zollverein, would compel the people of Germany to do the same, attended with similar results. The market of England would be borne down with the weight, and the price would fall so low as utterly to destroy the power of the labourer on land to pay rent for its use, and the power of the owner to improve it. The class intermediate between the producers in various parts of the world, would daily grow in numbers and strength, and the productiveness of labour and land would daily diminish, with steady diminution in the value of both.” (p. 132, Chapter 11th, How Protection affects the Landowner).
Carey also warned against the depreciation of labor into a commodity, ultimately resulting in a depreciation of the value of humankind in general and thus leading the masses to reject the free market over socialism;
“In Europe, on the contrary, population is held to be superabundant. Marriage is regarded as a luxury, not to be indulged in, lest it should result in increase of numbers. ” Every one”, it is said, ” has a right to live”, but this being granted, it is added that “no one has a right to bring creatures
into life to be supported by other people.” Poor laws are denounced – as tending to promote increase of population—as a machine for supporting thosewho do not work ” out of the earnings of those who do.” No man, it is thought, has “a right” to claim to have a seat at the great table provided by the Creator for all mankind, or that ” if he is willing to work he must be fed.” Labour is held to be a mere “commodity,” and if the labourer cannot sell it, he has no ” right” but to starve—himself, his wife, and his children. ” The particular tendency to error apparent in the prevalent social philosophy of the day”, to which it is deemed necessary to direct specialattention, is ” the unsound, exaggerated, and somewhat maudlin tenderness with which it is now the fashion to regard paupers and criminals!” Such are the doctrines of the free-trade school of England, in which Political Economy is held to be limited to an examination of the laws which regulate the production of wealth, without reference to either morals or intellect. Under such teaching it is matter of small surprise that pauperism and crime increase at a rate so rapid.Throughout Europe, men are held in low esteem. They are consideredto be surplus, and the sooner they can be expelled the better it will be for those who can afford to remain behind. To accomplish this object, Colonization Societies are formed, and Parliament is memorialized by men who desire
to export their fellow-men by hundreds of thousands annually. Whig and Tory journals unite in urging the necessity for expelling man from the land of Britain. Secretaries of State furnish ingenious calculations as to the amount required for accomplishing the work of expulsion. On all hands, it is agreed that men are too numerous, and that their numbers grow too fast, and yet there is not a country in Europe that can justly complain of overpopulation. Ireland, the type of this free-trade system, has millions of acres of her richest lands as yet untouched, that would alone, if drained, yield food in abundance for the whole population.” (p. 128-129, Chapter 11th, How Protection affects the Landowner).
“So long as this state of dependence exists, the condition of each is determined by that of the other. If the idle become more idle, and the dissolute more dissolute, those who still continue to work must steadily give more labour for less labour, and their condition must deteriorate unless they adopt such measures as shall gradually diminish and finally terminate their dependence on such companions. The policy of England has tended to produce communism among nations. She has rendered herself dependent upon other communities for supplies of the articles of prime necessity, food and clothing, obtaining her rice from the wretched Hindoo, her corn from the Russian serf, and her wool from the Australian convict, neglecting her own rich soils that wait but the application of labour to become productive. The necessary consequence of this is a tendency downwards in the condition of her people, and as it is with those of England that those of this country are invited to compete, it may not be amiss to show what is the condition to which they are now reduced by competition with the low-priced labour of Russia and of India.” (p. 154, Chapter 15th, How Protection affects the Labourer).
It is worth noting that Karl Marx was aware of Carey’s theories. Both men actually were at some point colleagues in the New York Daily Tribune, with Carey being an editorialist on political economy from 1849 to 1857 and Marx being the newspaper’s European correspondent from 1852 to 1862. Nonetheless, in and out of the Tribune, Marx heavily disagreed with Carey’s positions;
” […] H. C. Carey (of Philadelphia), the only American economist of importance, is a striking proof that civil society in the United States is as yet by no means mature enough to provide a clear and comprehensible picture of the class struggle. […] He reproaches not only him [Ricardo] but Malthus, Mill, Say, Torrens, Wakefield, McCulloch, Senior, Whately, R. Jones, and others, the leading economists of Europe, with rending society asunder and preparing civil war because they show that the economic bases of the different classes are bound to give rise to a necessary and ever growing antagonism among them. He tried to refute them, not indeed like the fatuous Heinzen by connecting the existence of classes with the existence of political privileges and monopolies, but by attempting to show that economic conditions—rent (landed property), profit (capital), and wages (wage labour) instead of being conditions of struggle and antagonism are rather conditions of association and harmony. All he proves, of course, is that he is taking the “undeveloped” conditions of the United States for “normal conditions”. (Letter to Joseph Weydemeyer in New York, London, March 5th, 1852, Marx-Engels Selected Correspondence, Progress Publishing 1975).
That said, he sometimes did agree with him, albeit partially;
“…Carey, the American economist, has published a new book, Slavery at Home and Abroad. “Slavery” here includes all forms of servitude, wage slavery, etc. He has sent me his book and has quoted me repeatedly (from the Tribune), sometimes as “a recent English writer”, sometimes as a correspondent of the New-York Tribune” I told you before that in his previously published works this man described the “harmony” of the economic foundations of the bourgeois system and attributed all the mischief to superfluous interference by the state. The state was his bogey. Now he is singing another tune. The root of all evil is the centralising effect of modern industry.
But this centralising effect is England’s fault, because she has become the workshop of the
world and forces all other countries back to crude agriculture, divorced from manufacture. For England’s sins the Ricardo-Malthus theory and especially Ricardo’s theory of rent of land
are in their turn responsible. The necessary consequence alike of Ricardo’s theory and of industrial centralisation would be communism. And so as to escape all this, so as to confront centralisation with localisation and a union of industry and agriculture spread throughout the country, our ultra-free-trader finally recommends protective tariffs. In order to escape the effects of bourgeois industry, for which he makes England responsible, he resorts like a true Yankee to hastening this development in America itself by artificial means. His opposition to England, moreover, throws him into Sismondian praise of petty bourgeois ways in Switzerland, Germany, China, etc. This is the same fellow who used to sneer at France for her likeness to China. The only thing of positive interest in the book is the comparison between the former English Negro slavery in Jamaica, etc., and the Negro slavery of the United States. He shows that the main body of Negroes in Jamaica, etc., always consisted of newly imported barbarians, as under English treatment the Negroes were not only unable to maintain their population but even two-thirds of the number annually imported perished; the present generation of Negroes in America, on the other hand, is a native product, more or less Yankeefied, English-speaking, etc., and therefore fit for emancipation.The Tribune is of course hard at it trumpeting Carey’s book. Both indeed have this in common, that under the guise of Sismondian-philanthropic-socialist anti-industrialism they represent the
protectionist bourgeoisie, i. e., the industrial bourgeoisie of America. This also explains the secret why the Tribune in spite of all its “isms” and socialist humbug, can be the “leading journal”
in the United States.” (Letter to Friedrich Engels in Manchester, London, June 14th, 1854, Marx-Engels Selected Correspondence, Progress Publishing 1975).
With all eyes as of writing on the fiscal policy of President Trump’s second administration, the Harmony of Interests perhaps can also make a comeback, much like tariffs did.
Yet, who knows…
“The Harmony of Interests: Agricultural, Manufacturing, and Commercial” link:
“Marx-Engels Selected Correspondence” link:
... Perchance to Economics 101 