Main currents in American thought

Henry C. Carey, son of the vigorous Irish Republican, Matthew Carey, who made The American Museum one of the ablest of the eighteenth-century American magazines, may perhaps be justly called our first professional economist. The eighty-six years of his life were filled with enormous labors in the twin fields of economics and sociology. He did his own thinking from a basis of facts that he was at great pains to gather and tabulate, and his intellectual unfolding followed naturally the current material development of the mid-century. His statistics, of which he was excessively fond, no doubt were as unreliable as most statistics that economists love to dabble in, and like other purveyors of columned figures and impressive charts he certainly leaned too heavily on his knotty staff; but unlike academic economists such as Francis Wayland he tried to keep his thinking in contact with reality and in consequence his studies possess a solidity that is still impressive.

Although his father had early been interested in Hamilton’s national system and for a time was president of a Philadelphia society concerned in furthering a protective tariff—for which the great German protectionist List published a number of letters in 1827—Carey began as a follower of the classical school, and in the thirties he published a treatise on political economy that expounded the Manchester doctrine of free-trade. But under the stirring leadership of Henry Clay the American System was making headway fast, and the facts of American expansion impressed him as earlier they had impressed the young List on his visit here. Turning statistician, he soon discovered, as he believed, certain fallacies in the English classical school, and he proceeded to examine afresh the Ricardian theory of rent. (The change came in 1848.) According to this most celebrated of all economic doctrines rent is measured by the difference in productivity between the best land, which is settled first, and the poorest, which social need later brings under cultivation; and hence in every growing community the increment of rent constantly increases at the expense of both labor and capital. But in the America which Carey was acquainted with, and where the story of social development was being swiftly recapitulated, the facts seemed to him to prove quite otherwise.

Here the poorer lands were settled first, because their physical condition made them more easily available, and only later, when social pressure increased and larger means were available, were the rich bottom-lands cleared and the marshes drained.

As a result of his narrow interpretation of Ricardo’s doctrine of social fertility, Carey lost faith in the Ricardian theory and turned frankly to the American scene to discover, if possible, a more adequate explanation. Soon the seeds of his intense nationalism were bearing their fruit. An inherited dislike of England led him to fear its industrial preëminence, and he abandoned the ideal of an international division of labor for the ideal of independent nationality, with America developing its individuality through the exploitation of its own resources. Free-trade, he came to believe, is international, it results in establishing a “single factory for the whole world, whither all the raw produce has to be sent whatever be the cost of transport”; whereas any society waxes individual and strong in the measure that it develops variety of employment with its demand for mutual help and service. Only through such associations can man develop his capacities and further his mastery of nature. His patriotism thus became involved in his economics and for years he waged a relentless warfare against Manchesterism. Not only were the English doctrines false to American fact, he pointed out, but they were vicious Tory doctrines which if followed here would keep America poor for the benefit of England. The great idea which came finally to dominate his thinking is suggested by the title of a pamphlet, written in 1852, The Harmony of Interests:

Agricultural, Manufacturing, and Commercial—a work that suggests Frédéric Bastiat’s Les harmonies économiques, published in 1850, and influenced by Carey’s earlier speculations.⁠[1] It was an age much given to discovering harmonies and Carey was not behindhand in the business. In the introduction he traced the ills of contemporary economic life to the Manchester theories of rent and population—theories which had thrown their black shadows over English Parliamentary programs of relief and perverted the normal unfolding of western civilization. In consequence the “tendency of the whole British system of political economy is the production of discord among nations.”⁠[2]

In the background of Carey’s mind was a Physiocratic dislike of the sterile middleman which sharpened his antagonism to an international division of labor, and a sensitive social conscience that was concerned at the ruthless exploitation of English mill-hands. An ardent believer in natural liberty and convinced of its beneficence, he restricted economic freedom within national boundaries. The harmony of interests is local and not international—the tying together of the several parts of the whole. Beyond the national boundaries it ceases. The pessimism of the English school with its iron law of wages and its Malthusian law of population was harshly repugnant to his buoyant optimism. From these vicious roots, he was convinced, sprang the principle of isolation and differentiation—that producer and consumer must live apart, with the corollary that the poor must seek new lands in far countries to supply the places of those from which they have been thrust, there to produce agricultural staples to exchange for the manufactured goods produced in thickly settled countries—a principle that taxes both producer and consumer in the exact measure of transportation tolls, and benefits exclusively the sterile middleman.

Applied to America the policy of free-trade must keep this country dependent upon England—keep it agricultural for the benefit of British merchants; and the program that Carey outlined, the complete sufficiency of which he never doubted, was a return to the policy of Adam Smith, to that “general harmony of interests” that must result from bringing the farmer and artisan into neighborhood communities, fashioning the raw materials where they are produced and consuming the farmer’s produce where it is grown. Adam Smith “saw well,” says Carey, “that when men came thus together, there arose a general harmony of interests, each profiting his neighbor, and profiting by that neighbor’s success, whereas the tendency of commercial centralization was toward poverty and discord, abroad and at home.”⁠[3]

To his death in 1879 Carey was the most distinguished as he had been the most tireless advocate of a system of protection for American manufactures. He was one of the most pugnacious pamphleteers of a pugnacious generation.⁠[4] He was a co-worker with Horace Greeley in the labor of convincing a suspicious people of the common benefits to be got from a subsidy to a class; and their joint influence gave respectability and popularity to the appeals of business men and politicians. Between 1849 and 1857 he “was the virtual editor of the New York Tribune” in all matters regarding protection. His chief antagonist in the long struggle was William Cullen Bryant and the Evening Post; and he made frequent appeal to Bryant to meet him in a pamphlet debate that should bring before the public both sides of the great question of protectionism. Bryant’s refusal did not lessen his ardor, and in successive pamphlets he laid before the American people a well-rounded argument for tariff subsidies that ranks him in the history of economic thought with Friedrich List, the great German apostle of a nationalist economic system. American manufacturers owe a heavy debt to Henry Carey.

In these early years of industrialism the manufacturer was still dependent on the banker, and industrial development was held back, Carey came to believe, by a false financial policy imposed on the county by the bankers. From his boundless enthusiasm for the ideal of a national economy sprang likewise his unorthodox views on money that so greatly annoyed his fellow economists. Individual in his thinking on this as on other subjects, he espoused theories that to dogmatic bullionists like David A. Wells seemed incendiary at a time (during the post-war years) when so many Americans were bitten with “money heresies.” On this theme his patriotism and his democratic sympathies ran together. He was opposed to the bullion system because it struck at nationalism. An English system, devised by Lombard Street, did not answer the needs of America. The price of gold is established in a world market and the flow of bullion is always toward the great centers already glutted with money. To throw the money of the world into a common pool was to subject the money of poorer and remoter countries to the control of the great financial capitals. Free-trade and the gold standard were the twin weapons forged by England for world-wide economic conquest, and for America to adopt a financial policy that held her subject to Lombard Street, seemed to Carey the height of folly. Gold follows the balance of trade, and until America had built up an adequate domestic economy her specie would continue to drain off, leaving too scanty a supply to do the necessary work of society.

The solution, he believed, lay in the creation of an independent national currency; and an efficient national currency, he held with Bishop Berkeley, was one that was non-exportable, that remained at home to do the day’s work instead of gadding about. To provide such a medium of exchange he proposed a currency founded on the national credit—a “national system,” he argued, “based entirely on the credit of the government with the people, and not liable to interference from abroad.”⁠[5] It was on such grounds that Carey supported the greenback issues and favored the remonetization of silver. The ideal of “societary circulation,” he pointed out, was credit—“that great step towards civilization which consists in substituting letters of credit for material money”; and because “the steady and regular use of the letter of credit known to the world as the ‘greenback,’ or that other known as the ‘national bank note,’”⁠[6] tended to wean the minds of men from dependence on specie, he was warm in their favor.

Carey’s insistence on a plentiful supply of money laid him under the charge of being an advocate of “cheap money,” and therefore one of those wicked persons known as “inflationists.” The charge in the main was true. He was pungent in his contrast between the prosperity of war times when an abundant currency released all the energies of the American people, and the stagnation that followed upon contraction. “Cheap money—low interest—enabled our working men to prosper,” whereas dear money—high interest—was bringing distress and hardship. Every reduction in the amount of currency decreases the purchasing power of the people, and slows down the circulatory system. The attempt to retire the greenbacks he regarded as a class attack on the common welfare of the country. “To that end the greenback, everywhere claimed as the people’s money, has by those in high places been denounced, small as is the quantity, when compared with the real need for it.”⁠[8] Paper money is “democratic in its tendencies,” passing from hand to hand and never seeking a bank vault to hide in.

Considering Carey’s reputation as an economist and his wide influence, such doctrine, in the eyes of all “sound-money men,” was distinctly pernicious. He was giving aid and comfort to the apostles of inflation and repudiation, and he suffered many a sharp attack. But that would not deter a warrior grown gray in battle, and in the very last year of his life he fell upon the bullion theory with the ardor of a young man. He would not suffer the bankers to go unrebuked in their mad attack on the prosperity of the country; he would not be silent while a policy of contraction, that so early as 1866 had reduced the per capita circulation to $12.50—according to his statistics—was still in full swing after the disastrous lesson of 1873. He had much in common with Peter Cooper, who in 1876 took up the battle against Wall Street for a “democratic” monetary system. The blood of the two old men, both born in the last decade of the eighteenth century, had not grown cold or sluggish with long years, but responded ardently to the great cause of democracy that had inspired their youth. That Carey’s national system was a house divided against itself—that industry and finance were engaged in a mortal combat for supremacy—he probably never quite realized. He was concerned that America should be free to create and enjoy the wealth that lay in the potentialities of the continent, and to that end he would have money serve industry, and not industry money.