Main currents in American thought An interpretation of American literature from the beginnings to 1920
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.[586]
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.”[587]
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.”[588]
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.[589] 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.”[590] 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,’”[591] tended to wean the minds of
men from dependence on specie, he was warm in their favor.
With a sound national system, let foreigners take our gold for
whatever balance of trade they can impose upon us, having no use
among ourselves for any coin money except what we can retain under
a wholesome foreign commerce.
What we most need today is the establishment of that monetary
independence which results from maintaining absolute command over
the machinery of exchange used within our borders, leaving to
the gold dollar the performance of its duty of arranging for the
settlement of balances throughout the world.[592]
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.”[593] Paper money is “democratic in its tendencies,” passing from
hand to hand and never seeking a bank vault to hide in.
A war upon what is called “paper money” is ... a war upon the
poor in favor of the rich; and that the war being made upon it
has precisely that effect is proved by the fact, that the western
farmer is now being so impoverished by reason of such a reduction
in the price of corn and oats that the former is being used as
fuel, while the latter sold at 8 cents a bushel, [while] houses and
lots in the neighborhood of Wall Street [are] commanding ... prices
such as had never before been heard of.[594]
Considering Carey’s reputation as an economist and his wide influence,