The American School, also known as the National System, represents three different yet related constructs in politics, policy and philosophy. The policy existed from the 1790s to the 1970s, waxing and waning in actual degrees and details of implementation. Historian Michael Lind describes it as a coherent applied economic philosophy with logical and conceptual relationships with other economic ideas. "Free Trade Fallacy" New America.

It is the macroeconomic philosophy that dominated United States national policies from the time of the American Civil War until the mid-20th century."Second Bank of the United States" U-S-History.com."Republican Party Platform of 1860" presidency.ucsb.edu"Republican Party Platform of 1856" presidency.ucsb.edu.Pacific Railway Act (1862) ourdocuments.gov."History of U.S. Banking" SCU.edu .ANDREWS, E. Benjamin, p. 180 of Scribner's Magazine Volume 18 #1 (January–June 1896); "A History of the Last Quarter-Century". Closely related to mercantilism, it can be seen as contrary to classical economics. It consisted of these three core policies: Protecting industry through selective high tariffs (especially 1861–1932). Government investments in infrastructure creating targeted internal improvements (especially in transportation). A national bank with policies that promote the growth of productive enterprises rather than speculation.Lind, Michael: "Lincoln and his successors in the Republican party of 1865–1932, by presiding over the industrialization of the United States, foreclosed the option that the United States would remain a rural society with an agrarian economy, as so many Jeffersonians had hoped." and "...Hamiltonian side ... the Federalists; the National Republicans; the Whigs, the Republicans; the Progressives." — "Hamilton's Republic" Introduction pp. xiv–xv. Free Press, Simon & Schuster: 1997. .Lind, Michael: "During the nineteenth century the dominant school of American political economy was the "American School" of developmental economic nationalism ... The patron saint of the American School was Alexander Hamilton, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods ... The American School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the "American System" of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican party well into the twentieth century." — "Hamilton's Republic" Part III "The American School of National Economy" pp. 229–30. Free Press, Simon & Schuster: 1997. .Richardson, Heather Cox: "By 1865, the Republicans had developed a series of high tariffs and taxes that reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising the standard of living for everyone. As a Republican concluded ... "Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes ... for ordinary expenses of Government." — "The Greatest Nation of the Earth" Chapter 4, "Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation" pp. 136–37. President and Fellows of Harvard College: 1997. .Boritt, Gabor S: "Lincoln thus had the pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leonard P. Curry, the historian of the legislation has aptly written, amounted to a "blueprint for modern America." and "The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate variety on economics, one whom Joseph Dorfman could even describe as 'a good Hamiltonian, and a western progressive of the Lincoln stamp in everything from a tariff to a national bank.'" — "Lincoln and the Economics of the American Dream" Chapter 14, "The Whig in the White House" pp. 196–97. Memphis State University Press: 1994. .

The American School's key elements were promoted by John Quincy Adams and his National Republican Party, Henry Clay and the Whig Party and Abraham Lincoln through the early Republican Party which embraced, implemented and maintained this economic system.Howe, Daniel Walker "The policies of tariff protection, federally sponsored internal improvements, and national banking that were later to be known as the “American System” took coherent shape in the years between 1816 and 1828 and were coherent with the “national” wing of the Republican party." - "The Political Culture of the American Whigs, pp. 48-49. University of Chicago Press, 1979.

History

Origins

The American School of economics represented the legacy of Alexander Hamilton, who in his Report on Manufactures, argued that the U.S. could not become fully independent until it was self-sufficient in all necessary economic products. Hamilton rooted this economic system, in part, in the successive regimes of Colbert's France and Elizabeth I's England, while rejecting the harsher aspects of mercantilism, such as seeking colonies for markets. As later defined by Senator Henry Clay who became known as the Father of the American System because of his impassioned support thereof, the American System was to unify the nation north to south, east to west, and city to farmer.

Frank Bourgin's 1989 study of the Constitutional Convention shows that direct government involvement in the economy was intended by the Founders. The goal, most forcefully articulated by Hamilton, was to ensure that dearly won political independence was not lost by being economically and financially dependent on the powers and princes of Europe. The creation of a strong central government able to promote science, invention, industry and commerce, was seen as an essential means of promoting the general welfare and making the economy of the United States strong enough for them to determine their own destiny.

Jefferson and Madison strongly opposed Hamilton's program, but were forced to implement it by the exigencies of the embargo, begun in December 1807 under the Non-Intercourse Act, and the War of 1812 against Britain.Earle, Edward Mead: "It is one of the ironies of history that Hamilton's political opponents Jefferson and Madison did more than Hamilton himself to give effect to his protectionist and nationalist views of economic policy. The Embargo, which Jefferson initiated in December 1807, the Non-Intercourse Act, and the succeeding war with Great Britain, upon which Madison reluctantly embarked, had the practical result of closing virtually all avenues of foreign trade and making the United States dependent upon its own resources for manufactures and munitions of war. The industries which were born under the stress and necessity of the years 1808 to 1815 were the infants to which the nation gave protection in 1816 and in a succession of tariff acts thereafter.... Jefferson in January 1816 wrote an exceedingly bitter denunciation of those who cited his former free trade views as 'a stalking horse, to cover their disloyal propensities to keep us in eternal vassalage to a foreign and unfriendly people [the British].'" — Makers of Modern Strategy: Military Thought from Machiavelli to Hitler, Chapter 6, "Adam Smith, Alexander Hamilton, Friedrich List: The Economic Foundations of Military Power", pp. 138–139. Princeton University Press: 1943, 1971. .

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 Patent Office in 1802, the creation of the Survey of the Coast (later renamed the United States Coast Survey and then the United States Coast and Geodetic Survey) in 1807 and other measures to improve river and harbor navigation created by the 1824 Rivers and Harbors Act.

Other developments included the various Army expeditions to the west, beginning with Lewis and Clark's Corps of Discovery in 1804 and continuing into the 1870s (see for example, the careers of Major Stephen Harriman Long and Major General John C. Frémont), almost always under the direction of an officer from the Army Corps of Topographical Engineers, and which provided crucial information for the overland pioneers that followed (see, for example, the career of Brigadier General Randolph B. Marcy), the assignment of Army Engineer officers to assist or direct the surveying and construction of the early railroads and canals, and the establishment of the First Bank of the United States and Second Bank of the United States as well as various protectionist measures such as the Tariff of 1828.

Leading proponents were economists Friedrich List (1789–1846) and Henry Carey (1793–1879). List was a leading 19th Century German and American economist who called it the "National System" and developed it further in his book The National System of Political Economy Carey called this a Harmony of Interests in his book by the same name, a harmony between labor and management, and as well a harmony between agriculture, manufacturing, and merchants.

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 Adam Smith in his work Wealth of Nations.

Central policies The American School included three cardinal policy points:

Support industry: the advocacy of protectionism, and opposition to free trade – particularly for the protection of "infant industries" and those facing import competition from abroad. Examples: Tariff Act of 1789, Tariff Act of 1816 and Morrill Tariff. Create physical infrastructure: government finance of internal improvements to speed commerce and develop industry. This involved the regulation of privately held infrastructure, to ensure that it meets the nation's needs. Examples: Cumberland Road and Union Pacific Railroad. Create financial infrastructure: a government sponsored National Bank to issue currency and encourage commerce. This involved the use of sovereign powers for the regulation of credit to encourage the development of the economy, and to deter speculation. Examples: First Bank of the United States, Second Bank of the United States, and National Banking Act.

Henry C. Carey, a leading American economist and adviser to Abraham Lincoln, in his book Harmony of Interests, displays two additional points of this American School economic philosophy that distinguishes it from the systems of Adam Smith or Karl Marx: Government support for the development of science and public education through a public 'common' school system and investments in creative research through grants and subsidies. Rejection of class struggle, in favor of the "Harmony of Interests" between: owners and workers, farmers and manufacturers, the wealthy class and the working class.Henry C. Carey, Harmony of Interests

In a passage from his book, The Harmony of Interests, Carey wrote concerning the difference between the American System and British System of economics: