December 15, 2012 <Back to Index>
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Henry Charles Carey (December 15, 1793 – October 13, 1879), a leading 19th century economist of the American School of capitalism. He is now best known for the book The Harmony of Interests, to compare and contrast what he called the "British System" of laissez faire free trade capitalism with the "American System" of developmental capitalism, through tariff protection and government intervention to encourage production. He was born in Philadelphia, Pennsylvania, in 1793 and was a chief economic advisor to Abraham Lincoln during his presidency. Carey was the son of Mathew Carey (1760 - 1839),
an influential economist, political reformer, editor, and publisher,
who was born in Ireland but for many years lived in Philadelphia.
Matthew Carey was a member of the publishing firm of Carey & Lea,
which was long the most conspicuous in America. When Henry Carey was 28
years old, he succeeded his father as a member of the publishing firm.
Among Mathew Carey's many writings had been a collection (1822) of Essays on Political Economy, one of the earliest of American treatises favoring Alexander Hamilton's idea of protection and promotion of industry. In 1835, Carey co-founded the famous Franklin Fire Insurance Company of Philadelphia. He retired from business in 1838, almost simultaneously with the appearance (1837 - 1840) of his book Principles of Political Economy. This treatise soon became the standard representation of the American school of economic thought, and was translated into Italian and Swedish, with some variance. It dominated the US economic system until 1973. Carey's first large work on political economy was preceded and followed by many smaller volumes on wages, the credit system, interest, slavery, copyright, etc.; and in 1858 - 1859 he gathered the fruits of his lifelong labours into The Principles of Social Science, in three volumes. Principles is
a comprehensive and mature exposition of his views. In it, Carey sought
to show that there exists, independently of human wills, a natural
system of economic laws, which is essentially beneficent and
spontaneously increases prosperity of the whole community, and
especially of the working classes, except when it is impeded by the
ignorance or perversity of humankind. He rejected the Malthusian doctrine
of population, maintaining that the only situation in which the means
of subsistence will determine population growth is one in which a given
society is not introducing new technologies or not adopting
forward thinking governmental policy. Population regulated itself in
every well governed society, but its pressure on subsistence
characterized the lower stages of civilization. Carey denied as the universal truth, for all stages of cultivation, of the law of diminishing returns from land. His position relates to the antithesis of wealth and
value. Carey held that land in industrial life is an instrument of
production formed by human labour. Its value was due to the labour
expended on it in the past (measured by the labour necessary under
existing conditions to bring new land to the same stage of
productiveness). He studied the occupation and reclamation of
land with peculiar advantage as an American, for whom the traditions of
first settlement were living and fresh, and before whose eyes the
process was indeed still going on. The difficulties of adapting a
primitive soil to the work of yielding organic products for human use
can be lightly estimated only by an inhabitant of a country long under
cultivation. Carey
believed that the overcoming of these difficulties by arduous and
continued effort entitles the first occupier of land to his property in
the soil. Its present value forms a very small proportion of the cost
expended on it, because it represents only what would be required, with
the science and appliances of our time, to bring the land from its
primitive into its present state. Thus, property in land is only a form
of invested capital, a quantity of labour or the fruits of labour
permanently incorporated with the soil. The owner of this capital is
compensated, as any other capitalist, by a share of the produce. The
owner is not rewarded for what is done by the powers of nature, and
society is in no sense defrauded by his sole possession. The so-called Ricardian theory
of rent is a speculative fancy, contradicted by all experience. Unlike
what the theory supposes, cultivation does not begin with the best
soils and move progressively towards poorer soils. The light and dry
higher land is cultivated first; only when population becomes dense and
capital accumulates is low lying land attacked and brought into
occupation. Low lying land is more fertile but also has morasses,
inundations and miasmas. Rent as a proportion of the produce sinks,
like all interest on capital, but increases as an absolute amount. The
share of the labourer increases both as a proportion and an absolute
amount. Thus, the interests of these different social classes are in
harmony. But, Carey proceeded to say, in order that this harmonious
progress may be realized, what is taken from the land must be given
back to it. All the produce derived from the land is part of it, and
must be restored to avoid its exhaustion. Hence the producer and the
consumer must be close to each other; the products must not be exported
to a foreign country in exchange for its manufactures, and thus go to
enrich as manure a
foreign soil. In immediate exchange value, the landowner may gain by
such exportation, but the productive powers of the land will suffer. In
March 1865, Carey published a series of letters to the Speaker of the
House of Representatives, Rep. Schuyler Colfax, entitled “The Way to
Outdo England Without Fighting Her”. In these letters, Carey advocated
the continuance of Abraham Lincoln's Greenbacks policy
of debt free, government issued money as a way of freeing America's
economy from British capitalists, who sought to control America's
wealth. (They eventually accomplished this by shutting out Greenbacks
and putting America on a gold standard with the Coinage Act of 1873.)
He also suggested raising the reserve requirements on private banks up
to 50%. Here are some excerpts from Carey's work, which history shows
fell upon deaf ears, as the subsequent Long Depression of
1873 - 96 plagued America with financial panics because of the inability
of the National Banking System to provide the public with all the
currency it needed: “The
Executive [Lincoln] is frequently compelled to affix his signature to
bills of the highest importance, much of which he regards as wholly at
war with the national interests. “To British free trade it is, as I
have shown, that we stand indebted for the present Civil War. Had our
legislation been of the kind which was needed for giving effect to the
Declaration of Independence, that great hill region of the South, one
of the richest, if not absolutely the richest in the world, would long
since have been filled with furnaces and factories, the laborers in
which would have been free men, women, and children, white and black,
and the several portions of the Union would have been linked together
by hooks of steel that would have set at defiance every effort of the
‘wealthy capitalists’ of England for bringing about a separation. Such,
however, and most unhappily, was not our course of operation.
Rebellion, therefore, came, bringing with it an almost entire stoppage
of the societary movement, with ruin to a large proportion of those of
the men…” “As a consequence, poor as was then our Government, and
unemployed as were then so large a portion of our people, we were
compelled to [loan from abroad] millions upon millions of dollars worth
of the machinery of war, and there to encounter all the obstacles that
could decently be thrown in our way by men who prayed openly for the
success of the rebellion.” “When the present war shall have been closed
there will be another to be fought, and that one will be with
England… but it is not now with [cannons] that she chiefly seeks to
fight us. It is in the Halls of Congress she is to be met.” “The whole
South now requires reorganization, and one of the first steps in that
direction should be found in furnishing machinery of circulation… If
the
Government does not supply that machinery, who is there that can or
will do so? Look carefully, I pray you, my dear sir, at the vast field
that is to be occupied, and at the great work that is to be done, and
then wonder with me that the Government should permit its soldiers to
perish in the field, while it is debating the terms of a loan to be
made to it by men all of whose interests are to be promoted by a
diminution of the circulation and an increase of the rate of interest.
Let our soldiers be paid, let the credit of the Government be once
again re-established, let the rate of interest be kept down, and let
the Treasury reassert its independence, and all will yet go well… “A
single decade of the system above described would suffice for placing
us, in this respect, side by side with England. At the close of
another, [England] would be left far behind, and we should then have
vindicated our claim to that position in the world of which our people
so often talk.” Among Mathew Carey's many writings had been a collection (1822) of Essays on Political Economy, one of the earliest of American treatises favoring Alexander Hamilton's idea of protection and promotion of industry.
In 1868, Carey was elected a foreign member of the Royal Swedish Academy of Sciences.
Carey, who had set out as an earnest advocate of free trade, accordingly arrived at the doctrine of protection:
the coordinating power in society must intervene to prevent private
advantage from working public mischief. He attributed his conversion on
this question to his observation of the effects of liberal and
protective tariffs respectively on American prosperity. This
observation, he says, threw him back on theory, and led him to see that
intervention might be necessary to remove (as he phrases it) the
obstacles to the progress of younger communities created by the action
of older and wealthier nations. But it seems probable that the
influence of Friedrich List's
writings, added to his own deep rooted and hereditary jealousy and
dislike of English predominance, had something to do with his change of
attitude. |