An American System Economic Scorecard

By Nancy Spannaus

Nov. 8, 2019—The coincidence of recent extravagant claims about the sterling performance of the American economy (highest stock market ever, lowest unemployment rates, etc.) and the persistent decline of key demographic indicators (increased mortality rate, increasing rates of suicide and other deaths of despair), should provoke some serious thought. It led me to review lessons from the American System of Economics about some fundamentals: Just what have been the key metrics of our healthy economy historically?

Those metrics have been defined in the writings and actions of the key American System economists and statesmen, such as Alexander Hamilton, Mathew and Henry Carey, Henry Clay, Abraham Lincoln, and Franklin D. Roosevelt (to select a few). Let’s take a look at how our current economy measures up.

For simplicity’s sake, I’m going to use the summary of the American System provided by Lincoln’s economic adviser Henry C. Carey in his 1851 book The Harmony of Interests, Agricultural, Manufacturing, and Commercial. At the conclusion of that document, Carey declares that “Two system are before the world.” He then contrasts those systems with empirical precision, coming to the following conclusion:

One looks to pauperism, ignorance, depopulation, and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilization. One looks towards universal war; the other towards universal peace. One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of ELEVATING while EQUALIZING the condition of man throughout the world… (emphasis in original)

Some Crucial Metrics

In the course of his detailed contrast of the two systems, Carey identifies some crucial metrics for the American System. They include:

1. Increasing the proportion of the labor force involved in production;
2. Increasing the domestic market rather than concentrating on exports of raw materials and impoverishing producers by the burden of freight;
3. An increasing rate of wages for the laborer as well as “good profits” for the owner of capital.
4. Investing in the “moral and intellectual improvement of the sovereigns of America” (meaning the population), through education and “diffusing intelligence;”
5. Establishing a system of protection for labor, which raises the value of the human individual laborer or farmer, as befits the fact that “it is population that makes the food come from the rich soils.”
6. Increasing the power of the population to maintain production and commerce into the future.

Carey’s summary does not include the means by which these aims can be achieved, but they can be found in his other writings and Lincoln’s economic policies, in particular. They go far beyond the tariffs which he is famously known for promoting, and include the provision of cheap government credit for vital industries and infrastructure, and government promotion of mass education and technological improvements that improve the power of the individual.

How We Measure Up 

Now, look briefly at where the United States stands today.

The latest BLS statistics put our goods-producing industries at a mere 12.8% of the workforce. Add in agriculture, and you increase that by 1.4%.  This percentage has actually been decreasing steadily, as we export goods-producing jobs abroad (in order to reap short-term profits) and put the workers who used to produce them on the human scrapheap. The percentage of the workforce in manufacturing is reported to be the lowest since 1947.

It is the results of that de-industrialization policy which has led to the phenomenon known as the “deaths of despair.” The latest report updating the original work of Professors Ann Case and Angus Deaton in 2015, focuses on the geographical concentration of these deaths in the center of our nation. The highest mortality rates among the middle-aged, white non-Hispanics who are spurring the increase in death rates overall are in Alabama, Arkansas, Kentucky, Mississippi, and Tennessee. That cohort of the population also happens to coincide with prime working-age males being out of the workforce, nearly 20% of men between the ages of 25 and 64.

Meanwhile, of course, as you will hear ad nauseam, a huge number of jobs are being created. One is tempted to recall the famous statement by a woman responding to President Clinton’s bragging of the same phenomenon in 1996: “Yes, I know. I have three of them.” Indeed, 17% of the jobs recorded in the latest BLS reports on the labor force are part-time (and that can be as low as an hour a week), and pay rates are barely inching up above the inflation-adjusted rates of 40 years ago. The “gig” economy is increasingly dominant, with no job security, pensions, health care, or even regular hours.

And at the same time, there is a documented shortage of skilled labor in certain critical blue-collar production jobs. That shortage is obviously being fed by a lack of education and motivation among the working-age population; the cultural factors cannot be dismissed.

That lack of education speaks to Carey’s insistence of investment in upgrading the value of labor, and improving the intelligence of the population. By contrast, we have a culture which devalues teachers and long-term investment (on everything from infrastructure, to education, to the welfare of the community), in favor of short-term “feel-good” solutions, or material gain.

Increasing the power of the population to sustain the economy means upgrading basic infrastructure, from water to energy to transportation. How do we measure up?  One need only read the depressing yearly report cards of the American Society of Civil Engineers, or visit schools in Newark, Detroit, or Chicago, to be confronted by the virtually criminal lack of investment in that infrastructure. Then, of course, there’s the huge homeless population, driven out of shelter by rents raised through the roof through speculation.

Carey spoke of raising the value of labor throughout the world, as well as our own; our politicians speak of preventing other countries from challenging our dominance.

Carey spoke of a happy population cooperating to lift all out of poverty, end war, and become rich and prosperous. He counted population a blessing, because people (if well cared for) are our most precious resource.  Yet we today see suicide rates estimated to be reaching that of the worst depression years of the 1930s. Suicides among veterans jumped by 50% between 2007 and 2017. Farm suicide are double that of veterans, and suicides among workers in construction and excavation (that would be mine-workers) are higher than that.

The Good News

The purpose of this exercise is not only to provide a reality check.  More importantly, an assessment of our economy from the standpoint of the American System highlights what our forefathers discovered and accomplished, when they built our nation into the industrial envy of the world. Their history and their principles are still there, for us to study and apply. All it takes is for us to apply ourselves to the work.

I would recommend beginning with the founder of the American System, Alexander Hamilton.  My book – Hamilton Versus Wall Street: The Core Principles of the American System – is a good place to start.

Tags: American System, deaths of despair, Hamilton Versus Wall Street, Henry Carey, jobs, labor, manufactures, Nancy Spannaus, workforce