Henry Charles Carey

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.

Early years

At the age of twenty-eight he succeeded his father, Mathew Carey (1760-1839) - an influential: economist, political reformer, editor, and publisher; of Irish birth, but for many years a resident of Philadelphia - as a member of the publishing firm of Carey & Lea, which was long the most conspicuous in America. 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. Young Henry's life-work was devoted to the propagation of the same economic philosophy.

In 1835, Carey was a co-founder of the famous "Franklin Fire Insurance Company of Philadelphia". He retired from business in 1838, almost simultaneously with the appearance (1837-1840) of his "Principles of Political Economy". This treatise, which was translated into Italian and Swedish, soon became the standard representation of the American school of economic thought which, with some variance, had dominated the economic system of the United States until 1973.

Contribution of economics

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 most comprehensive as well as 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 of which the increasing prosperity of the whole community, and especially of the working classes, is the spontaneous result, defeated only by the ignorance or perversity of man resisting or impeding its action. 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 being radically productive (by introducing new technologies or adopting forward-thinking governmental policy); numbers regulate themselves sufficiently in every well-governed society, but their pressure on subsistence characterizes the lower, not the more advanced, stages of civilization. He denied as the universal truth, for all stages of cultivation, of the law of diminishing returns from land.

His fundamental theoretic position relates, to the antithesis of wealth and value. Carey held that land, as we are concerned with it in industrial life, is really an instrument of production which has been formed as such by man, and that its value is due to the labour expended on it in the past--though measured, not by the sum of that labour, but 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 mans use can be lightly estimated only by an inhabitant of a country long under cultivation.

It is, in Carey's view, the overcoming of these difficulties by arduous and continued effort that 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. Property in land is therefore only a form of invested capital a quantity of labour or the fruits of labour permanently incorporated with the soil; for which, like any other capitalist, the owner is compensated by a share of the produce. He 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. Cultivation does not in fact, as that theory supposes, begin with the best, and move downwards to the poorer soils in the order of their inferiority. The light and dry higher lands are first cultivated; and only when population has become dense and capital has accumulated, are the low-lying lands, with their greater fertility, but also with their morasses, inundations, and miasmas, attacked and brought into occupation. Rent, regarded as a proportion of the produce, sinks, like all interest on capital, in process of time, but, as an absolute amount, increases. The share of the labourer increases, both as a proportion and an absolute amount. And 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 articles derived from it are really separated parts of it, which must be restored on pain of 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 continueance of Abraham Lincoln's Greenbacks policy of debt-free, government-issued money as a way of freeing America's economy from British capitalists who were seeking to control America's wealth (which they eventually accomplished 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 plauged 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.”

Legacy

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 the intervention referred to 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.

ee also

*Mathew Carey
*Alexander Hamilton
*Friedrich List
*Daniel Raymond
*American System
*Economic interventionism
*Capitalism
*Protectionism

References

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