American School

Published Mar 22, 2024

Definition of the American School

The American School, also known as the American System, represents an economic philosophy that emphasizes government intervention in the economy to stimulate growth, development, and national self-sufficiency. Rooted in the 19th century, this approach advocates for a combination of protective tariffs, investments in infrastructure, and a national bank to foster a vibrant domestic market and support burgeoning industries.

Historical Context

The American School’s principles were formulated in response to the economic challenges and opportunities that faced the young United States. Foremost figures such as Alexander Hamilton, Henry Clay, and later Abraham Lincoln championed these ideas. Hamilton, in particular, outlined the foundation of the American School in his “Report on Manufactures” (1791), arguing for protective tariffs to incubate emerging industries, government support for infrastructure projects to improve transportation and communication, and the establishment of a national bank to stabilize the currency and provide credit.

Implementation and Impact

During the 19th century, the American School’s policies were implemented to various degrees, influenced by the prevailing political landscape. Protective tariffs like the Tariff of 1828 (“Tariff of Abominations”) and the Morrill Tariff of 1861 aimed to shield domestic industries from foreign competition. The creation of the Second Bank of the United States in 1816 was a realization of the call for a national banking system, although its renewal was famously vetoed by President Andrew Jackson in 1832.

The financing and construction of infrastructure, notably in transportation with the establishment of the Transcontinental Railroad, were pivotal in integrating the national market, facilitating trade, and spurring industrial growth. This infrastructural development was crucial in realizing the vision of a self-sufficient, inter-connected American economy.

Why the American School Matters

The American School of economic thought was instrumental in shaping the United States’ economic policy during its formative years, laying the groundwork for its transformation into a global industrial power. By advocating for a role of government in supporting industrial development, it provided a blueprint for economic modernization that has influenced various economic policies and strategies to this day.

Moreover, the American School is a reminder of the complex interplay between government policy, economic development, and national interests. It showcases an early recognition of the need for strategic economic planning and intervention to achieve national objectives, a concept that remains relevant in today’s globalized economy.

Frequently Asked Questions (FAQ)

How does the American School differ from classical economic theories?

The American School diverges from classical economic theories, particularly those of Adam Smith and David Ricardo, which advocate for minimal government intervention and free trade. Instead, it emphasizes the need for protective tariffs, government investments in infrastructure, and a central banking system to support and protect nascent industries and promote national economic self-sufficiency.

What criticisms have been levied against the American School?

Critics of the American School argue that its protectionist policies can lead to inefficiencies, higher consumer prices, and retaliation from trade partners. They also caution against the potential for government intervention to distort markets and stifle competition, warning that such measures could harm the very industries they aim to protect.

Does the American School have contemporary relevance?

Yes, the principles of the American School continue to have relevance in contemporary economic policy debates. Issues such as industrial policy, trade protectionism, and public investment in infrastructure are still hotly contested topics. Modern discussions around economic nationalism, “re-shoring” of manufacturing, and strategic trade policies reflect the ongoing influence of the American School’s ideas in addressing the challenges of globalization and technological change.

Can the American School’s policies be applied in today’s global economy?

While the global economy has changed significantly since the 19th century, some aspects of the American School’s approach, such as strategic investment in key industries and infrastructure, can still be applicable. However, the interconnectedness of today’s global trade system and the complexities of modern economies require these policies to be adapted and applied judiciously, with consideration for international trade rules and the potential consequences of protectionism.