Henry Charles Carey (December 15, 1793 –October 13, 1879), was an American economist and sociologist, often regarded as the founder of the American school of economics. He is best known for his criticism of what he called the "British System" of laissez-faire free trade capitalism, and advocacy for the "American System" of developmental capitalism, based on tariff protection and government intervention to encourage production.
Although Carey recognized that there were natural economic dynamics that would allow a society to prosper, he also realized that the selfishness of individuals, and groups of individuals, often worked to prevent the prosperity of society as a whole. Thus, he advocated the intervention of government to protect society.
Henry Charles Carey was born in Philadelphia, Pennsylvania in 1793, the son of Mathew Carey, an Irish social activist, writer, and publisher, who came to the United States in 1784 as a political refugee. At the age of eight, Carey began work in his father’s bookshop as an apprentice, and remained in the publishing business for the greater part of his life. He was self-taught, obtaining his education through reading books and manuscripts.
At 16, Carey became a traveling salesman for his father, covering a large part of the East Coast. He was known in the trade by the title of the "Miniature Book-seller." At 21, he succeeded his father as the president of the company, which at the time was among the largest publishing houses in America. The company’s name was first changed into “Carey, Lea & Carey,” and finally into “Carey & Hart.”
In 1819, Carey married a sister of the distinguished painter Charles R. Leslie and in 1825 visited Europe for the first time. He would travel to Europe several more times, in 1857 and 1859, meeting with such great figures as John Stuart Mill, Camillo Cavour, and Justus von Liebig.
In 1829, Carey co-founded the famous Franklin Fire Insurance Company of Philadelphia. In 1835, as financiers from London started to retreat from investing in America, Carey decided to sell his business. It proved to be a wise move, since two years later one of the worst economic depressions hit the American market, causing bankruptcy for a thousand businesses.
After the economic depression, Carey decided to continue his studies of economics, and devote himself to investments, to writing, and to public affairs. His most influential works date from this period of his life. His Principles of Political Economy, was published in three volumes from 1837 to 1840. Although previously a supporter of the free trade economy of laissez-faire, sobered by the economic crisis that lasted for five years, he started to advocate for protectionism. His book from 1848, Past, Present, and Future, fiercely opposed the free trade or "British system" of classical economics, while in his 1853 The Slave Trade, Domestic and Foreign he criticized the slave economy. Carey later became one of the most prominent supporters of the new Republican Party, established in 1854. When in 1857 a new financial crisis hit the America, caused by the "free trade" tariff laws, Carey’s influence became even stronger, and his ideas more prominent. The protectionist tariff law from 1861, that was brought to curb the crisis, was ascribed to Carey.
Carey died in Philadelphia on October 13, 1879.
One of the first works that brought attention to Carey was his treatise Principles of Political Economy, published in three volumes from 1837 to 1840. It was preceded and followed by many smaller volumes on wages, the credit system, interest, slavery, and copyright, and in 1858–1859 by another major work, The Principles of Social Science, also in three volumes.
Principles of Political Economy became the most comprehensive as well as the most mature exposition of Carey's views. In it, Carey sought to show that there exists, independently of human will, a natural system of economic laws. He regarded this as essentially beneficent, the spontaneous result of which is the increasing prosperity of the whole community, and especially of the working classes, and which is defeated only by the ignorance or perversity of man resisting or impeding its action. He rejected the pessimistic Malthusian doctrine of population, claiming 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). He argued that 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 universal truth, for all stages of cultivation, the law of diminishing returns from land.
Carey's fundamental theoretical position relates to the antithesis of wealth and value. Carey held that land, as people are concerned with in industrial life, is really an instrument of production that has been formed as such by humans. He suggested that its value is due to the labor expended on it in the past, not by the sum of that labor, but by the labor necessary under existing conditions to bring new land to the same stage of productiveness. He studied the occupation and reclamation of land with the peculiar advantage of an American, for whom the traditions of first settlement were living and fresh, and before whose eyes the process was indeed still going on.
Carey rejected the Ricardian theory of rent, as a speculative fancy, contradicted by all experience. Cultivation does not, as that theory supposes, begin with the best land, and move downwards to the poorer soils in the order of their inferiority. Carey argued that, in reality, the light and dry higher lands are cultivated first; 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 other challenges, attacked and brought under cultivation. Rent, regarded as a proportion of the produce, sinks, like all interest on capital, over time, but, as an absolute amount, increases. The share of the laborer increases, both as a proportion and an absolute amount. And thus, in Carey's view, 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.
Although Carey initially supported the free trade laissez-faire system of economy, in his book, Principles of Political Economy, he made a fundamental departure from those ideas. The economic crisis of 1837 struck him hard, causing him to revise many of his ideas. He became a fierce advocate of protectionism and opponent of free trade. He attacked classical economics as being rooted in the “wrong” premise. That whole British system:
has for its object an increase in the number of persons that are to intervene between the producer and the consumer—living on the product of the land and labour of others, diminishing the power of the first, and increasing the number of the last…. The impoverishing effects of the system were early obvious, and to the endeavour to account for the increasing difficulty of obtaining food where the whole action of the laws tended to increase the number of consumers of food and to diminish the number of producers, was due the invention of the Malthusian theory of population (The Harmony of Interests: Agricultural, Manufacturing and Commercial, 1851).
He also criticized the economy based on the slave system. In his The Slave Trade, Domestic and Foreign (1853), he wrote:
By adopting the "free trade," or British, system, we place ourselves side by side with the men who have ruined Ireland and India, and are now poisoning and enslaving the Chinese people. By adopting the other, we place ourselves by the side of those whose measures tend not only to the improvement of their own subjects, but to the emancipation of the slave everywhere, whether in the British Islands, India, Italy, or America.
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 said, threw him back on theory, and led him to see that the intervention referred to might be necessary to remove (as he phrased it) the obstacles to the progress of younger communities created by the action of older and wealthier nations. However, it seems probable that the influence of Friedrich List's writings, added to his own deep-rooted and hereditary jealousy and dislike of British predominance, also had something to do with his change of attitude.
Henry Carey is often regarded as the founder of the American school of economics. He challenged the pessimism of British classical economic theory, which assumed that landlord and tenant, capital and labor, always had opposing interests. Carey’s views were more optimistic. He claimed that by raising wages the purchasing power also grows, which in turn produces economic growth. With this idea, Carey can be seen as a predecessor of Henry Ford’s "wage motive.”
Carey’s treatise Principles of Political Economy, which was translated into Italian and Swedish, became the standard representation of the American school of economic thought that, with some variance, dominated the economic system of the United States until 1973. His other major work, Principles of Social Science, was translated into five European languages as well as Japanese. Thus, his work was influential abroad as well as in the United States, often used to argue for an alternative to laissez-faire policies.
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