America needs to rediscover the art of political economy. Over the past thirty years, Americans have watched the middle class shrink at home and China rise abroad. Pressure on the American economy has been piled on by the pandemic and the war in Ukraine. Even if “stagflation” does not make a comeback, there are structural problems that threaten the long-term economic prosperity and security of the nation. This has forced the right of center to rethink its economic agenda.
Looking to the history of American political economy can offer the insight and inspiration to overcome today’s challenges.
Political economy has been central to the founding and growth of the American republic. Alexander Hamilton has found renewed recognition in recent years for his vision of American capitalism and internal nation building. Hamilton’s ideas did not end with him, but endured for decades afterwards, influencing Henry Clay, Abraham Lincoln, Theodore Roosevelt, and Dwight D. Eisenhower. Although the policies differed, they were all bound together by a belief that the success of the American republic rested on a strong federal government that promotes commerce, industry, and innovation. This is a tradition whose time has come again.
For much of American economic history, laissez-faire was influential but not dominant, and its limitations have been exposed repeatedly down the years. Despite this, the right has allowed itself to become too narrowly focused on libertarian strands of economic thought. Friedrich Hayek and Milton Friedman undoubtedly made major contributions to the Reagan Revolution. Conservatives co-opted their ideas and worked with libertarians to pursue shared policy goals. There might still be space for some of this cooperation to continue, but focus on it has caused conservatives to lose sight of alternative understandings of political economy.
The truth is that market economies have always been subject to the particular circumstances of the societies in which they operate. Geography, demographics, religious behavior, cultural norms, and political institutions all impact a country’s economic performance, and all these factors can change over time, leading to further variation. The abstract theories of economists do not always play out as planned because economic behavior cannot be reduced to predictable formulas. That is why political economy matters so much. It is about producing concrete economic observations that can better inform the practical business of governing. Returning to this fundamental realization can protect us from being blinded by theory.
Applied history can reveal to us how the nation’s leaders and thinkers have successfully managed the interaction between economic and political ideas in ways that clarify the choices facing policymakers today. It is certainly possible to identify the values, principles, and institutions that are essential parts of a continuous American conservative tradition. But the application of this tradition in practice is dynamic and changes over time, including in economics. The right has much to gain from a more thorough understanding of the history of American political economy.
Applying lessons from the history of American political economy does not mean clinging to the policies of the 1830s instead of the 1980s. It is about intelligently looking at the broad range of historic responses to economic questions and how they might echo today’s debates. Theodore Roosevelt’s trustbusting success has been a popular reference point for critics of the Big Tech monopolies and Eisenhower’s interstate highway an inspiration for advocates of building more infrastructure. More broadly, these historical examples encapsulate how American leaders used to approach political economy. But this only scratches the surface of the nation’s economic history.
To develop the use of applied history towards American political economy, this article opens a series of bimonthly essays, entitled The American System. The series will be committed to exploring economic policy areas such as manufacturing, education, trade, and competition through a historical lens. Policy experts, historians, and journalists will share examples of past figures, organizations, or schools of thought that have contributed to American political economy and might provide some inspiration for conservatives today. The first phase of essays will focus on industrial strategy, starting with an exploration of Clay and his conception of “the American System”.
These essays will examine conservative practitioners of American political economy, but it will not be limited to them. Practitioners from the left of center can also be fruitful to learn from, and other countries have interesting historical examples that can be drawn upon. Three key aspirations will guide the vision for economic renewal to be explored in The American System essay series.
First, America should rebuild its industrial base. The current supply chain problems have clearly demonstrated why America needs the security and resilience that comes from robust domestic manufacturing. Industrial growth can also create new jobs for communities that have been left behind by off shoring and automation and deliver a more productive and faster growing economy that can compete with China.
Second, America should restore its national infrastructure. Working from home has become more prevalent in the services sector since the pandemic began, but most Americans still rely on driving or public transportation to get around and work. Giving places greater access to better transportation, housing, and telecommunications is vital to spreading economic opportunity more evenly across the nation.
Third, America should protect its workers and consumers. Markets are very good at creating wealth, but they do not always create outcomes that work for everyone. Just look at Big Tech, where employers like Amazon fail to give their workers a fair deal and companies like Facebook have unparalleled access to people’s data. Intervention is required in these cases to make markets fairer and more competitive.
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As a set of aspirations, this is of course not a comprehensive outline of what a new American political economy should look like. It is a starting point from which the essay series can broaden conservatives’ appreciation for the history of American political economy. Current events and policy debates will influence this content, but the focus will be historically driven analysis that is accessible to a general audience. This greater awareness will hopefully shape debate within the right of center as it carries out its reordering of policy priorities in the years ahead. It should also help conservatives to think creatively about how to improve the American economy.
This call to action is about more than making minor policy alterations. It is about fundamental reform that channels the national spirit at its most ambitious and optimistic. Big, new initiatives are needed that follow the tradition of the Second Bank of the United States, the Homestead Act, the Tennessee Valley Authority, and the Space Race. These essays will remind readers of how and why these remarkable achievements were brought about and can inspire America to build again.
This article is part of the American System series edited by David A. Cowan and supported by the Common Good Economics Grant Program. The contents of this publication are solely the responsibility of the authors.