At DKos this morning, Mark Sumner (aka Devilstower) has a pretty good piece, "The free market is anti-American". It's actually excellent in one respect--it historically corrects the notion that America was founded on free market market principles. In fact, as Mark notes:
Those who worry that we've wandered too far from the vision of the founding fathers might want to remember that in George Washington's first term, the government was involved in: - selectively restricting imports
- bailing out debts of states
- being the majority owner of a private company
- clamping down on fiscal speculation
- executing a "stimulus plan" of infrastructure projects
And all of this goodness was paid for by new taxes.
The American school of economics was founded on these ideas: selective tariffs, government regulation of banks, and strong investment in infrastructure. Under later presidents a fourth plank was added to this platform -- investment in public education.
I downgrade it to "pretty good" because it oversimplifies, which we can see quite clearly in in this passage:
The American economic system -- the system defined by George Washington and Alexander Hamilton -- came directly out of the challenges faced by our nation. America, as a new country, was at a huge disadvantage to Europe when it came to the ability to produce manufactured goods. American-made goods at the time were often lesser quality, more expensive, or both when compared to products coming from European factories. Both men were well aware of free market principles (On the Wealth of Nations was published in 1776) and there were those among the founders that pushed Washington to run the country along a purely market-driven philosophy. An unregulated free market backed up by the gold standard was the basis of the "English System," and the British had enjoyed more than a little success.
There are two problems with this passage. First is that the "English system" in 1776--or even the 1790s--was definitely not free market. When Smith wrote The Wealth of Nations he was considered a radical, and he was writing as a critic of the existing English system (as well as the rest of Europe) that was dominated by royal charters and grants of monopoly. Remember the Boston Tea Party? The British East India Company? That was a royal charter company--the most important in British history, to be precise.
As explained quite wonderfully by Emma Rothschild in Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment, Smith and Condorcet were proponents of the free market as part of a broader vision of much wider human freedom. It wasn't until 50 years later, after the Napoleonic Wars, that the British trading class--buoyed by Britain's indisputable naval superiority--emerged as politically dominant, and rediscovered Smith's work as a legitimating ideology for its trade-based ambitions. The irony of the state power backing up this rediscovered--and reinvented--"free trade" philosophy should not be neglected. But it was not the "English System" as it existed when the United States was being established.
The other problem with the passage above is that it described the Federalists' Northern, trade and manufacturing-based economic vision, which was generally--often bitterly--opposed by the Democratic Republicans, for reasons both good and bad. While my own view is that the federalist policies were generally good for the country, they certainly weren't good for a lot of less prosperous folks trying to gain a foothold. Jefferson and Jackson spoke for those folks--and, directly or indirectly, for slavery and the genocide of Native Americans as well. Neither economic vision was anywhere near as pure as it claimed.
In short, our history is morally conflicted in a multitude of ways, and there is no single clear and shining pristine past for us to appeal to. Our politics, economics and democratic ideals have always been deeply contested, and we cannot understands ourselves and/or our history if we do not acknowledge that contradiction and struggle have been with us from the very beginning... if not before.
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