What is `American System' Economics?

PHYSICAL ECONOMY -- Part I

by Nancy Spannaus


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There is no task more urgent for the American Congress, and the American people, than to immediately put in place an emergency economic recovery program based on the principles of the American System of Economics. There is one big problem: Virtually no one in this country outside the LaRouche movement, seems to understand what the American System of Economics is!

I would be misleading if I were to say that I could convey the full substance of the American System in the series of columns of which this is the first. A working understanding of the subject actually requires a mastery of the major economics writings of Lyndon LaRouche, who proceeds both epistemologically and philosophically from the root of the matter. However, it is possible to prepare the ground for you, as citizens, to grasp what must be done, both by defining what the American System is not, and by providing some historical grounding in the crucial principles, as they were put into practice.

Let's start with a shocker: the American System of Economics is not capitalism.

- British Lies -

In his ``Man's Original Creations'' paper, published in June of this year. Lyndon LaRouche wrote:

``In contrast to contemporary European constitutions and systems, the actual form of society which the U.S. Declaration of Independence and Federal Constitution, with its crucial Preamble, define the U.S. economy to be, is neither capitalism nor socialism, but what U.S. Treasury Secretary Alexander Hamilton, among others, defined as The American System of political-economy. What the British system, and the Karl Marx it trained, defined as `capitalism,' was the British imperial form of Anglo-Dutch, Venetian-style ultramontane rule by a financier oligarchy. This was the system established by the victory of the Anglo-Dutch financier oligarchy, centered in the power obtained by the British East India Company through the February 1763 Treaty of Paris, which concluded the preceding, mutually ruinous `Seven Years War' among the powers of continental Europe. From 1848 on, the power of the old feudal systems of Europe, such as those of the decadent Habsburgs, were largely absorbed in what became, increasingly, the appendages of the Anglo-Dutch Liberal monarchical system. The power in this imperial system was located in that financier oligarchy which became known as the Synarchist International of the 20th century, the same Synarchist International whose cabal of private bankers gave us Mussolini, Hitler, and World War II.

``The European system, which the credulous of the world have accepted as what they describe as `the capitalist system,' is, in fact, usually the system of tyrannical rule which the private financier-oligarchical syndicates of Europe and elsewhere have exerted as a power placed legally above the authority of governments, through arrangements often described today as `independent central-banking systems.'|''

In fact, during the course of the 20th century, the whole concept of the American System of Economics, which had been known by name through the bulk of the 19th century, virtually disappeared. Instead, the London and Austrian schools of economics invaded our universities, and embedded the paradigm of socialism (or communism) vs. capitalism, left vs. right, class vs. class.

In fact, these options represent no choice at all. For as LaRouche said, both depend upon a reductionist concept of economics which denies the fundamental source of wealth in a physical economic system: the creative powers of the human mind.

- American Beginnings -

Although rooted in concepts developed in Europe, from the Italian Renaissance through Gottfried Leibniz, and substantially foreshadowed in the early Massachusetts Bay Colony, the American System of Economics did not fully develop until after the American Revolution. For it was not until this time that there was developed the sovereignty of a government, which had the power to carry out the economic policies.

Two individuals epitomize the thinking that led to the establishment of the American System: Benjamin Franklin, and our first Treasury Secretary, Alexander Hamilton. Not surprisingly, both of these Founding Fathers have known connections to the Leibnizian networks in Europe which developed the science of physical economics. Crucially, both also played indispensable roles in devising and enacting the U.S. Constitution which established the moral, political, and legal framework for accomplishing their economic goals.

Franklin's economics is wildly misunderstood by those who choose to identify it by his Almanac adages (``A penny saved is a penny earned''). To the contrary, Franklin's economic policy was based on building institutions of scientific learning, establishing banking institutions which would fund productive industry (including manufactures), building infrastructure, increasing wages, and promoting population growth.

While there was nothing in Franklin's program that Hamilton would have disagreed with, it fell to Hamilton to devise the specific government programs and institutions--the national bank, the tariff, and the prospectus for internal improvements--which actually came to be known as the American System by the time of the early 19th century. It is these programs, in contrast to the laissez faire which most so-called economists identify as the ``American way,'' which we will be discussing as the series progresses.


Part I: What Is 'American System' Economics?

Part II: The 'American System' Means Sovereignty, Not Free Trade

Part III: The 'American System' Requires That A National Control Its Own Currency

Part IV: The 'American System' Requires A National Bank


The author can be reached at nancyspannaus@larouchepub.com. Questions are welcomed.