The 'American System' Means Sovereignty,
Not Free Trade

PHYSICAL ECONOMY -- Part II

by Nancy Spannaus


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Nothing shows the ignorance of an economist or a historian more than the assertion that the American System of economics is based on the ``principle'' of free trade. Yet this assertion has largely prevailed in the last decades of popular culture and ``learning'' in the United States, with the result of instilling an academic excuse for the hatred of government by even those citizens who absolutely depend upon government functioning the most.

It was ``free trade'' that the American Constitution, and the economic system which it enabled to be brought into being, was founded against. And had ``free trade''--specifically the British system of control of trade which was dominating the world even after the end of the American Revolutionary War--not been curbed by the establishment of the Constitution, the funding system, and the Bank of the United States, there would have been no American Republic, and thus no roadblock to the global British imperium.

- `Free Trade' Assumptions -

The assumptions behind ``free trade'' in fact go back to Aristotle, who defined the subject of economics as merely an extension of managing a household budget. Under this concept, each family simply seeks to manage its affairs for its own benefit, and leaves the management of the society as a whole to the ``invisible hand,'' or, more likely, the very visible fist of the rich and powerful overlords who have amassed the greatest wealth and resources through the exercise of force. The result is an oligarchical society, controlled by a handful of the very rich, who seek primarily their own interests, not that of society as a whole. And there is no organized force, except another oligarchical one, which is prepared to stop their depradations!

The contrary notion of economy, which was developed during the 15th-Century Italian Renaissance, and further elaborated by the great scientist Gottfried Wilhelm Leibniz, understands the subject of economics to be the general welfare of society as a whole, and its ability to reproduce and improve itself. Under this concept, individual families or cities are not left to fight out their fate against others, but are obliged to participate in governing bodies which, more or less scientifically, devote themselves to knowing and implementing the policies which promote the general welfare of all.

Much more, of course, could be said on this subject, and has been by leading economist Lyndon LaRouche. Readers are referred to www.larouchpub.com, where an archive of his major writings, and attacks on free trade, can be found.

But the two fundamentally antagonistic assumptions behind the ``free trade'' system, on the one side, and the ``general welfare'' system on the other, can be readily grasped by the layman. Under the ``free trade'' universe, man is pitted against man, with all his bestial instincts mobilized for survival at the expense of others. Under the ``general welfare'' universe, man is a human being concerned with promoting good for his society as a whole, not only in the present, but in the future. And this ``good'' is scientifically knowable through his constant improvement of nature, and himself.

Establishing the United States

The victory of the American colonies in the War of Independence by no means ended the domination of the British imperial ``free trade'' system, even on these shores. The British continued to use their domination of the seas, and their developed manufacturing sector, to flood the rest of the world with goods, and, to the extent possible, to prevent the emergence of other manufacturing centers. Great Britain wanted the rest of the world to serve as her plantation, providing the raw materials she needed at the lowest possible price, and she was prepared to deploy her resources to preserve that arrangement.

The British policy in the mid-1780s was devastatingly successful. Not only was France, her only potential superpower rival, pushed into signing a free trade agreement that favored the British, but the various American colonies were being pitted against one another by British trade policies. While providing different concessions to different colonies, the British were being guided by a unified intention: keep the colonies at each others' throats, and prevent their development as a unified nation with the ability to defend and improve itself. In a word, reconquest.

And the name of the policy by which they hoped to accomplish this aim, was ``free trade.''

Thus, when Alexander Hamilton, George Washington, Benjamin Franklin, and others began to organize, and correspond around the project of replacing the ineffective Articles of Confederation with a Constitution of the United States, they were not simply talking about a ``good idea.'' What they understood is that, unless they created continental and governmental institutions which were devoted specifically to promoting the general welfare of the colonies as a whole, the British Empire was going to destroy everything that had been won in the Revolution.

First and foremost, the new nation had to have sovereignty over its economy. That meant controlling its currency, controlling its trade, controlling its debt, and controlling its economy as a whole. The idea of being able to defend the United States against foreign powers, when the United States did not have the ability to raise funds, or to provide basic economic security for its population, from the basics of food and clothing, to the infrastructure required to maintain and improve the economy, was recognized to be a sick joke.

Thus, the U.S. Constitution itself was established with an explicit commitment, in its Preamble, to provide for national sovereignty, the general welfare, and the nation's posterity--to preserve the nation against British ``free trade.''

(to be continued)


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 welcome.