The American School gets its origins from Alexander Hamilton who created the system with the goal of speeding up the development of the United States as a major world economy. The plan has three distinct parts. First, protecting domestic industry through high selective tariffs. The idea here is to have high tariffs so you force American consumers to buy American products because it is more profitable. The Second Part is government investments involving infrastructure. The creation and building new and improved infrastructure lead to greater commercial commerce and economic growth. The final point is a centralized national bank which can lend for investments and help to stimulate economic investment. The hope was to make America economically independent and nationally self-sufficient
Although Hamilton was the mastermind behind the idea, the plan never really got fully implemented until Henry Clay who coined it with the American System. Clay followed the plan through almost to perfection and was able to significantly industrialize the nation. Although the Nation did have several economic downturns following this macroeconomic philosophy, it set the nation up for success and by the end of the 19th century, America was worlds most powerful industrial economy.
Moving forward, although many people believe that FDR and other 20th century presidents followed the Keynesian economic school, they also incorporated a series of elements from the American School. FDR did promote high tariffs to protect America's manufacturing base and to help to stimulate economic circulation throughout the nation. Eisenhower, through his highway investments, greatly enhanced the infrasturce of the nation would lead to an increase of interstate trade and capital moving throughout the nation. Later Presidents would promote the use of the national bank, now called the Federal Reserve, to control inflation and help to promote economic and commercial development.
The Trump administration, most significantly, follows the American System. The administration has called for increased use of the central bank to control the economy and has implemented a high series of tariffs. The most notable of these has been the tariffs on steel and aluminum which Trump hopes will cause Americans to only buy America steel and American aluminum. Also, the administration has called for a $1.2 trillion infrastructure package to revitalize the American economy. The hope is that by following this plan the nation will once again see high levels of economic growth. (Around the 3-5% GDP per quarter range). This notion though is still up in the air since the American School has even been tested in an interconnected economic age that is today.
https://www.senate.gov/artandhistory/history/common/generic/Speeches_ClayAmericanSystem.htm
This is very interesting. I think that the American System has definitely influenced the economic policies of presidents. I think that it is also interesting to look at the similarities between the American System and the Keynesian System. The Keynesian theory is similar to the American system as it involves government intervention in the economy, which the American system does by government investment in infrastructure. Keynes also focused on "demand", which was shown by the reduction of taxes in the Keynesian model and the high tariffs in the American System. Either way, there are distinct similarities that can be drawn between the two economic systems.
ReplyDeletehttps://www.investopedia.com/terms/k/keynesianeconomics.asp