Harmony of Interests - Henry C. Carey and the American System: A Synthesis for the Political Economy Project

We do not need to invent a new paradigm.  We must return to what has proven to work. 

In the canon of American political economy, few names deserve revival more than Henry C. Carey, the economist who advised Abraham Lincoln, helped shape the Union’s war finance  and articulated a moral, scientific, and national alternative to the British Empire’s laissez-faire orthodoxy. 

Yet in the age of globalized supply chains and hollowed-out industrial towns, Carey has been nearly erased from mainstream economics. His disappearance was not accidental. His ideas threatened the interests of the imperial commercial order in the 19th century—and they threaten it again today.

Carey understood something mainstream economists and politicians are only beginning to rediscover: that prosperity is not found in free trade but in free people and freedom requires the development of national productive powers not dependence on international banks and foreign monopolies.

This essay synthesizes Carey’s major works and situates them alongside previous Political Economy Project writings on national development, labor dignity and the harmony of interests. In Carey’s vision the purpose of political economy is not to optimize spreadsheets or financial markets. It is to build a republic strong in industry, agriculture and free labor, united by shared prosperity and civic duty.

Who Was Henry C. Carey?

Carey (1793-1879) was America’s leading 19th-century economist, architect of the American System and trusted counselor to Lincoln and Treasury Secretary Salmon P. Chase during the Civil War. Where Europe’s economists rationalized empire, rent extraction and labor exploitation including imports from U.S. slave plantations, Carey forged a national economics rooted in production, labor uplift and national self-reliance.

He rejected the “iron laws” of Ricardo and Malthus as anti-human and anti-republican, insisting instead that:

• wealth grows fastest where labor is most empowered

• population growth is a sign of strength, not crisis

• protection nurtures industry, raises wages and builds national sovereignty

• harmony can be engineered through policy and cannot be left to “invisible hands” that served imperial merchants

Carey saw political economy not as a detached science but as the moral science of national development.

The Great American Counter-Theory

Where British political economy promoted cheap labor, cheap food and cheap colonial extraction, Carey championed a model of harmonized interests:

Agriculture + Manufacturing + Commerce = National Prosperity

This harmony required statecraft that used sovereign public finance, tariffs and internal infrastructure improvements thereby rejecting surrender to a laissez-faire market controlled by City of London financiers. 

His critique was prophetic. The “free market” ideology that deindustrialized Britain’s colonies later deindustrialized America’s heartland in the second half of the 20th century.

The British intellectual elites used vague abstractions that hid the concrete aim: control the strategic chokepoints of industrial civilization.

Carey warned that a nation that depends on others for industry becomes their subject.

Carey’s Major Works and Their Core Arguments

Principles of Political Economy (1840)

Population and wealth grow together. Freedom, security of property and productive employment lift the whole nation. Scarcity is not natural but manufactured.

The Harmony of Interests (1856)

The farmer, machinist and merchant rise together when industry is national. “Free trade” is imperial language for colonial dependency.

Financial Crises: Their Causes and Effects (1864)

Crises are policy-made not natural. Protection stabilizes wages and credit while free trade breeds speculation, debt, collapse and dependency.

Principles of Social Science (1865)

A civilization flourishes when labor becomes more skilled, more dignified more free. The economy is healthiest when the proximity of producer and consumer increases, reducing the “tax of distance” and empowering communities.

Public Debt & Reconstruction Letters (1866–67)

To rebuild the Union, America required national credit, territorial integration, industrial investment and after the Emancipation Proclamation racial uplift through productive work—not British-style austerity.

The Productive-Power Equation and Carey’s System

Using the Political Economy Project’s equation outlining the real rate of profit:

r = S′ / (C + V − S)

Where

C = constant capital (infrastructure, machinery) V = variable capital (labor) S = overhead and extractive costs

S′ = surplus  (C + V − S)

r = rate of profit

Carey’s thesis expresses this by demonstrating:

• A society thrives when surplus grows

• Constant capital (infrastructure, machinery, energy) expands productive capacity

• Variable capital (labor) rises in skill, income, dignity

• Overhead and extraction decline as financial parasitic systems are dismantled

The City of London imperial policy raises S (rent, speculative finance, transport tolls, imperial plunder), collapsing the ratio and bleeding nations dry.

Carey’s American System lowers S, aligns labor and capital, and reinvests surplus into:

• canals, rail, ports

• schools, patents, science

• industry and agriculture

• wages and family formation

National wealth is not based on fiat money. It is based on the productive power of its people.

The American System vs. The British System

American System	British Free-Trade System
Build productive capacity	Extract existing wealth
Tariffs, national banking, infrastructure	“Free trade,” speculative banking, rentier finance, debt peonage
Rising wages & skills	Cheap labor & de-skilling
Industrial sovereignty	Industrial dependence
Harmony of interests	Zero sum game, Divide and rule

Carey’s political economy is the economics of Lincoln, Hamilton, Clay, List, Roosevelt—and is also expressed in China’s successful development model.

We must work toward a political economy fit for a sovereign republic and free people, not a rentier empire with serfs and slaves. 

Knowing Our History - Which way will we go?

America today does not operate on the American System—it operates on the British one:

• finance over production

• speculation over industry

• imports over domestic manufacturing

• Race to the bottom runaway shops over union wages

• infrastructure decay instead of national renewal

The result: social fragmentation, political extremism, declining life expectancy and ease of divide and conquer politics. The mission of the Political Economy Project is to resurrect the American System as a living school of statecraft as necessity.

We do not need to invent a new paradigm.  We must return to what has proven to work. 

Conclusion: A Republic Worthy of Its People

Carey believed that economics must serve:

• human dignity

• productive labor

• national sovereignty

• broad-based prosperity

• peace through development

His vision is the antidote to extractive globalization, exploitation and war. He offers us a framework not only to rebuild industry, but to rebuild an economy based on natural law capable of sustaining a free republic and a free people.

In reviving Carey, we reclaim the economics of the Union, the New Deal and every civilization that ever dared to build a future liberating labor.