National Capitalism

Towards a Paradigm Shift

“Free trade! Free trade! The call for free trade, is as unavailing as the cry of a spoiled child, in its nurse's arms, for the moon or the stars that glitter in the firmament of heaven. It never has existed; it never will exist. Trade implies at least two parties. To be free, it should be fair, equal, and reciprocal. But if we throw our ports wide open to the admission of foreign productions, free of all duty, what ports, of any other foreign nation, shall we find open to the free admission of our surplus produce?” -Senator Henry Clay

“I’m not a Nazi, I’m the opposite of a Nazi.” - President Donald J. Trump

At the end of the War of 1812, a young congressman, a Virginian by birth, was convinced, more than ever, that America needed a national economy. Henry Clay, a thorough Jeffersonian and one of the Hawks who called for war with England, saw a bright future for America, but also dark clouds. A land with a nearly limitless frontier, an energetic and zealous people, and rich in resources, America could become a global powerhouse. Or America could, like its frozen shackled sister in the north, could remain a colony to Great Britain. Political sovereignty was not in formal independence, but in trade. If America could not control her own resources and her own manufacturing, if she was, by credit or by conquest, an informal colony, then America’s great potential would belong to another.

Years prior, President Jefferson also realized this great danger. In 1807, against the shrieks of New England, the Sage of Monticello passed his infamous Embargo, shutting off trade with both Britain and France (who continued, throughout the Napoleonic Wars, to shamelessly pillage American shipping). If the policy was not a success (and few argue it was), its consequence was profound. The Embargo demonstrated America’s need to provide for itself, less foreign trade wreck the nation. Freedom should reign internally, but strong borders (political as well as economic) should hold against an uncontrolled, corrupting, flood of foreign goods and investment. Clay would later call this program the American System. This essay will call it National Capitalism.

Jefferson, however, found many former friends accuse him of power lust and hypocrisy. How could Jefferson, the enemy of cities and courts, indulge in this strong use of the federal government? How could, these Old Republicans queried, Jefferson embrace the abominable doctrines of his old foe, Alexander Hamilton?

This question was not mere histrionics, for Hamilton did, seemingly, embrace a similar doctrine. As the Articles of Confederation were empirically failing, and John Adams, antiquated and out of touch, babbled about constitutional theory to win an argument against Marchamont Nedham 150 years too late, Hamilton had turned his hand to law-making. The new Constitution of 1787 was to provide a framework for a strong national government, one that could mimic the best of the British system. A compromise through and through, Hamilton saw in the new federal system a means to recreate a new Parliament and a new chief executive monarch. With a meritocratic-plutocratic aristocracy at the helm, Hamilton embraced the necessary evil of political patronage. Unlike Jefferson’s Republicans, who echoed commonwealth arguments from Algernon Sidney and James Harrington, Hamilton accepted that the power of the British Empire came through an embrace of sleaze, where an executive and his court could manage parliamentary government through carrots and sticks. The new federal system would create a republican court, the same that led Great Britain to imperial greatness under the Hanoverians. Under a new George I, America too could rise to reign on the world stage.

In terms of a new political economy, Hamilton embraced what Adam Smith denounced as “mercantilism” to fuel American largesse. Like the Hanoverian Court Whigs of old, and unlike later Jeffersonians like Clay, wealth was in trade and trade was to be pursued abroad. Britain’s Blue Water policy, combined with laws like the Navigation Acts, sought to a win a zero-sum game of world trade. As opposed to many American who looked West, Hamilton looked East, hoping to dominate trade in Europe. Though a benchmark in American political theory, Hamilton’s Report on Manufactures preferred industry subsidies (“bounties”) over tariffs, sharpening swords instead of building walls. Nevertheless, free trade was an illusion. Contrary to many textbooks and Jefferson’s own stated abhorrence for manufactures, the first Secretary of State embraced tariffs as a measure against foreign subversion. If unfair trade policies targeted the United States, Jefferson counseled defense. None of the Founders were liberals in any classical sense of the word.

It was this Jeffersonian spirit, that happened to dovetail with Hamilton on this single point alone, Clay took up the cause against Great Britain. Rather than dreaming of an international empire, a vibrant and dynamic republic required its own internal developments. Consciously rejecting mercantilism for manufacturing, rejecting finance for industry, Clay and his so called “National Republicans” rejected the turn in Britain towards free trade. Clay did not believe this posture for one moment, seeing in it a plan for domination. He even counseled in 1832 that the Frenchman Albert Gallatin, Jefferson’s Treasury Secretary who had later embraced free trade liberalism, should go home to Europe for he still remained an alien in his heart. If Britain’s industry swamped America with subpar goods, then America would never be able to compete and remain aloof from foreign affairs. If America was going to trek its own course in the Wilderness and abandon European statecraft, as all good Jeffersonians desired, then it required walls to protect this experiment in liberty. Thus, to preserve and form this system, Clay advised three general policies: internal improvements to build up publicly accessible roads, tariffs to protect trade from foreign influence, and a national bank to provide stable American credit.

On the first point, Clay faced detractors who denounced the use of federal taxes to fund projects that did not benefit all equally. Why should South Carolina, for example, pay for roads in Pennsylvania? The seas were already available for trade. On the second point, Clay faced enemies who believed tariffs provoked counter-tariffs, which would penalize any export economy (particularly South Carolina’s trade in cotton to Britain). Tariffs, in the main, would then make everything expensive for those who depended on international trade. On the third point, a national bank risked the same kind of Hamiltonian corruption (though the Second Bank of the United States, unlike the First, was focused less on debt and trade than providing steady credit to purchase land and tools). More importantly, the national bank would not prioritize one institution over others, especially those smaller banks that had a variety of relations with the king of capital, London.

As it should be obvious, the hostility to the American System often derived from dependence on foreign capital, namely British capital. The rise of Andrew Jackson, a pragmatic moderate and Anglophobe, mobilized opponents of the “silk stocking” National Republicans as engaged in Hamiltonian aristocracy. It was not a love of free trade and a night watchman state, contrary to Libertarian historiography, that marked Jackson’s explosive popularity. As he candidly admitted in his Veto to Clay’s effort to renew the Second Bank of the United States, Jackson was fine with a government bank as long as the common man owned a share. Democratic hostility to the national bank often dovetailed with Old Republican hostility to a national economy. Tariffs and road projects might not benefit planters in the South who were happy with their growing trade in cotton to Britain. Similarly, hostility to the national bank unified Democrats who despised all paper money as a scam and Democrats who opposed any federal bank. This latter opposition may have derived from principled constitutionalism, but it flowed equally from those who supported banks that received alternate streams of credit. The Rothschilds, who had a growing influence in New York and in Southern finance, did not care for the Second Bank of the United States. Democrats, especially John C. Calhoun and his followers in South Carolina, often depended on British capital to survive. The defeat of the national bank further intensified that partnership.

Clay continued to pursue his American System, though it came further from many Southern planters who rejected any renegotiation of trade with the British Empire. Clay’s Whig party suffered severe setbacks, gaining the presidency under a not so crypto-Democrat John Tyler and regaining the executive just as slavery had displaced tariffs and national banks as the national political issue. But Clay’s cause would be avenged through the Republican Party of his most ardent disciple, Abraham Lincoln. Dying at the conclusion of the Civil War, leaving the GOP as masters of the national scene, Lincoln secured a place for a protective tariff at the heart of American politics. Internal improvements tied into the boom of railroad construction, tethering San Francisco to Kansas City to Chicago to New York. Combined with a commitment to sound money, through gold backed papers, the American System dominated national politics as America began to dominate the world scene.

Contrary to historical claims that Lincoln brought about the birth of statism and a federal leviathan, it was mainly enemies of Republican Stalwarts that demanded greater state intervention. Populists, later fused with Democrats, demanded an income tax, federal regulation on railroads, and anti-monopoly legislation. Similarly, many self-professed Progressives wanted regulation of the economy and the breaking up of trusts, or large interpersonal business congolmerates. While this National Capitalism embraced strong walls and inner freedom, the new critics demanded thinner walls and internal regulation. Free Labor, which had galvanized Republican criticisms of slavery, was a threat to the teeming masses of newly minted Americans stuffed into the dysgenic urban hubs dotting the continent. With the harbinger of Marxism, it was believed the newer liberal progressivism would provide the means, through centralization and state-building, to sublate radicalism.

It was into this mix that William McKinley, a new Henry Clay and equally gifted, advanced a fresh defense of the American System. As the frontier closed, and Americans became anxious for new opportunities, a renewed focus on protection, sound money (gold with some silver to create credit for farmers), and internal developments could channel American energies away from foreign adventurism. The policy of Open Door asserted American access to foreign markets, to sell in Asia on equal terms as every other great European power. This arrangement was not naive free trade, but a self-consciously political message to establish joint resolution of trade. Mutuality and cooperation, the combinations of voluntary associations that created businesses and labor unions, would provide a means of worldwide stability. While liberalism was drowning against the advance newer revolutionary ideas, only the American System could reject either the zero-sum world of Empire or Socialism.

In contrast to standard historiography (usually lifted from Populist and Progressive criticisms), the age of Republican dominance was not the tyranny of robber barons and monopolies. Rockefeller’s rise came on the heels of Jay Cooke’s fall. There was no permanent monopoly caste, the same way that the British Empire had chartered royal trade corporations like the East India Company. If you want to do something about it, as Mark Hanna (McKinley’s arch-strategist) told a group of agitated wage-earners, organize and smash ‘em! The purpose of the American System, the purpose of National Capitalism, is to maximize internal freedom to associate and organize. The greatness of America was that corporate bodies, whether it be the Methodists or Standard Oil or the second KKK or American Federation of Labor, assembled for their own needs. This could produce, as Toqueville noted, a stultifying effect upon individuality. But groups could divide and subdivide and reorganize. Great walls maintained this system economically, but they also provided a broad defense for free association. National Capitalism prioritizes a free nation through a guarded economy.

With the death of McKinley, and the rise of Progressive-adjacent Theodore Roosevelt, there was an aborted imperial turn. Besides the neo-Hamiltonian flare (with the Great White Fleet’s global tour and a desire for colonies, something McKinley had been reluctant to pursue), Roosevelt had embraced the imperial reformism of Progressives to regulate internally. Breaking up Standard Oil as a “monopoly” was as much a favor to J.P. Morgan as it was a form of paternal scolding. These efforts to internally regulate continued through the reformed liberalism of Woodrow Wilson, who not only advocated protections for small businesses (privileging the little and weakening the potency of sheer free associating), but believed in the civilizing power of free trade. The Federal Reserve System, whatever its true purposes as it was hatched on Jekyll Island, fit the reformist desire (which could be connected back to Andrew Jackson) to have a people’s bank (overseen as it was, nominally perhaps, by Congress). The power of free trade could, as empires dissolved, create a world parliament of nations. Europe’s empires rejected this hare-brained scheme, but the idealism behind it continued.

It was this shift, beginning with Theodore Roosevelt and Woodrow Wilson, that saw a rejection of National Capitalism for the current world order that American currently pursues. Franklin D. Roosevelt did not transform America through the New Deal (a pragmatic ad hoc program of uplift and back scratching), but through the Second World War. Like his Secretary of State Cordell Hull, a folksy idealist from Tennessee, Roosevelt believed free trade as a means to maintain global peace. Not nearly as idealistic as the Wilsonians, FDR tacitly accepted their program. As Britain’s flower faded, and America stepped into the role as European arbiter (neither trusting Germany nor Russia), an international liberalism gained priority. Free trade became possible because the entire world was to belong to a rules based order that became a second nature. Free trade also became possible because America was the world’s premier and only manufacturing power in the postwar wreckage. The prosperity that the American System, that National Capitalism, had built could be used to rebuild the world. Labor and management could both indulge in what seemed limitless profit. The latter twentieth century became American because the latter nineteenth had made America great.

Behind this new turn to international liberalism, free trade became paramount, but American business (and free association by extention) required discipline. During the Truman or Kennedy years, this process was simple jaw-boning with the unrealized threat to nationalize. Unions were given raises and expected to go back to war without striking. In between these administrations, Eisenhower represented a brief return to an older Republican style of government, the last being Calvin Coolidge’s sincere belief that the business of America was business. Under Ike, America fulfilled a massive program of internal improvements, constructing the interstate highway system for America’s burgeoning car culture. However, the foreign policy demands of the Cold War drove most of his focus, with trade policy as a tool to prevent World War Three. But the real turn towards a focus on the old American System began with Ike’s apprentice, Richard Nixon. The triangulation over Vietnam (a war that had little to do with America’s direct interests, but could not forfeited without conclusive honor) broke the vision of international liberalism. To accept a balance of power with the Soviet Union and the Maoist People’s Republic of China was a bridge too far. Similarly, Nixon’s decision to suspend payment in gold for dollars was less a rejection of sound money (though it was, in part, that) than a preservation of American purchasing power.

Nixon’s downfall, unifying hawkish and dovish liberal internationalists, signaled a return to status quo. James Carter ended his presidency with renewed hostility towards the USSR. But his term coincided with the rise of new thinktanks, new policy initiatives, to reckon with America’s inability to preserve homebound prosperity and a rules based order. The Bilderberg Group and the Trilateral Commission begin the pivot towards what has been called “neoliberalism,” but may better be considered globalization and financialization. America needed further ingratiation with the world’s great economies (such as Britain, West Germany and Japan) to prop up its tottering prosperity. It meant, ultimately, the descaling of American manufacturing for a new service in the global economy. America could not just go it alone and never should be allowed to go it alone ever again. The National Capitalism of the American System was ejected for a growing promotion of financial capital (as opposed to industrial capital that financed itself) to search abroad for opportunities. America’s GDP would increase, even as industrial jobs went abroad.

Outside of culture war (which is not unimportant), there was marked continuity between the Reagan and Clinton terms. Hawkish intervention increased, manufacturing left for cheaper labor, investment banking was deregulated, public corporations lost control of their governance to shareholder democracy, and immigration boomed. Libertarians (such as Ron Paul) denounced “free trade” in the name of “free trade,” concerned that international organs like the World Trade Commission as a blow against America’s Constitution. How does this make sense? While Reagan and Clinton had perfected a world safe for free trade (as much as can be bombed into the Earth), it still was not enough, or it was the wrong kind, and Libertarians tore at each other, dividing over culture war (Christians like Lew Rockwell against Randian Satanist witches) as much as applied economics (Rothbardian economics against the innovations of Milton Friedman and the Chicago Boys). Reagan was the great snake that had slithered into the Garden of Mises and offered cursed fruit through lying tongue. America had embraced free trade, but any patriot was now naked and ashamed.

But this paradigm of neoliberal internationalism, despite attempted insurgencies into the GOP by Pat Buchanan (a former Nixon speech writer) and Ron Paul, as well as the heckling of labor Democrats like Jim Traficant, remained. Everytime Americans went to polls, whether it was for Bush/Dole or Clinton, Bush Jr or Gore/Kerry, McCain/Romney or Obama, it was simply a slightly different configuration of the same political economy. But Obama’s mismanagement (embittering many supporters with his faux-support for “Main Street”) occurred simultaneously with the open GOP pathway for Donald J. Trump.

Contrary to accusations of cynicism and opportunism, saying whatever works to promote himself, Trump’s politics have remained remarkably stable. A member of Ross Perot’s Reform Party, the only meaningful third party attempt to break the uncritical neoliberal internationalism, Trump had advocated against open borders and internationalist free trade. Greater walls, even tariffs (which Trump has spoken glowingly about, with explicit praise for McKinley), means greater American liberty. With whatever failures in his first term, Trump pursued efforts to protect American jobs and renew American manufacturing. Freedom to associate, which has twinned with hostility to “Woke” social policing, means freedom for business to do business. Catapulted to the nomination in 2016 by ex-Tea Partiers, those libertarians who have looked sideways at supposed free trade, and winning the election through agitated ex-Democrats who were fed up with the neoliberal internationalism of the Clintons, Trump’s second term signals the return (in some form) of the National Capitalism in the American System.

In this brief historical reconstruction of an idea, National Capitalism may provide the conceptual basis to rethink political divisions. Why has leftwing labor become alienated, despite government constantly regulating industry and signaling against fat cat Wall St? Why are Libertarians so frustrated with the public success of free trade? It cannot all be cynicism and broken promises, but that both sides have failed to understand the state of affairs. If classical liberal ideas gave way to the internationalist liberalism (and neoliberalism) that defined the American Century, then what other alternative is there? Margaret Thatcher famously claimed There Is No Alternative. But that is what Trump has successfully demonstrated, spawning various other national Trumps. Reagan may have hated Trump, as some bitter Republicans have claimed, but that was because Trump questions (neo)liberal internationalism. It is for a similar reason that media and academia have decried the turn to “illiberal democracy” or “populism,” for these prioritize internal freedom and external (politicized) boundaries that would cause the rules based order to cease functioning. The Popperian open society is not socialism, except in that it regulates market functions. It self-consciously thinks of itself as progressive and liberal, for globalism and multicultural porous borders. National Capitalism is an impediment, the American System is a roadblock, on the path to this idealized world.

This term, National Capitalism, is posed against the so called International Capitalism baked into the regnant liberalism (though it is a capitalism that wavers into forms of market-based socialism, as state ownership can be conducive in the same way of global market openness). It is also posed against National Socialism, and International Socialism, that enacts permanent bureaucratic regulation of business and free association. Nazis passed many regulatory statutes to manage how business functioned and what could or could not occur (something that irritated German corporations prior to the endless boom of war sales). National Capitalism, like the American System, rejects both the globalist orientations of both mercantile imperialism and liberal/socialist international idealism.

2025 may signal a very new dawn for America in the world. With Xi’s China embracing a kind of Hamiltonian, neo-mercantilist, politics, and the rest of the world reeling with the failures of (neo)liberal internationalism, there is space for a fresh reappraisal. Contrary to rhetoric of progress and the future, today’s (neo)liberal internationalists, like the advocates of the Biden-Harris administration, are aged, defunct, and exhausted. They are reactionary, diggin their heels into the cracked earth, refusing a serious reassessment that many populations threaten to unleash. Perhaps a new theory is in order.