National Commentary

Investment Vs. Austerity

Lest people be deluded and confused, the dividing line in American politics and policy making today is not Democrat versus Republican. Instead, it is investment versus austerity, and seldom in the nation’s history has the contrast been more stark.

The contrasting approaches have been there from the day the last shot was fired at Yorktown, as the tenacity of structural greed has been remarkable. In the early days of the American republic, it was the ongoing efforts of her former British masters to reign in the U.S. through financial and trade machinations that characterized the post-revolutionary period.

The British reverted to military means again in the War of 1812, and when that failed, the long tentacles of their banking institutions continued to buy the influence of U.S. politicians into the 1820s, when the choices between the pro-British proponents of domestic austerity and debt repayment versus the “American System” of investment in national infrastructure were at the forefront of the political discourse.

The epitome of the British austerity policy viewpoint was embodied in New York banker Martin Van Buren, who was the influence behind the candidacy of Andrew Jackson and the campaign to kill the U.S. National Bank, which they called the “Monster Bank.” The 1830s presidencies of Jackson and then Van Buren, himself, not only stifled national infrastructure growth, but set the preconditions for what soon followed as a schism in the union and the Civil War.

On the other side was Henry Clay, America’s most under-appreciated hero. After the War of 1812, he recognized the need to recommission the National Bank, originally the invention of Washington’s Treasury Secretary Alexander Hamilton to marshal and leverage the new nation’s resources to shore up its potential for defense and internal development.

Clay recognized what was at stake between British austerity and American-style internal development, and led the crusade against the Van Buren faction in the 1820s in conjunction with John Quincy Adams. They represented the first generation after the founding fathers – Washington, Adams, Jefferson, Madison and Monroe – to run the country, and were in close consultation with those among the founders whose lives overlapped their emerging political careers.

They all, with nuanced differences, saw the need to preserve the new union by centrally-run national policies of directed investment in infrastructure, including canals, water conveyance systems and roads and later extending to railroads and telegraph lines.

The “American System” of economics derived from this, the work of Matthew Carey and his son, Henry. This theory played a major role in the economic growth initiatives of the Lincoln administration – including the “greenback” policy, the land grant college, railroad and homestead initiatives – in the 1860s.

Lincoln was a protege of Clay, who knew from the early 1830s onward that what the nation faced was its breaking apart at the hand of the British. He became known as the “Great Compromiser” for his efforts at defusing every potential cause celebre for one or another state to secede and set a process of disintegration in motion.

His efforts in the U.S. Senate almost single-handedly held off the British-backed inevitable for 30 years, until the U.S. had the resources and will to prosecute a war against southern secession.

The British were prevented by international considerations from intervening militarily on behalf of the South, which provided the slave-generated raw materials (cotton) for its textile industries in London.

Reformist Russian Czar Alexander II sent warships to the harbors in New York and San Francisco as a signal to the British not to intervene in the U.S. Civil War, or face wider military consequences.

The rallying cry for Lincoln’s prosecution of the Civil War was the “preservation of the Union,” the same cry central to the Federalist Papers calling for the ratification of the U.S. Constitution in the 1780s. It makes the word, “indivisible,” central to the U.S. Pledge of Allegiance.

“Indivisibility” is the critical notion that deterred British recolonization efforts. In fact, the American revolution was not completed until the resolution of the Civil War.

But since then, the same financial policies persist to weaken America, to yet still ensnare it in the lethal web of global financier interests.