We have a new president-elect and a new approach to governing. But is there anything that is really new? Harry Truman is quoted as saying, “The only thing new in the world is the history you don’t know.” Students of history – especially high school students whose life experience has not provided them with much information on how the world works – can look for parallels in our nation’s past.
Recently, Donald Trump made some phone calls, promised some financial incentives, and kept a few hundred jobs from being shifted from Indiana to Mexico, where presumably they would have been sent had free market forces been allowed to operate without government interference. Savvy American businessmen jumped on Trump’s incentives and agreed to export only some of the jobs.
If this description of events sounds cynical, it is only because business decisions in a capitalist system require a certain detached cynicism informed by self-interest. Political decisions are no different. Trump needed to show that his negotiating skills in the business arena could translate to the political arena. Credibility is currency in politics, and public support is capital. There is nothing wrong with recognizing cold calculation for what it is.
But public policy is different from politics or business – although greatly affected by both. Public policy is the effort through governmental action to arrange resources so as to benefit the public. It can be accomplished through taxing or spending, regulation of commercial activities or even criminalization of certain activities.
Trump’s strategy was to use personal intervention and tax breaks. Was this a desirable approach? It is certainly a valid question for citizens in a republic to ask. It is an important question for students to learn how to ask. What insights can history offer?
History students will note that government intervention in the economy is one of the oldest political issues in American public life. Our break from Great Britain was prompted by trade restrictions and tax policies designed to control colonial activity and to funnel the wealth generated by American productivity back to the mother country. Our first constitution as an independent nation, the Articles of Confederation, gave the national government no authority over commerce. The result was chaos – trade wars between states, uncollectable debt, and profound economic uncertainty – not at all the kind of stable business environment in which entrepreneurs feel comfortable taking risks. Something had to be done to calm the chaos and encourage economic growth.
The Constitution gives Congress the authority to regulate interstate commerce. The question has always been – to what extent should the government intervene in the free market? In an economic system in which we trust the market to show us the way to efficiency and profitability, what is the proper balance of government action that will create a healthy environment for economic growth without dictating outcomes?
In the early 1800s, the policy issues were different, but the underlying questions were the same.
The federal government raised almost all of its revenue from tariffs – taxes on imported goods. There was no income tax. High tariffs gave a competitive advantage to domestic producers of goods, and provided resources for the federal government to finance needed improvements like roads for a country that still had an expanding western frontier.
Roads, canals, and later railroads all received financial support from different levels of government. These forms of infrastructure facilitated the movement of goods and labor, and so provided a benefit both to farmers on the frontier and manufacturers with goods to sell to a nationwide market. Government-sponsored transportation projects were known in the 1800s as internal improvements.
The financiers of all these activities benefitted from internal improvements, and from the high tariffs that paid for them. But the 1800s were a time of minimal if any regulation of the financial industry. Almost anyone could start a bank, and any bank could issue currency. In the end, this bank-backed paper money was only as good as the institutions that distributed it. When the banks went under, as they often did, their paper money became worthless IOUs. To stabilize the industry without taking it over through regulation, Congress chartered the Bank of the United States, and used it as a depository for all the revenue the federal government received from its tariffs. The Bank issued paper money that was as reliable as the U.S. government, and imposed rules on other banks with which it did business. The business community thus had some measure of stability in the financial market, and the confidence to make investments in new ventures.
Supporters of high tariffs, internal improvements, and a strong banking system called the program The American System. Its advocates included congressional heavyweights Henry Clay and Daniel Webster, former president John Quincy Adams, and future president Abraham Lincoln. But it had its detractors as well.
Western farmers and Eastern wage-earners disliked high tariffs that raised the cost not only of imported goods but, because they interfered with the natural competition of the marketplace, they also increased the price of all goods sold in the United States.
Western farmers liked internal improvements because roads made it easier to get goods to market. But easterners in established cities disliked the allocation of revenue for a resource they did not need. They saw the settlement of the west as a threat to their political influence. Complicating the picture further, most Americans took the constitutional grant of congressional authority over interstate commerce as a limitation. Congress had the power to build roads that crossed state lines, but not roads that lay entirely within one state.
Leaders of commerce liked the Bank of the United States, and the stability it provided, but small business owners and western farmers did not. The banks that would be most agreeable to give loans to struggling start-ups with few assets were the same ones driven out of business by the rules imposed by the Bank of the United States. They saw the existence of the Bank as a roadblock to their opportunity.
The election of 1832 brought to the fore the conflicts between supporters and detractors of the American System. An increase in the tariffs had led to the Nullification Crisis in South Carolina, which brought the first threat of Southern secession from the Union. Henry Clay tried a political maneuver to win the White House by making the re-charter of the Bank an election year issue.
In a U.S. history class, students will learn about these issues and circumstances in much greater detail. But in order to truly understand what was at stake for Americans back then, and to gain insight on how the questions of 1832 can provide suggestions of answers for 2017, students need to look at things from the inside.
History students can be assigned roles for a project in class. Some will take the role of western farmers, some will be eastern businessmen, some will be bankers, some will be small-town New Englanders. Many other categories of roles can be created. Each student will examine how each part of the American System would affect them directly. Each student will then pick the candidate in the 1832 election whose position best serves their interests, and explain the rationale for their choice.
The best way for students to gain insight on current political issues is to examine how these issues play out in different contexts, and evaluate for themselves the proper balance between market forces and government action. After all, the only thing new in the world is the history you don’t know.
 Miller, M. (1974). Plain Speaking. New York, NY: Berkley Pub., p. 273