The author is chief executive for an international specialist newsweekly, the Executive Intelligence Review, whose quarterly forecast for the US. Economy has been the most accurate in the history of economics.
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The first known writing on the subject of economics is the Judeo-Christian Book of Genesis. In Genesis, man is informed that he shall not live but by means of his daily labor. He is also instructed to be fruitful, to multiply the human population, to fill up the earth, and to exert command over all creatures and objects of nature. Excellent advice: No society which rejects those instructions would last for long.
Economic science is a more recent development. The first economic scientist, in the strict modern sense of science, was Gottfried Leibniz, who also was the first to produce a differential calculus,[1] and also more branches of modern science than most of today's university graduates could list from memory of their names.[2] The idea of developing an economic science did not begin with Leibniz; the case of Leonardo da Vinci’s work on the theory of design of machinery, and other examples show that the effort to ect of the necessary costs and wages of productive labor. His work continued with intensive study of the principles of heat-powered machinery; out of Leibniz’s work on this subject he developed the terms work and power, as those terms came to be used in physical science after him. In the same connection, Leibniz defined the meaning of the term technology, a term translated into French as polytechnique.
During the eighteenth century, the influence of Leibniz's economic science was strong in many parts of Europe, and spilled into circles around Benjamin Franklin in America. Leibniz developed a comprehensive program for developing the mines and industries of Russia, in his capacity as advisor to Czar Peter I; until the policy was reversed, during the last part of the eighteenth century, the industrial output of Russia exceeded that of Britain. Most of the leading scientists of Germany, into the early nineteenth century, were developed at technical schools and universities based on Leibniz’s program. In France, Leibniz’s science was adopted by circles associated with the Oratorian teaching order, and was the basis for the establishment of the Ecole Polytechnique in France, in 1794, under the leadership of Franklin’s former collaborator, Lazare Carnot. And so on.
Over the period from 1791 through about 1830, Leibniz’s economic science became identified world-wide as the American System of political economy. This name was coined by U.S. Treasury Secretary Alexander Hamilton, in 1791, within a U.S. policy document submitted to Congress entitled “A Report on the Subject of Manufactures.” After the end of the War of 1812, the circles around Lazare Carnot and the Marquis de Lafayette collaborated intimately with leading circles in the United States, especially through Channels of the U.S. military freemasonic association which the Marquis de Lafayette led in Europe, the Society of the Cincinnati. A close former associate of both Franklin’s and Hamilton’s, Philadelphia publisher Mathew Carey, led the revival of Hamilton’s economic policies in pulling the United States out of a deep economic depression at that time. Lafayette introduced a German economist, Friedrich List, to Carey; List later organized the German Customs Union (Zollverein) which made the nineteenth-century industrial development of Germany possible.
The leading U.S. economist of the mid-nineteenth century was Mathew Carey’s son, Henry C. Carey. Henry Clay and his Whig Party were committed to the Hamilton-Carey-List American System as U.S. economic policy, as was the Clay-Carey Whig, President Abraham Lincoln. Beginning approximately 1868, the American System was introduced as policy to Japan, partly through an economist closely associated with Henry C. Carey, E. Peshine Smith; Smith served as economic consultant to the Meiji Restoration in Japan during most of the 1870s, laying the basis on which Japan emerged as a modern industrial power.
About the same time Leibniz was developing economic science, the Jesuit order and its trainees began first steps toward developing a counter-teaching. Jesuit-trained William Petty, head of the London Royal Society and head of Britain’s banking affairs during the late seventeenth century, was the starting-point for this in Britain. Earlier English economic thinking had been cameralist since Henry VII, in the same direction as the economic policies of Jean-Baptiste Colbert during the late seventeenth century in France. In France, the Jesuits directly produced what became known as the Physiocratic doctrine, explicitly modeling their work on the economy of China; Dr. Quesnay is the prototype of this development. The Jesuit schools of political economy in Britain, France, and elsewhere focused their attack against colbertisme.
Formal British political economy began with Adam Smith’s Wealth of Nations. Smith’s work in this direction began as a follower of David Hume; during the late 1750s, Smith taught Hume’s philosophy at the University of Glasgow, where he wrote his 1759 Theory of the Moral Sentiments. In 1763, Smith was picked up by a direct descendant of William Petty, the Second Earl of Shelburne. In a famous carriage ride during that year,[3] Shelburne gave Smith instructions on a program for wrecking simultaneously the economy of France and those of the English colonies in North America; the highlights of that program were later featured in the Wealth of Nations. Smith picked up his economics traveling in France and Switzerland, chiefly from Dr. Quesnay and allied circles.
After Smith, the most prominent British political economist was Jeremy Bentham, also a leading protégé of Lord Shelburne. Bentham’s 1789 Introduction to The Principles of Morals and Legislation,
and his 1787 “In Defence of Usury,” are Bentham’s most relevant writings on political economy. During Bentham’s period, all influential study and teaching of political economy in Britain was concentrated at the British East India Company’s training center at Haileybury, with which Bentham himself was closely associated. This was the center which produced Thomas Malthus, David Ricardo, James Mill, and John Stuart Mill. Lord Shelburne was the leading political representative of the British East India Company’s interests at that time, who struck an agreement with George III, under which the Company took over the government of England, with help of the Company’s own bank, Baring Brothers; the long government of Shelburne’s puppet, Prime Minister William Pitt the Younger, was the result.[4]
So, following the 1815 Congress of Vienna, or during the years immediately following, there were only two significant, and directly opposing doctrines of political economy in the world: the American System versus the British East India Company’s teachings. In the United States, through the 1863, the American System was the policy of the Whigs, Whig Democrats, and Republicans, whereas the British system was the policy of the New England Abolitionists, the New York financial Establishment, the leaders of the Confederacy’s movement, and of Jackson, Van Buren, Polk, Pierce, Buchanan, and the Democratic Party king-maker of the 1850s and 1860s, New York’s August Belmont. With the adoption of the U.S. Specie Resumption Act of the middle to late 1870s, this Act bankrupted the United States’ government, caused a deep and prolonged economic depression, with massive social upheavals, and created the successive waves of financial panics, through the 1907 Panic, leading into the formation of the Federal Reserve System. With the establishment of the Federal Reserve System, put through by the election of President Woodrow Wilson, the United States was placed under the regimen of the British System. Meanwhile, through the ruining of the U.S. currency by the U.S. Specie Resumption Act, the balance of financial and economic power was tilted in the world to the point that the British gold standard took control of world trade, and London, in partnership with the Dutch, Swiss, and VeniceGenoa banking interests, established a virtual world dictatorship of the British system of political economy.
For these historical reasons, what is generally taught in universities throughout most of the world today is either the British system of political economy or some outgrowth of that system. This includes Marxian political economy. Although Karl Marx was a product of Giuseppe Mazzini’s Young Europe, and anti-capitalist by political profession, his dogma was derived entirely from the Physiocrats and the British East India Company teachings, which Marx defended rather fanatically against Friedrich List and Henry C. Carey. [5] Marxian political economy is properly treated as a legitimate branch of British political economy, whenever the British is contrasted with the American System. Today, although many universities teach Marx’s economics as part of the economics curriculum, virtually no study of the work of the early cameralists, of Leibniz, of Chaptal, Ferrier, Dupin, or of Hamilton, the Careys, and List is included in the curriculum; these adversaries of the British system are more or less totally blacked out, to the extent that many professional economists do not even know the names of many of the leading economists of the sixteenth, seventeenth, eighteenth, and nineteenth centuries, and nothing of the economic science of Leibniz.
Since the refutation of the British doctrines of political economy is accomplished in various published locations, including those of the Careys, List, and E. Peshine Smith, as well as the author's own, [6] we shall not repeat that here. Our purpose here is to introduce the ABCs of economic science positively, a task which permits us to disregard safely the British System and its outgrowths. The foregoing remarks serve to situate the matter to which we now turn our attention.