Lincoln: The Capitalist?

Note: Austrian economists distinguish between two types of capitalists, those who make money because they provide products that consumers want, and those who make money because they have connections in government and enjoy subsidies while their competitors are crippled. Also, there is a great controversy raging right now as to whether free market people should use the term capitalism or capitalist. I chose to use Capitalist for purely literary reasons. It would be awkward to say, “Lincoln: The Free Marketeer” or something like that. So there’s no great significance about my choice of words.

So, I hope you are not still living under the myth that Lincoln was anti-slavery and that the Civil War was about freeing the slaves. But I’d like to focus on Lincoln’s economic rather than political views.

To understand Lincoln, we have to understand mercantilism or protectionism. This is what Lincoln, Henry Clay, and others referred to as the “American System.” What is protectionism?
Tom DiLorenzo, “Protectionism is an indirect subsidy to politically influential businesses that comes at the expense of consumers (who pay higher prices) and potential competitors.” He also writes, “The American System, in other words, was the framework for a giant political patronage system.”

For example, during Lincoln’s campaign in 1840, he made numerous speeches in favor of establishing of nationalized banking system. He also attacked Andrew Jackson (who ended the Second Bank of the United States) and defended the alleged constitutionality of a national bank.

Lincoln ignored the work of Adam Smith, Jean Baptiste Say and other free market economists so he could study the work of Henry Carey. Carey spent his life to exposing the faults of Smith and more broadly, the free market, “although,” as DiLorenzo says, “Carey once admitted that he had  never devoted three days to the study of political economy…”

In 1838, the Illinois legislature allocated $12 million dollars for “internal improvements” in the state. What are “internal improvements”? The 19th century equivalent of pork.

Lincoln assured his state that every river and stream would be widened, deepened and made navigable. Cities would spring up everywhere, and soon Illinois would become the greatest state in the Union.

How did that grand plan turn out?

After the money was spent, there were a few miles of embankments and a few abutments that stood for years, waiting for the bridges and ferries that never appeared.

Henry Clay, Abraham Lincoln and Daniel Webster carried on the legacy of Alexander Hamilton who proposed a powerful central government even at the founding of our country. To understand how this idea was carried through political parties, it was the Whig Party that first adopted the belief in big government and protectionist economic policies. When the Whig Party imploded, the mercantilist ideas didn’t die with it, but were resurrected in the Republican Party.

So, Lincoln wasn’t a supporter of the free market, and he created the legacy that the Republican Party would carry on, up to this day. We must understand the history of our country and this political party if we are to ever enjoy freedom again, otherwise we’ll be content to let another Lincoln rule over us, “because he’s a Republican.”

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