To Our Lady of Perpetual Help, whose picture hung in the homes
of tens of thousands of steelworkers in Western Pennsylvani...
The Pantheon

The Manufacturing Manifesto is a result of years of research into the Golden
periods of American business an...
Read the full Pantheon
Other Books by Quentin R. Skrabec Jr., Ph.D (The Literary Pantheon)

The Boys of Braddock ISBN 0-78...
The Manifesto of Greatness

•   Duty Free Trade is not a requirement of free market

•   The only example ...

         For thirty years I have been researching and writing about the golden years of
manufacturing in America...
that America’s great industrialists honored their fallen President William McKinley. It is
a pantheon of bronze busts of f...
captive by not allowing them the knowledge of working metals.
         Manufacturing remained the heart of ancient civiliz...
“prayer and work,” putting manufacturing on the level of prayer. Benedict saw self-
actualization in man creating with his...
management with group innovation. They were the first to define organizational mission
statements and set corporate goals....
need for productivity improvements led to advances in technology. Energy became
critical to expand growth, leading to the ...
1800s, such as H. J. Heinz and George Westinghouse, adopted many of Owen’s ideas.
These early American monastic ideas form...
model that includes manufacturing an economic success. Still, manufacturing can achieve
its greatest potential in a capita...
internal free trade versus the clogged internal customs and tolls on main land Europe.
Proponents of world free trade toda...
could move into foreign markets readily. Jefferson had grown up in a tobacco and cotton
culture that depended on European ...
as fundamental to national security. The Whig Party saw strong manufacturing as part of
national defense, and even Adam Sm...
including Henry Clay.
         Henry Clay was a Virginian lawyer who moved to Kentucky to launch a career. In
1810, he was...
attempted to destroy the American textile industry by dumping huge quantities of British
textiles on American docks. The B...
such as Daniel Webster.
        Congress in 1824 moved to debate even more extensive tariffs. Clay, the orator,
would emer...
Northern state congressmen whether Jacksonians, Jeffersonian, or Federalist supported
tariffs. The rural Scotch-Irish were...
capital, and the strength of that alliance would define the success of the new Whig party
as well as the Republican Party ...
Crystal Palace Exhibition, the British were shocked and humbled by the American
machine technology. The Connecticut Valley...
America’s Machine Age
         The period from 1840 to the Civil War was one of slow growth for the American
industry. Whi...
America had surged ahead of industrial Britain. The list is informative for today’s
         (1). A logic to exp...
        Education was a key factor in the industrial boom of the 1850 to 1920. The
variable that most stands out...
a small increase initially in prices, but prices would actually decrease long term as
industry invested in research and de...
path that took an Empire to a small world state. At best, American politicians do not
understand the role of manufacturing...
were really “golden” tariffs leading to America’s greatest industrial period ever. Prices
actually went down as industry s...
Spices, tobacco, and precious metals were the major oceanic trade. Britain’s small
manufacturing base had no competition. ...
The first of these cases was economic tariffs in cases like dumping. The second would be
the case of slow implementation o...
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
A Manufacturing Manfesto2
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A Manufacturing Manfesto2

  1. 1. To Our Lady of Perpetual Help, whose picture hung in the homes of tens of thousands of steelworkers in Western Pennsylvania in the 1900s Vox clamantis in deserto 1
  2. 2. The Pantheon The Manufacturing Manifesto is a result of years of research into the Golden periods of American business and capitalism. It has produced a number of iconic biographies. At the seat of Jupiter is President William McKinley, who developed a managed approach to tariffs. On his right side are business innovators such as H. J. Heinz, George Westinghouse, and Michael Owens. On the left there are William McGuffey, America’s educator, and Henry Clay Frick corporate organizer. The Pantheon of books includes tributes to the many developers of early industry (The Pig Iron Aristocracy, Boys of Braddock, and Iconic Lessons of Operations Management). The many industrial laborers are honored in book A Genealogy of Greatness. Over twenty of these “gods of business” are interviewed and questioned about today’s problems in the book-Interviews with the Titans of Business. 2
  3. 3. Read the full Pantheon Other Books by Quentin R. Skrabec Jr., Ph.D (The Literary Pantheon) The Boys of Braddock ISBN 0-7884-2516-1 George Westinghouse: Gentle Genius ISBN 978-0-87586-507-2 The Metallurgic Age ISBN 0-7864-2326-9 Michael Owens ISBN 978 1 58980 385 5 In Search of the Lost Grail of Middle Management ISBN 0-7618-2551-7 Glass in Northwest Ohio ISBN 13 978-0-7385-5111-1 Labor Productivity and Profits ISBN 0-7414-3890-9 St. Benedict’s Rule For Business Success ISBN 1-55753-254-0 Iconic Lessons in Operations Management ISBN 0-7414-2893-8 De Metallica Pertia ISBN 0-7414-3559-1 Saintly Lessons and Divine Concepts for Business ISBN 156072845-0 William McKinley: The Apostle of Protectionism ISBN 978-0-87586-577-5 A Genealogy of Greatness ISBN 978-1-934209-46-2 The Pig Iron Aristocracy ISBN 978-0-7884-4515-6 Interviews with the Titans of Business ISBN 0-7414-4536-0 H. J. Heinz: A Biography William Holmes McGuffey Henry Clay Frick Or Search “skrabec” on 3
  4. 4. The Manifesto of Greatness • Duty Free Trade is not a requirement of free market capitalism • The only example of free trade is between American states, where political and social systems, national interests, citizen sacrifice, currency value, and citizen representation are equal • Free trade economics has prevented the resurrection of the conservative alliance of American labor and management that led to the golden years of American manufacturing • Duty free trade reduces the value of American sacrifice to that of a commodity • Free trade is never free between different political and social systems • Ideals spread democracy, not trade • American labor has the additional price of blood paid on foreign fields, defense of liberty, and the beacon of democracy; "free" trade ignores that cost paid by all American families • Duty free trade is taxation without representation • Duty-free trade is international socialism; distribution of wealth based by governments, not economics; it is a same world, one government view • Free trade must include reciprocity, free floating currency, no political advantage, equality, citizen representation, government protection from predatory trade and economic warfare • Jobs for political gain must come with the full consent of the people; favorable trade status must be economic based 4
  5. 5. Prologue For thirty years I have been researching and writing about the golden years of manufacturing in America, creating a literary pantheon. I have written many industrial biographies and I’ am presently extending that literary Pantheon. This Pantheon includes H. J. Heinz, Henry Clay Frick, George Westinghouse, Charles Schwab, Andrew Carnegie, William McGuffey, Edward Libbey, Michael Owens, William McKinley, Charles Goodyear, and many others. I have researched the nature of the immigrants that filled the factories as well as the capitalists who managed them. I have studied the economics of the 19th century for clues in its creativeness and industrialism. There are themes and factors, which can be recaptured. It is in this history of great industrialists, capitalists, educators, scientists, and inventors that the seed of a future manufacturing renaissance. I grew up in industrial Pittsburgh and managed in the steel industries. I came from a family of steelworkers. No sight intrigued me more than the glowing orange night skies of Pittsburgh that spelled prosperity. I played on the endless slag plies from the Pittsburgh steel mills, and found a love of nature in Frick Park named after one of America’s most committed capitalists. I found a love of learning in the Carnegie libraries and the great Carnegie Museum. Winning a science award from Buhl Planetarium in eight grade, I met a scientific hero in Werner Von Braun. My best Christmas gift was and always will be my Gilbert chemistry set. I lived through the glories and the fall of American industry. I got my undergrad degree in engineering from the University of Michigan, where a learned the automotive industry. While in Michigan I found my favorite piece of American geography in the Henry Ford Museum and Greenfield Village. I have a passion for manufacturing, and ultimately got a PhD in manufacturing management. My whole life has been spent in the “rust belt” from Detroit to Cleveland to Akron/Canton to Pittsburgh. I saw the “final” glories of these cities. We have been told that free trade policies would be the engine of our economy only to see a factories close. A group of in vogue “Austrian school” or “Chicago” economists have told us for years that free trade is the pillar of capitalism, yet American capitalism saw it glory on the protectionist (managed trade) policies from 1850 to 1910. Sociologists of the same school have told us what is good for the world is good for America. My conservative brothers have left me standing alone on managed trade. The idea that America is exceptional has been debunked, and replaced by the idea that we are merely a state in a big world. Environmentalists tell us that America uses more than its share and our standard of living must be reduced. Manufacturers, like me, lament the passing of American capitalism, American exceptionalism, and domestic production. Our prayers and hopes remain in a return of American capitalism and manufacturing. American capitalism differs from capitalism in that it is specific. It puts a premium on freedom and the pursuit of happiness. That premium is reflected in fair wages and a higher standard of living. It does not ignore the world, but offers a beacon light for it. It rewards hard work and those that advance society and freedom. It allows for American exceptionalism. It was only in 2000 that I visited a shrine to that type of American capitalism. The shrine sits in the heart of the rust belt in Niles, Ohio. It is here 5
  6. 6. that America’s great industrialists honored their fallen President William McKinley. It is a pantheon of bronze busts of forgotten heroes that has inspired my life quest of building a literary pantheon of American capitalism. It is doubtful that any American school child today would recognize these rows of bronze. I believe that America will have a manufacturing renaissance, but the polices since the 1950s have taken on the opposite path. This manifesto offers a different path. It details a renaissance as much as a revolution in manufacturing. It goes belong merely opening old factories, and suggests a new type of manufacturing. A Manufacturing Manifesto We are still awaiting the Manufacturing Revolution. The Industrial Revolution was merely one of quantity and methodology. The Manufacturing Revolution will be when the mind of man, not the hand of man does the manufacturing. It will represent the confluence of information systems, computer technology, and robotics. It will be one of man’s greatest ages, far surpassing the “information age.” It will be an evolutionary change more than revolutionary. It will require having infrastructure in place. Still, the prize will go to the country that can make things. This confluence is actually under way in places like the old steel slag dumps of Pittsburgh, which I spent my youth. It is on these slag piles of the Industrial Revolution that Carnegie-Mellon tests its robots. This is more than symbolic, the manufacturing revolution will be born in the factories of the industrial revolution, and that process is under way. Whichever country wins this revolution will be the next super-power. It will be a social revolution as well, where robots replace cheap labor or highly productive labor replaces that of cheap hands. The struggles of labor and capitalists will change dramatically. The very role of a manager will change. It will not necessary eliminate jobs, but create a new class of jobs. It will be a world augured in Isaac Asimov’s robotic trilogy. It will bring new challenges with its many blessings, but it will require investment and innovation now. Future success is dependent on creating a vision today. Another often-overlooked part of any manufacturing thrust will be abundant and cheap energy. The ability to manufacture has been used to define man’s evolutionary progress. Man has been classified not by brain size as much as by the complexity of his manufactured tools. Even the Bible marks man’s advance in terms of manufacture, progressing from Tubalcain, the father of all manufacturers. Early primitive American civilizations are distinguished on the manufacturing prowess to move from the Clovis to Folsom point technology. The Folsom point representing the best of flint pressure-flaking manufacturing, which opened up new horizons in hunting larger game. The Assyrians manufacturing skills created one of the world’s first great civilizations, as did the Egyptians. These were societies built on manufacturing and building, as were their military empires. The Hittites built the first iron-based civilization and ruled most of the known of the west with their metal working superiority. The Philistines held Israel 6
  7. 7. captive by not allowing them the knowledge of working metals. Manufacturing remained the heart of ancient civilizations regardless of political or social organization. As early as 1700 B. C., the Chinese had developed a national industry of trades under the autocratic rule of the emperor. Official state workshops ranged from a few hundred employees to thousands of employees. The Song Dynasty in the seventeenth century B. C. established a national Ministry of Works. The craftsmen lived in government controlled collective workshops in a type of civil monastery. Craftsmen reached the highest level of skill under this specialized organization. Production was often inspected and rewarded personally by the emperor. Quality of manufacture was considered a reflection of the nation’s soul. This type of nationalistic pride in manufacture would augur the early Greeks, Egyptians, 19th century Americans, Nazi Germans, and Japanese of the late 20th century. It was a type of national self- actualization through manufacturing achievements, which a nation becomes the aggregate craftsman. It was the type of manufacturing pride seen in the World Fairs of the 19th and early 20th century. Manufacturing pride can replace that of war in civilizations. The world’s great culture has been a result of man’s ability to manufacture. Agriculture and manufacturing have been the basis of civilizations and great empires. Again it has been the advance of manufacture that allowed for significant advances in agricultural productivity. The Egyptians, Greeks, Romans, Hittites, Persians, Chinese, and other were all expert builders and manufacturers. The lesson of western nations is that the failure to develop and maintain manufacturing has resulted in the fall of great empires. Many may argue that today we are in the Information Age, and that will be the basis of future empires, civilizations, and cultures. The ability to process data, however, has always been limited by the ability to manufacture more miniaturized silicon chips. The chip is the limiting factor not the knowledge of computing. Most philosophers such as David Hume, Adam Smith, and Henry Kames, agree that the way people of a nation earn their living defines the country’s laws, government, and culture. It should be remembered that manufacturing, science, and industry drive information technology, not the other way around. Manufacturing is an economic policy, a social philosophy, and the touchstone of the level of civilization. Furthermore, there is an inherent love of man’s ability to rise above nature, and to create and manufacture things. We see it in our love of architecture and building, and in the earliest playing of our children with toy blocks. We learn by trying to re-order our world. Our greatest tribute to our God was in our cathedrals and churches. Manufacturing is the touch mark of the human soul. It is even reflected in our great literature such as Robinson Crusoe, which birthed centuries of novels down to this day. The Robinsonade was the technique of the master fiction writer Jules Verne, which hailed man’s ability to survive through primitive manufacture. We never lose interest in watching man create from nothing. Manufacturing is part of man’s psyche. An attribute that was exploited by the early monastic communities of Roman soldiers in Africa. Medieval Europe moved out of Feudalism and the Dark Ages on the back of manufacturing. No one understood the importance of manufacturing and the nature of man better than the monk St. Benedict, whose followers would build over 40,000 monasteries throughout the world. It is in the monastic business model that we can find many answers for globalization, since globalization has its roots in the monastic manufacturing centers of the Middle Ages. Benedict’s vision of human nature became 7
  8. 8. “prayer and work,” putting manufacturing on the level of prayer. Benedict saw self- actualization in man creating with his hands. Monastic manufacturing resulted in a revolution in management, science, and information technology. Their vertical integration offers powerful lessons in supply chain management. No similar historic model offers a successful blend of green and lean. They built green operations that included the world’s first fisheries and forest management. They found energy independence in the wind and water. While their monastic network was worldwide, stringing hundreds of monasteries together, they found favorable local production to limit transportation costs. It was an energy efficient model with many applications for today. Their great libraries and information collection was related to their need to advance manufacturing into new areas. Christian monastic communities and monks represent some of the world’s oldest factories and trade centers. The Monastic business model includes the age-old monasteries such as the Benedictines, American communal societies such as the Shakers, and German separatists such as the Harmonists. These manufacturing engines were based on similar rules for organizational success, and a belief that man finds self-actualization in his ability to produce. They pioneered industries such as brick, glass, food processing, and iron making. These monasteries revolutionized agricultural techniques, fisheries, and harvesting in Europe. Monasteries evolved rapidly to become self-sufficient and green, and then from that base spread capitalism to deal with their surpluses. For centuries, the monasteries of Europe fed, employed, and trained craftsmen. They employed and taught the commoners in agriculture. In the 15th and 16th century, they revived a broken world economy. They were not only economic engines, but also centers of innovation and knowledge. Beyond manufacturing techniques, they established organizational principles for economic success. Pioneering the science of Human Relations and personnel management. The monks were brilliant at information management, data base creation, and data mining. The medieval monasteries were the original “knowledge creating” organizations, inventing and innovating to advance productivity. Their inventions include the glass kiln, blast furnaces, assembly line techniques, improved bricks, fisheries, crop management, sheep shears, grinding wheels, water power, turbines, deep mining, and textile manufacture. Their organization offers the businessperson insights into building successful and productive organizations. Probably the most overlooked part of their manufacturing was their green approach. Green was a necessity for these monasteries. Resources were often in short supply, and their agricultural roots had honed them in recycling. Their sanitary systems were state of the art. They advanced intensive farming to maximize the use of land, and developed crop rotation practices. They learned to use all parts of the cattle, sheep, and horses. Reduction of waste, in a resource short world, was the core to their success. Like Toyota, in the 1980s, monasteries realized waste and high inventories clogged manufacturing systems. Energy was a limiting factor and had to be conserved, while searching out new sources. These monks were efficiency engineers that got the most out of their resources, developing wind, solar, and waterpower. They not only conserved resources, but also through technology and productivity drove manufactured products prices down. They balanced green and economic needs, allowing manufacturing to become an extension of man’s natural evolution. These monks were true organizational geniuses, combining scientific 8
  9. 9. management with group innovation. They were the first to define organizational mission statements and set corporate goals. They combined and utilized Roman law and military organization to build highly efficient factories. They combined Christian principles to motivate employees. At heart was the concept that manufacture had to be combined with prayer, and through this combination you can achieve self-actualization. They pioneered paternal capitalism that was founded on individual improvement. They build research and development centers that improved all phases of manufacture. They invented the very principles of scientific research. They built great libraries to store scientific and manufacturing data for improvement. Data mining was used to make information work for them in their production techniques. Their organizations are the world’s most successful and oldest. Their principles, techniques, and management approaches are timeless and the organizations they created. More recently, businesses and colleges have turned to these principles for competitive advantage. What is at the root of this organizational and economic success? The monastic approach honors work on a level with prayer, which centuries later would be honored in America as the “Protestant Work Ethic.” In fact, it was 20th century German sociologist Max Weber that attributed the success of American capitalism to its religious based work ethic. Weber praised manufacture, as did the monks, as Godly. The basis of these great monasteries was their organizational rules, such as the Rule of St. Benedict. These rules reinforced organizational infrastructure, established manufacturing, built a work ethic, and fostered creativity. The rules were based on Roman organizational principles, government, and military procedures. The earliest second century rule of Pachomius had been developed out of necessity to sustain a desert community. Pachomius was an ex- Roman soldier, who knew the importance of organization. The most famous rule was created by Benedict of Nursia (480-547), and spread by Gregory the Great (540-604). Both these men came from old Roman senatorial families, and experienced personally the fall of the Roman Empire. Their personal experience of the entropy and anarchy of the Roman fall inspired a desire for a lasting organizational order. These organizational rules offered the cybernetic guidance needed for stability and growth, and became incorporated in manufacturing management. It would be the Benedictine Rule that spread order, an inherent praise of manufacture, and economic growth. Like the desert fathers of Pachomius, early sixth century monasteries worked for basic needs. They applied and advanced agricultural science, but self-sufficiency took them into tool making. Monks became skilled blacksmiths to produce plows and carpenters to produce wagons and harnesses. They improved on Roman technology such as the padded horse collar to improve efficiency and productivity. The core of their manufacturing strategy was self-sufficiency or what we would call vertical and horizontal integration. Blacksmithing took them into mining and metallurgy in the seventh century. Blacksmiths produced nails and horseshoes. They expanded into sheep herding to produce woolen clothing, developing iron shears among the way. By the ninth century, success allowed them to more into construction, masonry, and brick making. Charlemagne (771-814) recognized their organizational genius, and their principles were applied to government and education. By the tenth century, these monasteries were the economic engines of Europe. Capitalism was born in the great surplus these monastic organizations produced. They moved from self-sufficiency to surplus supply and mass production. The 9
  10. 10. need for productivity improvements led to advances in technology. Energy became critical to expand growth, leading to the full application of waterpower and wind power to power grain mills, forges, winepresses, breweries, glass houses, and iron furnaces. By the eleventh century, the monasteries were the food processing factories of Europe. Clothes manufacture stimulated dye and loom technology. As trading and mass production increased, the monasteries moved into banking to support the economic boom. Increases in productivity allowed for more time to pursue intellectual arts, which also inspired the production of paper and ink. Bringing their pragmatic approach to science, chemistry emerged out of alchemy, physics out of magic, and astronomy out of astrology. The combination of encyclopedic knowledge and manual arts led to the foundation of crafts guilds. Monastic principles instilled quality manufacture into the system, and manufacturing pulls in science and technology advances just like the pull systems of inventory control. Today’s businessperson may wonder how the study of “religious” rules might apply to the business of business. First it would be a mistake to look at monastic rules as prayer books, they were not. They dealt with the practical problems of mission, organization, management, manufacturing, authority, and corrective action. The Rule of Benedict remains today, the Western World’s oldest living document. It is the only document to fully embrace the pragmatic civil laws, military principles, and organization of the Roman Empire. The rule understood that manufacturing and crafts were in the very soul of man. These rules were guides as to how to run a complex monastery, similar to ISO 9000 in today’s business world. While ISO 9000 makes for a simple analogy, the rules were much more pragmatic, more of a medieval managerial handbook. While standards or rules of today such as ISO 9000 are strategic, monastic rule translates strategy into organizational tactics. The rules did not make saints, but created efficient organizations. No modern standard can boast as Benedict’s Rule, organizations of 1500 years. Benedictine organizations that have outlasted empires, religions, government, natural disasters, and nature’s own entropic drive. Benedictine organizations today exist within every type of political and cultural environment. No simple organizational document has lasted and been used for 1500 years, except that of Benedict’s Rule. This longevity and cultural regeneration is the very heart of the Rule, and manufacturing with prayer was the soul of Rule. The success of monastic manufacturing and business is not limited to the Middle Ages, but finds a different renewal in the American 1800s. The early 1800s saw the influx of Protestant immigrants, mainly from Germany, committed to communal business communities. These were religious communities of families. The largest such as the Shakers, Mennonites, Harmonists, and Zoarites were well known for their quality products, and a belief that work is at the heart of society. Like their Middle Age predecessors, they lived under strict organizational and religious rules. Most were German Separatists, but many used the secular model of Robert Owen in the 1800s. Owen had studied the success of the Shakers and applied it in a non-religious setting. Owen had created a communal manufacturing center at New Lanark, Scotland in 1800. New Lanark applied a paternalistic type of capitalism. The community provided education, housing, and medical help. The model was highly productive, competitive with the best textile mills of the time. Robert Owen came to America and the Harmonists in Pennsylvania and Indiana readily accepted his ideas. The paternal capitalists of the late 10
  11. 11. 1800s, such as H. J. Heinz and George Westinghouse, adopted many of Owen’s ideas. These early American monastic ideas formed the basis of America’s golden manufacturing era. Countries that do not manufacture are destined to lesser roles. Rome’s final fall saw it completely dependent on other countries for food and products. Few countries have risen to the top tier as merchant nations, exceptions being Venetians and the Dutch, but even these embraced glassmaking and shipbuilding. In the early 1840s, Great Britain fully embraced free trade theories of Adam Smith. In 1851, a backward protectionist country shocked many of the industrial equipment exhibits of the world’s Great Exhibition held in Britain in 1851. Prince Albert was so shocked; he formed a national review to identify the factors in America’s manufacturing success. By the 1860s, British machine makers and tool and die makers were emigrating from Britain to America. By the 1870s, an even more protectionist America was leading in machine and railroad equipment manufacture. Britain remained proud and an apostle of free trade. In the 1890s, protectionist America eclipsed Britain’s iron, steel, machine, glass, ceramic, chemical, and most other industries. Germany’s Bismarck saw the decline of Britain, and moved to build German industry like America, using focused protectionist principles. With Britain’s decline in manufacturing came its decline as the world’s superpower. The point is not to favor protectionism over free trade, but to put manufacturing at the heart of national policy. Free trade is however, the capitalist’s Achilles heel. It offers new markets and draws in the capitalist, but then destroys its very home base. Manufacturing is the base of any economic philosophy. Bismarck of Germany in 1800s built up industry around his nationalistic socialism. In effect, Bismarck developed a national community for manufacturing. Bismarck moved from national free trade to the type of managed trade that had led to America’s success. Bismarck believed that working people were happier and better off, but he worried about the abuses of capitalism. Bismarck found much success in extending the paternalism of Adolf Krupp to a nation. The danger is that National Socialism can take workers to a form of economic slavery. Andrew Carnegie tied a welfare type of capitalism with paternalism. The ideal operating environment would appear to be some form of paternal capitalism such as that of George Westinghouse and H. J. Heinz. Manufacturing without the hope of someday being a boss or owner is but slavery. Smith believed this type of economic slavery must be avoided. There are social costs associated with bringing in imported cheaper goods, which Adam Smith overlooked. Manufacturing supplies the jobs needed for growth, and makes trade possible. Adam Smith knew nothing of currency fluctuations between nations as we have today. His experience was not manufacturing based but that of trade markets of Glasgow, Scotland. Even Marxist governments were aware that the real economic power resided in the heavy industries. Communist countries focused on the development of heavy industry because of its pull of dependent demand, its militaristic dimension, and its potential of full employment. Small German and American communal manufacturing communities proved highly successful in the 1800s, with the same type of “communist” control to promote manufacturing. Manufacturing can supply jobs and a standard of living, not possible in trading based societies. China has shown this very power of manufacturing in a mixed political and economic environment. Alexander Hamilton argued that capitalism and manufacturing were sisters, but China is example of manufacturing making any 11
  12. 12. model that includes manufacturing an economic success. Still, manufacturing can achieve its greatest potential in a capitalistic model; however, government must always be the auditor and regulator of capitalistic manufacturing. Capitalism inspires man to work, but it can lead to greed, and that is why regulation is part of the American capitalism. The basic concept of capitalism motivates society to produce more. Manufacturing certainly reached its highest success in the American industrial age, where capitalism, American exceptionalism, and democracy ruled. Even before the American Revolution, when it was feared American resistance who cut off trade with England, Alexander Hamilton stated: “Those hands, which may be deprived of business by the cessation of commerce, may be occupied in various kinds of manufactures and other internal improvements. If . . . manufactures should . . . take root among us, they will pave the way, still more, to the future grandeur and the glory of America.”1 Hamilton and these early patriots believed that it would be manufacturing that would lead to America’s grandeur. The rise of America over the great British Empire was manufacturing based. In many ways, Britain had abdicated its world leadership preferring to become the world’s merchant in the 1860s, when it moved to a free trade policy. Britain realized that to be a merchant, it needed manufacturing, and reset it goal to become a banking and financial center. The result was Britain passed as one of the world’s leading manufacturing countries. America seems determined to take the same path. America has now abdicated its leadership to Asia preferring to be the world’s marketplace. Free trade has become our mantra and Adam Smith (1723-1790) our hero. We can look to Europe as our future. Both American political parties are free traders, and since the 1930s Adam Smith has been accepted as economic dogma. Liberals and misguided conservatives have found common ground in free trade policies.2 Tariffs have been effectively blamed for the Great Depression. This logic has created a generation that sees free trade as a given. Yet, few of these followers had read the behemoth Wealth of Nations. Adam Smith was far from a purist as his followers are today. He made exceptions on free trade for industries necessary for a country’s defense or culture. He allowed the British to protect its shipbuilding and France to protect its wine. A “fair trader” today is considered uneducated and ignorant of enlightened economics. A “protectionist” is a dumb nativist lacking education and blindly patriotic. An economist that suggests any benefits of protectionism has the same lunch table as the university creationists. The protectionist and fair trader have even been expelled from their natural home in conservative politics. They are in ideological exile. Adam Smith’s 900 page manifesto was framed in the Britain of the 1700s. He argued for free trade based on a provincial model. The Union of Scotland and England in 1707 represented the largest free trade zone in Europe, which created an economic boom in Adam Smith’s Glasgow, Scotland. England had successfully moved out of its provincial tolls and tax system. The economic success of free trade was based on British 1 Pamphlet by Alexander Hamilton, “A Full Vindication of the Measures of the Congress,” December 15, 1774, Syrett and Cooke, p. 56 2 Free Trade is used to identify a government policy. The term is really duty-free in practice. Protectionism is really managed trade as successfully employed in the 1800s. Fair Trade is an acceptable and preferred term for protectionists, but out of vogue as a term. Politicians have beaten back the use of the term fair trade. 12
  13. 13. internal free trade versus the clogged internal customs and tolls on main land Europe. Proponents of world free trade today miss the point that the only true analogy to Smith’s view today would be trade between the states of America. Furthermore, does it make sense to put our faith in Adam Smith, who never saw or heard of the Industrial Revolution? Most if not all tariffs of Adam Smith’s lifetime were on agricultural products. A man from a world dominated by craftsmen and small merchants. A man who knew a world of only a handful of manufacturers, and a handful of developed countries. Had Adam Smith seen the economic power and employment of large industry, he would have deemed it as necessary for a nation. Adam Smith was right in seeing all trade as local and capitalism as national. Lacking a one world movement and system, there can be no other view. The real fact is that both free trade and full protectionism are ideas that need open review. Like politics, all trade is local. American Capitalism and a Vision of a Democratic Manufacturing Utopia The father of American manufacturing is none other than Federalist Alexander Hamilton. It is unfortunate that conservatives have embraced the political ideas of the Federalists, but have totally ignored the economic policies of Federalists. American exceptionalism and sacrifices demands a premium for our labor. Hamilton’s Report on Manufactures should be a guiding document. The following is an important excerpt: “But though it were true, that the immediate and certain effect of regulations controlling the competition of foreign with domestic fabrics was an increase of price, it is universally true, that the contrary is the ultimate effect with every successful manufacture. When a domestic manufacture has attained to perfection, and has engaged in the prosecution of it a competent attend the importation of foreign commodities, it can be afforded, and accordingly seldom or never fails to be sold cheaper, in process of time, than was the foreign article for which it is a substitute. The internal competition, which takes place, soon does away every thing like monopoly, and by degrees reduces the price of the article to the minimum of a reasonable profit on the capital employed. This accords with reason of the thing, and with experience. Whence it follows, that it is in the interest of a community, with a view to eventual and permanent economy, to encourage the growth of manufactures, in a national view, a temporary enhancement of price must always be well compensated by a permanent reduction of it.”3 Hamilton’s thesis would be proven in the1800s. Tariffs built up domestic manufacture and encouraged technology investment that actually lowered prices long run. In addition, domestic competition was strong enough to prevent monopolistic behavior. Hamilton saw capitalism as national in scope. Hamilton’s and Federalist views led directly to the “American System” of Henry Clay. American capitalism was directly related to the political foundation of Henry Clay’s “American System.” Clay’s American System was a protectionist approach to protect American industries via tariffs, and an aggressive approach to national improvements. The Federalists and the Jeffersonians would split on this to form the Whig Party. To fully grasp the roots of Clay’s economic philosophy, one must first understand Thomas Jefferson’s vision of the nation. Jefferson envisioned an agrarian society of farmers and merchants. In 1790, an estimated 90% of the American population was employed in agriculture. His vision demanded free trade to assure that American crops 3 Alexander Hamilton, Report on Manufactures, January 15, 1790 13
  14. 14. could move into foreign markets readily. Jefferson had grown up in a tobacco and cotton culture that depended on European purchases and their crops. While he believed in farm self-sufficiency, he feared the industrialization that he had seen in Europe. Hamilton on the other hand saw America’s freedom rooted in its ability to achieve economic freedom through manufacturing and banking. Hamilton, the soldier, was well aware of the role of technology and manufacturing in the ability of a nation to win wars, and believed that manufacturing was fundamental to America’s freedom. Hamilton as a young officer found the colonial army constrained by lack of iron cannon and rifles because of the lack of American manufacture. America’s moved to cheap dumped British iron after the Revolutionary War, only to be caught again short of manufactured arms for the War of 1812. Interestingly, President William McKinley would have the same experience in his regiment during the Civil War, and it would be President McKinley that was the golden era for pig iron protectionism. Hamilton, however, remained a opposed to across the board duties, like many of his federalist friends, believing that financial systems were the basis for industrialization. Still, at the very root of Hamiltonian Federalism was government’s role to promote industry. Actually, the Federalists were split on tariffs, some seeing no need for them because America lacked manufacturing, and others seeing tariffs as a source of federal revenue. Hamilton envisioned protectionist tariffs to help develop particular industries. Even today we allow a 50 cents a gallon tariff on Brazilian ethanol to promote the domestic development of this industry. Both Jefferson and Hamilton were constrained by the agricultural nature and lack of manufacturing in America at the time, as well as by earlier colonial British constraints on industries such as iron making. These British prohibitions such as the British Iron Act of 1750 had infuriated Scotch-Irish iron makers like James McKinley (William McKinley’s grandfather) in western Pennsylvania. In particular, the Scotch-Irish moved to the Ohio frontier to avoid tax laws. The Iron Act of 1750 allowed for all raw bars of smelted iron known as pig iron to be shipped to England duty-free, but outlawed the production of iron products, such as kettles, skillets, stoves, forged iron for guns, and steel for the blacksmith shop. These frontiersmen remembered and vowed never to be economically restrained again by any government. Many of these same Scotch-Irish would flee western Pennsylvania to Ohio, Kentucky, and Tennessee to avoid the federal tax on whiskey manufacture in 1794, and would become part of the political base of frontier politician Henry Clay. It would be a base that often disagreed with Clay wanting cheap imported goods, but believed in America. The rural nature of early America colors the approach of the Federalists papers. But make no mistake about it; if the Federalists were to see the erosion of the manufacturing base today they would be appalled. The Federalists believed firmly in the function of government to regulate commerce. The Federalists were supporters of tariffs to protect American agriculture, but foresaw a day when a different movement would be necessary to promote manufacturing.4 James Madison also argued the regulation of foreign commerce was a function of the federal government.5 They would quickly see through the idea of “free” trade, and realize the nature of the economic warfare we find ourselves. They would well remember their dependence on England for iron when the War of 1812 began. That lesson would help form the Whig party that saw manufacturing 4 Federalist Papers, James Madison No. 41 5 Federalist Papers, James Madison No. 42 14
  15. 15. as fundamental to national security. The Whig Party saw strong manufacturing as part of national defense, and even Adam Smith saw national defense trumping free trade concepts. The anti-government Scotch-Irish, who a rebelled against federal taxes, believed that the federal government should promote manufacturing as a national defense issue. These freedom-loving patriots realized that economic freedom was necessary for political freedom. They have suffered centuries both in Europe and America from British control of their manufacturing. Similarly, the American declaration of economic freedom preceded the Declaration of Independence by two years. The Whiskey Rebellion of 1794 more than anything caused a political divide in the Scotch-Irish along economic lines. The wealthy Scotch-Irish industrialists and the Presbyterian Church leaders had supported the Federalist application of the law. Their poorer cousins in the Pennsylvanian hills opposed a strong central government and taxes on their whiskey. The whiskey tax forced these frontier Scotch-Irish into Jefferson’s “Republican” Party, and the 1820s, “the clapboard junto” of Pittsburgh (those who lived in clapboard houses) put together a strong opposition to the Federalist manufacturers. The Jacksonain Democratic Party (known as the clapboard democracy) controlled the area, but Pittsburgh’s congressmen were protectionists, who sided with Henry Clay in Congress. Clay’s Federalism and strong support of manufacturing turned western Pennsylvania, eastern and southern Ohio, Northern Kentucky, and Maryland into a stronghold for “Clay Federalists.” Clay’s system built a manufacturing base in the Midwestern and New England states. Pennsylvanian Henry Baldwin supported Henry Clay’s American System with an iron fist. Pennsylvania Senator Judge Wilkins became known as the “iron knight” in his support of iron tariffs. The manufacturers ultimately wrestled the vote away from the democrats as Andrew Jackson’s policies turned anti- manufacturing. These manufacturers often held dinners for national protectionists, such as Mathew Carey and Henry Clay. Near-by manufacturing cities such as Steubenville, Ohio and Wheeling, Virginia developed a manufacturing network through Clay and Carey. Matthew Carey would become a proponent of managed trade and an advisor to a young Abraham Lincoln. Clay and Carey (and Hamilton) would be heroes to future Presidents Lincoln and McKinley. If President William McKinley’s economic roots can be traced to Henry Clay then Clay’s roots can be traced to Federalist and first Secretary of the Treasury, Alexander Hamilton. And like McKinley, Hamilton learned his economics as an army supply officer. Hamilton, while on Washington’s staff, had struggled to get their soldiers clothing because of America’s dependence on British goods. He also learned the hard lesson of inflated dollars as merchants rejected government notes. His experiences would be the foundation for Hamilton’s classic in 1791, the Report on Manufactures, which “prophesied much of post-Civil War America.”6 It would augur both Henry Clay and McKinley’s approach to government as it related to national industrial planning, and the importance of protecting such industries as pig iron. Hamilton was the first to suggest a scientific approach to tariffs versus across the board revenue tariffs. First defense and national industries were to be protected, followed by targeted infant industries. He argued for lower tariffs on raw materials to help industry. This is why you must manage trade for the good of the country. These early founders invested federal money in the development of canals and roads to expand manufacturing. Hamilton would win many disciples 6 Ron Chernow, Alexander Hamilton, (New York: Penguin Books, 2005), 374 15
  16. 16. including Henry Clay. Henry Clay was a Virginian lawyer who moved to Kentucky to launch a career. In 1810, he was elected to the United States Congress. Clay was a nationalist, patriot, republican, Founder of the Whig party, and a Federalist. In his junior years in the Senate, he advocated a strong national bank and a national road system. Often Clay favored the good of the nation over his own constituents in Kentucky. His oratory, compromising skills, and patriotism brought him quickly to the position of Speaker of the House. Clay not only fashioned the position of House Speaker, but he formed the powerful standing committees such as the Ways and Means Committee, which would be the pedestal to launch the career of William McKinley years later. Clay also created a Committee on Manufactures to help stimulate American manufacturing as Alexander Hamilton had suggested years earlier. Clay appointed members for these powerful committees, and thus centralized legislative power under the position of Speaker. Clay used the power to create a national infrastructure for an industrial America. Clay’s vision of an industrial empire took him from Jeffersonian Republicanism to Federalism and then to conservatism and republicanism. Some Federalists, however, were New England based free traders. Clay’s arguments and the rise of American manufacturing won over many Federalists who believed in the destiny of the American republic as a world power. Clay had grown up in the economic debates between the Jeffersonians and the Federalists. Amazingly, the early Jeffersonians promoted duty-free trade were possible to assure tobacco and cotton plantations could trade with England. British dumping of defense related materials such as iron, saltpeter (for gunpowder), foundry products, hemp, and an array of manufactured goods. America had become dependent on Britain, and might have faced a major defeat in the War of 1812, when providence intervened a in the years preceding the war. Political disagreements with England required some strong action. Jefferson imposed an embargo (the ultimate tariff) on some British goods and later there was a British embargo. The lack of iron, in particular, caused the start-up of America’s iron furnaces that had been dormant for decades. Saltpeter and gunpowder mills were re-started. American manufacturing was created as foundries and forges opened again. A mini economic boom resulted. The result was an industry, while still weak, could supply the American fight. America would win the war, but Brittan would later turn to economic warfare to break the young American nation. The struggle and the delineation of these competing visions of agriculture and industry would evolve as the nation evolved. By the dawn of the 1800s, the nation had a developing manufacturing sector in New England. America was learning to produce guns, gunpowder, farming implements, and textiles. Even Jefferson marveled at the industrial growth and its contribution to the nation. Yankees had smuggled in new automated looms from England and American textile manufacture moved to a new level. The acceptance of automation had given American textile manufacturers an advantage over the labor-intensive British industry. Its own anti-automation proponents known as Luddites had held England back. Furthermore, the War of 1812 had caused a surge in American textile production as part of the need for economic freedom, as well as, a boom in iron manufacture in the middle states. The McKinley family would ultimately purchase one of those infant iron furnaces of 1812 in Niles, Ohio in the 1850s. The War of 1812 and the economic warfare that followed extended into the 1820s, and proved Hamilton’s view of the need for economic independence. The British 16
  17. 17. attempted to destroy the American textile industry by dumping huge quantities of British textiles on American docks. The British similarly dumped cheap pig iron to suppress the American pig iron industry. Henry Brougham in Parliament declared, “It was well worth while to incur a loss upon the first exportation, in order, by the glut, to stifle in the cradle, those rising manufactures in the United States.” The British were more successful in this type of war bankrupting hundreds of American manufacturers and closing charcoal iron furnaces throughout the country. Lord Brougham in Parliament of 1816 summarized the strategy: “ It is well worth while to incur a loss upon first exportation, in order by the glut to stifle in their cradle those rising manufacturers in the United States which the war has forced into existence contrary to the natural course of things.” The northeast put political pressure on Congress to save its textile-manufacturing base, and the Pennsylvanian, Virginian, and Ohio pig iron producers and users joined the political pressure. That pressure would build and lead to the formation of the “American System” of Henry Clay. Congress hesitated to act, torn by competing regional goals. The southern cotton growers opposed any tariffs on British goods, believing Britain would retaliate with tariffs on cotton and tobacco. The major portion of the South’s cotton and tobacco went to Great Britain for processing. Furthermore, even the northeast representatives were torn between the textile manufacturers and the merchants, who favored free trade. The struggle in congress in 1816 would produce a new champion in Henry Clay, Speaker of the House. The congress appeared hopelessly deadlocked on the issue. Clay built an alliance for the tariffs based on nationalism versus regional politics. The debate took place in a temporary brick building (at the site of today’s Supreme Court), known as the “Old Brick capitol. The city of Washington lay in ruins after the sacking by the British, and offered a stark reminder to Congress of the need for a strong defense. Clay found allies in southerners John Calhoun and President Madison, who would help tip the balance. Clay brought in the middle state representatives who had suffered from British dumping of iron products to suppress American industry. He astutely played on rising nationalism and anti-British sentiments to bring in enough southern votes to pass the tariff. The embryonic Pig Iron Aristocracy rallied behind Henry Clay. The result was America’s first tariff- the Tariff of 1816, which established duties of 25% on cotton and wool products and 30% on iron products. The Tariff of 1816 would help the financial security of the Pennsylvanian ironworker families, such as that of the future William McKinley. Clay had by the Tariff of 1816, not only broken from Jefferson’s thinking, but that of his own Federalist leanings of free trade. The Federalists were split because tariffs appeared to be a heresy. Many Federalists were free-trader Yankees, even thro they favored helping national industries. The split would eventually lead to the Whig Party. Clay forged a new path for American capitalism that was nationalistic and economic. It was a Magna Charta of American economic freedom. Clay realized that economic war was a reality in the world of the 1800s. Clay’s vision was similar to Jefferson’s, differing only in that industry was substituted for agriculture. Like Eisenhower in the 1950s, Clay envisioned a system of national transportation to support industrial growth. Clay molded a powerful new philosophy, which blended Jeffersonian independence with economic manifest destiny. Clay went further to justify his American System by blending in American moral superiority with nationalistic capitalism. The momentum had turned in Clay’s favor by 1824. The struggle, however, would not end as skillful opponents arose 17
  18. 18. such as Daniel Webster. Congress in 1824 moved to debate even more extensive tariffs. Clay, the orator, would emerge as leader of this industrial movement. He thundered in Congress with an oratory reminiscent of Patrick Henry a generation earlier: Is there no remedy within the reach of the government? Are we doomed to behold our industry languish and decay yet more and more? But there is a remedy, and the remedy consists in modifying our foreign policy, and adopting a genuine American System. We must naturalize the arts in our country, and we must naturalize them by the only means, which the wisdom of nations has yet discovered to be effectual- by adequate protection against the otherwise overwhelming influence of foreigners. This can only be accomplished by the establishment of a tariff.7 Clay struggled against his oratorical match, Daniel Webster, and the entire southern wing of the House of Representatives. Clay had strong support of the Pig Iron Aristocracy’s Henry Baldwin, the “iron knight,” from Pittsburgh. Daniel Webster of New Hampshire opposed the tariff because it might hurt the New England shipping industry. Clay persisted, and on April 16, 1824, the Tariff of 1824 passed 107 to 102. Since cotton and tobacco caused resistance in South, a break down of the slave versus non-slave states is more telling. Non-Slave States voted for the tariff 89; against 32. Slave states: for tariff 18; against tariff 70. Ohio supported the tariff not only in the Mahoning Valley but also in more western counties where an infant wool industry was emerging. Pennsylvania and Ohio’s Pig Iron Aristocrats added additional support. President Monroe signed it in May. The Tariff of 1824 extended the general level of protection to 35% ad valorem (the percentage of value as represented by the invoice). The Tariff included cotton, wool, and iron products also extended it to the hemp producers of Clay’s Kentucky. Clay’s politics started a change in what would become the future core of the Whig Party (known as Iron Whigs) and President McKinley's base- the Mahoning Valley, Niles, Youngstown, Canton, Pittsburgh, western Virginia, and Ohio’s Western Reserve. These old frontier areas had a large Scotch-Irish population who had opposed with guns, the whiskey taxes of the Federalists. They tended to be frontier Jeffersonian, but the protection on wool and iron by Clay started to build base for a new type of Federalist. Industrialization was changing the area as well, and most middle-state Federalists were moving toward protectionism versus their initial free trade policy. National roads and canals favored the growth of these areas, which was fundamental to Federalist theory. This Ohio old frontier was also similar to Clay’s Kentucky congressional district. The victory of the 1824 tariff bill split the nation as well and cost Henry Clay the presidency in 1824, but the defeat led to the formation of the pro-industry Whig Party. Clay would further develop his American System as Secretary of State for the new president John Q. Adams, but political opposition in the south was growing too. The opposition was gathering behind Andrew Jackson and the Democrats. While the Pig Iron Aristocracy supported Adams and Clay, Jackson’s popularity triumphed over local interests on the Allegheny plateau of Pennsylvania and Ohio. In fairness at the time 7 Robert Remini, Henry Clay: Statesman of the Union, (New York: W. W. Norton & Co., 1991), 230 18
  19. 19. Northern state congressmen whether Jacksonians, Jeffersonian, or Federalist supported tariffs. The rural Scotch-Irish were fierce Jacksonians as a results of Federalists efforts to tax whiskey, but the Scotch-Irish were pro-tariff. The Jacksonians were positioning for a presidential run, and found success early by taking control of the Twentieth Congress in 1827. The Jacksonians of the Democratic Party had strength in the west and south. The result of the popularity of tariffs in the east and middle states and political division led to the “Tariff of Abominations” as tariffs became a party and political issue. The Democrats actually allowed an unbalanced tariff to be passed by the National Republicans, turning the measure into future votes for the Democrats and ultimately lower tariffs. The bill extended the tariff on certain products from Ohio, Pennsylvania, Kentucky, and New York by increasing the duties on iron, spirits, hemp, and molasses. The wool products of New England, which Clay had initially used to justify the earlier tariffs, were basically ignored with a modest increase. Clay could only watch as the bill passed, assuring future Jackson votes in the powerful northeast. President Adams signed it because its usefulness outweighed future political problems. The Tariff of Abominations would in retrospect give Jackson and the free trading Democrats the White House, setback the nationalistic tariff policy of Clay, and move the nation towards civil war. The Jacksonain movement re-strengthened the Democrats on the Ohio frontier because of the personal popularity of Andrew Jackson, but ultimately Jackson proved a weak supporter of American manufacturers, which helped bring some Democrats into the Whig Party of Henry Clay. Jackson’s weak trade policies had started to hurt his popularity. Clay’s industrial vision was growing in 1828, but it lacked a national political base such as Jefferson’s. The success of the American System was still a regional phenomenon, allowing Democratic Andrew Jackson to take the White House in 1828. The Jacksonians efforts to reduce tariffs were somewhat muted in Congress by Clay and his followers. Jackson’s popularity won him re-election over a challenge by Henry Clay. Jackson would be Clay’s nemesis throughout their careers. Clay might well have won the presidency except for the split the Scotch-Irish Jackson caused among the Scotch-Irish. The Tariff of Abominations in 1828 had caused the legislature of South Carolina to pass a Nullification Act. For the sake of the union, Henry Clay compromised with the Jacksonians to pass a slightly reduced tariff. The Jackson administration was a constant problem for protectionists such as Clay, yet the industrialism of the north and east represented a growing political base. The Jacksonians would bring down the National Bank system, but tariffs remained with only minor reductions. The national banking system known as the First Bank of the United States (1791-1811) and the Second Bank of the United States (1816-1836). The national bank had been a key factor in the industrialization of America. The bank had been a Hamiltonian approach to assure money and credit were available to industry. Clay held the tariffs, but lost the battle for the national bank. Still, the national bank served a very important role in jump-starting American industry. The bank further showed that credit and money help was part of the government’s role. Some might argue that a national bank might have a role today. The counter-revolution of Clay and Webster resulted in an alliance between labor and capital under protectionism, which would be embodied in the formation of the Whig party and later the Republican Party. Clay believed the laborer to be part of American capitalism. This fundamental premise of an alliance of labor and 19
  20. 20. capital, and the strength of that alliance would define the success of the new Whig party as well as the Republican Party for the next 60 years. To counter the folk hero of Andrew Jackson, the Whigs elected their own Scotch-Irish hero, Davy Crockett of Tennessee to Congress. The Whigs would also attract future leaders such as Abe Lincoln, James Garfield, and Scotch-Irish William McKinley in the 1850s. This idea of an alliance between labor and capital did not assume two distinct classes but realized that America offered upward mobility not known in Europe. The original republican view of Abe Lincoln: “the interests of labor and capital were identical, because equality of opportunity in American society generated a social mobility which assured that today’s laborer would be tomorrow’s capitalist.”8 Upward mobility is the fuel of the capitalistic engine, without it, we have a feudal system, socialism, and /or aristocracy established by birth. To focus solely on the political ramifications of Clay’s American System, however, would also be to overlook the realization of Clay’s (and ultimately McKinley’s) dream of an Industrial Eden. And it truly was a system where tariffs were focused to help infant industries, and the tariffs revenues were used to build roads and canals. In the northeast, textile mills were growing; in Pennsylvania and Ohio iron furnaces were being built; and the American nation was moving from an underdeveloped country to an industrialized one in the first decade of the 1800s. The American system of industrialization was being held by industrial critics such as Charles Dickens as utopian. The manufacturing methods and automation of American industry was rapidly becoming the standard of efficiency for the world. Pioneering American industrialists such as Francis Cabot Lowell started to develop uniquely American textile factories. While still physically demanding, the factories were clean and offered schooling and training. Even old Jeffersonians were proud of the rise of American manufacturing supremacy. Part of the superiority could be found in the American “factory system.” The tariffs and government contracts produced volume levels never previously encountered, allowing a shift in many industries from a crafts system to the factory system. In 1812, Thomas Jefferson had contracted Eli Whitney to produce arms with interchangeable parts; it was the first government contract. The Springfield Armory under Colonel Roswell Lee advanced the factory system in the 1820s with the application of labor specialization and automation. The real progress was not so much in the ability to produce standardized and large quantities of weapons, but the growth of the new industry of machine making to support such industries. The Tariff of 1824 had built a foundation for American investment by stabilizing the market for American industrial goods. In the 1830s, America was becoming a nation of mechanics as exemplified by the appearance of mechanics’ institutes, schools, magazines, and newspapers. The Franklin Institute of Philadelphia was founded in 1824 to promote the advance of mechanics and science. The protective tariffs caused an industrial boom in New England’s textile industry. The textile manufacturers were well protected and the textile industry grew, and it birthed the machine industry to support the automation of the textile indsutry. Utilizing the waterpower of the Connecticut River, the machinery industry grew to support textile manufacture, arms manufacture, and farming equipment. The growth caused England’s greatest machinists to immigrate to New England. They came with British machines, which the New England Yankees reverse engineered into better machines. At the 1851 8 Eric Foner, Free Soil, Free Labor, Free Men, (Oxford: Oxford University Press, 1995), p. 20 20
  21. 21. Crystal Palace Exhibition, the British were shocked and humbled by the American machine technology. The Connecticut Valley would become a bastion of tariff support for Clay and then McKinley. The machine industry opposed the Jacksonians and would ultimately find a home in the Whig Party and Republican Party. The textile industry and ancillary industries had demonstrated that tariffs could create focused growth. The tariff created volume and stabilization in the textile industry ushered in an era of invention and technology after 1812. An 1837 survey by the state legislature of Pennsylvania of the textile industry reported the amazing advance: Ten years ago, it was generally supposed, that few improvements in machinery could take place. The machinery of that day is now useless; and another period of ten years may make the same difference; manufacturers are subject, in this particular, to a heavy tax. He who advances with the times, must incur the cost of continual improvement; he who lags behind, must lose in the cost of his production. The success of the American textile industry was a manufacturing miracle attracting the world’s manufacturers, writers, and politicians.9 Henry Clay toured the textile industry several times in the 1830s to furthermore promote his “American System.” One of the mills was named after Henry Clay to honor his protective tariffs. Even Clay’s enemy Andrew Jackson honored the textile industry with a personal tour. Clay was now able to address the hero of free trade and the Democrats’ philosophical heart-Adam Smith. Adam Smith’s 1776 book Wealth of Nations had become the banner for free trade. Henry Clay now argued that free trade could reduce prices in the short run but at the expense of capital investment, invention, and automation. Furthermore, Clay saw capitalism as a national philosophy, not an attribute of free trade. Still, the farming majority saw it much differently, fearing international reprisals and higher prices for domestic goods. Henry Clay would bring philosophical support for protectionism. Henry Clay, the lawyer, had actually read Smith’s long and boring narrative. Clay understood the weakness of Scottish Smith’s ideal of free trade. Smith had allowed for a number of exceptions in his free trade proposals such as defense industries. By doing so, Smith allowed exceptions for some of Britain’s strongest industries. Clay saw industry itself as basic to America’s defense of its freedom. Clay believed in capitalism at the national level, but felt political factors restricted the type of international capitalism suggested by Adam Smith. Furthermore, Clay was a true conservative, seeing America as having supremacy and a God directed destiny. The survival of democracy depended on the productivity of its laborers. To Clay protectionism was critical to freedom and democracy itself. He further argued that Smith based his thesis on the trade-based economy of Scotland, where trade was their industry. Clay’s friend and amateur economist John Q. Adams agreed completely. Both of these men would champion the “American System” as a political alternative. Clay’s philosophical base for protectionism helped win over some old Federalists as well as many Jeffersonians. 9 Anthony Wallace, Rockdale, (Lincoln: University of Nebraska Press, 1972), 186 21
  22. 22. America’s Machine Age The period from 1840 to the Civil War was one of slow growth for the American industry. Whig political pressure kept the tariffs favorable, and abundant resources allowed growth. The iron industry, in particular, grew and improved. The Connecticut Valley saw an emergence in the machine tool industry. The Connecticut Valley had a long history of manufacturing. Like all immigrants, the Puritans moved west to find prosperity. One of the earliest of these movements was to the Connecticut River Valley in 1636. The Connecticut River starts in the mountains of New Hampshire and cuts through Vermont, Massachusetts, and Connecticut into Long Island Sound. In the early 1600s some Pilgrims and Dutch had a fur trading operation, but not farming. It was an extremely fertile valley, which drew immigrants from New York and Pennsylvania. More importantly, the Connecticut River was a huge energy source. The Connecticut River’s fall over its length is estimated to have had an energy potential greater than that of Niagara Falls. The river could support power for gristmills and iron furnaces, making farming more economically successful. The power of the Connecticut River caused a mixing of nationalities, and the emergence of American manufacturing. The Valley would birth manufacturers, such as Eli Whitney, Samuel Colt, Francis Lowell, Cyrus Buckland, Thomas Blanchard, Alexander Holly, and George Westinghouse. The ethnic mixing retained the Protestant work ethic and economic drive of the Puritans. The Connecticut Valley would launch the Machine Age in America. The Puritans in Connecticut expanded their crafts and skills. Twenty-six towns recorded silversmiths before 1776. Silver plate was one means of storing wealth in a pragmatic manner, so favored by the Puritans. The demand for silver product created world-class silver smiths in New England such as Paul Revere of Boston. The Puritans of Connecticut really started the metals trades of America. Even with limited efforts to produce pig iron, the Connecticut colonists developed a secondary metals industry unequaled in the other colonies. Connecticut developed eight rolling mills (two more than the total of all the other colonies), which manufactured hoops for barrels, nails, and sheet for tinplate. The demand for iron bar created a search for bog iron, which was found in 1734 in Salisbury Township near the New York border. Initially, these industrious colonists used crude Catalan furnaces and small forges. By 1740, charcoal furnaces were being built; some of these became “iron plantations”, making an array of products. Connecticut ironsmith advanced the technique of steel making for small tools, knives, and banquets. The area became known as the “Arsenal of the Revolution.” In 1762, Ethan Allen, future Revolutionary War hero, built his Lakeville Furnace. He added some of the large forges in America to make cannons and anchors. Without the Salisbury iron works, it is doubtful that the colonists could have armed properly for the British. The great tradition of the Connecticut Valley was again awoke under Whig polices in the 1840s and 1850s. Cheap energy, Whig tariffs, and regional capitalism again birthed new industries. The machine tool industry took root. Lathes were refined and applied to new applications. These “valley guys” invested in research and development. They made precision machining a “Holy Grail.” Their fame grew within the field as machinists emigrated from England to the valley. They stole technology when necessary and improved on it. At the famous Great Exhibition of 1851 in London, America shocked the world with its machines and tools. America was now a manufacturing power on equal with England. Prince Albert was so shocked he formed a committee to detail how 22
  23. 23. America had surged ahead of industrial Britain. The list is informative for today’s managers. (1). A logic to exploit abundance (2). High literacy rate (3). Few barriers to organizing business (4). Lack of resistance of the American worker to innovation (5). A highly competitive nature Interestingly, today these can be considered our weaknesses. Lincoln exploited these strengths during the Civil War, and Lincoln forced domestic production were possible. He stirred a competitive spirit in Union manufacturers to build bigger and better arms. Great pride would be found in the stories of casting the world’s largest cannons at Pittsburgh’s foundries. The American spirit impressed the imagination of French science fiction writer Jules Verne, whose stories hailed American ingenuity. It was competitive spirit that wanted to produce the biggest of anything. Americans took pride in producing cannon bigger than those of those of the Krupp in Germany. To make things bigger required the development of technology. The success led to the Republican application of tariffs throughout the end of the 1800s. American competition led to a love to conquer not in war but in the technology of the World Fairs. To Europe it seemed boastful and wasteful. By the Philadelphia Exposition of 1876, America was the world’s technological leader. American heroes were capitalists, inventors, manufacturers, and engineers. Machines were the art of America, and engineers were its artists. America was fulfilling the predictions of technological greatness predicted by Jules Verne. America led the world in engineers, while today we rate at the bottom of industrialized nations. Another part of America’s success was the competitive and fundamental approach of American education. Much has been written about William McGuffey and capitalism because of Henry Ford’s love affair with McGuffey Readers. It must not be lost in any discussion that McGuffey was an educator, not a philosopher. McGuffey Readers hailed American exceptionalism. Maybe more revealing was the description of the education of Henry Clay Frick, the father of American capitalism. Frick biographer George Harvey described it as: “The curriculum comprised the familiar three R’s, slightly amplified, the books allotted being McGuffey’s Reader, Pinneo’s grammar, Mitchell’s geography and Ray’s arithmetic.” Other McGuffey capitalist alumni include John Rockefeller, Andrew Carnegie, Charles Schwab, Charles Goodyear, Thomas Edison, Andrew Mellon, George Westinghouse, H. J. Heinz, and many others. McGuffey did not mold roots of American society but often merely spoke for them. More so than Max Weber’s “Protestant Work Ethic,” McGuffey’s rationalization for class structure and elevation of industry to a virtue formed the basis of American capitalism. McGuffey took on Marxism before Marx had defined it as a political system. The fundamental support of capitalism came from McGuffey’s unwavering support for individual property rights. Likewise, his basic support of capitalistic concepts came before Capitalism was defined as an economic approach. He saw the existence of poverty and wealth as both in God’s providence. Neither was intrinsically evil. McGuffey personally feared Andrew Jackson in his day as promoting redistribution of wealth. Poverty was to be addressed by the wealthy, not solved by political schemes to redistribute wealth. McGuffey preached competition when socialism preached political 23
  24. 24. equality. Education was a key factor in the industrial boom of the 1850 to 1920. The variable that most stands out is the high national literacy rate, not our institutions of higher learning. Our methodology was routine and poor, but our belief in education was key. Americans from the beginning had prized good education. As the Scotch-Irish fled British oppression to America in the 1700s, they brought a love and culture of elementary and high level education. In Scotland the literacy rate was an amazing 80 to 85%. The Scotch-Irish Presbyterian school system came with them to the American colony. By the time of the American Revolution, America’s literacy rate was the highest in the world (second only to Scotland) at 70% to 75%, while England’s rate was only 50 to 60%. France and Italy were under 40%. York County’s Presbyterian schools were popular with the Germans as well as the Scotch because of their high standards. Presbyterians made up the majority of roving “subscription” teachers. The Western frontier, where William Holmes McGuffey would be born, had an amazing literacy rate of 65%.10 This literacy rate coupled with the high average wealth allowed Americans to read and buy books at an amazing rate. This literacy rate turned the Western frontier of Pennsylvania and Ohio into the seed of the American empire. Our simple one-room schools put the emphasis on student performance and competition. Playgrounds were often a full of harshness and bullying, but they were also mixing bowls where students prepared for the competitive nature of American society. Classroom discipline was strict and could also be harsh, but in one-room schools it was a necessity. The secret seems to have been the learning of the basics by the highest percentage of the population possible. Men like Heinz, Edison, Ford, Westinghouse, Libbey, Owens, Carnegie, Frick, etc., had skills in the basics. All were products of one-room schools with McGuffey Readers. The basics allowed the 19th century person to advance on their own in science and technology. It was writing, reading, and math that opened the world. Lastly, McGuffey believed Americans were special and destined to do great things. It is exactly the educational system that is lacking today. It was the opposite of today’s world view. The Golden Years of Protectionism The Tariff Bill of 1890 was the career signature of William McKinley, and it would give him national support and a local defeat. What at first was called his Waterloo would actually forge the sword of victory. The Fifty-first Congress of 1888 formed with what was believed to be a mandate for tariff reform. The Republicans controlled the White House and both branches of the legislature. Providence seems to favor McKinley, and McKinley’s power was peaking. The tariff issue, now preeminent was what McKinley studied his life for. The new president Benjamin Harrison was for high tariffs, although not a personal friend of McKinley, but McKinley drew on old friends such as ex-president Hayes. McKinley’s showed true brilliance in his compromises and teamwork, not only in the House, but also with the Senate and White House. He was dealing with a mix in both parties. The tariff bill included many innovations, which helped American farmers and manufacturers. It was an extremely well prepared by on industry and product statistics. The bill completed the evolutionary steps of American tariffs from revenue generating to protective to industry development. No bill before had been directed at policy to build industries such as tinplate and sugar. Yes, there would be 10 Joseph Ellis, After the Revolution, (New York, W. W. Norton, 1979) 24
  25. 25. a small increase initially in prices, but prices would actually decrease long term as industry invested in research and development because of stable prices. This was a pleasant surprise that long-term market stability actually improved investment. Think of today as the swings in energy prices discourage long-term investment. McKinley’s Bill of 1890 was the best researched ever, and used science and statistics to apply the tariff rates. First McKinley argued that the revenue tariff approach was the real problem, not protective tariffs. His statistics were convincing: “Before 1820 nearly all our imports were dutiable; scarcely any were free; while in 1824 the proportion of free imports was less than 6 percent; in 1830, about 7 percent…. The percent of free imports from 1873 to 1883 was about 30 percent, and under the tariff revision of 1883 it averaged 33 percent.”11 For his 1890 bill it would be 50%. The difference was that it focused on the nation’s needs, not revenue producing, which for years had been the only major source of government income. The plan was fully consistent with the Federalists view of a manufacturing utopia. The McKinley plan was a result of years of study, and none knew more about tariffs than McKinley, but he would have to make political compromises to get it passed. McKinley poured nightly over the tariff schedules, and surveyed his colleagues on industry needs. McKinley argued that protective tariffs had not restricted exports, and again the numbers supported him: “We sell to Europe $449,000,000 worth of products and buy $208,000,000 worth. We sell to North America to the value of $9,645,000 and buy $5,182,000. We sell South America $13,810,000 and buy $9,088,000.” McKinley was not alone is his evaluation. Bismarck in 1882 had hailed the protective tariffs of America: “ Because it is my deliberate judgment that the prosperity of America is mainly due to its system of protective laws.” The McKinley tariffs were focused on building America, not restricting trade. They were applied in a manner that did not produce trade wars. Still, McKinley was clear that his tariffs were nationalistic: “The free-trader wants the world to enjoy with our citizens equal benefits of trade in the United States. The Republican protectionist would give the first chances to our people, and would so levy duties upon the products of other nations as to discriminate in favor of our own.” McKinley extensive study had truly brought scientific management into tariff rates, but Congress prefers politics to science. A tariff commission was also established to monitor the impact of the tariffs. This regulatory committee helped the opposition assure fairness and companies invested in jobs, not filling their pockets. And it wasn’t just manufacturing that benefited. A 40% tariff on pickles had allowed the rise of the great Heinz Company of Pittsburgh. Free Trade America has developed the British idealism of free trade of 20th century Britain. A 11 William McKinley, “ The Value of Protection,” The North American Review, June 1890, Volume 150, Issue 403, pages 747-48 25
  26. 26. path that took an Empire to a small world state. At best, American politicians do not understand the role of manufacturing and the consequences of the lack of manufacturing. At worst, America is willing to trade jobs for ideology. To buy minds for democracy instead of convincing them with success. It is more than just jobs (as though that weren’t enough), it’s about energy. It’s also about American freedom and our way of life. Without manufacturing our destiny is a twentieth century India. The problem cannot be overcome by free trade. One might argue that we are still the military power of the world. True, but for how long. Many of our vital military machine parts are not manufactured here. The very fuel for these military vehicles is mainly from other countries. America’s downfall will not come from a nuclear warhead or a successful military invasion, but in its inability to defend itself. We are already in a position where small countries can generate crippling economic blows to our nation. Free trade assumes a one-nation world, not seen since the times of Babel. It assumes one world mission and equality. It assumes national self-sacrifice for the greater world, which is a myth. The type of free trade we have today is world socialism with the goal of redistributing the wealth of nations (not redistributing the wealth to the poor of the world). Governments still for the most part act in self-interest, which makes free trade far from fair trade. To put it in the simplistic village localism of Adam Smith, I’ll relate a true story. The Congress had been under weeks of stress and in fighting. Neither party was willing to cross the aisle. The President watched powerlessly as national unemployment spiraled up, and money to buy houses disappeared. The farm representatives of Iowa and other farm states, and the opposition industrial states had battled to a standoff. One Midwest congressman rose to share his unbiased observations of the industrial belt and forge an alliance: In passing along the highway one frequently sees large and spacious buildings, with the glass broken out the windows, the shutters hanging in ruinous disorder, without any appearance of activity and enveloped in solitary gloom. Upon inquiry what they are, you are almost always informed that they were some cotton or other factory, which their proprietors could no longer keep in motion against overwhelming pressure of foreign competition.12 This was not spoken today but in 1820 by Henry Clay! America was in its first depression after its first great industrial expansion. She was still celebrating her second victory over the world’s greatest military in the War of 1812. America had opened her ports to all goods duty free, and an aggressive British empire saw the opportunity to win the economic war. The crisis would result in the “American System” and lead to her becoming the world’s manufacturing center forty years later. This worldwide crisis consisted not only of economic factors but a fuel shortage in Britain. In the 1860s, Britain fully embraced the theories of free trade, and within three decades lost it manufacturing lead with the rapid decline of iron, steel, coal, and machinery industries. At about the same time, America implemented managed trade with protection to specific high employment and infant industries, and it was America that replaced Britain in industrial leadership. The protectionist tariffs of America from 1860 12 Thomas Cochran and William Miller, The Age of Enterprise, (New York: Harper & Row, 1942), 12 26
  27. 27. were really “golden” tariffs leading to America’s greatest industrial period ever. Prices actually went down as industry stability created long term investment in technology. The better term here is managed trade policies, which were protectionist, but avoided trade wars, and demanded economic reciprocity (not political). During the great Republican tariffs, America investments revolutionized glass, steel, communications, and oil industries. Against the common wisdom that big business would pocket the profits from tariffs, business saw stability of protection as an incentive for long-term capital investment. Wages increased during the period as well as Americans were protected against cheap labor. Vertical integration mushroomed as protected raw material prices forced industries to look for American raw materials. America was fully employed and shipping its manufacturing surplus overseas. Protected industries actually reduced manufacturing costs and were competitive with the world. With tariffs as the government’s major income (there were no income taxes) there was a surplus, and the main problem was how to spend it! This golden period (1890 to 1907) has been overshadowed by the later corruption and progressive shadow of Teddy Roosevelt. Statistics for the 1890 to 1900 decade support the conclusion that prices came down, profits rose, capital investment went up, and wages held or slightly increased (real wages clearly rose). Average annual manufacturing income went from $425 a year and $1.44 a day in 1890 to $432 a year and $1.50 a day in 1900. The average day in manufacturing remained around 10 hours a day. Heavily protected industries such as steel fared slightly better with wages. The cost of living index fell during the decade from 91 to 84 or about 8%. The clothing cost of living dropped even more from 134 to 108 or 19%. Food stayed about the same but the cost of protected sugar dropped around 25%. The bottom line is that real wage (adjusted for cost of living) index rose from $1.58 a day to $1.77 a day in 1900 or about a 12% increase.13 The success of this period of managed trade depended on government oversight, business cooperation, and labor support. Maybe just as important in a belief in American exceptionalism and healthy nationalism. It’s not a small point that managed trade can be abused as capitalism itself. The McKinley success depended on American capitalists re-investing in American plants. Early on in the 1882, Congressman and Chair of Ways and Means, William McKinley formed an overview board in congress to accesses the ongoing impact of the tariffs. This overseeing and regulation was the final piece of the puzzle, preventing the abuses many feared. Managed trade, however, contradicted Adam Smith. University economists and politicians lined up to attack the success of McKinley’s tariffs. Wealth of Nations The least read, most often quoted book remains Adam Smith’s Wealth of Nations. It is rarely misquoted, in that few who quote it have had to punish themselves by reading it. The 1776 world reflected in Wealth of Nations has remained a model for today’s world. It is used to justify the call of free trade. In 1776 the British world was yet to enter the industrial revolution. The world was dependent on the trade of agricultural products. 13 Albert Rees, Real Wages in Manufacturing 1890-1914, (Princeton: Princeton University Press, 1961) 27
  28. 28. Spices, tobacco, and precious metals were the major oceanic trade. Britain’s small manufacturing base had no competition. Adam Smith was a true genius in understanding the aggregate operation of world economics in a pre-industrial world. Adam Smith clearly defined the assumptions and restrictions of free trade in that 1776 world. In many cases, in unusual ways, he even foresaw the problems in a modern world. Adam Smith foresaw how factors could act as a restraint to free trade. The problem is not so much in the application of Adam Smith’s principles, but in the correct application of Adam Smith’s principles. Adam Smith’s free trade exceptions are often overlooked. First was the exclusion for defense, which is a large hole in itself. Second is a lesser discussed exception: “The second case, in which it will generally be advantageous in lay some burden upon foreign for the encouragement of domestic industry, is, when some tax is imposed at home upon the produce of the latter. In this case it seems reasonable that an equal tax should be imposed upon the like produce of the former.”14 This is the essence of the fair trade argument. Smith argued the ideal of trade theory, but he was a realist, making assumptions and exceptions. Adam Smith’s free trade exceptions are often overlooked if not purposely ignored. Second is a lesser-discussed exception of products where some form of internal domestic tax is added. Smith went even further, noting that there are other cases where consideration should be given as well. Smith adapted to the real problems of unequal advantages and differences between nations. He was well aware that duty free trade was not possible between England and France in the foreseeable future. Smith noted, “To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that an Oceana or Utopia should ever be established in it.”15 These “domestic taxes” today take many forms such as social security, health care, and pensions. Adam Smith was clearly a fair trader and “readers” overlook this today. A simple reading of Wealth of Nations or The Invisible Hand clearly shows this.16 We must stop blindly following those who reference Adam Smith, and start reading Adam Smith. American products, in fact, carry a high social and cultural tax. That tax includes pensions, health care, safety requirements, and standard of living. These domestic taxes maybe as high as 30%. Adam Smith would agree that these are monetary charges on our products. Tariffs should be set to reflect the home social tax we impose on our products. This is at the heart of why world trade is not free or fair. Chinese product competes unburdened by the costs of pensions, health care, safety, and standard of living, let alone the high cost of freedom paid by generations of Americans. The cost of this American social tax is as high as 30%. Certainly our steel, automotive, refining, and most manufacturing would meet both of Smith’s exclusions. Adam Smith even went further: “As there are two cases [defense and internal tax] in which it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic industry; so there are two others in which it may sometimes be a matter of deliberation.”17 14 Adam Smith, Wealth of Nations, (New York: Prometheus Books, 1991), p. 361, [ chapter of restraints of certain imports] 15 Adam Smith, The Invisible Hand, (Penguin Books, Great Ideas Series), p.81 16 Adam Smith, The Invisible Hand, (Penguin Books, Great Ideas Series), p. 72 17 Smith, p. 363 28
  29. 29. The first of these cases was economic tariffs in cases like dumping. The second would be the case of slow implementation of free trade. Adam Smith realized that unemployment could be a major issue. Smith noted in this case: “Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection.” These are the “lost” chapters of Adam Smith. McKinley, Managed trade, and Reciprocity McKinley’s model is the best for democracies and capitalism. McKinley’s “dinner pail industrialism” is clearly on a par with Jefferson’s agrarian vision, Clay’s American System, and Roosevelt’s New deal. In all these cases, at least for the period, they gave proven results. Protectionism and tariffs has become an anti-intellectual position in a complex world. McKinley saw protectionism or managed trade as an extension of the Federalist view of government’s role to expand commerce. Protectionism was a conservative principle until the 1960s, and now it is a concept lost to both parties. Economic reciprocity has lost to political reciprocity in trade arrangements. Part of the issue is tied to the death of nationalism, which was part of McKinley’s vision. Furthermore, the main pillar of McKinley’s Dinner-Pail Republicanism was American exceptionalism, which passed away in the 1970s. Today the heart geographically of McKinley’s political strength is called the “Rust Bowl.” The once great factories of the industrial heartland have broken windows as Henry Clay had predicted in 1814. The great bronze busts of the pantheon at the McKinley Niles Memorial are no longer recognizable to young visitors. But if there is to be a renaissance of American Manufacturing it will be found in the McKinley pantheon in Niles, Ohio. It is here that some Joan or John of Arc will rise from America’s rust belt. McKinley had learned what Henry Clay had known before him. Protectionism while good for the nation’s overall manufacturing was many times industry specific and regional specific. As with Clay voting to protect American industry often had local backlash. Protectionism, like its antithesis free trade, works as a ecomonic policy, not as a set of economic principles to be applied. Political compromise and trade-off would always be required. Even Adam Smith made exceptions for British shipbuilding in order to pacify critics. McKinley would learn to compromise in the future suggesting reciprocity with certain nations and products. Furthermore, McKinley believed with Henry Clay that Congress’s function was to review and monitor manufacturing tariffs. This is the cornerstone of managed trade-reciprocity and review. Both Clay and McKinley developed a congressional committee to oversee the tariffs. Still, in the end Congress preferred debate to the work of monitoring. It is this approach that can lead to true free trade. Even today economists still point spuriously to the tinplate industry of the 1890s as a failure of protectionism.18 Tinplate, however, is a biased example. In 1890 tinplate was made from mostly imported rolled high quality iron. The tin-platters coated the rolled iron plate with tin through a rolling or coating process. Most of the tin came from Wales, which drove domestic platters costs higher. Two-thirds of their costs were in rolled iron as a raw material, which came mostly from England, thus a tariff on imported 18 D. A. Irwin, “Great Tariff Debate of 1888,” Journal of Economic History, March, 1998 29