The New American System

Part I

What the press calls chaos

Venezuela in January. Iran in February. Greenland in September. Tariffs, a closed border, a trade war with Canada and a reset with China. Taken one headline at a time, it looks like improvisation.

Here are the moves side by side, with where each one stands today.

Read together, they follow a plan two centuries old. The same program built nineteenth-century America: build it here, protect the wage, secure the hemisphere, secure the currency, and keep the gains in the household.

Part II tells the history of the contest between that program and its rival. Part III follows its five pillars today. Parts IV and V look at how it is carried out and what it has delivered, and Part VI explains why there is reason for optimism.

Part II

Two systems

Americans have argued since the founding about how a nation grows rich and stays free. Two answers emerged, and the contest between them runs through our history.

The American System

In 1791 Alexander Hamilton sent Congress his Report on Manufactures. A young nation that bought its goods from abroad, he argued, could not stay truly free.

In 1824 Henry Clay gave the program a name: the American System. It rested on three pillars: protective tariffs to build home industry, a national bank to supply stable credit, and public investment in roads and canals to bind the country's markets together. Lincoln, a lifelong admirer of Clay, advised by the economist Henry Carey, put much of it into law in the 1860s. McKinley ran on it in the 1890s. For most of the century between them, it was simply how America built itself.

The British System

Across the Atlantic stood the other model. Britain built its financial machine first, beginning with the Bank of England in 1694, and London became the center of the world's credit, insurance and trade. Once British industry led the world, Britain made free trade its creed: open markets for British goods, raw materials from the colonies and the periphery, and finance run from London.

Clay knew exactly what he was defining his program against. When he defended it in the Senate in 1832, he titled his speech a defence of the American system "against the British colonial system."

The German economist Friedrich List, who lived in America and studied Clay's system, put the charge memorably in 1841: Britain climbed to industrial supremacy behind tariffs, then urged free trade on everyone else. It was kicking away the ladder it had climbed.

Side by side, the two systems look like this.

Who paid for free trade

In the 1990s the British model won the argument worldwide under a new name: globalization. Free traders make a real argument. Adam Smith and David Ricardo showed that nations grow richer by specializing, and the open-trade era after 1990 coincided with the fastest fall in global poverty in history. But look at who collected the gains and who paid for them.

Close to three-quarters of the world's fall in extreme poverty happened in China, built largely on access to American markets. The bill landed on American industrial towns. After China joined the World Trade Organization in 2001, the United States lost roughly 5.5 million manufacturing jobs in a decade. Economists studying the "China shock" estimate that Chinese import competition alone cost 2 to 2.4 million American jobs between 1999 and 2011. The communities that lost their plants rarely got the promised retraining or the new jobs, and the working and lower middle class that factory work had built hollowed out.

Even the founders of free trade saw its limits. Ricardo's theory assumed capital would stay at home; he never imagined factories crossing oceans for cheaper labor. And Adam Smith defended Britain's protective shipping laws, writing that "defence, however, is of much more importance than opulence."

The American System's answer is not that trade is bad. It is that a nation which stops making things eventually stops designing, defending and deciding for itself, and that its working people should not pay for everyone else's cheap goods.

A financial system built on war

Because the British System began as a way to pay for war, war never strayed far from its center. The record runs for three centuries.

None of this needs a secret plot to explain it. A financial system built to fund war, with money free to cross battle lines, produced all of it by following profit. What the old order did was let financial centers, London above all, profit from risk that American soldiers and taxpayers absorbed.

That is the contest the current administration has reopened. Part III follows the American System's pillars as they are being rebuilt today.

Part III

The five pillars today

Each of Clay's pillars has a modern counterpart. Tariffs rebuild industry. Border policy protects wages. The Monroe Doctrine returns as a hemisphere strategy. And Hamilton's concern for sound national credit becomes the fight to keep the dollar at the center of world trade. And the pillar Lincoln added, the one that decided who would own what the system built, has a modern counterpart too.

Build it here

Tariffs are the first pillar, and this year they were tested in court.

In February the Supreme Court ruled 6–3 that the emergency powers law behind the 2025 tariffs doesn't authorize tariffs at all. Within hours the White House replaced them with a 10% global tariff under a 1974 trade law; the trade court struck that down in May, and it expired by statute in July. The administration has since rebuilt the wall on firmer statutes: national-security tariffs on steel, aluminum, autos and other sectors, new unfair-trade investigations into 60 economies, and Section 338 of the 1930 Tariff Act, a century-old power never used before, now aimed at Canada.

The Constitution gives tariff power to Congress, which delegated pieces of it over the decades. The courts are forcing the administration to use the pieces actually written for the job.

Is industry coming back?

The Iowa mill is the pillar in one project. Hamilton's report was about exactly this: a country that digs its own ore, smelts its own iron and rolls its own steel does not ask anyone's permission to build a ship or a railroad. The last American iron mine opened before most of today's steelworkers were born. Whether a 10-million-ton mill gets built on time is a fair question; that it was announced at all, with a mine behind it, is the kind of thing the System was for.

The fair verdict so far: a strong manufacturing sector, not yet a boom. The American System was never a one-term project. Hamilton's program took a generation, and Lincoln's took another.

Factories need workers. The second pillar is about who fills those jobs, and at what wage.

Protect the wage

Vance's argument joins two policies most people treat separately. In his words, whether factories were offshored to cheap labor or cheap labor was imported, "cheap labor became the drug of Western economies."

The enforcement turn

For thirty years the visa programs ran on an honor system. An employer certified that no qualified American was available, the Labor Department took its word, and the certification became the first step to a green card. Vance described the method from the podium: "They'll put an advertisement in a small-town newspaper," collect no replies, and use the silence to "replace American workers with what is effectively foreign indentured servants."

On October 8 the Labor Department stopped taking the word. It suspended Microsoft, Adobe, Cognizant, Infosys, Tata, Wipro, HCL and Capgemini from the permanent labor certification program while it investigates them for visa fraud: no new green-card sponsorships, and every pending case frozen. Across the eight firms the department cited more than 230,000 H-1B approvals and at least 100,000 labor certifications. Vance's arithmetic on Microsoft: 6,000 Americans laid off last year, 6,300 H-1B visas and nearly 3,000 green cards obtained in the same period, "one and a half foreign indentured servants" for every worker let go. Microsoft answers that about four in five of its filings were renewals for people already on staff, and that visa holders were laid off too. The claims have not been tested in court, and the suspension is a pause pending investigation, not a debarment. But the largest software company in the world can no longer sponsor a green card until it explains itself to the Labor Department, and that has not happened before.

One honest note on history: the original American System welcomed immigrants who came lawfully. Lincoln signed an act to encourage immigration in 1864 to fill factories and settle the West, and those newcomers arrived through the front door, registered and counted.

That distinction runs through the modern policy too. Trump has long said he wants a wall with "a big, beautiful door" in it: open to people who come legally, closed to those who don't. The target is illegal entry and visa programs bent into pipelines for cheaper labor, not lawful immigration itself. The principle beneath both eras is the same. American workers should not be undercut by labor brought in outside the rules.

In fairness to critics, the administration has also narrowed some legal channels, such as refugee admissions, so the line between legal and illegal immigration is a debate within the policy as well as a principle of it.

Industry and wages are the domestic pillars. The third looks outward.

Secure the hemisphere

The American System always had a foreign policy. Monroe announced his doctrine in December 1823; Clay named the American System four months later. After 1991 the United States stood alone: one superpower, policing sea lanes, underwriting open markets, and backing the dollar system for everyone. Scholars called it the unipolar moment. That moment is over.

Why the moment ended

Put together, America spent twenty years securing the Gulf's energy for its chief rival while offshoring its industry to that same rival. The New American System reverses both: stop policing other regions' energy, and bring the industry home.

Europe didn't drive the decision to invade Iraq. France and Germany opposed it in 2003, and Britain joined as a partner at its own cost, losing 179 troops in Iraq and 457 in Afghanistan. The free ride was on the long-term security umbrella, not on the choice of wars.

China now rivals America in manufacturing and, by some measures, in total output. Russia, India, Turkey and the Gulf states hedge between camps. The real question is no longer whether the world becomes multipolar, but where America stands when it does.

The administration has answered in writing. Its National Security Strategy announced a "Trump Corollary" to the Monroe Doctrine, and after the Venezuela operation the President himself used the phrase "Donroe Doctrine." The idea is simple: stop trying to police the whole globe for free, and instead lock down the Western Hemisphere, its energy, and the dollar's chokepoints, while other regions carry more of their own defense.

Energy is the thread

Put the pieces on one map: US shale and LNG, Canada's oil sands, Venezuela's reserves, Guyana's offshore fields, Argentina's Vaca Muerta, Greenland's minerals. The Western Hemisphere can supply itself.

That changes the math of the Middle East. When this hemisphere is self-sufficient, a closed Strait of Hormuz hurts Asia, and China above all, far more than America. It also explains the heavy-oil logic tying Venezuela to Canada: Gulf Coast refineries are built for heavy crude, and a revived Venezuela means Canada is no longer America's only irreplaceable supplier.

And the Gulf is routing around Hormuz

Iran's greatest weapon has always been the threat to close the strait. It has not held. Saudi Arabia activated its contingency plan within hours of the first strikes and has run its East–West pipeline to the Red Sea at its full 7 million barrels a day. The UAE's line to Fujairah carries up to 1.8 million, and a parallel pipeline will double that by 2027. And by late September, seven months into the war, Gulf crude exports were back at pre-war levels. About 13 million barrels a day were moving through the strait itself, roughly three-quarters of the old flow, and the pipelines carried the rest; September saw the most non-Iranian transits tracked since the war began.

Recovered is not normal. Lloyd's List counted at least 13 attacks on tankers and gas carriers in the two weeks after September 28, the most since March, and rates the threat as still severe. Crude moves through a handful of operators on expensive workarounds; refined fuels, Qatar's LNG and bulk and container traffic have not come back. Pipeline endpoints at Yanbu and Fujairah have been hit, and Red Sea cargoes still pass Bab al-Mandeb. Because oil is priced globally, Americans feel the premium at the pump even when US supply is secure. What has changed is that Iran can no longer close the Gulf; it can only make using it cost more.

Regions carry their own load

The pattern repeats: America convenes aligned partners into a structure, then steps back from being everyone's first line of defense.

Critics note these networks lean on like-minded governments, and Brazil and Mexico, Latin America's two largest countries, sit outside the Shield. But every durable alliance started small. NATO had 12 members at its founding; the Shield added two in its first six months.

The Canada question

Canada is the hardest test of the doctrine, and the most revealing, because it sits entirely inside the perimeter. For years it spent around 1% of GDP on defense while sheltering under NORAD, and America could not threaten to stop defending it, because Canada's Arctic is America's northern front door. That is why Ottawa could underpay for so long, and why the bill is now being collected through trade. The pressure has worked on that front: Canada hit NATO's 2% target in March for the first time in decades and has pledged 5% by 2035.

The live dispute is China. Washington negotiates with Beijing for the continent; Ottawa wants its own deal, and signed one in January that reportedly eased tariffs on Chinese EVs for canola access. Inside an integrated North American market, that is a back door into America's. The USMCA already lets members walk away if one cuts a deal with a non-market economy; the US asked this summer to tighten that clause, Carney called it sovereignty, and talks collapsed in August. Tariffs and an import ban followed. Canada has folded before, on the digital services tax and on defense spending. This round touches independence, and three in four Canadians backed the walkout. Ottawa is waiting out the November midterms. Economics usually wins; the question is when.

Control of the hemisphere's energy leads to the fourth pillar: control of the currency it is priced in.

Secure the dollar

Look at whose oil got hit. Venezuela and Iran were the two big producers selling crude outside the dollar system, largely to China and largely settled in yuan.

Venezuela's barrels now move back inside the dollar system. Iran's are squeezed by blockade and sanctions. In the short run, the shocks have actually strengthened the dollar, because in a crisis the world still runs to it.

Operation Economic Outcast carries the same logic into finance. Anything that touches dollars answers to the US Treasury, including trust companies in British overseas territories. That is not dismantling the offshore system; it is asserting authority over it.

Insurance: Washington steps behind London

For decades, war-risk premiums on Gulf shipping stayed low because the US Navy carried the real risk, while London's market, where Lloyd's decides which waters count as war zones, collected the premiums. When the strikes began in February, premiums jumped fivefold within 48 hours, and insurers cancelled cover and reissued it at up to 60 times pre-war rates. Insurance closed the strait before Iran's navy did.

Washington answered by becoming the insurer of last resort. The Development Finance Corporation built a $20 billion reinsurance backstop behind private insurers, open only to ships that honor US sanctions. London still writes the policies, at far higher prices. But in a crisis, Washington now decides who gets the coverage that matters.

Riyadh was locked in first

The petrodollar began as a Saudi arrangement in 1974: oil priced in dollars, American protection in return. Trump secured that anchor in his first term. His first foreign trip as president, in 2017, was to Riyadh, where he received the kingdom's highest civilian honor and signed a record arms package. Later that year the crown prince's anti-corruption crackdown consolidated power in a leadership aligned with Washington. And the riyal has been pegged to the dollar since 1986, the strongest lock of all.

Beijing has kept knocking, with a yuan swap line in 2023 and Saudi membership in the mBridge payment network in 2024. So far those remain side channels. Saudi oil is still sold in dollars, and Venezuela and Iran were the holdouts, not Riyadh.

Four pillars rebuild production and protect the conditions around it. None of them decides where the surplus goes once it is inside the firm. The fifth does.

Keep it in the household

Clay named three pillars. Lincoln's party added a fourth that the first three could not do without, and it was not a tariff.

The Republican platform of 1856 and 1860 ran on three words: free soil, free labor, free men. The soil part had a bill behind it. The Senate narrowly passed a homestead bill in 1860 and President Buchanan vetoed it; the Senate could not override. The alternative on offer was to keep selling public land for revenue, which in practice meant selling it in blocks to speculators and planters. Lincoln signed the Homestead Act on May 20, 1862: 160 acres to any citizen who would live on the land and work it for five years, for a nominal fee. Some four million claims were filed before the act was repealed in 1976; 1.6 million households proved up, and 270 million acres passed to them, about a tenth of the country, across thirty states.

It was passed in the same Congress, within months, as the Morrill Tariff, the Pacific Railway Act, the land-grant colleges and the national banking system. Read together, those laws are the American System in full. The tariff built the industry. The railroads bound the market. The banks supplied the credit. And the Homestead Act decided who would own the ground the system was built on: not whoever could buy the most of it, but the household that would work it. Production and distribution were legislated together. The founders of the system did not assume the gains would reach the household. They made a law to see that they did.

Here is the problem the revival inherits. In 1862 the thing worth owning was land, and a homestead was a way to give a family a share of it. Today the thing worth owning is the productive enterprise, and the household's share of it has been quietly separated from the household. Most Americans own stock through a fund that votes for them. The firm's governing class sets its own pay through boards it nominates and consultants it hires. The surplus of a rebuilt factory does not go to the home market by default. For forty years it has gone to buybacks and option grants.

What the last forty years did with a productivity gain

What shared the gains in 1945 to 1978 was not the owner in the room; by 1963 most large corporations were already run by professional managers. It was an architecture: top tax rates that made reinvestment more attractive than extraction, boards that retained and reinvested rather than paid out, a productivity-indexed wage written into the 1948 GM contract and copied across industry, and pay norms a CEO could not breach without a senator noticing. Every piece of that was dismantled between 1978 and 1992, and the ratio left its equilibrium within a decade.

Bezos is describing the right destination. He is leaving out the road. A three-day week does not come from productivity. It comes from productivity plus the architecture that distributes it, and that architecture is exactly what the last forty years took apart. Rebuild the factories, secure the hemisphere, anchor the dollar, and leave the inside of the firm as it is, and the AI dividend goes where every dividend since 1979 has gone.

The legislative arm

The fifth pillar has a program, as the first four do. The Commonwealth Project has drafted four instruments grounded in Locke, Burke, the Fifth Amendment and existing fiduciary law: a federal pay-ratio ladder anchored to Drucker's 20:1; a federal governance act that puts employee directors on boards, weights votes toward long-term holders, and places stewardship duties on the asset managers who vote most of America's shares; a Utah state bill as the first prototype; and a framework for the public's claim on AI systems built from the public's knowledge. The argument, the instruments and the sources are there.

The modern Homestead Act is not 160 acres. It is a share in the enterprise, with a voice in how it is run, for the household whose work makes it productive. Same principle. Different ground.

Five pillars, one strategy. What still puzzles observers is the way it is carried out.

Part IV

How it's done

The reversals are not confusion. They are the negotiation.

Greenland is the textbook case: open by demanding ownership and refusing to rule out force, then settle for bases, a ban on rivals, and permanence. That is anchoring. Ask for far more than you need, and close on what you wanted all along. "Taking Cuba" followed by "we'll make a deal" follows the same pattern.

Sun Tzu described the principle long before any real estate deal: let your tactics take the shape of the ground, like water, while the objective stays fixed. The objective here has not moved. The hemisphere, the energy, the dollar.

The method has a known risk, and Sun Tzu names it too: leave a cornered opponent no way out and it fights harder. Nations, unlike property owners, have other buyers. Canada is where that risk is being tested.

A method is judged by what it delivers.

Part V

Judging the results

Judge a dealmaker by the deals that close, not by the headlines along the way.

Scorecard

What to watch

The case against

A reading worth holding should survive its strongest critics. These are theirs, with the answers where the record supplies one.

Tariffs are paid at home.

Most studies find importers and consumers bear much of the cost, and manufacturing employment fell about 1% in the year after the April 2025 tariffs before turning up. The answer: for decades America ran one of the most open markets on earth while its partners protected theirs. The WTO puts the average US tariff at 3.3%, against 5% for the European Union, 7.5% for China and 17% for India. On cars, America charged 2.5% while Europe charged 10% and India 70%. The cost of that one-sided openness was paid in closed plants. Tariffs level the field and create the leverage that brought partners to the table.

Labor pulls both ways.

About 520,000 manufacturing jobs sat open in August. Tightening labor supply while rebuilding industry can leave new plants short of workers. The answer: those openings are also the best news in the data. Factories want workers, openings are up 25% in a year, and the jobs pay more than they have in years. The point of the system is to fill them with American workers at American wages.

Coercing allies breeds hedging.

Pressure on Canada pushed Carney toward China, India and Europe. Even friendly Latin American governments resent being treated as vassals. Hedging by middle powers is how multipolarity actually forms.

The Iran war cut both ways.

Iran tied safe passage through Hormuz to yuan-priced oil, handing Beijing a new channel even as Venezuela's closed. The answer: the war was never mainly about oil. Its purpose is keeping the bomb out of Iran's hands, and the oil effects are secondary. The yuan channel is a side effect, and the bypass pipelines are shrinking it with every barrel routed around the strait.

Coalitions of the like-minded are fragile.

The Shield excludes Brazil and Mexico, and Latin American elections swing hard against incumbents. The answer: coalitions take time. NATO began with 12 members in 1949 and has 32 today. The Shield grew from 17 signatories to 19 members in its first six months. And its glue is a shared threat, not shared ideology: crime and insecurity rank as the top concern of Latin American citizens, whoever they vote for. A coalition built on a problem voters want solved can outlast the next election.

Energy security isn't price security.

Oil trades on a world market. A secure hemisphere still pays world prices in a crisis. The answer: price shocks always start as security shocks. The only question is where. For natural gas and electricity, which are priced close to home, American energy security already is price security: in 2022, Europeans paid several times what Americans paid for gas. Oil is different because it trades globally, so a shock anywhere reaches the pump here. That is why the strategy works on world supply too, bringing Venezuela's reserves back into production and backing Gulf pipelines that keep barrels moving when Hormuz closes. Every barrel secured anywhere lowers the price everywhere.

The offshore problem starts at home.

The Tax Justice Network has ranked the United States itself as the world's largest financial secrecy jurisdiction, through anonymous LLCs and trust-friendly states.

Spheres set precedents.

If America may police its hemisphere, others will claim the same right over theirs. Taiwan is where that argument bites. The answer: they already claim it, precedent or not. Russia invaded Georgia in 2008 and Ukraine in 2014 and 2022, all while Washington preached a rules-based order. China built and armed islands across the South China Sea and ignored the 2016 international ruling against its claims. Great powers are held back by strength, not by example. A secure hemisphere frees American power for the Pacific, where it actually constrains Beijing. The one real test is Washington's own resolve: a world of spheres must never become a bargain that trades Taiwan away.

The honest answer to most of these is: watch the scorecard. A strategy is measured by what it produces.

Part VI

Why optimism

The American System has been in this contest before, and it won.

Clay's program, and then Lincoln's, built the industrial power that turned a young debtor republic into the world's largest economy by the end of the 1800s, and that outproduced every rival through two world wars. It was never a secret formula. It was a choice to build at home, pay American workers well, and answer to no one else's financial system.

What is new is not the argument. It is that Washington is acting on it again: tariffs to rebuild industry, a border that protects wages, a hemisphere secured for energy, the dollar's chokepoints back under American authority, and, still to be built, the architecture inside the firm that keeps the gains in the household. The results are early and the scorecard is mixed. But the direction is set, and for the first time in decades it points home.

Further reading

The debate is two centuries old. These are the places to go deeper, from the original texts to the modern interpreters.

Sources