Born in Philadelphia, Pennsylvania in 1793, Carey was the son of Mathew Carey (1760–1839), an influential economist, political reformer, editor, and publisher. Mathew Carey was born in Dublin, Ireland but emigrated to Philadelphia in 1784, where with the help of Benjamin Franklin and the Marquis de Lafayette he founded a publishing firm. Among his many writings was Essays on Political Economy (1822), one of the earliest American treatises favoring Alexander Hamilton's idea of protection and its use in the promotion of American industry.
In 1825, Carey succeeded his father in the publishing firm, which became Carey & Lea, attaining a leading position in America. In 1835, Carey co-founded the famous Franklin Fire Insurance Company of Philadelphia.
Carey retired from business in 1838 while publishing his 4-volume treatise (1837–1840) Principles of Political Economy, which soon became the standard representation of the American school of economic thought, and was translated into Italian and Swedish, with some variance, dominating the U.S. economic system until 1973.
In 1863, Carey was elected an Associate Fellow of the American Academy of Arts and Sciences, and in 1868, a foreign member of the Royal Swedish Academy of Sciences.
Carey's first large work on political economy was preceded and followed by many smaller volumes on wages, the credit system, interest, slavery, copyright, etc.; and in 1858–1859 he gathered the fruits of his lifelong labours into The Principles of Social Science, in three volumes. Principles is a comprehensive and mature exposition of his views. In it, Carey sought to show that there exists, independently of human wills, a natural system of economic laws, which is essentially beneficent and spontaneously increases prosperity of the whole community, and especially of the working classes, except when it is impeded by the ignorance or perversity of humankind. He bases its economy on Colbert system, system based on manufactures helping farms upon himself.
He rejected the Malthusian doctrine of population, maintaining that the only situation in which the means of subsistence will determine population growth is one in which a given society is not introducing new technologies or not adopting forward-thinking governmental policy. Population regulated itself in every well-governed society, but its pressure on subsistence characterized the lower stages of civilization. Carey denied as the universal truth, for all stages of cultivation, of the law of diminishing returns from land.
His position relates to the antithesis of wealth and value. Carey held that land in industrial life is an instrument of production formed by human labour. Its value was due to the labour expended on it in the past (measured by the labour necessary under existing conditions to bring new land to the same stage of productiveness). He studied the occupation and reclamation of land with peculiar advantage as an American, for whom the traditions of first settlement were living and fresh, and before whose eyes the process was indeed still going on. The difficulties of adapting a primitive soil to the work of yielding organic products for human use can be lightly estimated only by an inhabitant of a country long under cultivation.
Carey believed that the overcoming of these difficulties by arduous and continued effort entitles the first occupier of land to his property in the soil. Its present value forms a very small proportion of the cost expended on it, because it represents only what would be required, with the science and appliances of our time, to bring the land from its primitive into its present state. Thus, property in land is only a form of invested capital, a quantity of labour or the fruits of labour permanently incorporated with the soil. The owner of this capital is compensated, as any other capitalist, by a share of the produce. The owner is not rewarded for what is done by the powers of nature, and society is in no sense defrauded by his sole possession.
The so-called Ricardian theory of rent is a speculative fancy, contradicted by all experience. Unlike what the theory supposes, cultivation does not begin with the best soils and move progressively towards poorer soils. The light and dry higher land is cultivated first; only when population becomes dense and capital accumulates is low-lying land attacked and brought into occupation. Low-lying land is more fertile but also has morasses, inundations and miasmas. Rent as a proportion of the produce sinks, like all interest on capital, but increases as an absolute amount. The share of the labourer increases both as a proportion and an absolute amount. Thus, the interests of these different social classes are in harmony. But, Carey proceeded to say, in order that this harmonious progress may be realized, what is taken from the land must be given back to it. All the produce derived from the land is part of it, and must be restored to avoid its exhaustion. Hence the producer and the consumer must be close to each other; the products must not be exported to a foreign country in exchange for its manufactures, and thus go to enrich as manure a foreign soil. In immediate exchange value, the landowner may gain by such exportation, but the productive powers of the land will suffer.
In March 1865, Carey published a series of letters to the Speaker of the House of Representatives, Rep. Schuyler Colfax, entitled “The Way to Outdo England Without Fighting Her”. In these letters, Carey advocated the continuance of Abraham Lincoln's Greenbacks policy of debt-free, government-issued money as a way of freeing America's economy from British capitalists, who sought to control America's wealth.
He also suggested raising the reserve requirements on private banks up to 50%. Here are some excerpts from Carey's work, which history shows fell upon deaf ears, as the subsequent Long Depression of 1873–96 plagued America with financial panics because of the inability of the National Banking System to provide the public with all the currency it needed:
“The Executive [Lincoln] is frequently compelled to affix his signature to bills of the highest importance, much of which he regards as wholly at war with the national interests.
“To British free trade it is, as I have shown, that we stand indebted for the present Civil War. Had our legislation been of the kind which was needed for giving effect to the Declaration of Independence, that great hill region of the South, one of the richest, if not absolutely the richest in the world, would long since have been filled with furnaces and factories, the laborers in which would have been free men, women, and children, white and black, and the several portions of the Union would have been linked together by hooks of steel that would have set at defiance every effort of the ‘wealthy capitalists’ of England for bringing about a separation. Such, however, and most unhappily, was not our course of operation. Rebellion, therefore, came, bringing with it an almost entire stoppage of the societary movement, with ruin to a large proportion of those of the men...”
“As a consequence, poor as was then our Government, and unemployed as were then so large a portion of our people, we were compelled to [loan from abroad] millions upon millions of dollars worth of the machinery of war, and there to encounter all the obstacles that could decently be thrown in our way by men who prayed openly for the success of the rebellion.”
“When the present war shall have been closed there will be another to be fought, and that one will be with England...but it is not now with [cannons] that she chiefly seeks to fight us. It is in the Halls of Congress she is to be met.”
“The whole South now requires reorganization, and one of the first steps in that direction should be found in furnishing machinery of circulation...If the Government does not supply that machinery, who is there that can or will do so? Look carefully, I pray you, my dear sir, at the vast field that is to be occupied, and at the great work that is to be done, and then wonder with me that the Government should permit its soldiers to perish in the field, while it is debating the terms of a loan to be made to it by men all of whose interests are to be promoted by a diminution of the circulation and an increase of the rate of interest. Let our soldiers be paid, let the credit of the Government be once again re-established, let the rate of interest be kept down, and let the Treasury reassert its independence, and all will yet go well...
“A single decade of the system above described would suffice for placing us, in this respect, side by side with England. At the close of another, [England] would be left far behind, and we should then have vindicated our claim to that position in the world of which our people so often talk.”
Among Mathew Carey's many writings had been a collection (1822) of Essays on Political Economy, one of the earliest of American treatises favoring Alexander Hamilton's idea of protection and promotion of industry.
Carey, who had set out as an earnest advocate of free trade, ultimately arrived at the doctrine of protection: the coordinating power in society must intervene to prevent private advantage from working public mischief. He attributed his conversion on this question to his observation of the effects of liberal and protective tariffs respectively on American prosperity. This observation, he says, threw him back on theory, and led him to see that intervention might be necessary to remove (as he phrases it) the obstacles to the progress of younger communities created by the action of older and wealthier nations.