Commercial Republic: Understanding America's Mixed Economy

Dr. Trevor Shelley explains that America's economic system is best understood as a "commercial republic" rather than pure capitalism, revealing the philosophical tensions between unlimited commerce and the bounded nature of republican governance. The term "commercial republic" captures a balance between market-driven economic liberty and civic virtue that continues to define America's mixed economy.

• The term "capitalism" was coined by Karl Marx and carries derogatory connotations not used by the Founders themselves
• Commerce recognizes no limits while republics rest on specific boundaries, creating an inherent tension
• America's economy combines private property rights and market exchange with varying degrees of government intervention
• Key influences on the American economic system include John Locke, Montesquieu, David Hume, and Adam Smith
• Alexander Hamilton had the greatest initial impact on shaping America's economic approach
• 2026 marks the 250th anniversary of both the Declaration of Independence and Adam Smith's "Wealth of Nations"
• Smith's concept of the "invisible hand" shows how markets direct self-interest toward public benefit without government micromanagement
• The division of labor increases productivity as markets expand, a key insight that appealed to the Founders

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Episode Transcript

Speaker 1 (00:03):
Thank you so much for that question, and today I am
really excited to have Dr TrevorShelley, who is an assistant
professor and director ofgraduate studies at the School
of Civic and Economic Thoughtand Leadership, and somebody
that I get to work with, so itis really great to have you on
the podcast.
Dr Shelley, can you help usanswer this question?

Speaker 2 (00:26):
Yeah well, first of all, thank you very much, very
glad to be here.
You know, many argue that theUS has a market economy or a
system of a free enterprise, orwhat is otherwise known as
capitalism, as it were.
This latter word was originallycoined by Karl Marx and so
carries a degree of derogation,perhaps even still, and,

(00:48):
moreover, none of these termswere used by the founders
themselves.
Perhaps, then, none perfectlycapture really the complex
nature of the economic system ofthe United States.
The phrase that the foundersused was that of commercial
republic, which consists of twoterms around which there was,
and really continues to be,considerable disagreement about

(01:11):
their true meaning, as well aswhether they can or really do
hang well together.
Some tensions here between thecommercial or economic and the
Republican or political aspectsof the American regime or system
is worth highlighting, even ifwe can't go into them in great

(01:31):
detail.
But to put it simply, commerceseems to recognize no limits.
Right, the whole world can be amarket for individual and
voluntary exchange.
Well, on the other hand, arepublic rests on specific
limits and delineations, say ofterritory, population, powers
and even values or a common good.

(01:53):
One might engage ininternational trade, but one
still remains, you knowsomething, of a law citizen of a
particular political communityor regime, and to maybe put
these tensions a littledifferently.
Yet, commerce encourages thepursuit, if not the love, of
wealth, while the spring ofrepublics is really the practice

(02:15):
, if not the love, of civicvirtue.
So, with these intentions inmind, it's perhaps best to
characterize the Americaneconomic system as something of
a mixture, or even a mixedeconomy.
Well, it consists largely ofprivate property ownership,
freedom of contract andassociation, market exchange and

(02:36):
competition, and an extensivedivision of labor and production
.
There has been a persistent, ifvarying, degree of government
regulation, protectionism,social welfare programs and
public services.
This mixture of, on the onehand, market-driven systems and,
on the other hand, ofgovernment intervention, I think

(02:57):
reflects at least something ofthe original tensions of the
early commercial republic.
And that said, commerce itself,of course, has changed with
scientific, technological andindustrial developments which
have had tremendous furthereffects on the republic, even
perhaps on the very possibilityof and for republicanism.

(03:20):
As to the thinkers whoinfluenced the American founders
and thus the American economicsystem, there are many, but
maybe, to name just a few of theluminaries, certainly John
Locke, baron de Montesquieu,david Hume and Adam Smith.
Those would be the first tocome to mind Among the founders
themselves.
Alexander Hamilton arguably hadthe greatest initial impact on

(03:42):
the American economic system,but he was certainly not without
opponents or dissenters, andsome of the early debates and
disagreement over the role ofcommerce and the meaning of
republicanism, and thus whetherand what shape the American
commercial republic should orought to take, can be found, for
example, in the writings of thefederalists and the

(04:04):
anti-Federalists, which I'dencourage all the listeners to
read and reread.

Speaker 1 (04:12):
And we, after this podcast, will very much do a
deep dive into some of thoseFederalist Papers was you know

(04:37):
we did talk about Locke, andMontesquieu brought up Hume, but
Adam Smith and the wealth ofnations.
What kind of influence did thathave on the economy?
Maybe that we have now?

Speaker 2 (04:44):
Yeah, certainly.
Well, I'd be remiss if I didn'tmention that, as we're
celebrating the 250thanniversary of the Declaration
of Independence, it also marksthe 250th anniversary of Adam
Smith's large economic work andinquiry into the nature and
causes of the wealth of nations.

(05:05):
And in this book I mean Smith.
Two volume work, a massive work.
Smith both compiled andsystematized most of the
existing works and knowledge ofpolitical economy, but also
critiqued much of what he saw ascontrary to productivity and
liberty, a system known asmercantilism, and in the work he

(05:27):
advances his own view that hereferred to as the system of
natural liberty.
And to mention just a couple ofkey elements of this work, he
certainly elaborated right fromthe outset, in a rather
magisterial way, on theimportance of the division of
labor for the sake ofproductivity.
He saw how the broader itextended through ever more

(05:51):
specialization, the greater theproficiency and output would be,
but also that as marketsthemselves extended or there was
access to greater, extendedmarkets, this would further
encourage, in turn, morespecialized labor and economic
growth.
So these things work, thesethings work together, and this,

(06:11):
this insight regarding sort ofyou know, productivity and the
possibility for wealth fornations was of course very
attractive to many of thefounders, and again, not least
of all, alexander Hamilton.
I should also add, of course,that Smith elaborated under the
guise of his very famous phrase,used only well two times,
possibly three, in a differentcontext, but twice in his works,

(06:34):
once in the Wealth of Nationsand once in the Theory of Moral
Sentiments this famous phrase,the invisible hand, and for our
purposes here in this work, theWealth of Nations, this metaphor
really suggests that markets,the mechanism of a market, or
the place and space of voluntaryexchange, space of voluntary

(07:00):
exchange, operates in anunintentional manner to direct
self-interest toward the publicinterest or the benefit of
others.
And so, again, it's in contrastto this notion of mercantilism,
where the suggestion was thatwise statesmen ought to be
directing the actions and theproductivity and the labor of
various members of the communityand parts of the nation.
Here are the ideas when, infact, individuals step back or

(07:24):
governments minimize this kindof top-down orchestration and
control, the outputs will be allthe greater, and so there's an
argument here as well, of coursethe greater, and so there's an
argument here as well, of course, that really dovetails with
limited government orconstitutionalism as the
founders understood it as well.

Speaker 1 (07:46):
Dr Shelley, that was the most efficient explanation
of our economy and Adam Smith'sWealth of Nations.
Thank you so much for your timeand your expertise and we
definitely hope to have you onagain.

Speaker 2 (08:00):
All right, well, thank you.

Speaker 1 (08:03):
That was perfect, that literally.
Yes, thank you.

Speaker 2 (08:08):
Oh, sure, yeah.

Speaker 1 (08:09):
No, that was exactly.