Excerpts from "Alexander Hamilton, A Biography" by
printed with permission by W.W. Norton & Co.,
Young Man Hamilton:
Fame was the province of demigods,
of mortals whose heroic deeds win them eternal and grateful remembrance in the hearts of posterity. In the
ancient pantheon of demigods, as resurrected in the eighteenth century, the highest place was reserved for the
Lawgiver, who "transmits a system of laws and institutions to secure the peace, happiness, and liberty of
future generations." Hamilton was by no means alone among founders of the American Republic who aspired
to that role, but he viewed it differently from the others. Their vision was grand: they sought to transform
the nature of government by binding it with a fundamental law, a written constitution that would govern the
exercise of power. His vision was grander: he sought to transform the American people into free, opulent, and
law-abiding citizens, through the instrumentality of a limited republican government, on the basis of consent,
and in the face of powerful vested interests in the status quo. The others were content merely to effect a
political revolution. He set out to effect what amounted to a social revolution.
As Hamilton saw the people of his
adopted country, they were kept from being a great nation, indeed kept form being a nation at all, by the
inertia of a social order whose pervasive attributes were provincialism and lassitude. Provincialism was
reinforced by habit, by opinion, by familiarity, by interests; but in every state and every region its main
prop, as well as its main beneficiary, was an oligarchy, great or small. That scheme of things discouraged
industry by failing to reward it. Status derived not from the marketplace, where deeds and goods and virtues
could be impartially valued, but from birthright. More precisely, status rested upon person relations which
rested upon family connection which in turn rested upon ownership of land. In the few, this social order bred
the habit of arbitrary command or rule by cabal, in defiance of law; in the many it bred the habit of
deference and, because a tolerable subsistence was easy to come by, it bred laziness as well. To be sure, the
work ethic and opportunity for advancement energized the people in the larger port towns and in those parts of
New England nearest the seaports, and the German-Americans in and southward of Pennsylvania were likewise
But otherwise energy and persistent
application were scarcely to be found. His countrymen, Hamilton said, had "the passiveness of the sheep
in their compositions'; it was almost impossible to rouse them from "the lethargy of voluptuous
indolence." To him all this was anathema because it was alien to his own nature, because it was
inherently unjust, and because, in his eyes, it made the nation weak and despicable.
Hamilton's audacious mission in
life was to remake American society in accordance with his own values; and by 1787 he had conceived a means of
accomplishing that revolutionary change. What distinguished the industrious minority from other Americans was
that they measured worth and achievement in terms of money and worked to obtain money, whereas the others
disdained to work for money (although they were willing to connive for it) and made do with a cumbersome
system of personal obligations, barter, and fiat credit. To transform the established order, to make society
fluid and open to merit, to make industry both rewarding and necessary, all that needed to be done was to
monetize the whole - to rig the rules of the game so that money would become the universal measure of
inherited social position; money is the ultimate, neutral, impersonal arbiter. Infused into an oligarchical,
agrarian social order, money would be the leaven, the fermenting yeast, that would stimulate growth, change,
prosperity, and national strength.
It is easier to describe the
romantic personality than to account for it, but surely that and much else in Hamilton's makeup derived from
his parents and his childhood. His mother, Rachel Faucett Lavien, was of a respectable family of French
Hugenots who unfortunately lacked the knack of establishing stable marriages. Her father was John Faucett, a
physician, man of letters, and planter on the British West Indies island of Nevis. In 1740 her parents were
legally separated. Five years later she went with her mother, Mary Faucett, to visit her older sister, who was
married to a prosperous planter on the Danish island of St. Croix. There she met a planter and merchant named
Johan Miachel Lavien, whose peacock wardrobe suggested falsely that he was a man of great wealth. Though
Rachel was only in her teens, her mother forced her into a marriage with Lavien, and she had by him a son
named Peter. The marriage was a wretched one, however, and Rachel - described as "a woman of great
beauty, brilliancy, and accomplishments" - apparently found it impossible to perform her wifely duties.
In 1750 Lavien had her imprisoned for "indecent and very suspicious" behavior, thinking that
incarceration in the miserable island prison would stimulate her to change "her ungodly mode of
life" and that upon her release she "would live with him as was meet and fitting." Instead, she
fled the island and made her way back to Nevis.
Hamilton's father, James Hamilton,
was of noble lineage. He was the fourth son of a Scottish laird, descended from a ducal line, who had married
the daughter of an "ancient Baronet," Sir Robert Pollack. Such a bloodline, as Hamilton remarked
later in life, gave him "better pretensions than most of those who in the Country plume themselves on
Ancestry." It did not, however, give him material well-being. James Hamilton went to the West Indies as a
merchant but gradually succumbed to the langours of the islands; easy-going, lazy, excessively generous, and
no doubt regularly drinking to excess, he went bankrupt and began a long career as a ne'er-do-well and
drifter. Nonetheless, he instilled in Hamilton a pride of ancestry and, as a man of fine Celtic imagination
who dreamed and planned even if he failed to execute, he doubtless aroused in his son a high level of
Hamilton's parents met on Nevis
after Rachel's return and began a cohabitation that lasted more than fifteen years. They had two sons; James
was born about 1753 and Alexander on January 11, 1757. When Hamilton was two, Lavien obtained a divorce from
Rachel, and it seems likely that James and Rachel then went through a marriage ceremony. If so, they were in
for a surprise, for the terms of the divorce precluded Rachel from ever remarrying. They may not have learned
this until 1765, when the family went to St. Croix, James Hamilton having been sent by his mercantile employer
to collect a debt there. Possibly that explains what he did next: he remained a few months, collected the
debt, then sailed for the island of St. Kitts, leaving the family behind. He stayed in touch for a while, but
he never got around to returning.
Rachel managed. She rented a house
from the merchant Thomas Dipnall and in it opened a retail store, selling food and other imported items to
local plantations. She bought her goods on credit from Dipnall and from David Beckman & Nicholas Cruger, a
wholesale import-export firm recently established in Christiansted by two young New Yorkers; she kept her
books in good order and made her payments punctually. The boys also went to work, Alexander for Beckman &
Cruger. No doubt he served only as an all-purpose flunky at first, but it is safe to assume that he rapidly
acquired a solid grounding in the rudiments of wholesale and retail trade, both foreign and domestic. Thus
Hamilton's personal indifference to property was tempered by a hard-nosed realism about credit and accounts.
Rachel also saw to more bookish training. She had Alexander at an early age in school run by a Jewish lady,
and he could repeat the decalogue in Hebrew when so small that he gave his recitations "standing by her
side on a table." Rachel apparently loved books, for she acquired thirty-four of those rare treasures
herself; and though young James was not especially interested, Alexander probably read them avidly. He also
became reasonably fluent in French.
Then the World of childhood
suddenly came crumbling down. In February 1768, Rachel died of a tropical fever. Peter Lavien claimed and
obtained her estate, leaving his half-brothers penniless; and it became clear that Hamilton's father, gone two
years now, was not coming back to take care of his sons. They became the ward of Peter Lytton, Rachel's
nephew, but in 1769, grieved over the death of his own wife, Lytton committed suicide. The others of Rachel's
relatives went broke or left St. Croix. Young James was apprenticed to a carpenter and moved in with his
master. Alex is said to have been taken in by Thomas Stevens, father of his boyhood chum Edward Stevens.
At the age of nine Hamilton's
prospects had surely seemed boundless, for one can imagine the fanciful future James Hamilton had painted for
his precocious son. At the age of twelve he had no apparent future at all, and from then onward he had no one
on whom he had a right to rely but himself.
He was, it is true, remarkably
self-reliant. He continued to work for Beckman & Cruger and was increasingly trusted with managerial as
well as clerical functions. When Alex was fourteen Cruger took a trip to New York for his health and left
Hamilton in charge for several months; the boy bought and sold cargoes and gave orders to sea captains with
the authority of a seasoned merchant. Meanwhile, his circumstances afforded time for reading as well as access
to books, and he read whatever he could lay his hands on. His reading reflected his parental mix: his
favorites were Pope (he wrote idyllic poetry himself) and Plutarch.'s Lives of the Noble Grecians and
Romans, which he devoured along with the firm's accounts and treatises on mathematics and chemistry. As he
read, he improved upon a capacity for total concentration and an ability to master complex subjects rapidly.
But it is not easy being a frail
little boy, having nobody, in a world in which the privileged few live in idle luxury from the labor of Negro
slaves who outnumber them more than ten to one; and the difficulty is not lessened when one believes that, by
right of birth and talent, one deserves a better lot. Possibly Hamilton felt betrayed and deserted by his
parents, but there is no evidence that he did so. There is abundant evidence that he resented his fate, that
he attributed it to the injustices of the socio-legal system that ordained it, and that he was fiercely
determined to overcome it.
And thus, with a sense of otherness
that attends the truly gifted, the boy knew he was destined for greater things. He never ceased to dream of
grand and heroic accomplishments, but he tempered his dreams with regular habits, reliable behavior,
systematic and persistent application, and constant attention to self-improvement. He despised laziness,
disorderliness, unpredictability, impropriety, procrastination, drunkenness, sloth - the ways of the islands
and, as he would come to believe by 1779, the ways of most Americans as well. His own moral code became the
opposite of all those characteristics; and in that sense, though Hamilton was by no means a prude, he was
emphatically a puritan. Indeed, when he found his life's calling, it would be to refashion his countrymen into
moral beings, as he understood morality.
Education in the Legal Arts:
Most importantly, he
learned an elementary fact about the law which, applied on a larger scale, would constitute a new idea in the
art of government. Blackstone had defined the law as "a rule of civil conduct prescribed by the supreme
power in a state, commanding what is right and prohibiting what is wrong"; but every practicing attorney
knew that in operation the law was less a matter of commands and prohibitions than of procedures. Hamilton was
the first statesman to perceive that this characteristic of the law could be consciously applied not merely to
bringing government under law through a constitution but to the grander goal of transforming society. He saw
that one could best combine freedom and energy in a people, and infuse them with industry and love of country,
by establishing the ways that things be done rather than trying to order what was to be done.
Hamilton had no occasion to specify
his plans for America until he became secretary of the treasury, but his constitutional principles were clear
in observations he made during and soon after the convention. His conception of the nature of government and
its relation to society, greatly influenced by Hume and Vattel, was different from that of most Americans.
Hume rejected Montesquieu’s widely held proposition that the spirit of a people determined its government on
the grounds that laws and institutions were far more important than "spirit," and that a people
received its "manners" and morals and "national character" from the example of
"people In authority,’ anyway. On much the same grounds he rejected the Idea of the economic basis of
politics—the dictum, associated with John Locke and fully developed by the Scottish legal philosopher and
historian John MilIar, that government was Instituted primarily to protect property and therefore "power
follows property." Power followed property, said Hume, only if a society’s institutions permitted it to
do so or channeled activity in that direction. Hume rejected Locke’s thinking in another crucial respect.
Locke Insisted that the origin of all just governments was in a compact between governors and governed, and
that the duty of the governed to obey the laws arose from the obligations of that contract. That was nonsense,
Hume scoffed; most governments originated in force or fraud, and the reason for obeying them was "because
society could not other-wise subsist." On all three points, the positions of Montesquieu and Locke
were so generally accepted in America as to amount to clichés, if not to holy writ, and on all three points
Hamilton followed Hume in rejecting them.
In regard to the objectives of
government, Hamilton’s views were also unorthodox, paralleling as they did the ideas of Vattel. Virtually
every member of the convention held that one primary end of government was the protection of liberty and
agreed with Madison’s Lockean statement that the other primary objects of civil society, and thus of
government, "are the security of property and public safety." Hamilton took a much more positive
position. Paraphrasing Vattel, he declared that the ends of government were three: (1) providing for "the
great purposes of commerce, revenue, [and] agriculture"; (2) facilitating "domestic tranquility
& happiness"; and (3) establishing "sufficient stability and strength to make us respectable
To be sure, property and liberty
were both essential In Hamilton’s scheme of things. He considered an unequal distribution of property to
arise inevitably from liberty in any society where industriousness was encouraged, and he believed that that
inevitable tendency, in turn, was a bulwark of continued liberty. It had been pointed out by another Scotsman
whose work Hamilton studied, Sir James Steuart, that modern commercial society was "a better scheme for
limiting the arbitrary power of princes than all the rebellions that were ever contrived." As to liberty,
that was equally essential. He "trusted he should be as willing a martyr to it," Hamilton said, ‘as
any man whatsoever," and all who knew him knew he meant it. But unlike most Americans, he had ceased to
regard the protection of liberty as an end of government. Rather, he had come to regard liberty as an
indispensable means to the attainment of desired political ends. By turning tile equation around, by making
political liberty the activating principle rather than an objective of government, he would render it far more
secure, for it would no longer depend upon the goodness of anyone, in government or out.
That idea, inferred from but not
explicit in Home’s writings, was fundamental to Hamilton’s thinking. He shocked many of his colleagues in
the convention by endorsing Hume’s judgment that "corruption"—the kings power to influence
Parliament by appointing its members to lucrative or prestigious offices—was essential to the equilibrium of
the British constitution. That judgment was in keeping with Hume's notion that men in government must be
supposed corrupt, that they could be counted on to act in the public interest only if doing so squared with
their greed or love of power and position. Endorsing the principle was as far as Hamilton went in the
convention, but he had evolved a much subtler idea than Hume’s as to the way the principle could be applied.
It was that a "wise government" could arrange the details of administration in such a way that, if
the people at large were at liberty to follow the passions of private ambition and avarice—indeed, were
expected and encouraged to do so—what they did would necessarily contribute to the welfare of the public.
Moreover, because his system would reward people for honesty and diligence in pursuing their interests, it
would in time actually make them more virtuous.
Hamilton's assigned duty, upon
becoming minister of the nation's finances, would be to devise a way of managing the Revolutionary War debts
so as to place public credit upon firm foundations. Formidable though the task was, Hamilton conceived of it
not as a goal but as a vehicle for reaching a larger goal. In a sense his objective was a fairly common one in
the eighteenth century, though hardly one for commoners. Like the enlightened despot Charles Frederic of
Baden, Hamilton proposed to make his countrymen into "free, opulent, and law-abiding citizens, whether
they liked it or not"; like the Prussian philospher G.C Lamprecht, who drew up a social blueprint for
another benevolent despot, his master Frederic the Great, Hamilton set for himself "the task of making
the citizens in every regard more well-behaved, healthier, wiser, richer, and more secure." Specifically,
he proposed to use his administration of the public finances as an instrument for forging the American people
into a prosperous, happy, and respected nation.
Had Hamilton been a despot such an
undertaking would have been arduous enough. Within the framework of a republic, wherein government rested upon
the consent of the governed, the barriers were well-nigh insurmountable. The greatest general obstacle was
inertia: the American people, who tended to think of themselves as God's chosen, had no urge to be remade in
Alexander Hamilton's image. The greatest specific obstacle was interest: the oligarchs who dominated the
American republic by the grace of the existing rules were of no mind to have those rules changed.
The existing rules defined
"the people" in a fashion that excluded most of them. Of the roughly 4 million Americans, nearly
700,000 were slaves; of the remainder half were female and half were children under sixteen. Slaves, women,
and children had legal rights to life, but slaves had almost no rights to liberty or property, women and
children had few, and all three groups were denied a voice in politics. Nor was every white adult male allowed
to participate in choosing those who governed him. Nearly half were disfranchised by property qualifications,
and others were effectively disfranchised by distance from polling places, which were often located in county
seats, a day’s travel over primitive roads and trails. In the most important elections Americans had ever
known, those for delegates to the state ratifying conventions, about 160,000 people voted—one-twenty-fifth
of the population.
And the limitations on rights and
on voting were only the beginning. More important were the structure of power and the restrictions upon access
to it. Despite the lip service paid to the theory of checks and balances, power was in fact exercised directly
in most places. In state governments it resided with the legislatures, and locally it was the province of
magistrates—boards of selectmen in the towns of New England and justices of the peace in the counties of the
South. Pennsylvania permitted all "taxpayers" to hold such offices, but elsewhere the property
restrictions were larger, ranging from twenty-five acres of improved land for eligibility for a seat in
Virginia’s assembly to £2,000 ($8,560) for a seat in the South Carolina senate.
Thus were status and power
monopolized, in most American communities, by a handful of intermarried families which, for the most part,
were closed to newcomers: except through birth or marriage, precious few entered the ranks of the squirearchy
that dominated rural New England, the manor-lord aristocracy of New York, or the slave-plantation gentries of
Maryland, Virginia, and South Carolina. A generation or two earlier, American society had been more nearly
fluid, but except in the cities the gates to wealth and power had long been closing. In Virginia, for
instance, nearly all members of the richest hundred or two hundred families who dominated state and local
government in 1790 bore the same names as the people in power in 1750.
The key to this political situation
lay in ownership of the land and in American attitudes about land. Most Americans shared Chancellor Robert R.
Livingston’s view that land was the legitimate source of wealth and status, and their laws and institutions
reflected that view. The property qualifications for voting and officeholding were not just any property;
normally what was required was "real" property, land and improvements. Moreover, the value of land,
for purposes of taxation as well as politics, was not its market or appraised value but its "fair"
or intrinsic value—a concept rooted in feudalism. It is true that most American families, possibly 80
percent of the nonslaves, owned their own farms. It is also true that in the United States, in contrast to
Europe, land could be bought and sold as a commodity, and that during and after the Revolution many states
liberalized their land laws, ridding them of feudal vestiges and making the buying and selling of land still
easier. Except in parts of New England, however, most of the land belonged to the few; in the older areas of
the South, 10 or 15 percent of the white families owned upwards of two-thirds of the land. As for the legal
reforms designed to make a freer market in lands, those did not serve to redistribute land to smaller holders.
On the contrary, they mainly helped landed people gain larger quantities of it.
Hamilton had nothing against a
hierarchical and deferential social order. He thought such an order natural, desirable, and, in any
politically free society, inevitable. Furthermore, he abhorred the leveling spirit. But his detestation of
dependency and servility was stronger yet, for those were contrary to his very idea of manhood, and the
American system of pluralistic local oligarchies made everyone dependent upon those born to the oligarchy. He
hated the narrow provincialism that the system nourished and fed upon; and he resented, as only a natural-born
outsider can, the clannishly closed quality of the system. Most objectionable of all was that the system
failed to reward industry—industry in the sense of self-reliance and habitual or constant work and effort.
Accordingly, though Americans everywhere were prone to praise the virtue of hard work, the fact was, as
Hamilton said, they "labour less now then any civilized nation of Europe." Certainly devotion to
work was not to be found among slaveowners, nor among their slaves, nor among the Scotch-Irish herdsmen who
dominated the interior uplands, nor among the majority of yeoman farmers. Orderly and systematic attention to
business was likewise missing among the great majority; when Hamilton attempted to gather information about
the relative profitability of agriculture and manufacturing, he was able to find few farmers who knew even
approximately how much they had planted, their crop yields, their revenues, or their costs.
Nor, as matters stood, was any of
this likely to change through the natural operation of market processes, for the market was not free. State
and local regulations hampered both the production and the sale of goods. The new states continued the English
practice of regulating public markets to prohibit what Blackstone called "offenses against public
trade," which included forestalling ("buying or contracting for any rnerchandize or victual coming
in the way to market"), regrating (buying a commodity "in any market, and selling it again in the
same market"), and engrossing (acquiring "large quantities of corn or other dead victuals, with
intent to sell them again"). Beyond that, the interest on money, the price of bread, the fees of millers
and lawyers, and a host of other activities were fixed by law, and the states had enacted rnercantilistic
systems for the inspection of goods destined for international trade. Only in the Lex Mercatoria— the
established rules and customs governing the international exchange of commodities and of bills of exchange,
notes, and other negotiable instruments—was economic activity free of government regulation.
Therein lay the reason Hamilton
could believe it possible to bring about fundamental change through administration of the nation’s finances.
The Lex Mercatoria was consistent with Hamilton’s notions about liberty, industry, justice, and honor,
because it was built upon free contractual relationships. It governed all commercial paper transactions, and
if the public debt could be transformed into a species of paper money, Hamilton could see to it that the
spirit of the Lex Mercatoria would govern that, too. Since the public debt was so large, amounting to many
times more than all the "hard" money in circulation, its monetization could infuse the whole of
American society with that same spirit.
Hamilton’s method for bringing
about the monetization of American society, against its preference and yet with its approval, eluded his
contemporaries: otherwise it could not have been done. To be sure, some of his techniques were fairly obvious.
He solicited cooperation by appealing to self-interest, on the ground that it was easier to harness human
nature than to fight it, check it, or change it. He applied the stick as well as the carrot-—the people, he
said, must feel the sting as well as the benefits of government—for he understood that an excess of nominal
freedom in America, meaning a want of lawful government, perpetuated a social system in which most people were
actually less than free. Again, he managed things through an artful mixture of action, example, and illusion.
But these were only techniques. The genius of his system lay far deeper, in his idea of establishing the
procedures by which people interacted, rather than attempting to ordain what they should do.
His conception was elegant in its
simplicity. He would construct efficient fiscal machinery, make it beneficial to everyone, and interlock its
operations into the workings of the economy. Imperceptibly, the people would come to find it a convenient, a
useful, and finally a necessary part of their daily lives, and a stimulus to industry as well. That
accomplished, everyone must comport himself in accordance with the rules by which the machinery of government
itself functioned, and it would be almost impossible to dismantle the machinery short of dismantling the whole
How things are done governs what
can and will he done: the rules determine the nature and outcome of the game. That was the heart of
Hamiltonianism. It was a concept as essential to the art of free government as Ockham’s Razor was to the
philosophy of logic.
At every step along the way,
Hamilton paid meticulous attention to the details of how things were done. The first step, the writing and
ratification of the Constitution, had been taken. The next three were to ensure that Washington became
president, for the aegis of his prestige would be essential; to see that the Treasury Department was properly
constituted, for otherwise the ministerial function could not be performed; and to obtain his own appointment
as head of the Treasury. Once Hamilton was in office, his real work would begin, and that, too, would unfold
in three major phases. He would work out a way of servicing the public debts that would stabilize their value
and thus make them liquid capital; he would use some of that capital to establish a national banking system;
and he would direct the flow of the remaining capital into permanently productive channels, lest it be
dissipated in the purchase of consumer goods or in land speculation.
Triumph and Trouble: 1791:
Hamilton’s efforts during the
fall of 1791 were directed mainly toward executing the third step in his plan to nationalize, monetize, and
energize American society. The objective was to promote industry, both in the sense of industriousness and in
the sense of large-scale manufacturing. He had two specific means in mind: to transform the paper capital
created by his fiscal policies, or as much of it as possible, into productive capital, and to persuade
Congress to promote manufacturing with a broad system of protective tariffs, subsidies, and similar
Transforming the capital proved
easy, at least at first. Believing that American businessmen were moved largely by a "spirit of
imitation," he set out to provide an attractive example. With the help of Assistant Secretary Tench Coxe
and the backing of several entrepreneurs in New York and Philadelphia, he proposed to create a corporation,
the Society for the Encouragement of Useful Manufactures (commonly called the S.U.M. by historians and the
Manufacturing Society by those involved in it). The encouragement of manufacturing in the United States had
long been regarded as vital to the public interest, as Hamilton wrote in a prospectus for the corporation, but
so far the dearness of labor and the want of capital had prevented it. Recent developments in the use of
machinery could overcome the first obstacle, provided that British law preventing the export of machinery and
the emigration of skilled workers could be circumvented. As to the second obstacle, subscriptions to capital
stock could be made in certificates of the public debt which, after partial exchange for stock in the Bank of
the United States, could be pledged as collateral for specie loans abroad. Once organized, Hamilton believed,
the company would have "a moral certainty of success" in the production of paper, pottery, brass and
iron ware, and a variety of textiles.
As for obtaining the necessary
corporate character, Hamilton thought almost every state would be eager to grant one, but that New Jersey
would probably be the most desirable location. It had an abundance of cheap and easily tapped water power at
the falls of the Passaic; it was thickly settled and had access to cheap provisions and raw materials; it had
neither extensive commerce nor vacant frontier lands to be peopled and thus could feel "no supposed
interest hostile to the advancement of manufactures." It was unnecessary for Hamilton to add that, being
located between New York and Philadelphia, New Jersey was well situated for attracting investors in those two
cities. It would have been politically imprudent to add, though Hamilton had it in mind, that a location close
to New York City would help induce the Bank of New York to be generous in making accommodation loans to the
The plan met with a warm reception.
Merchants, brokers, and speculators were interested from the outset, and the magic of Hamilton’s name
together with the effects of William Duer’s salesmanship ensured that investors would be forthcoming.
Hamilton proposed an initial stock offering of $500,000, to be increased ultimately to $1 million; when
subscriptions were opened in the fall, $600,000 in stock was sold almost immediately. Moreover, the market
value of the stock doubled within a month. Similarly, steering a bill of incorporation through the New Jersey
legislature was a breeze, thanks partly to the efforts of Governor William Paterson, after whom the
Manufacturing Society’s new factory town would be named. The charter was a generous one, vesting the society
with monopoly status and exemption from taxation.
A weakness in the plan would soon
become visible. A controlling interest in the company was bought up by a syndicate consisting of Duer, Walter
Livingston, Alexander Macomb, William and J. Constable, John Dewhurst, Benjamin Walker, and Royal Flint. These
respected businessmen would prove to be little better than rich and/or wellborn versions of the unsavory Mr.
But Hamilton’s model corporation
seemed off to an auspicious start, and he turned his attention to his third great state paper, his Report on
Manufactures. In the report Hamilton revealed at last the full range of his program for making the United
States a prosperous, secure, and happy nation. Underlying the whole plan was his conviction that none of these
three ends of government was obtainable unless Americans fundamentally changed their ways. He believed the
country could achieve prosperity and safety only if it broadened its economic base to include manufacturing as
well as agriculture and commerce, and he was "morally certain" that it could be happy only if its
people were infused with the spirit of industry, regularity, order and improvement.
The report begins with a rejection
of the agrarian ideal. Knowing that he was dealing with a set of deep-rooted prejudices shared by the vast
majority of Americans, Hamilton trod softly at first. Instead of considering the emotionally laden ideal
directly, he started obliquely with an attack upon an economic theory that had been employed to justify it.
The French physiocrats, following the lead of a doctor named Francois Quesnay, had developed a systematic body
of thought which held that land, or agriculture, was the source of all wealth. The physiocrats maintained that
only agriculture produced a net surplus over the costs of production, and that all nonfarm labor was
"sterile," since it merely changed the products of the land into consumable forms and added nothing
to those products except the direct value of the labor. Fanciful as the theory was, it gained wide currency
and became, in agrarian dogma, the economic counterpart of the political and social doctrines of Bolingbroke.
(As Hamilton learned in doing his research for the report, few American farmers knew whether farming was more
or less profitable than other enterprises, for almost none kept any records. The lack of information did not,
however, prevent them from having opinions.)
Hamilton demolished the
physiocratic theory by quoting and paraphrasing at length from Adam Smith’s Wealth of Nations. That was a
shrewd approach, for the Scots economist’s free-trade doctrines were highly respected in America, appealing
to agricultural and commercial interests alike. Shrewd, too, was Hamilton’s reserve in drawing conclusions
from Smith’s arguments. He was not contending, he said, "that manufacturing industry is more productive
than that of Agriculture," only that both were productive, probably about equally. Having demonstrated
that, he went on to show in a series of analyses and examples that the development of manufacturing would
benefit the farmers themselves. Domestic manufacturing establishments would provide the farmer with cheaper
goods and create a more profitable outlet for his produce. Besides, the existence of factories where cash
wages could be earned would "afford occasional and extra employment to industrious individuals and
families, who are willing to devote the leisure resulting from the intermissions of their ordinary pursuits to
collateral labours, as a resource of multiplying their acquisitions or their enjoyments." And for the
less industrious, for the husbandman who was immune to the lure of "a new source of profit and support
from the encreased industry of his wife and daughters" and for "persons who would otherwise be
idle," Hamilton would provide an extra incentive. He suggested that a "Motive to greater exertion in
any occupation" could be created by raising taxes—not so high as to discourage industry by engendering
despair, but high enough so that everyone would have to work in order to pay them.
Having used Smith in his rejection
of agrarianism, Hamilton next rejected Smith’s own central argument, that economic activity is regulated by
natural laws and is most beneficial when government does not interfere with its workings. Insofar as this
implied free trade, or the taxation of trade only for purposes of revenue and so moderately as not to
interfere with its flow, Hamilton could endorse noninterference as an ideal; but as a statesman and not a
theorist he saw that it was unrealistic in practice. The nations on whom the United States depended for
markets and manufactures were committed to mercantilism and if the United States followed a free-trade policy
without reciprocation abroad, she would merely increase the disadvantages under which she traded. As Necker
put it, "all those hypotheses which are founded upon a general freedom of commerce, are chimerical
propositions; the powers who would lose by this freedom would never adopt it, and those who would gain by
it," if they should introduce it to set an example, "would imitate the folly of a private
individual, who in the hope of establishing a community of effects, suffered all his neighbors to share his
patrimony." Hamilton agreed entirely with Necker’s view.
But Hamilton also rejected Smith’s
doctrine of noninterference in its broader sense—that human industry, "if left to itself, will
naturally find its way to the most useful and profitable employment." In doing so he was influenced by
both Necker and Hume, but in the main his thinking was his own. For Hamilton perceived— as later economic
theorists, befogged by Marxism, failed to see—that social values and habits normally dictate economic
activity, and not the other way around. "Experience teaches," Hamilton wrote in a pellucid and
persuasive passage, "that men are often so much governed by what they are accustomed to see and practice,
that the simplest and most obvious improvements, in the most ordinary occupations, are adopted with
hesitation, reluctance and by slow gradations." Men would resist changes so long as even "a bare
support could be ensured by an adherence to ancient courses," and perhaps even longer. The natural order
of things was for social habits and values to dictate economic norms and for government to reflect the
interplay of the two. Hamilton saw the advantages of turning the formula around, of using government to bring
about economic changes which in turn would alter society for its own benefit.
While rejecting laissez faire,
however, Hamilton was emphatic in his commitment to private enterprise and to a market economy. Primarily that
commitment was moral, not economic. Hamilton believed that the greatest benefits of a system of
government-encouraged private enterprise were spiritual—the enlargement of the scope of human freedom and
the enrichment of the opportunities for human endeavor. "Minds of the strongest and most active
powers," he wrote, "fall below mediocrity and labour without effect, if confined to uncongenial
pursuits. And it is thence to be inferred, that the results of human exertion may be immensely increased by
diversifying its objects." In its own right, "to cherish and stimulate the activity of the human
mind’ was a distinct good. Too, "even things in themselves not positively advantageous, sometimes
become so, by their tendency to provoke exertion. Every new scene, which is opened to the busy nature of man
to rouse and to exert itself, is the addition of a new energy to the general stock of effort. The spirit of
enterprise, useful and prolific as it is, must necessarily be contracted or expanded in proportion to the
simplicity or variety of the occupations and productions, which are to be found in a Society. It must be less
in a nation of mere cultivators, than in a nation of cultivators and merchants; less in a nation of
cultivators and merchants, than in a nation of cultivators, artificers and merchants.
Hamilton spelled out what he
regarded as the proper role of government in the economy of a free society. Except in the "manufactories
of all the necessary weapons of war" which the experience of the Revolution had convinced him was
unreliable in private hands—the means of production should be managed privately and for profit. The function
of government should be to promote a general spirit of improvement. It should reward productivity and punish
dissipation, idleness, and extravagance. Taxes should be designed to encourage industry, never to impede it.
Regulation of productive activity should be confined to inspection to prevent frauds and ensure the highest
quality and marketability of products. If such policies were adhered to, every member of society would gain—the
poor as well as the rich, the farmer as well as the manufacturer and merchant, the South as well as the North
- and the gains would be justly distributed, for rewards would be proportionate to ability, integrity, and
Attack and Counterattack 1791-1792:
...Hamilton was a national hero.
His doings were immensely popular in their own right, and Washington’s sanction made them doubly so.
Prosperity was so widespread that for the first time in memory nearly everybody except the tobacco planters
was able to get out from under debt to Europe. Fresh capital was pouring in from abroad and, together with the
paper capital created by Hamilton’s system, it fueled an unprecedented burst of developmental energy. In New
York the excess of money triggered a mania for getting rich quickly, but elsewhere the money was translated
into tangible improvements. Forty corporations - as many as had been chartered in the colonial and
Confederation periods combined—were chartered by state legislatures in 1791—92, nine of them for banks,
the remainder for manufacturing and for canals, turnpike roads, and water works. Farmers, too, were faring
well, and not just because they were getting good prices for their products. Before the Hamiltonian system was
enacted, Massachusetts and Virginia had been levying a million dollars a year in direct taxes on land,
Connecticut more than $200,000, Pennsylvania $600,000. Almost all these taxes were for servicing public debts,
since the "civil lists" or regular expenditures in each state were nominal. After Hamilton’s
system was adopted, these tax burdens disappeared, and in most places ordinary landowners became as free from
taxation, except for modest local needs, as in the halcyon days before 1763.
Nor was there only prosperity.
Washington, on his tour through the South in 1791, made a point of sounding out the popular mood, especially
in areas that had opposed ratification of the Constitution, and learned that the people "appeared to be
happy, contented and satisfied" with the national government. There had been some opposition to the
whiskey excise, but that had subsided when the law was explained - presumably when people learned that stills
for home consumption were exempt from the tax - and Washington heard no complaining about Hamilton’s other
For his part, Hamilton abhorred
dueling, doubly since the death of Philip, but when negotiations broke down he accepted the challenge and went
through with it. One of his stated reasons was that, given the prejudices of the country, he would be regarded
as a coward if he declined the "interview," and that would end all prospects of public service in
the future. A second stated reason was his belief that he would have to face Burr sooner or later: Burr's
ambition, he was convinced was boundless, and Hamilton knew he must always try to prevent Burr from obtaining
any position of real power. And there was still a third, unstated consideration. The dueling ground was not a
killing ground; it was an arena in which gentlemen proved their honor by facing with courage the possibility
of death, whether by accident or by the baseness of one's opponent. Men of honor fired and deliberately
missed, though they might try to miss closely. That is what Eacker and Price had done in their duel: each had
fired four times and missed, after which they shook hands, each having obtained "satisfaction" that
the other was a gentleman. Hamilton intended to do this in his interview with Burr. It was possible that Burr
would do the same; for one could be unprincipled in politics and immoral in private life, and yet comport
oneself among gentlemen as a man of honor.
The meeting was delayed for various
reasons until July 11. Hamilton went calmly about his business, made out his will, wrote two farewell letters
to his wife, and was noticeably gay on social occasions. That was the way gentlemen behaved. On the morning of
July 11 he and his second, accompanied by a physician, met Burr and his second at a secluded spot in
Weehawken, New Jersey, near where Philip had fallen. By accident or design, Burr's shot struck Hamilton in the
right side and passed through his liver. Hamilton was taken back to the city, where he survived in intense
pain for thirty-six hours. He pleaded with the Episcopal bishop, Benjamin Moore, to administer the last
sacraments, but Moore declined on the ground that Hamilton had never been confirmed as a member of the church
and, possibly, because he had been felled in a duel. After a second call Moore relented. Hamilton repented his
sins, forgave Burr, and committed his soul to his Maker. About two o'clock in the afternoon of July 12, his
Maker took him.
That was not the end of the story.
As Troup had often predicted, it was necessary for Hamilton's friends and admirers to pay his debts and save
his widow and family from penury. But that was not the end of the story, either, nor is it important. What is
important is that the revolution Hamilton had set in train proved immune to the attacks of his enemies, and
thus the United State was spared the fate of every other republic that was established on the American
continents. Instead, it became what Hamilton dared dream it might become - the richest, most powerful and
freest nation in the history of the world.
The realization of that miracle
was, to be sure, resisted. The Jeffersonians labored for a dozen years to tear down what Hamilton built, only
to blunder their way into a war and thereby to discover the necessity of putting it back together again. A
generation later the Jeffersonians’ heirs, the Jacksonian Democrats, tore it down again, with a peculiar
result. In the absence of an effective national government, it became possible for each state to make its own
rules of the game. Those in the South adopted Jeffersonian rules, and their society continued to rest upon the
mystique of the land, upon slavery, and upon the exercise of force without the impartial restraint of law.
Those elsewhere adopted Hamiltonian rules, and their society rested upon the market, free labor, contractual
relationships, and law. The Civil War brought the triumph of the Hamiltonian way, leaving Jefferson’s
beloved South a wretched and accursed backwater. The rest of the nation moved on toward greatness.
For a long time, Hamilton’s
country was appropriately grateful to him: for nearly a century and a half, his Fame seemed secure. Partly his
memory was kept alive by the efforts of his family, who strove diligently to safeguard the place in history he
had earned. Partly he got his deserts because most of American history was written by New England Yankees who,
except for descendants of John Adams, almost uniformly idolized him. For many decades after the Civil War his
niche in the pantheon of American demigods was beneath only Washington’s, if indeed it was not at Washington’s
But the American nation reached the
peak of its greatness in the middle of the twentieth century: after that time it became increasingly
Jeffersonian, governed by coercion and the party spirit, its people progressively more dependent and less
self-reliant, its decline candy-coated with rhetoric of liberty and equality and justice for all: and with
that decline Hamilton’s Fame declined apace.
Though he would have cried for his
country, perhaps he would have been content that his Fame lasted as long as it did. To return to the words of
Hume, "It is a sufficient incitement to human endeavors, that such a government would flourish for many
ages; without pretending to bestow, on any work of man, that immortality, which the Almighty seems to have
refused to his own productions."
Betsey outlived Hamilton by half a
century. When she had long since been a widow, James Monroe, who had long since completed his presidency came
to call upon her. She entered the parlor to receive him. "Monroe rose. She stood in the middle of the
room facing him. She did not ask him to sit down. He bowed, and addressing her formally, made her rather a set
speech - that it was many years since they had met, that the lapse of time brought its softening influences,
that they both were nearing the grave, when past differences could be forgiven and forgotten." Betsey,
still standing, looked at him and replied, "Mr. Monroe, if you have come to tell me that you repent, that
you are sorry, very sorry, for the misrepresentations and the slanders, and the stories you circulated against
my dear husband, if you have come to say this, I understand it. But, otherwise, no lapse of time, no nearness
to the grave, makes any difference. "
It would become the American people
to consider that as a parable.
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