Excerpts from "Alexander Hamilton, A Biography" by Forrest McDonald

printed with permission by W.W. Norton & Co., New York


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 diligent.

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 expectations.

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.

Constitutional Revolution:

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 abroad."

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 society.

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 inducements.

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 Manufacturing Society.

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. Reynolds.

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 industry.

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 measures.


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 right hand.

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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