In the Bank debate, the consensus of the Framers coalesced against use of the substantive intent of the Philadelphia convention.
So returning to Thomas McCraw’s The Founders and Finance, McCraw’s interpretive concept around which he builds his narrative is the idea of the “immigrant,” but not just any immigrant. Rather, he has highlighted the traits of a select few: those with commercial and financial experience and understanding. This group, he points out, had particular facility with numbers. They were at home with account books. They understood commercial instruments. They could handle all manner of complex transactions.
Robert Morris, Alexander Hamilton and Albert Gallatin were exemplars of this type. But aside from their technical proficiencies, McCraw finds one further trait to be of paramount importance: a national perspective on their adopted homeland. (363) And among this select few, it is Hamilton who takes the lead, rising to the level of brilliance.
McCraw admits his favoritism. (342) To the extent that he approves of Gallatin, it is in direct proportion to Gallatin’s agreement with the first Secretary of the Treasury. In particular, our author endorses Hamilton’s call for active and energetic government intervention as necessitated by the exigencies of the day. Where Gallatin agrees with him, such as in the case of a national bank or fostering domestic industry, McCraw approves. Where Gallatin counsels otherwise, he is seen as political. This makes for an engaging and heroic narrative, but it should be taken as an invitation to argue—not a pronouncement on facts. Was Hamilton’s activism really a necessity?
Among the many points endorsed by the author is the notion that a young nation needs the financial infrastructure to amass the capital necessary to secure its political and economic independence. This objective was made more difficult by a burdensome war debt. To my mind McCraw misses here a wonderful opportunity to press the historical question by evaluating more evenly the alternative views of Hamilton’s contemporaries. It isn’t that he can’t hold to a Hamiltonian interpretation, but let us have the full picture.
Instead, McCraw has assumed what is too easy to assume, what has in fact been assumed by most writers on the topics of banking and finance since Bray Hammond’s classic Banks and Politics in America (1957). “The federal government, “ McCraw writes, “was going to have to take a stronger role, especially in finance. Otherwise, Hamilton believed, the United States could not survive as a nation…”(55) And he fairly endorses that view when he observes that it was Hamilton’s policies that promoted “long-term business confidence, setting the stage for the release of immense economic energy.” (132)
Towards the end of the book, McCraw notes that Hamilton favored more centralization than Gallatin. He tended towards the view that “systematic government guidance of private decision making” was necessary. Gallatin, on the other hand, tended more towards laissez-faire and a minimalist conception of intervention, though not so much as Madison or Jefferson. Ultimately both men alighted somewhere in the middle, with frequent government interventions at all levels of city, county, state and nation.(375-376) The key here for McCraw is to recognize that both were doing what was “best to develop a diversified national economy.”(361) Yet, by accepting so readily Hamilton’s take on the matter, we lose a sense of just how radical was his intellectual break with his contemporaries.
Hamilton’s views in his earliest revolutionary writings reveal a fairly orthodox Whig. He was concerned about corruption from the Imperial center—from Parliament and King. He counseled resistance for the sake of preserving liberty. It was his experience as Washington’s aide-de-camp that brought on a different perspective: the miserable conditions of the army, poor supplies and rations, the bickering of Congress, the indolence and lack of coordination among the states. His embrace of activist national government was fully expressed shortly after his resignation from the army in the “The Continentalist” essays of 1781-82. He certainly did suggest that independence hung in the balance as McCraw notes, but there was a bit more to it than that. In fact that really was the least of his fears, if we read the essays more closely.
It really was not the idea that without the powers to regulate trade; to consolidate the national debt; to actively manage the nation’s finances and currency; to charter a national bank, that everything would just fall apart into chaos and ruin. It was rather, that muddling through might just work—that largely, internally self-governing states would eventually handle their own debts—that Congress would continue restrained in its abilities to set grand strategy or, yes, to make war. That, in fact, we would be content just to settle back into our old habits—the old ways of self-government that had preceded the troubles with Parliament—our comfortable colonial prejudices and proclivities.
This comes through brilliantly in the last Continentalist essay where Hamilton concluded by contrasting the most likely outcomes:
There is something noble and magnificent in the perspective of a great Federal Republic, closely linked in the pursuit of a common interest, tranquil and prosperous at home, respectable abroad; but there is something proportionably diminutive and contempt able in the prospect of a number of petty States, with the appearance only of union, jarring, jealous, and perverse, without any determined direction, fluctuating and unhappy at home, weak and insignificant by their dissensions in the eyes of other nations. Happy America, if those to whom thou hast intrusted [sic] the guardianship of thy infancy know how to provide for thy future repose, but miserable and undone, if their negligence or ignorance permits the spirit of discord to erect her banner on the ruins of thy tranquility!
Earlier in the series, Hamilton had referenced the grand powers—the English, the French, the Dutch. To be respectable was to stand on a similar footing of power on the world stage. This was a vision fitting for one with ambition, but it wasn’t exactly the same as the ends of American independence as originally conceived.
The Revolution was fought to preserve liberty, to ensure rights originally possessed as Englishmen, but which, nevertheless, were ultimately derived from nature and Nature’s God. It was certainly to ensure self-government, but in the form the colonists had originally understood as the true basis of the violated imperial constitution: a very limited confederal authority composed of largely self-governing states.
Here Hamilton’s vision was strikingly different. It was not to preserve the right old order of liberty as Americans had experienced it for the last century and a half, but this was merely the first stage in history! America was in its “infancy.” As infants, Americans needed guardians. To be certain, the parent/child analogy had been used by Revolutionary writers countless times before, but the difference with these earlier references (and here Paine comes to mind) was that they assumed the Colonies had come of age. Not so, said Hamilton.
To Hamilton and other aspiring purveyors of national guardianship, America was a baby still. For such, leaving things alone—leaving things be—most especially in commerce and finance—was simply not permissible. And so he entered on a formidable task indeed: To limit the growing influence of all such arguments of forbearance and patience. He had the chutzpah to take on no less a mind than Adam Smith himself. McCraw passes over this moment too quickly because he agrees, like so many of us today, with the essential outlines of Hamilton’s position:
In the era of Hamilton and Gallatin, the American economy was moving toward a modern capitalist system, which matured [emphasis added] during the nineteenth century. (350)
Yes—Of course. A more compelling and interesting picture needs more of the other side.
And so let’s really give Hamilton his due…
…in the next post.