A Republic No More - Jay Cost

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is Hamilton on about here? Return to his broader theory of republican government: the people’s representatives were not to be trusted to perceive the public interest, let alone sacrifice their own parochial desires for the sake of the common good. What was needed was a strong executive, largely free from public meddling, that had the capacity to, in effect, bribe small-minded members of the legislature to do the things that they should otherwise be doing. For Hamilton—a man who never took a dishonest dollar—this is not about venality for its own sake. This is about compelling venal men to do what they really ought to do, anyway.32

      Intentions aside, one can see why Madison would not truck with any of this. In his vision of the new American republic, there were simply to be no special favors whatsoever to be dispensed by the government—no patronage, no sinecures, no insider information leading to vast fortunes. The whole point of his system was to enable factions to rise up to prevent other factions from doing precisely these things, so that the only product of public policy was well and truly public spirited. Corruption was not a tool to be used ultimately for the public good by a natural elite; instead, it was a form of cancer that could pervert otherwise good men into destroying the republic itself. Ironically, the main focal point of the disagreement was none other than their old colonial master: Great Britain. In the old mother country, Hamilton saw an example of republican empire to be emulated while Jefferson and Madison saw a cautionary tale of how a true republic may be destroyed.33

      Thus, what united them in defense of the Constitution was not so much a shared vision of what the new government should be, but rather what it should not be. Both judged the Constitution to be a supreme improvement over the Articles of Confederation, but once the fight to replace it was won, it is not terribly surprising—in historical retrospect, at any rate—that the two would part ways, and indeed become leaders of the political factions that would dominate American politics for the next decade.34

      In the final analysis, it was not so much that the two held views that necessarily contradicted one another; rather, they possessed different priorities that could, and did, come into conflict. For Madison, the ultimate goal of the new government was to balance different factions and produce public policy that was only in the public interest; for Hamilton, the goal was a vigorous government to spur the country on to national greatness. Insofar as these views suggested divergent policy demands, Madison and Hamilton could be expected to turn from allies into opponents. That is precisely what happened, as the public debate turned from ratification to the Bank—a controversial institution that may have been necessary from Hamilton’s perspective, but was anathema to Madison.

      Washington was chosen unanimously to be the nation’s first president, and while his cabinet did not sample from Anti-Federalist sentiment, it drew from a broad spectrum of nationalist political opinion.35 Jefferson—a skeptic of expansive federal power—became secretary of state. Randolph—who refused to sign the Constitution but eventually supported it for ratification—became attorney general. Washington chose for secretary of the treasury his former chief of staff Hamilton, who had grand plans for the office. In Federalist #11, he hopes to make “one great American system, superior to the controul of all trans-atlantic force or influence.”36 The first step in this process was to get a handle on America’s disastrous public finances.

      That would be no little feat, as there were centuries’ worth of precedent demonstrating America’s reckless approach to its debt. Some of this was due to Great Britain refusing to allow the colonies to coin their own money, but the balance of the blame lay with the colonial governments, the first in the world to print fiat paper money. The result was rampant inflation and eventually an insistence by Britain that the colonies cease and desist. The Continental Congress was little better either, printing fiat “Continentals” that quickly became debased; by 1781, a single dollar of specie (or hard currency) was worth a whopping 168 Continental dollars. Farmers and merchants refused such worthless paper, and so the Continental Army was forced to impress supplies, with loan certificates promising future repayment.37 But the impotent national government counted on just $500,000 per year in requisitions from the states during the 1780s, so there was no repayment, meaning the certificates were basically worthless, often snatched up by speculators for pennies on the dollar.38

      All told, the creditworthiness of the United States was very low indeed by the time Hamilton was sworn in as the first secretary of the treasury. This was Hamilton’s top concern because, as he writes in the Report on Public Credit, the nation was “possessed of little active wealth, or in other words, little monied capital” and needed the capacity to borrow on “good terms.”39 Accordingly, he suggests guaranteeing the repayment of existing federal debt, for the federal government to assume the states’ debt loads, and a new tax on alcohol, tea, and coffee.40 This, he asserts, would help the flow of currency, extend trade, promote agriculture and manufacturing, and lower interest rates.41

      In the Report on a National Bank Hamilton proposes the chartering of a national bank, which he argues would have several beneficial effects. First, it would help the nation’s economy, as gold and silver deposited in a bank with good credit can generate much greater capital flows than just their sum in hard coin. Second, it would give the government a reliable resource for borrowing money at favorable rates of interest. Third, it would facilitate the payment of taxes. The Bank, Hamilton proposes, would be largely held by private interests, though the government would supply $2 million of its $10 million capitalization limit via a loan from the Bank itself. The rest would come from private purchases of bank stock, with 25 percent up front in gold or silver and the rest to be paid over time at an interest rate of 6 percent.42

      Finally, Hamilton proffers a vast system of public support for manufacturing, which at this point in the country’s history badly trailed the advances being made in Great Britain. In his Report on Manufactures, he offers a series of justifications to diversify the economic basis of the American economy, from a virtual agricultural hegemony to one where industry had a prominent role to play. This would diversify, sharpen, and streamline existing labor; it would promote the application of time- and expense-saving machinery; it would improve employment opportunities; it would promote immigration; it would provide more opportunities for expression of the people’s creative talents; and it would create new domestic markets for the consumption of foodstuffs. Thus, Hamilton advances tariffs on manufactured items, regulations on exports of vital materials, bounties, premiums, tariffs and tax breaks on raw materials, and more. All of this, Hamilton asserts, would stimulate the people to dedicate time and capital toward manufacturing.43

      Hamilton had submitted all these proposals by December 1791. Considering that this work followed right on the heels of his defense of the Constitution, both as an anonymous author of an estimated fifty-one Federalist essays and as a delegate to the New York State ratifying convention, and that he had done all of this before he turned thirty-five years of age, we can appreciate clearly why Jefferson once commented that Hamilton was “a host unto himself.”44 It was Hamilton above all else who gave the young government energy and purpose during Washington’s first term.45

      Considered in light of Federalist #11, it is pretty clear what Hamilton intended to do. His goal was to harness the natural bounty of the United States, as well as the energetic, intrepid character of its people, to transform the young nation into a world power. To do that, the debt problem had to be solved, interest rates had to be brought under control, the veins of credit had to be opened, and a forward-looking industrial policy had to be implemented. And, in a subtext that runs through all four proposals, he intended to tie the interests of the well-to-do to the success of the government itself. Their private prosperity would hinge on it thriving, and Hamilton adopted the logic of Madison’s large geographical sphere to prop up the republic; he would use the private interests that past philosophers had argued was its greatest threat. But while Madison was concerned about keeping a proper balance between factions, Hamilton was particularly worried about capturing the moneyed class and bending it toward the public good.

      In general, Hamilton believed Americans had to follow the example of their former British

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