Alexander Hamilton’s poisoned legacy

by
David Gordon
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“The Hamilton Scheme: An Epic Tale of Money and Power in the American Founding”
by William Hogeland
New York: Farrar, Straus and Giroux 2024; x + 575 pp.

Most readers of the Mises Wire will be familiar with the account of American history developed in many books by Mises Institute President Thomas J. DiLorenzo. According to him, American history since our founding as a nation has been shaped by two conflicting traditions: one, begun by Alexander Hamilton, favoring a centralized government and the other, best personified in Thomas Jefferson, supporting decentralized government and the rights of the states and local communities. Hamilton favored building up American industry artificially through high tariffs, as well as a national bank and a system of costly “national improvements.” He also supported high government debt to stimulate industry. Jefferson opposed all of these measures. Henry Clay’s “American System” continued the Hamiltonian plan, as did Clay’s follower Abraham Lincoln. In the twentieth century, Franklin Roosevelt’s “New Deal” fits into this paradigm.

William Hogeland, the author of a number of books on the American founding, is much more sympathetic to Hamilton than Di Lorenzo is, but he supports DiLorenzo’s analysis in every detail.

As Hamilton made clear at the Constitutional Convention, he was a radical centralizer:

“He wanted to eradicate the states altogether. He admitted it. He wanted to eradicate them as governments ... [he wanted] to shut down the states and turn them into, at most, regional departments.”

In order to get the elite elements in the national economy to support his centralizing plans, Hamilton had to offer them what were, in effect, bribes:

“So Hamilton, too, was betting — for stakes far higher than the speculators played for. They wanted to get fabulously rich for generations to come. He wanted to author a rich, powerful nation, an empire. The bet was his own ability to channel, direct, and leverage the Money Connection’s bottomless greed to the purpose of creating the economic United States — to him, the United States itself — and make it a global player.”

Hogeland says about the Hamiltonian and Jeffersonian traditions:

“Madison and Jefferson had been framing a critique of Hamiltonian finance in constitutional terms, a philosophy of American government that would become broadly known as Jeffersonian. The philosophy was based on Madison’s notion that the [national] bank violated the Constitution but it had other features too. Jefferson vocally opposed all government chartered companies, known as corporations, for creating monopolies that he believed corrupted relationships between commerce and government. Especially egregious to Jefferson, then, were Hamilton’s efforts at consolidation, which took monopolization to a national level and gave it new power. Jefferson had come to believe that the federal government was restrained, constitutionally, from pursuing any such action.”

Jefferson had a clear program for ending Hamilton’s centralizing schemes:

“Jefferson’s idea of dismantling Hamilton’s system was simple and three-part: repeal all internal taxes, fire all Federalist appointees and employees of the treasury and replace them with Republicans; pay off the Debt as cheaply as possible in a year or two or three. The bank’s twenty-year charter wouldn’t expire until 1811. That heinous violation of republican virtue couldn’t be shuttered yet. All other parts of the machine should be taken down right away.”

Henry Clay’s “American System” followed Hamilton faithfully:

“[Clay] advanced an assertive federal legislative agenda intended to accelerate what observers would later call ‘the market revolution’: a commercial and investment boom, ushering in just the kind of federally supported economic nationhood that Hamilton had been trying to foster.

“Clay promoted this policy as ‘the American System.’ With Congress admitting new western states carved out of the territories, American agriculture was growing fast. Enabled by new technologies, manufacturing took off too. Both expansions were encouraged by assertive federal policies: funding interest payments on the Debt, ... the Second Bank’s serving as a national economic hub; federal support for domestic manufacturing; and a federally supported buildout of interstate canals, roads, and bridges. ... The American System also depended on what had begun as the federal impost and was now called the tariff; a tax on a wide range of imported products. At 38 percent by 1828, the tariff was set high because it was designed not only to support government operations and the Debt ... but also to give a big competitive price advantage to domestically manufactured goods.”

Abraham Lincoln continued Clay’s American System. He regarded Clay as his political ideal:

“But Lincoln’s labor philosophy really combined the [Albert] Gallatinian dream of the free, westering farmer with the Hamiltonian need to operate a consolidated national system in the Henry Clay mode. ... The policy dovetailed all too easily with Indian Removal — after the Civil War, U.S. policy for handling the Sioux, President Ulysses S. Grant and General William Tecumseh Sherman agreed, was extermination.”

In the twentieth century, Franklin Roosevelt presented himself as a Jeffersonian and denounced Hamilton. But in the guise of anti-Hamiltonianism, he followed Hamilton’s plans for a centrally controlled national economy:

“‘If the glaring contradictions in forcing Jefferson to serve as the face of a nationally pervasive federal government, consolidating public welfare and economic planning in a host of massive bureaucracies, had been the kind of thing that bothered FDR, he couldn’t have revolutionized the country, but some of his supporters did try to reconcile facts with history. Repeating [Herbert] Croly’s ‘Jeffersonian aims by Hamiltonian means,’ they gave the New Deal a feeling of Henry Clayish founding American compromise.”

So far as I can determine, Hogeland has not read DiLorenzo, whom he does not cite. It is amazing how closely the two historians agree in their account of the Hamiltonian tradition.