The Elbert Files: A new look at Hamilton
I admired Alexander Hamilton long before biographer Ron Chernow and Broadway playwright Lin-Manuel Miranda made our flawed founding father into a 21st-century icon.
As Aaron Burr sings at the opening of Miranda’s “Hamilton”:
“How does a bastard, orphan, son of a whore and a Scotsman, dropped in the middle of a forgotten spot in the Caribbean by providence, impoverished, in squalor, grow up to be a hero and a scholar?”
Today, there is little argument that Hamilton was the smartest and most driven founder. After serving as George Washington’s indispensable man during the Revolutionary War, Hamilton became the rule-writer in chief when it was time to create a new nation.
He didn’t write the Constitution, but he did write most of the arguments that resulted in its adoption, even after many of his own ideas were passed over. He wrote most of the rules of legal procedure that guide our judicial system. (Someone had to do it, and he was, after all, by his own admission the new nation’s smartest lawyer.)
When Washington became president in 1789, he gave Hamilton the most difficult task facing the new nation: putting in order the finances of a busted confederation of 13 widely divergent states.
As Washington’s treasury secretary, Hamilton wrote a series of reports beginning in 1789 that effectively created our modern economy.
His “Report on the Public Credit” turned war debts into paper currency, capable of circulating throughout the country where they acted as capital for new investments and inventions.
Next came his “Report on a National Bank.” It stirred up controversy, but with Washington’s support it resulted in the creation of the nation’s first central bank, which lasted from 1791 to 1811.
Hamilton’s “Report on the Establishment of a Mint” followed and resulted in the creation of the U.S. dollar; to combat smuggling, he created the U.S. Coast Guard.
Finally on Dec. 5, 1791, Hamilton submitted his most far-reaching report, the 32,000-word “Report on the Subject of Manufacturers,” a road map for converting the young nation into a world powerhouse.
Christian Parenti, associate professor of economics at City University of New York, explores that final report in his 2020 book “Radical Hamilton: Economic Lessons From a Misunderstood Founder.”
To be clear, few of Hamilton’s manufacturing recommendations were implemented during his lifetime. In fact, two years before his fatal 1804 duel with Burr, Hamilton wrote to a friend that “this American world was not made for me.”
But his manufacturers report had far-reaching consequences.
The report is rarely quoted, but anyone who reads it will recognize a powerful road map for the industrialization of not only the United States but Europe and Asia, as well.
Particularly compelling were the 11 “means proper” he suggests for creating and controlling a successful capitalist economy.
The list includes suggestions for when and how to use controls on foreign trade, including tariffs and embargoes. For example, export bans on farm commodities “ought to be adopted with great circumspection,” Hamilton wrote, a suggestion that the Carter administration should have followed in 1980 when it banned U.S. grain exports to the Soviet Union.
Also discussed was the use of direct subsidies and how to keep subsidies from becoming what we call corporate welfare.
“Hamilton wanted neither to suppress competition nor let markets run wild,” Parenti wrote. “Rather, he sought to manage and use creative destruction” to provide effective government management of the economy.
Hamilton also believed government should encourage new inventions and discoveries. At the state level, he even “suggests legal protection for those committing industrial espionage.”
At one point, Parenti interprets Hamilton’s 18th-century prose as follows: “Never mind the property rights – get the technology.” And while he does not say it, that’s exactly what China has been doing, much to the distress of U.S. industries in recent decades.
The bottom line is that Hamilton, who Parenti says was the first to use the term “capitalist” in print, believed in government regulation.
I’ll write more about that next week.