A Republic No More. Jay Cost

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СКАЧАТЬ 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 masters, whose economy and military had benefited greatly by a sensible system of public finance such as what Hamilton was offering.⁴⁶ That these ideas, in the main, constituted the economic thinking of the later Whig and Lincolnian Republican parties for the whole of the nineteenth century is a testament to his far-sightedness.

      It also signals his culpability in the rise of partisan politics, for these policies provoked heated backlash, at least in due course. According to historian Ron Chernow, by the summer of 1791 Hamilton had become the “enfant terrible of the early republic, and a substantial minority of the country was mobilized against him.”⁴⁷ There were a host of reasons for this opposition; Hamilton’s proposals tended to favor the Northeast over the West and South, indebted states like Massachusetts over fiscally responsible ones like Virginia, commercial interests over poor farmers, and so on. Even so, these issues, while certainly salient, do not really capture the essence of the critique against Hamilton, which was universal in scope, rather than merely dependent on one’s geographic or socioeconomic status, and was symbolized by the name his opponents chose for themselves—that of the Republicans.

      Today, this party is often called the “Democratic-Republican” Party, to distinguish it from the modern Republican Party and to signal that it eventually became the modern Democratic Party. Here, we are going to avoid this term and stick with “Republicans” or “Jeffersonian Republicans.” “Democratic-Republican” is not generally what they called themselves, and anyway the modern Democratic Party was just one off-shoot from a later split within the Jeffersonian Republicans. The other off-shoot became the National Republican Party for a time, then finally the Whig Party. The Whigs did form the basis for the modern Republican Party.⁴⁸

      The cluster of views that historian Lance Banning calls the “Republican persuasion” did not develop immediately; opposition to the early elements of Hamilton’s plan was present, but usually followed regional lines.⁴⁹ In fact Jefferson—Hamilton’s eventual archrival—helped broker a deal to bring about the federal assumption of state debts. It was only after Hamilton proposed the Bank that the Republicans began to put together a systematic critique.

      Some of their arguments were antiquated; for instance, their commonplace fears of banks as institutions belied a lack of knowledge of public finance and leaned heavily on the simple prejudices of the age. Some were paranoid; for instance, many were convinced that Hamilton and his friends were looking to establish an American monarchy.⁵⁰ Some were too influenced by the hyperbole of Britain’s Country Party; the most radical Republicans were ready, willing, and able to interpret any trifling insult as a portent of the republic’s impending doom.⁵¹ But amidst these unpersuasive claims, the Republicans leveled some extremely cogent assertions that ring true even today. Three interrelated complaints stand out in particular.

      First, in Madison’s view, Hamilton was going against the plain meaning of the Constitution as understood at the time of ratification. Though Madison himself had proposed at the Constitutional Convention a power for Congress to grant charters, such as the Bank’s, the Convention had voted it down.⁵² Moreover, the clauses in the Constitution that Hamilton was using to justify the Bank’s legality (the General Welfare and Necessary and Proper Clauses) were ones that the advocates of the Constitution had assured its opponents during the ratification debate would not lead to unlimited legislative power.⁵³ Many observers at the time, and indeed historians ever since, have strained to reconcile Madison’s constitutional interpretation of the 1790s to his advocacy for vast federal powers in 1787. But that misses the point. Madison had long been worried about the capacity for government—especially the legislative СКАЧАТЬ