The Libertarian sect of the Conservative faith devoutly believes in the power of free markets to generate wealth, efficiently allocate resources, reward merit, bridge social classes, and ameliorate all manner of social ills. However, Libertarians often fail to recognize or at least neglect to acknowledge that free markets to not arise out of nothing. Markets, with their reliance on the rule of law, a reliable common currency, and social stability, depend upon strong governments. Ron Chernow’s recent biography, Alexander Hamilton, reminds us just how much American capitalism relies upon the governmental structures created by the nation’s first treasury secretary.
After the American Revolution, the United States (plural intentional) remained a rather loose confederation of states lacking a strong central government not dependent on the largesse of the states. There was not even a common currency. States, like small principalities collected duties as products crossed state boundaries. In many cases, people thought of themselves primarily as Virginians or New Yorkers. The American identity was real, but still secondary. The Articles of Confederation were not working. Economic growth was limited by interstate trade restrictions and a lack of liquidity, and there remained a real potential for the American states to become pawns in the international competition between France and England.
The states convened a convention to make the appropriate modifications, but what emerged was the US Constitution that instituted a comparatively strong federal government with a strong executive. The ratification of the Constitution was not automatic and it required considerable lobbying by Hamilton in New York and James Madison in the Virginia to secure it. The Federalist Papers written primarily by Hamilton and Madison with contributions by John Jay laid out the intellectual case for the Constitution and played a pivotal role in New York’s crucial ratification. Even with the ratification, it took the presidency of George Washington to tie the country long enough for the Constitutional institutions to take tenuous root.
What is less appreciated is how Hamilton used the treasury department to bind the nation together. Hamilton arranged for the assumption of individual state debts by the federal government. This was opposed by southern states like Virginia that had already paid their debts and did not want to subsidize some northeastern states that still retained significant debt. Since the new constitution prohibited interstate customs duties, it was less possible for some states to pay their debts. Hamilton helped negotiate a compromise with Thomas Jefferson whereby the federal government would assume state debts and in return the new federal capital would be moved to the South. With this grand compromise, the economic fortunes of the states became strongly coupled.
The Republicans (later to become the present day Democrats) led by Jefferson still believed in a bucolic agrarian society dominated by patrician farmers like themselves. Manufacturing and financial services were suspect and somehow less ennobling. The Republicans represented a populist movement deeply distrustful of wealth not obtained from the fields. As one wit would have it, the Jeffersonian Republicans did not trust people who earned their income by the furrows, rather than the sweat, of their brows. This philosophy was buttressed by the nearly universal experience of plantation owners in the South. They were typically in debt to British creditors as they tried to simultaneously live the extravagant lives of country gentlemen, while managing not particularly efficient plantations. It is not surprising that those who were land-rich and cash-poor would nurture animosity against creditors and banks
Hamilton, the self-made hero of the Revolutionary War who immigrated to the colonies as an orphan from the West Indies, realized that only through robust commerce would the country become wealthy enough to maintain its political independence. Hamilton’s key contribution was the formation of a national bank and the creation of a national debt. Contrary to the deficit spending that the federal government engages in now, the national debt in post-Revolutionary War America was more akin to present day paper money. Hamilton believed that the debt should be repaid regularly through customs duties, but bank notes backed by the United States government provided necessary liquidity to finance commercial growth. It is additionally ironic that this increase in liquidity reduced interest rates and actually alleviated some of the debt burden born by plantation owners in the South.
Nonetheless, the fact that those in New York grew rich in commerce was resented and many believed that Hamilton must by privately benefiting from his forceful institution of the national bank. After Jefferson became president he had his treasury secretary, Albert Gallatin, carefully comb the US financial records looking for evidence of Hamilton’s perfidy or other fraud. To the disappointment of Jefferson, his treasury secretary found “the most perfect system ever formed. Any change that should be made in it would injure it. Hamilton made no blunders, committed no frauds.”
The country was prosperous and Jefferson wisely retained Hamilton’s bank and government financing structures, griping, “[I]t mortifies me to be strengthening principles I find vicious.” It was not until James Madison became president and allowed ideology to overwhelm prudence that the national bank was disestablished. General discontent from the resulting economic downturn may have contributed to the War of 1812 against the British.
Hamilton, who arguably is the person most responsible for the capitalist country we have grown into, was a champion of a broader interpretation of federal powers than Jeffersonian Republicans. When the Constitution granted the legislature or the executive a general power, Hamilton claimed that Congress retained an “implied powers … necessary and proper” for the exercise of the general power. Jefferson and the Republicans ineffectively argued that since the expressed power to create a national bank was not specifically written in the US Constitution, there was not such power. Hamilton’s interpretation prevailed. If it had not, it is doubtful whether the tiny band of 13 colonies would have remained cohesive enough to become a continental and eventually a world power.
Though rhetorically Jefferson always articulated a small government vision, he was not above the expansion of executive power when he became president. It was Hamilton’s doctrine of implied powers that made possible Jefferson’s Louisiana Purchase. Chernow cites John Quincy Adams apt description of the Louisiana Purchase as “an assumption of implied power greater in itself, and more comprehensive in its consequences, than all the assumptions of implied powers in the years of the Washington and Adams administrations.”
The past two hundred years have seen political parties turn upside down in other ways. Jeffersonian Republicans believed that will of the people as expressed through Congress was the ultimate authority. They did not subscribe to the concept of judicial review of the constitutionality of laws. While modern day liberals must resort to courts to win victories they cannot win at the ballot boxes, their erstwhile champion, Jefferson chafed a judicial review as just one more way the Federalists were thwarting the will of the people. He complained of the “original error of establishing a judiciary independent of the nation.” By contrast, Hamilton believed that the country could survive without an independent judiciary.
Perhaps the saddest part of Chernow’s book is the description of the death of Hamilton in a duel with Aaron Burr, Jefferson’s vice-president, who later hatched schemes to divide the United States. Sadly, Alexander’s death was presaged by the death of Hamilton’s oldest and most promising son, Philip, also in a duel.
As poignant as these parts are, Chernow’s greatest contribution is filling in the history of ideas that served to create US capitalism and the reminding us of the necessity of a strong vigorous government for capitalism. Sometimes, strong governments can enhance and protect liberty. Whereas, Jefferson may be perceived at the champion of the commoner against moneyed interests, it was his political adversary Hamilton that created economic structures that allowed the US to remain free and independent. It was the avidly abolitionist Hamilton who helped create an economic meritocracy, while Jefferson could not match his beautiful rhetoric in the Declaration of Independence that “all men are created equal” by freeing his slaves.
Better Angels of Our Nature
Tuesday, January 18th, 2005With the following words in late in 2001, John Ashcroft strongly criticized those he believed were exaggerating civil libertarian concerns about the Bush Administration’s efforts to protect us from terrorism:
Never a favorite of the Left, John Ashcroft immediately became to de facto poster boy for the rabid anti-Bush Left. The paragraph was seized upon as one more piece of evidence that Ashcroft seeks to crush dissent and paint anyone who disagrees with the Bush Administration as “unpatriotic.” Though the Bush Administration has been careful never to use these terms, we constantly hear and read the faux concern for stifling of honest dissent.
Indeed, the statement does suggest that we need “unity” and some people who disagree with the Administration must be aligning themselves with the interests of terrorists. To then extent that such suggestions are conveyed they are grossly unfair. The judicious use of a single word would have rendered the entire paragraph far less controversial. One need change, “Your tactics only aid terrorists…” to “Your tactics only unintentionally aid terrorists…” The use of the word “unintentionally” concedes that critics retain the same goals with perhaps different approaches.
Now suppose someone on the Left has used the same rhetorical logic and argued:
Would there have been calls on the Left to tone down the rhetoric and not depict opposition as mean spirited? The evidence suggests not. There have been far more egregious statements than Ashcroft’s by serious people on the Left with nary a yawn of concern and usually accompanied by smiles of support. The Left has been exquisitely and deliberately sensitive to even subtle indirect implications that they are less than patriotic, though they seem to have few qualms about making such direct charges themselves.
Senator Edward Kennedy rightly suggests that “In this serious time for America and many American families, no one should poison the public square by attacking the patriotism of opponents.” However, with little evidence he then asserts that “Republican leaders are avoiding key questions about the Administration’s policies by attacking the patriotism of those who question them.” Democratic hopeful General Wesley Clark whines, “How dare this administration make the charge that if you disagree with its policies, you are somewhat unpatriotic!”
Yet, it is the Left who has done the most lately to foster and nurture an us-against-them attitude. We can forgive the easy way that all candidates wrap themselves in values we all embrace. Although the web site for Presidential aspirant Howard Dean is called “Dean for America,” it would far too obsessive to believe that he is suggesting that those who do not agree with him are not for America. It is Nixon-level paranoia to suggest that naming the Liberal advocacy group “People for the American Way” suggests that others are not for the American Way. It is hard to even be upset with the Dean’s purile projection, “This president [Bush] is not interested in being a good president. He’s interested in some complicated psychological situation that he has with his father.” Such statements by Dean are more self revelatory than credible.
What coarsens the public discourse is the reference by Dean to Bush as the “enemy” or the assertion that “John Ashcroft is not a patriot.” What serves to “poison the public square” are remarks by Clark such as “I don’t think it was a patriotic war. I think it was a mistake, a strategic mistake, and I think that the president of the United States wasn’t patriotic in going after Saddam Hussein. He simply misled America and cost us casualties and killed and injured America’s reputation around the world without valid reason for doing so. It’s not patriotic; it’s wrong.”
For the Democratic Party who beats its breasts about keeping religion and politics separate and sometimes ridicules Bush’s conspicuous faith, it is particularly disheartening to hear Clark suggest that as far as Christianity goes, “there’s only one party that lives that faith in America, and that’s our party, the Democratic party.” That’s a pretty amazing assertion from someone who admits voting for Richard Nixon and Ronald Reagan. If the difference between parties is so morally stark, what took Clark so long to declare as a Democrat?
It is not clear how much such rhetoric Dean and Clark really believe. Certainly candidates like Senator Joe Lieberman, Richard Gephardt, or John Edwards have not seen the need to resort to such tactics. Such flame-throwing rhetoric ignites the dry-tinder partisans who populate the halls and auditoriums of pre-primary America. However, people who wish to lead have an obligation to eschew such anger. As Lincoln enjoined in a far more contentious and dangerous time, “We are not enemies, but friends. We must not be enemies.Though passion may have strained it must not break our bonds of affection.” Rather than rally around anger, we must summon forth “the better angels of our nature.”
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