One of the most insightful monologues in Lin-Manuel Miranda’s Hamilton musical comes from King George, who raps to the following effect: Well, now that you have your freedom, do you have any idea what to do next?
To most Americans at the time of the War for Independence, of course, the King’s question was the farthest thing from their minds. They reveled in freedom from tyranny and were not thinking of what came next. But to the most prescient of the Founding Fathers, the future was a serious concern. The new country was bankrupt and divided, and still faced an adversary that was not reconciled to its freedom. It was clear that winning the war for independence would only be the first step in securing the country’s ability to enjoy its freedom. To defend hard-won American liberties, its citizens would have to establish their economic independence as well.
Foremost among those far-sighted Founders was Alexander Hamilton, the man destined to be the First Treasury Secretary of the United States. Even as the Revolutionary War proceeded,[1] Hamilton came to realize that American freedoms could only be secured with the proper economic measures. Political freedom would be tenuous, and ultimately fatally undermined, if the United States continued to be dependent upon its enemy, Great Britain, for its economic survival.
Hamilton laid out his thinking on this matter most fully in his masterwork, The Report on the Subject of Manufactures. Prosperous nations require the development of home markets and manufactures, promoted by government support, he asserted. Industrialization benefits all sectors of the economy, including agriculture, and must be advanced in the interest of the “General Welfare.”[2]
All the Essentials
There are many who believe that Hamilton’s concern for developing U.S. manufactures was restricted to the need for military defense. A thorough reading of the Report on Manufactures should dispel that notion. This quote from that report encapsulates the idea:
Not only wealth, but the independence and security of a Country, appear to be materially connected with the prosperity of manufactures. Every nation, with a view to those great objects, ought to endeavor to possess within itself all the essentials of national supply. These comprise the means of Subsistence, habitation, clothing, and defence.[3]
Not to secure those essentials domestically meant depending upon the good will of the supplier, among other conditions (weather and war, for example), he argued. While it might appear advantageous for America to rely on sales of its abundant raw materials, and purchase cheap manufactured goods from England and elsewhere, such reliance would have meant the United States would continue to exist as de facto colonies. Should England have decided to raise prices on or embargo essential goods, or demand concessions in order to continue purchasing our raw materials, the United States would have had no recourse but to submit.
Hamilton envisioned the United States as a fully sovereign nation, controlling its own finances and ensuring continuous economic growth and prosperity. This vision animated his vital contributions to the Revolutionary War, creation and ratification of the Constitution, establishment of a national financial system and the First Bank of the United States, and propelling the new United States into solvency in only a few short years. He knew that, without that economic freedom, political liberties could easily become a mere charade.
But for Hamilton’s vision to prevail, he and his allies would have to wage a vigorous fight.
Who Disagreed?
There were many powerful people who disagreed with Hamilton’s outlook. First and foremost, of course, was the British Empire, which was not reconciled to American independence, including its development of nascent, domestic industry. The British flooded the colonies with cheap goods after the Treaty of Paris, bankrupting many of the industries which had arisen during the war. Their prominent economist Adam Smith had explicitly warned the Americans in his 1776 book The Wealth of Nations against developing manufactures. Smith wrote:
Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.[4]
Hamilton had countered Smith in his Report on Manufactures, noting that just the opposite was true. Of course, Great Britain had itself adopted government policies to support its own manufacturing development, contrary to Smith’s advice to Britain’s colonies.
British policy for thwarting U.S. economic independence was even more boldly enunciated in 1815 (right after the War of 1812) by British Lord Henry Brougham, who spoke of stifling American manufactures “in the cradle” by flooding the U.S. market with cheap English goods.[5] That same British policy was pursued continuously up until the Union victory in the Civil War.
Domestically, the most vocal opposition to Hamilton’s vision came from Thomas Jefferson. Jefferson explicitly denounced the idea of making the U.S. a manufacturing nation, claiming it would bring corruption and misery.[6] He adamantly opposed Hamilton’s efforts to promote manufactures,[7] in addition to opposing the First Bank and federal support for infrastructure development,[8] a crucial prerequisite for economic growth. As if the plantation system and labor-intensive farming on the frontier were idyllic modes of life, and the roads to prosperity!
Ironically, Jefferson’s opposition to U.S. manufactures de facto allied him with the British intent to keep the United States subjugated economically. While accusing Hamilton of being pro-British, Jefferson himself was serving their interests. Under his idea of economy, the United States had no economic independence.
But the Jeffersonians were not the only domestic opponents of Hamilton’s perspective. Leading merchants in Massachusetts and New York City, in particular, also opposed the manufacturing perspective, which they knew to be hated by their clients in Britain. These merchants made their money with what was called the carry trade, and claimed to fear a reduction in the transatlantic trade of U.S. raw materials for British manufactured goods. They poured their capital in expanding commerce, not building up industry.
Henry Clay, a key proponent of Hamilton’s American System,[9] put this finger on the nature of the opposition from both the planters and the merchants in his famous speeches on that System in 1824 and 1832. What unites these two opponents of a tariff to protect manufactures, Clay said, is their dependence upon the British. This dependence, he charged,
Is, in effect, the British colonial system that we are invited to adopt; and, if their policy prevail, it will lead substantially to the recolonization of these states, under the commercial domination of Great Britain.[10]
Hamilton’s Manufacturing Project
Faced with opposition to his plans for Federal government promotion of manufacturing, Alexander Hamilton acted according to his character: he forged ahead. Among his actions was the establishment of the Society for Useful Manufactures at the Passaic Falls in New Jersey. That project should be understood as a pilot project for his vision of a diversified industrial nation; it also marked the establishment of the city of Paterson.
Leonard Zax of the Hamilton Partnership for Paterson pointed out that Hamilton chose Independence Day, 1792 to found the city that hosted his manufacturing project.[11] The symbolism was clearly not accidental; it underscored Hamilton’s understanding that the development of manufactures was essential to preserving American independence.
Happily, Hamilton’s vision was ultimately realized far beyond Paterson as well. Defeated in the short term, advocates of the manufacturing perspective fought on, led in particular by publisher and political economist Mathew Carey.[12] The disastrous results of Jeffersonian abandonment of Hamilton’s principles which were evident in the War of 1812, had a salutary effect in convincing the U.S. population of the need for federal action to establish economic independence.
Dramatic progress toward that goal was made during the 1820s, especially under the administration of John Quincy Adams, only to be sabotaged with the accession of President Andrew Jackson to the Presidency. But Hamiltonian ideas could not be squelched; especially in periods of crisis, like the Lincoln and FDR eras, national leaders have seized the opportunity to promote a manufacturing renaissance, leading ultimately to U.S. industrial pre-eminence worldwide. His focus on domestic infrastructure vis-à-vis developing a self-sustaining manufacturing sector continues to hold currency in the modern global economy.
[1]In an April 30, 1781 letter to the newly appointed U.S. Superintendent of Finance Robert Morris, Hamilton wrote, “’Tis by introducing order into our finances—by restoring public credit–not by gaining battles, that we are to finally gain our object.” Alexander Hamilton to Robert Morris, April 30, 1781, www.founders.archives.gov/documents/Hamilton/01-02-02-1167.
[2]For a comprehensive discussion of that Report and how it was implemented at home and abroad, see: Nancy Spannaus, Hamilton Versus Wall Street: The Core Principles of the American System of Economics, www.iuniverse.com/BookStore/BookDetails/788568-hamilton-versus-wall-street.
[3]“Alexander Hamilton’s Final Version of the Report on the Subject of Manufactures,” founders.archives.gov/documents/Hamilton/01-10-02-0001-0007.
[4]Adam Smith, The Wealth of Nations (London: W. Strahan and T. Cadell, 1776), vol. 1, Book II, Chapter V.
[5]The Merchants’ Magazine and Commercial Review, Vol. V (1841), 129.
[6]Thomas Jefferson, “Notes on the State of Virginia,” docsouth.unc.edu/southlit/jefferson/jefferson.html.
[7]See: “Note of Agenda to Reduce the Government to True Principles,” ca. July 11, 1792, www.founders.archive.gov/documents/Jefferson/01-24-02-0196.
[8]In the year of his death, 1825, Jefferson wrote a diatribe against Federal support for infrastructure development, entitled “Declaration and Protest of the Commonwealth of Virginia, on the Principles of the United States of America, and on the Violations of them.”
[9]For a primer on the American system, see americansystemnow.com/what-is-the-american-system/.
[10]Henry Clay in the compilation by Robert Byrd, “The Senate 1789-1989, Classic Speeches, 1830-1993, volume 3.” (Washington, D.C.: U.S. Senate Historical Office, 1993).
[11]www.hamiltonpartnership.org/nationalpark/whypatersonmatters/economicindependence/. The Hamilton Partnership for Paterson is a non-profit organization dedicated to supporting the Paterson National Park and “enhance its educational, social, and economic benefits for Paterson and the nation.”
[12]For a brief synopsis of Mathew Carey (1760-1839), see www.encyclopedia.com/people/literature-and-arts/journalism-and-publishing-biographies/mathew-carey.
One thought on “Alexander Hamilton was Right: True Liberty Demands Economic Independence”
Sounds like China today – flooding the US with cheap goods and working to become a lynchpin in modern technology.