KZ: No one was better prepared to defend the Constitution than Alexander Hamilton. In 1787-88 he worked with John Jay and James Madison to write a series of 85 essays in support of the Constitution. Known as “The Federalist,” these remarkable essays proved critical in achieving ratification of the document in New York, as well as the rest of the nation. The essays were published under the pen name Publius. Hamilton himself wrote more than two-thirds of them.
In the first of the essays, Hamilton set the stage for those that would follow, proclaiming that “the vigor of government is essential to the security of liberty.” Today almost all the vigor of government has been siphoned away by a new wave of anti-Federalists operating under the cover of conservatism and populism. Although most are neither conservative nor populist.
The essays were churned out at a remarkable pace, especially considering the rational, learned, and eloquent defense of the Constitution that Hamilton and co-writers developed. Among the topics covered by Hamilton were “Dangers from Dissensions Between the States,” “Defects of the Present Confederation,” and the “General Power of Taxation.”
Today’s scholars consider “The Federalist” classics of political literature. At the time, they proved effective in gaining allies for the Constitution. But perhaps nearly as remarkable as the writing of “The Federalist” was Hamilton’s performance at the New York ratifying convention in Albany.
By the time the convention met in June 1788, several major states, including New York and Virginia, had not yet ratified. Hamilton and 19 other Federalist delegates faced a seemingly immovable and palpably oppositional group of 47 Anti-Federalists. Hamilton was outnumbered. Without New York, the new government would inevitably split into separate confederacies.
Over the next month, Alexander Hamilton presented the convention with his case for ratification. Day after day, hour after hour, the eloquent attorney spoke, hammering away at the Anti-Federalists’ arguments. The ratification of the Constitution by Virginia bolstered his case, but the supreme logic and persuasive abilities of Hamilton proved critical as well. Opposition evaporated, and the Constitution was approved.
Hamilton had helped to save the Constitution. But creating a government on paper was quite separate from operating that government. Hamilton had helped to ensure the Constitution’s ratification. And now, as Treasury secretary under President George Washington, he would build the economic system that enabled the new nation to not just survive but thrive.
Even before the Revolution began, Hamilton had recognized that the future of America lay in business and industry. And he understood that to develop into an industrial power, America would need a powerful economic system. But during the Revolution and the years that followed, the economy had become a shambles. The Continental Army had been nearly paralyzed by the Continental Congress’ inability to collect taxes. The war had been funded largely by the issue of bonds, most of which went unpaid at war’s end. And the new government lacked a revenue source to pay these debts — or to pay for funding defense or other national projects.
In his position on Washington’s cabinet, Hamilton worked diligently to solve these problems. Again, he would have to overcome some skepticism. Taxes had been a major reason for throwing off British rule. But Hamilton understood taxes were essential for the country’s survival. And he developed a plan that would pay off America’s debts and set the nation on course for an economically prosperous future.
Hamilton’s course of action, delivered to the House of Representatives in his “Report on Credit” of January 14, 1790 and his “Report on the Subject of Manufactures” of December 15, 1791, was threefold. First, the government should pay off the war bonds it had issued. To fail to do so, he argued, would establish the federal government as a bad debtor. Second, the government should assume the debts of the states. Although many argued that this was another unnecessary expansion of central government, Hamilton realized that to have all states manage their debts was inefficient. Finally, he proposed that the government establish a steady revenue stream by taxation of imported goods.
For months, Hamilton’s proposals languished in Congress. The final sticking point was the federal assumption of state debts. Some states had made good on their promise to pay off war debts, but others had not. If the debts of states that had failed to pay were shifted to the federal government, citizens in states that had paid their debts would end up paying twice.
Alexander Hamilton had driven the Constitution through the New York convention with impeccably focused logic. But he would use a bit of old-fashioned horse trading to get his financial plan through Congress. Among the states opposed to assumption of state debts was Virginia. Virginians were also unsettled about the planned location of the federal capital in New York. Hamilton realized he could use this issue as leverage.
Late in June, Hamilton met in private with Virginia Congressman James Madison. A deal was struck; Virginians would support assumption of state debts, and President Washington’s administration would support moving the capital to a location on the Potomac River. With the backing of Virginia, Hamilton’s proposals were approved.
Hamilton’s economic wizardry was not yet finished. Later in 1790 he proposed the creation of a federal bank. When this, too, was approved, his vision was complete. America was on a solid footing and prepared for a prosperous future. In fact, Hamilton had probably saved the economy from ruin and the new United States with it.
In a span of just under fourteen years, in his efforts to pass the Constitution and develop a sound monetary policy, Alexander Hamilton had provided invaluable service to his nation. But in this struggle, he had made powerful enemies. Demonized by the republicans as a would-be dictator or a promoter of monarchy, he saw political power slip from his grasp in 1800, when Thomas Jefferson became president and Aaron Burr vice president. Unable to give up his animosity toward Hamilton, Burr challenged Hamilton to a duel in February 1804. Hamilton wanted to avoid the duel, but politics left him no choice. That decision proved tragic for Hamilton.
Now the US is filled once again with violent anti-Federalists. Some with the vilest of motives for their beliefs and actions. Unfortunately, we have no new Alexander Hamilton to present eloquent and persuasive arguments and engage in horse trading when necessary to save the Constitution and the Republic it protects. In fact, we are beset by the most ignorant and loutish of ‘sunshine patriots’ who use the Constitution merely as window dressing to launch the nation into anarchy.
Me: An excellent and informative post Ken. What to learn of it though is essential. The founding fathers including (or perhaps with the knowledge) of Hamilton “dropped the ball” so far as money was concerned. The war was fought over the monetary and economic tyranny of the Bank of England not some tax on tea. The superior distributive forms of the money systems of many of the colony’s were nixed by the BOE and the rest is history. That we then beget the same tyrannical and domination waiting to happen institution of a national bank to be established proves that paradigms and zeitgeists are not easily perceived or understood. But revolutions have almost always been betrayed. Makes one wonder why we don’t “go for” evolutions instead.
The recurringly modern overlooked fact that debt as the sole form and vehicle for the creation and distribution of money/credit has always been the primary factor in the disintegration of empires. Those past empires extended their reign had recurrent debt jubilees as pointed out by David Graeber and Michael Hudson. But the private debts always came back. This tells us that we moderns are both dumber than the ancients at a time when we also need to be even smarter than they were. Smarter in that in addition to earned income we should provide continual demand and reduce costs sufficiently to proactively prevent eventual unpayable costliness with monetary policies like a universal dividend and a 50% discount/rebate policy at retail sale. In other words invert the problematic austerity of a paradigm of money as Debt Only into ongoing abundance via Gifting.
Perhaps Hamilton could be excused for not knowing this in the 19th century, but Hamilton like almost everyone else may have let his self interest and knowledge of the power of the monetary and financial systems be his persuasive political tool and his eventual object.
KZ: Hamilton was not a ‘reformer without a cause.’ He knew, for example that unless the US paid its foreign debt for the revolutionary war that the nation would not survive long enough to work on reforms of debt policy. Sometimes you have to accept received reality until you can make or take advantage of an opportunity to change that reality. Overall, however Hamilton’s actions helped create an American economy focused on production and export of ‘real’ products, to create an American manufacturing and skilled economy. He also did his best to remove speculative finance from that economy while ensuring that American businesses had all the capital they needed to operate from domestic sources. His arrangements were attacked and, in some ways, reversed first by Andrew Jackson’s presidential administration. And later by industrial monopolists and big finance (especially big banks and stock trading companies). By the turn of the 19th century there was little left of the economic arrangements Hamilton put in place. They made a comeback after WWII. But that ended with Reagan. Today may be another opportunity to reform economic arrangements.
Me: Yes sometimes one has to repair before they can truly progress. I was not actually disputing the genuinely pragmatic and helpful things Hamilton did. And there’s no necessary conflict between self interest and The Good although it takes a high regard for honesty to navigate that route. One way to make that process a lot easier is to understand that every historical paradigm change has utilized and expressed an aspect or aspects of the natural philosophical concept of grace which is also the most unitary and integrative of opposites concept known to man. Discover the paradigm, study the aspects of grace, align with it and let it roll.
Hopefully we don’t have to go through a devastating war that back tracks us like the founding fathers had to endure. Humanity may not survive the next palliative monetary reform. So lets have the evolution known as a paradigm change.