Alexander Hamilton: Father of America’s Economy

The columnist George Will wrote in 1992 that, “There is an elegant memorial in Washington to Jefferson, but none to Hamilton. However, if you seek Hamilton’s monument, look around. You are living in it. We honor Jefferson, but live in Hamilton’s country, a mighty industrial nation with a strong central government.” George Washington is the most important man in American history and the personification of the American spirit, but it is Alexander Hamilton’s vision that has been fulfilled in American history—the United States as a commercial superpower.

He was, as Jefferson recounted, the “Colossus to the anti-republican party,” the man whose singular vision paved the way for a powerful federal government and the American financial system. But he, like the other founders, also believed firmly in liberty and limited government and would be shocked—and appalled—at the scope of government today, which has grown far beyond the boundaries he set for it. John Adams enjoyed emphasizing Hamilton’s undesirable beginnings.

He was a bastard, born on 11 January 1757 to a beautiful French woman named Rachel Faucett (Lavien) and a Scotsman, James Hamilton, on the island of Nevis in the Caribbean. James Hamilton came from a noble bloodline, and Rachel was the daughter of a prosperous physician and James Hamilton was a shiftless speculator who ultimately went broke and deserted his family. Rachel and her two sons by Hamilton survived, but barely. She owned a retail store where young Alexander Hamilton learned credit, book-keeping, and wholesale and retail trade at his mother’s knee. Rachel ensured that Hamilton had the best education she could provide, and it became apparent that Hamilton was bright and a quick learner. He studied the classics and learned Hebrew and French. Hamilton was a talented young man, everyone around him knew it, but his circumstances were hard.

Rachel died of fever in 1768, when Alexander Hamilton was eleven years old. Orphaned, he found work as clerk at an export-import firm. The poor boy dreamed of a higher social station, glory on the battlefield, and fame; and to achieve his goals, he continued to educate himself. His one familial treasure was his mother’s books, classics, which a kindly benefactor had bought for him on the closing of his mother’s estate. In 1772, the talented and industrious young Hamilton was “discovered” by the Reverend Hugh Knox, a Presbyterian minister and also publisher of a newspaper to which Hamilton contributed a story about a hurricane. Knox became Hamilton’s mentor and helped raise funds to send him to the College of New Jersey at Princeton for a formal education. Hamilton bristled when the president of the school, John Witherspoon, would not let him work at his own (accelerated) pace, so he left Princeton and enrolled at King’s College in New York (Columbia University), where he completed most of his degree in less than three years. Hamilton, however, did not devote as much time to his formal studies as other students did. Instead, he was captivated by politics and an independent study of military history.

The Revolution 

At only seventeen, Alexander Hamilton authored two pamphlets that caught the attention of the American Patriot community. His A Full Vindication of the Measures of Congress (1774) and The Farmer Refuted (1775) displayed an understanding of American and British political history matched only by men ten to twenty years his senior. Like others of the Founding generation, Hamilton pursued a cautious course toward independence.

He warned against mob violence and maintained his allegiance to the crown despite his conviction that Parliament was exercising unconstitutional authority over the colonists. He wrote in The Farmer Refuted that “the origin of all civil government, justly established, must be a voluntary compact, between the rulers and the ruled; and must be liable to such limitations, as are necessary for the security of the absolute rights of the latter; for what original title can any man or set of men have, to govern others, except their own consent?” Parliament, in his estimation, was not governing by the consent of the governed.

Alexander Hamilton was too young to participate fully in the political campaign against the king. No matter. He preferred the military to debate, and he quickly caught the eye of American military commanders through his skill at drilling and the fact that he had helped raise and organize a New York militia company, in which he was elected captain, and had seen action, and performed well, in the early days of the war. General Nathanael Greene introduced Hamilton to Washington in 1776, a move that changed Hamilton’s life. Washington was impressed with Hamilton’s resolve and leadership, but most of all he was dazzled by Hamilton’s skill with a pen. He promoted him to the rank of lieutenant-colonel and made him his personal secretary and aide-de-camp in 1777.

As both commander-in-chief of the Continental Army and de facto secretary of war for the Continental Congress, Washington had more business than he could handle personally. Hamilton organized and systemized his correspondence and in the process became a trusted advisor. He was not one to reserve his opinion. Though Hamilton yearned for military glory, Washington kept him to his desk. Hamilton complained privately about his assignment but worked diligently. His position allowed him contact with the most important men in the states, and allowed him to participate, if only informally, in major political and military discussions.

Alexander Hamilton believed as early as 1778 that the Confederation was inefficient and weak and needed reform. He championed representative government but believed that the central authority needed far more power. He also believed in the need for a central bank and a centralized financial system. In 1780 he pushed for a constitutional convention to amend or replace the Articles of Confederation. This was six years before the Annapolis Convention and seven before the Philadelphia Convention. Hamilton was remarkably consistent throughout his life, and he always had a “grand vision” for the United States. The historian M. E. Bradford called him a man with a penchant for the “everlasting glory” of the United States.

Hamilton resigned from Washington’s staff in 1781. They were beginning to grate on each other’s nerves. Hamilton thought Washington uncouth—the “most horrid swearer and blasphemer”—impatient, and temperamental; and Hamilton desperately wanted a field command. At last, with Washington’s blessing, he was given command of a light infantry battalion, shortly before the final siege at Yorktown. Hamilton captured a British redoubt during the battle. After the British surrender, he resigned his commission and returned to New York to begin life as a private citizen.

The best government the country will permit

Alexander Hamilton was admitted to the bar after five months study in New York and was elected to the Continental Congress in 1782. He did little in the Congress, but his time there solidified his belief in the necessity of a stronger central government. He once called the Congress a “mass of fools and knaves” and did not soften his opinion after spending one uneventful year in that body. He continued to practice law after his retirement from Congress while organizing further support for a stronger central government. When Maryland and Virginia called for a convention at Annapolis to discuss commercial problems of the Articles of Confederation, Hamilton had himself appointed to the convention as one of two delegates from New York. This was his chance to push for a new governing document.

Only five states sent delegates to the Convention. Without a quorum, the twelve men in attendance, at the insistence of Hamilton, called for another meeting of all the states “to take into consideration the situation of the United States, to devise such further provisions as shall seem to them necessary to render the Constitution of the Federal Government adequate to the exigencies of the Union, and to report an act for that purpose to the United States in Congress assembled.” This statement, of course, did not explicitly state that the next convention would draft a new constitution. In fact, very few men in the United States dreamed that the Philadelphia convention would take this course of action. But Hamilton had aligned with the nationalists from other states, and these men had a clear agenda to alter the powers of the United States government.

Alexander Hamilton’s role at the 1787 Philadelphia Convention was largely insignificant. His vote was cancelled by the two Anti-Federalists in the New York delegation, and his home state was generally hostile to the idea of a stronger central government. He would therefore spend most of his time trying to convince the people of New York that a stronger central government was necessary for their future security and liberty. This was no easy sell. Today, Americans have come to believe that a stronger central government has been a positive good for the Union, that the Articles of Confederation were universally despised, and that men like Hamilton led crushing majorities in their respective states. Hamilton, in fact, was in the minority in his state—anti-Constitution men controlled the most powerful states in the Union: New York, Massachusetts, and Virginia— and many Americans, particularly in the Founding generation but even into the mid-nineteenth century, debated whether the idea of a stronger central government was a “positive good.” For much of the convention, Hamilton remained silent or offered minor comments in relation to specific issues, but he did give one five-hour speech on 18 June 1787. He advanced that Americans should look to precedent and history rather than lofty political theory as the guiding hand for a new governing document.

In that regard, he advocated a popularly elected (though muted through a sort of electoral college system) executive with a life term, a Senate chosen by state electors to similar life terms (both the governor and the senators could be removed for malfeasance), and a popularly elected assembly, serving three year terms. His model was obviously the English system of government adapted to American conditions, with an elected executive rather than a king and a senate rather than a House of Lords. “I believe the British government forms the best model the world has ever produced . . . ,” he wrote. “This government has for its object public strength and individual security.”

Ultimately, Alexander Hamilton argued that a system of government that offered moderation between extremes—monarchy and pure democracy—offered the safest form of government. “We are now forming a republican government. Real liberty is neither found in despotism or the extremes of democracy, but in moderate governments—if we incline too much to democracy, we shall soon shoot into a monarchy.” When the Philadelphia Convention completed its work in September 1787, no one did more to secure ratification of the new constitution in New York than Hamilton.

His shrewd moves, including the threat of the secession of New York City should the document fail ratification, handcuffed a powerful Anti-Federalist cabal led by New York Governor George Clinton. Hamilton attempted to placate these men by assuring them that the states would still have the power to check the federal government if it overstepped its bounds. “The most powerful obstacle to the members of Congress betraying the interest of their constituents, is the state legislatures themselves . . . jealous of federal encroachments, and armed with every power to check the first essays of treachery. . . . Thus it appears that the very structure of the confederacy affords the surest preventives from error, and the most powerful checks to misconduct.” To Hamilton, state sovereignty remained an integral part of the American political system. These statements in support of states’ rights appear out of place to the conventional interpretation of Hamilton as the prototypical “big government” guy. He was that, but “big government” in the eighteenth century was far different from “big government” in the twenty-first century.

Alexander Hamilton never imagined a federal government that provided “welfare” to its citizens in the form of an income or medical care. And Hamilton’s optimism about the power of the states was born from his own vision of the federation. Anti-Federalists, to their credit, insisted that the Constitution as written would eventually produce a federal “leviathan” that swallowed state power whole, but Hamilton could not foresee that because he could not imagine that the American love of liberty would degrade into welfare state, or socialist state, dependence.

During the process of ratification in New York, Hamilton, James Madison, and John Jay anonymously authored eighty-five essays in support of the Constitution under the title Federalist. Hamilton wrote fifty-two of the essays, and all three men wrote at an unprecedented clip. The essays appeared weekly, sometimes four per week, and each essay is around two thousand words. His passion for the limitless possibilities of the new government is evident from the first essay. “It will be . . . forgotten,” he wrote in Federalist No. 1, “that the vigor of government is essential to the security of liberty; that, in the contemplation of a sound and well-informed judgment, their interest can never be separated; and that a dangerous ambition more often lurks behind the specious mask of zeal for the rights of the people than under the forbidden appearance of zeal for the firmness and efficiency of government.” Hamilton believed that the new Constitution secured “the blessings of liberty” and the republican principles of the Revolution. Others disagreed firmly and loudly, but it was his passion for the new government, a government he called “the best that the present views and circumstances of the country will permit” that won the day and ultimately triumphed in the new republic.

Secretary of the Treasury

Alexander Hamilton achieved victory over his Anti-Federalist foes with the final ratification of the Constitution in 1788. At the urging of James Madison, Washington chose Hamilton to serve as first secretary of the Treasury under the Constitution. Madison wished the treasury to be subordinate to the Congress; Hamilton had other plans. Hamilton became the most powerful person in the federal government and Washington’s closest advisor for much of his administration.

Hamilton’s financial plan involved assuming the federal debt acquired under the Articles of Confederation and the debt the states had accrued during the Revolution. Hamilton knew debt could have a tremendous impact on the government. He wrote in 1781 that “a national debt, if it is not excessive, will be to us a national blessing.” The United States needed a line of credit, and a modest national debt (not the trillion dollar variety of the modern federal government) would provide a solid financial foundation.

But his plan would also tax some states twice (principally Southern states). Virginia, for example, had already retired most of its Revolutionary War debt, but Massachusetts had not. Washington brokered a compromise that allowed the assumption of state debt in return for a promise to locate the new federal capital in the South—a poor bargain, but apparently Southerners wanted to keep an eye on the federal government.

Shortly after the “assumption scheme,” Hamilton proposed a sweeping range of financial reforms that would ultimately centralize the financial system of the United States. This involved the creation of a central bank and a series of taxes and tariffs to provide revenue for the new government. Opponents immediately challenged the constitutionality of his “Bank of the United States.” Jefferson wrote a lengthy articulation of the principles of strict construction of the Constitution in order to thwart the bank.

In his defense of the Bank, Alexander Hamilton advocated a loose interpretation of the Constitution. Hamilton wrote, “Every power vested in a government is in its nature sovereign, and includes by force of the term a right to employ all the means requisite . . . to the attainment of the ends of such power.” In other words, Hamilton knew that the Constitution did not specifically authorize a bank, but believed the ends justified the means. Though Hamilton’s economic system triumphed over its opponents at first, it was later defeated by the Jeffersonian Republicans and the Jacksonian Democrats until it was revived as the “American System” of Henry Clay, and ultimately implemented by the Republican Party in the 1860s.

Alexander Hamilton’s financial system divided Americans as much as the Constitution had. Jefferson and Madison led the opposition party, the Republicans, while Hamilton and Washington led the Federalists. Much of Jefferson’s support came from the South, and much of Hamilton’s came from the North. Hamilton’s taxes on whiskey and tariffs on imported goods were felt more acutely in the agricultural South; and Southerners suspected Hamilton’s system of promoting urbanization and commerce, two trends that Jefferson and other Southerners feared. Hamilton was in many ways a traditional mercantilist who viewed government as the primary engine responsible for driving commerce and industry for the “national” good. He loved the “corruption” of the British financial system, because he believed it was patronage and the government’s encouragement of financial speculation that made the system work.

Retirement and duel

After seeing his economic system through, Alexander Hamilton resigned as secretary of Treasury in 1795. He helped author Washington’s farewell address and continued to be engaged in American politics, criticizing Jefferson’s affinity for the French, supporting a pro-British foreign policy, and disdaining his fellow Federalist John Adams.

He was commissioned as a major general in 1798 and charged with organizing a standing army for a possible war with France. As with all of his public assignments, he performed his duties energetically and faithfully. He used his influence to sway the 1801 presidential election for Thomas Jefferson. Hamilton wrote to key voters in the House of Representatives and insisted that Jefferson, though untrustworthy, was not as dangerous as Aaron Burr. Burr, naturally, resented being undone by his fellow New Yorker.

Alexander Hamilton never again served in a public capacity. He continued to denounce the Jeffersonians in the press, but supported Jefferson’s acquisition of Louisiana in 1803. This proved to be a fatal decision. New England Federalists, led by Timothy Pickering, believed the purchase destroyed their chances of controlling the government. They concocted a plan to secede from the Union, but their scheme hinged on Vice President Burr. If he could be elected governor of New York, Burr would lead the state out of the Union and into a new Northern confederacy. Hamilton discovered the plan and threw his support behind the opposition candidates. Burr lost by 8,000 votes and immediately questioned Hamilton’s role in his defeat. Hamilton had apparently made some disparaging remarks about Burr’s character, and though Hamilton denied it, Burr insisted on pressing the matter. He challenged Hamilton to a duel, and under the gentlemen’s code, Hamilton had to accept. The date was set for 11 July 1804.

Alexander Hamilton wrote before the duel that he intended to reserve his first shot and possibly his second, meaning that he had no intention of shooting Burr. For his own part, Burr never confessed he would miss Hamilton, though there is some evidence to suggest he did not mean to shoot him. Both men proceeded with their regular business. Hamilton wrote two letters to his wife and filled out his will. The men met in New Jersey for their “interview” in the early morning of 11 July. Hamilton was allowed to fire first and apparently shot into the tree above, but Burr fired and hit Hamilton in the stomach. The .52 caliber bullet left a two inch entry wound, pierced his lung and liver and lodged in his spine. Hamilton knew it was mortal, and he suffered in excruciating pain for thirty-six hours before succumbing to his wounds. (Ironically, his son had been killed in a duel three years before, just yards from the spot where Hamilton was shot by Burr.)

The vice president of the United States had shot and killed the former secretary of the Treasury, and though indicted for murder, never faced trial for it. Hamilton differed from other men in the Founding generation in one regard. Unlike many of the men who led the United States in the War for Independence, Hamilton was not a native of any particular state. He was a transplant and only came into wealth when he married Elizabeth Schuyler in 1780. The Schuyler family represented the interests of elite New Yorkers. As a first generation America, Hamilton did not have the same interests in the preservation of state authority as say Jefferson or John Hancock. The United States was his country, and he was one of the first Americans to display an attachment to a “nation” rather than a state.

Legacy

The progressive Herbert Croly, often classified as one of the founders of modern liberalism, admired Hamilton because he championed a policy of “energetic and intelligent assertion of the national good.” Liberals criticize Hamilton for his anti-democratic tone and his seemingly elitist attachment to an old social order, but some of them also see him as “their guy” for championing “big government” and a loose interpretation of the Constitution. There is a problem with this line of thinking. Progressives don’t read the Founding generation carefully enough. No one in this generation, let alone Hamilton, could be “their guy.” His statements on a range of issues contradict everything progressives stand for.

He was against direct democracy, a tactic the progressives carefully implemented in many states through referendum, initiative, and recall, and through the Seventeenth Amendment to the Constitution, the direct election of United States senators. Hamilton said in 1788, “It has been observed that a pure democracy if it were practicable would be the most perfect government. Experience has proved that no position is more false than this. The ancient democracies in which the people themselves deliberated never possessed one good feature of government. Their very character was tyranny; their figure deformity.”

He supported individual gun rights. “The militia is a voluntary force not associated or under the control of the States except when called out; a permanent or long standing force would be entirely different in make-up and call.” And he insisted that an armed citizenry was the only check on a standing army. “If circumstances should at any time oblige the government to form an army of any magnitude that army can never be formidable to the liberties of the people while there is a large body of citizens, little, if at all, inferior to them in discipline and the use of arms, who stand ready to defend their own rights and those of their fellow-citizens. This appears to me the only substitute that can be devised for a standing army, and the best possible security against it, if it should exist.”

He believed direct taxation (such as an income tax or a direct property tax) to be a messy constitutional question and avoided advocating this type of tax even during the height of his power in the cabinet. He understood the states to be sovereign, arguing that they alone possessed the ability to check federal “misconduct.” He argued a constitutional amendment was necessary for the federal government to finance internal improvements. He believed in the free market, and though a disciple of the old mercantilist system, would not have supported progressive regulation of industry and commerce. He was a forthright opponent of the French Revolution, which was one reason why he was so ardently pro-British in his foreign policy, and a defender of a conservative social order. He believed in organized religion and near the end of his life created a Christian Constitutional Society to combat the worst elements of the “church of man.”

Alexander Hamilton never believed, as progressives do, that man could perfect society. “I should esteem it the extreme of imprudence to prolong the precarious state of our national affairs, and to expose the Union to the jeopardy of successive experiments, in the chimerical pursuit of a perfect plan. I never expect to see a perfect work from imperfect man. The result of the deliberations of all collective bodies must necessarily be a compound, as well of the errors and prejudices, as of the good sense and wisdom, of the individuals of whom they are composed.” Far from being a liberal or a progressive, Hamilton, for all his belief in a strong central government, was an American conservative in the mold of a British Tory.