Hamilton versus Wall Street: The Core Principles of the American System of Economics

By Nancy Bradeen Spannaus

Hamilton versus Wall Street delves into the life and mind of Alexander Hamilton, focusing on his impact on the economic history of the United States. The author challenges the conventional portrayal of Hamilton as merely a financier, unveiling him as a statesman whose economic policy laid the foundation for the nation's prosperity and resilience against global imperialism.

The book portrays Hamilton not as a follower of the British System but as the architect of the "American System of Economics," a doctrine adopted by influential presidents like Lincoln and Roosevelt to drive the nation toward prosperity.

It answers questions such as, “What were Alexander Hamilton’s beliefs on economic growth?” and, “What was Hamilton’s economic plan?”

This book about Alexander Hamilton allows readers to appreciate the power of political economy in shaping the nation's history. Hamilton's revolutionary economic principles, ensuring America's true independence, are presented as vital elements of the American Revolution, inviting readers to reassess their understanding of economic theories.

Praised as a “thoughtful, well-written argument for Alexander Hamilton’s financial system as a guard against tyranny.”
--- Kirkus Reviews

Richard Sylla, author of Alexander Hamilton: The Illustrated Biography, “In our time of crumbling infrastructure, anemic economic growth, and dysfunctional government, Spannaus points to a better path, the American System of economic policy initiated by Alexander Hamilton more than two centuries ago. … His policies made America great, and a return to them can make America great again.”

“An excellent book that for me brought clarity to several threads that made up the fabric of Hamilton’s vision of a political economy for the post-war United States, a national country and not a collection of states….”
--Douglas S. Hamilton, fifth great-grandson of Alexander Hamilton

“Spannaus meticulously traces the origins and describes Hamilton's system (in contrast to the Jeffersonian/British system) and shows how it resulted in the economic growth that defines American enterprise. … This book is a definite must-read.”

--David J. Kent, author of Lincoln: The Fire of Genius; President, Lincoln Group of D.C.

Inspired by Hamilton's genius and humanity, the author illuminates Hamilton's revolutionary economic ideas, compellingly exploring how Hamilton's ideas have shaped the nation and continue to resonate in today's economic landscape.

• Language: English
• Publisher: iUniverse
• Release date: Feb 16, 2019
• ISBN: 9781532067556

Nancy Bradeen Spannaus

Nancy Bradeen Spannaus first discovered Alexander Hamilton in the mid-1970s. She was shocked to find the depth of ideas in his work, which contrasted with the usual superficial “tax revolt” idea of the American Revolution. In 1977 she co-edited a book of writings on the economics of the American Revolution (The Political Economy of the American Revolution, available on Amazon), in which major excerpts from Hamilton’s major financial papers were featured. After a career in political journalism, Nancy turned back to studying Hamilton’s American System. In 2017 she set up the blog https://americansystemnow, which serves as a resource on the history of the American System, and comments on current events in that light. Delighted to find the surge of interest in Hamilton as a result of the musical, she rushed to produce this book. Nancy has deep New England and Revolutionary roots. She was born in Portland, Maine in 1943, of parents who both were descended from American patriots. She is a member of the DAR and of the Alexander Hamilton Awareness Society. She and her husband Ed live in northern Virginia, where they both indulge in as much history as possible. Show Less

Book preview

Copyright © 2019 Nancy Bradeen Spannaus.

All rights reserved. No part of this book may be used or reproduced by

any means, graphic, electronic, or mechanical, including photocopying,

recording, taping or by any information storage retrieval system

without the written permission of the author except in the case of

brief quotations embodied in critical articles and reviews.

iUniverse

1663 Liberty Drive

Bloomington, IN 47403

www.iuniverse.com

844-349-9409

Because of the dynamic nature of the Internet, any web addresses or

links contained in this book may have changed since publication and

may no longer be valid. The views expressed in this work are solely those

of the author and do not necessarily reflect the views of the publisher,

and the publisher hereby disclaims any responsibility for them.

Any people depicted in stock imagery provided by Getty Images are

models, and such images are being used for illustrative purposes only.

Certain stock imagery © Getty Images.

ISBN: 978-1-5320-6754-9 (sc)

ISBN: 978-1-5320-6755-6 (e)

Library of Congress Control Number: 2019901442

iUniverse rev. date:  02/16/2019

CONTENTS

INTRODUCTION

Chapter 1     Alexander Hamilton would have been the foremost opponent of Wall Street today

Chapter 2     Hamilton’s Report on Manufactures is the Rosetta Stone of his thinking on economics.

Chapter 3     What the Report on Manufactures Proposes

Chapter 4     Hamilton’s ideas of political economy formed the basis for America’s periods of prosperity.

Chapter 5     Abraham Lincoln, Hamiltonian

Chapter 6     Franklin Roosevelt Chose Hamilton

Chapter 7     Alexander Hamilton was a vigorous opponent of Adam Smith.

Chapter 8     Alexander Hamilton’s banking system was not British!

Chapter 9     Hamilton’s economics threatened to bring down the British Empire.

Chapter 10   Hamilton’s political economy is key to saving our Constitutional republic

Chapter 11   A Hamiltonian Vision for Today

Glossary of Economic Terms

A Proposal for a new Hamiltonian National Infrastructure Bank

Notes on Sources

Special thanks to Stuart Rosenblatt; Rand Scholet, founder of the Alexander Hamilton Awareness Society; Jeffrey Steinberg; and my dear husband Ed, for reading my manuscript and providing their insights and encouragement.

001_a_imahe.jpg

Alexander Hamilton as President-General of the Society of the Cincinnati. The painting was done by an unknown artist in the early 19th century, using portraits by John Trumbull. It was lent for exhibition at the Society’s headquarters in Washington, D.C. by Mrs. Laurens Hamilton, and photographed by the author. (courtesy of Nancy Spannaus)

INTRODUCTION

To cherish and stimulate the activity of the human

mind, by multiplying the objects of enterprise, is not

among the least considerable of the expedients, by

which the wealth of a nation may be promoted.

–Report on Manufactures

THE PURPOSE OF this book is simple: to establish once and for all that the first U.S. Treasury Secretary, Alexander Hamilton, was the founder of an American System of Economics which provided the unique basis for building the United States into an industrial powerhouse. Since the popularity of the Hamilton musical has excited a surge of interest in this Founding Father, we now have a golden opportunity for making his true ideas broadly known for the first time since the mid-Nineteenth Century. That opportunity must not be squandered.

This book is based on my 40 years of study of Hamilton’s ideas and policies on political economy, the science of building a thriving national economy. My appreciation of Hamilton’s economic vision was first piqued by my reading of his Report on Manufactures; I was particularly struck by the sentence quoted above. My further study has led me to conclusions which clash with those of even some of the most pro-Hamilton voices in the country today. I have called for a public debate on Hamilton’s economics and their applicability to today, but that has yet to occur. It is my hope that this book will aid in provoking that debate, and the adoption of the Hamiltonian ideas so desperately needed in the United States, and worldwide.

I originally intended this book to be a thorough scholarly treatment of Alexander Hamilton’s life and work. Over recent years I read Hamilton’s entire collected works with the aim of producing the definitive, in-depth evaluation of his thought.

But that would be a years-long project, and the current opportunity must be seized. So instead, I will present a series of propositions dealing with the core principles Hamilton represents—principles which refute some of the most misleading assertions about his policies–and how they have shaped American and world history. I will start with one of the most dangerous lies of all—that Alexander Hamilton is the father of Wall Street and the financial premises and methods which characterize it today.¹

I begin with a brief profile of Alexander Hamilton, the man. For a man’s ideas can never be totally separated from his character.

A REVOLUTIONARY GENIUS

Who was Alexander Hamilton? He was, first and foremost, a revolutionary visionary, who devoted nearly his entire life to creating a new kind of political-economic system uniquely suited to uplifting mankind. His legendary energy, his towering intellect, and even his super-sensitive attention to defending his honor were all vectored toward achieving that primary objective. As George Washington said of Hamilton in a letter to John Adams in 1798, By some he is considered as an ambitious man, and therefore a dangerous one. That he is ambitious I shall readily grant, but it is of that laudable kind which prompts a man to excel in whatever he takes in hand.

The experiences of Hamilton’s early life as an orphan on St. Croix taught him that he had to rely on his intellect to achieve his purposes in life. It also gave him invaluable experience in dealing with international commerce, a step toward seeing himself on the international stage. Fortunately, the individuals who befriended and protected him—from his cousin Ann Lytton Venton² and the Rev. Hugh Knox, to the New Jersey revolutionary circles around Elias Boudinot³ and William Livingston—provided support for his voracious studies of history, philosophy, and economy, while bringing him to the American mainland. By 1774, when British oppression in Boston was leading to a revolt against London throughout the colonies, the young Alexander had chosen the revolutionary path, and put his pen to work on its behalf.

The evidence for this is available in Hamilton’s extensive 1775 tract known as The Farmer Refuted, his second refutation of the attacks on the first Continental Congress by the Tory Rev. Samuel Seabury. This extraordinary document starts from first principles which I believe Hamilton never abandoned, both in terms of Natural Law and economy. The 17-year-old Hamilton, then still at King’s College (later Columbia University), already shows intimate familiarity with both English history and the philosophy of law, and he argues systematically from certain fundamental axioms. Among those are these two memorable assertions. The first is that the "supreme law of every society is its own happiness, a view he contrasted with the Hobbesian (might makes right") view of Rev. Seabury. The second is more well-known:

The sacred rights of mankind are not to be rummaged for among old parchments or musty records. They are written, as with a sunbeam, in the whole volume of human nature, by the Hand of the Divinity itself, and can never be erased or obscured by mortal power.

Many have argued that, as a result of his experience with treachery among both his allies and his enemies, Hamilton abandoned this idealistic outlook. Certainly he did not have a pollyannish view of human nature; he believed that institutions had to be created which would channel men’s behavior for the good of society, rather than leaving it to individuals to exercise their individual rights without constraint. But Hamilton remained, despite all his disappointments, a religious man with a commitment to republicanism.

In a letter to his friend Edward Carrington on May 26, 1792, Hamilton responded to charges that he was leading a party seeking monarchy thus: I am "affectionately tied to the Republican theory. I desire above all things to see the quality of political rights exclusive of all hereditary distinction firmly established by a practical demonstration of its being consistent with the order and happiness of society." [emphasis in the original]

I don’t believe Hamilton ever abandoned his belief that mankind was imbued with God-given powers. His call for a Christian Constitutionalist Society in the 1800s buttresses my view. Indeed, Hamilton’s economic system depends upon the God-given inventive power of the human individual, for the creation of the technological advances upon which human scientific and moral progress depend.

Hamilton is well-known to have shown no interest in personal wealth, and to have been generous to the poor and troubled. His stance against African slavery,⁴ and his actions for the education and emancipation of slaves and Native Americans,⁵ testify to his commitment to the belief that all men are created equal. Notably, although the 1783 Treaty of Paris called for the British to remunerate American slave-holders for their freed slaves, Hamilton told John Jay, who had negotiated the Treaty, that this plank could be ignored; it was immoral. He also argued that view publicly in his Camillus letters in defense of the Jay Treaty, which said nothing about the compensation issue.

Hamilton hated oppression, British or otherwise. He believed in the triumph of reason and truth; just look at his masterful argument for truth as the standard in libel law in the Croswell case.⁶ He was willing to give his life to save the Union which he had helped to create as a bulwark against British or other European destruction of the fledgling United States—and he did.

THE WAR EXPERIENCE

It is impossible to understand Hamilton’s principles of political economy without taking his war experience into account. He saw action in the Revolutionary War, from its start in 1774 through the decisive Battle of Yorktown in 1781. He began on the front lines in New York City, where he caught the attention of General Washington for his daring exploits as an artillery captain. Even after he became Washington’s chief aide-de-camp in 1777, he was often on the battlefield. He engaged in the Battle of Trenton, at Princeton, and at Monmouth. He suffered with the rest of the army at Valley Forge and Morristown.

Hamilton also saw the war from the standpoint of high command, especially concerning the devastating lack of provisions from the Congress, but also the difficulties in maintaining alliances, and attempting to negotiate prisoner exchanges and other arrangements with the British. As Washington’s aide-de-camp, Hamilton took part in strategic planning, and had a sensuous grasp of how the shortfalls in material resources, as well as in human commitment, constantly threatened the revolutionary cause.

Thus, Hamilton’s war experience strengthened his identification as an American, not the citizen of any particular state, and as a staunch patriot.

The ties Hamilton formed during the War of Independence led to life-long friendships. He was a prominent member of the Society of the Cincinnati,⁷ and continued to be addressed according to his military rank during much of his public life. While he campaigned vigorously for war veterans to be compensated, he himself gave up his claim to a pension upon leaving the Army in 1782. Many of his close associates during the war, such as Gen. Henry Knox, George Washington, the painter John Trumbull, New York City Mayor Richard Varick, and later Secretary of Defense James McHenry, continued to be his collaborators.

Through his war experience, Hamilton got a clear understanding of the mindset and treachery of the British enemy, which was determined, even after a military victory over the Americans was clearly impossible, to defeat the Revolution. British tactics would involve financial warfare, trade embargos, bribing and arming Native Americans to harass the frontier, and even providing funds to distressed American citizens to riot against the government (cf. Shay’s Rebellion)⁸. Hamilton knew this, and that the only way the gains of the war could be protected would be to form a strong union, with a constantly improving economic base.

How does Hamilton’s revolutionary war experience cohere with the oft-repeated assertion that he (and his close colleague George Washington) sought to use the Constitution to impose British policies on the victorious United States population? It doesn’t, because Hamilton never sought to do any such thing.

ON TO THE AMERICAN SYSTEM

None of this is to say that Alexander Hamilton did not make mistakes and compromises, and commit irrational acts. Whole books have been devoted to describing them, while virtually burying his accomplishments. Hamilton did not perfectly adhere to the principles he espoused. But it is beyond question that he supplied the spark of revolutionary genius–the ideas, combined with nearly unbelievable energy–that were crucial in creating the United States Republic, and its unique and successful, but now nearly abandoned American System of political economy.

That American System is the very antithesis of the British imperial system of economy which the American Revolution was fought against, a