We tend to forget these lessons...
Stephen S. Cohen and J. Bradford DeLong: Why Hamilton—Not Jefferson—Is the Father of America's Economy: ... How we can better energize America’s economy, create more jobs, and provide more fulfilling lives for our citizens? Politics says that the answer is either ‘Left!’ or ‘Right!’ But neither of those is the solution. To find the answer, we need to look at our American past.
We Americans have been repeating the same political-economic arguments in different keys and with different harmonies—the arguments over the costs and benefits of freer trade, of government support for industry, over the righteousness of libertarian government, over activist New Dealism—for more than two centuries now. Yet today we have largely forgotten the earlier rounds of this debate: the ones that started with Thomas Jefferson and Alexander Hamilton. ...
Before Hamilton, it was the Jeffersonian economic mold, the mold that Britain had imposed through its mercantilist colonial policy, into which the American economy was being poured. Jefferson wanted to cut America loose politically from what he saw as the corruption of Imperial Britain. But he had no major quarrel with the un-industrialized agrarian economy that the British Empire was designing America to be.
Hamilton, a New Yorker, thought differently: that liberty could spring from the city as well as the countryside, and that prosperous market economies needed big pushes to get themselves going. And so Hamilton pushed the United States into a pro-industrialization, high-tariff, pro-finance, big-infrastructure political economy, and that push set in motion a self-sustaining process. ...
After Hamilton, the U.S. economy was different. It was a bet on manufacturing, technologies, infrastructure, commerce, corporations, finance, and government support of innovation. That turned out to be good for more than just farmers and the bosses and workers: it turned out to be good for the country as a whole. ...
The economy was to be reshaped to promote industry. And the principal instrument for this was a high tariff on manufactured imports from Britain...
It was also to be the major source of federal government revenues, and would thus support an extensive program of infrastructure development. This was vital for territorial expansion and economic development, and for adding the critical political support of the western farmers to the northern coastal commercial and labor interests.
But that was not all. The tariff was also the instrument that permitted the federal government to credibly assume states’ debts incurred to fund the Revolutionary War, thus strengthening the central government (central to Hamilton’s plans).
The creation of a federal government debt also constituted the basis of a new and vigorous financial market. No wonder then that in Hamilton’s strong and settled opinion: ‘a national debt, if it is not excessive, will be to us a national blessing.’
Finally there was Bank of the United States, which Hamilton designed to sit at the center of the financial system and tame the wildcat banks and their wildcat currencies. ...
So what is the lesson? ... The lesson is that ideologies—no matter what they are—are bad masters. Hamilton’s genius was in focusing on not what was decreed according to ideological first principles laid down by some academic scribbler, but rather focusing on what was in a pragmatic sense likely to generate prosperity at that moment in that situation. ...
It is only in the past generation that we have forgotten our pragmatic past and applied ideological litmus tests to what our public policies will be. And we have suffered for it.
Stephen S. Cohen and J. Bradford DeLong: Why Hamilton—Not Jefferson—Is the Father of America's Economy: ... How we can better energize America’s economy, create more jobs, and provide more fulfilling lives for our citizens? Politics says that the answer is either ‘Left!’ or ‘Right!’ But neither of those is the solution. To find the answer, we need to look at our American past.
We Americans have been repeating the same political-economic arguments in different keys and with different harmonies—the arguments over the costs and benefits of freer trade, of government support for industry, over the righteousness of libertarian government, over activist New Dealism—for more than two centuries now. Yet today we have largely forgotten the earlier rounds of this debate: the ones that started with Thomas Jefferson and Alexander Hamilton. ...
Before Hamilton, it was the Jeffersonian economic mold, the mold that Britain had imposed through its mercantilist colonial policy, into which the American economy was being poured. Jefferson wanted to cut America loose politically from what he saw as the corruption of Imperial Britain. But he had no major quarrel with the un-industrialized agrarian economy that the British Empire was designing America to be.
Hamilton, a New Yorker, thought differently: that liberty could spring from the city as well as the countryside, and that prosperous market economies needed big pushes to get themselves going. And so Hamilton pushed the United States into a pro-industrialization, high-tariff, pro-finance, big-infrastructure political economy, and that push set in motion a self-sustaining process. ...
After Hamilton, the U.S. economy was different. It was a bet on manufacturing, technologies, infrastructure, commerce, corporations, finance, and government support of innovation. That turned out to be good for more than just farmers and the bosses and workers: it turned out to be good for the country as a whole. ...
The economy was to be reshaped to promote industry. And the principal instrument for this was a high tariff on manufactured imports from Britain...
It was also to be the major source of federal government revenues, and would thus support an extensive program of infrastructure development. This was vital for territorial expansion and economic development, and for adding the critical political support of the western farmers to the northern coastal commercial and labor interests.
But that was not all. The tariff was also the instrument that permitted the federal government to credibly assume states’ debts incurred to fund the Revolutionary War, thus strengthening the central government (central to Hamilton’s plans).
The creation of a federal government debt also constituted the basis of a new and vigorous financial market. No wonder then that in Hamilton’s strong and settled opinion: ‘a national debt, if it is not excessive, will be to us a national blessing.’
Finally there was Bank of the United States, which Hamilton designed to sit at the center of the financial system and tame the wildcat banks and their wildcat currencies. ...
So what is the lesson? ... The lesson is that ideologies—no matter what they are—are bad masters. Hamilton’s genius was in focusing on not what was decreed according to ideological first principles laid down by some academic scribbler, but rather focusing on what was in a pragmatic sense likely to generate prosperity at that moment in that situation. ...
It is only in the past generation that we have forgotten our pragmatic past and applied ideological litmus tests to what our public policies will be. And we have suffered for it.
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