The Left has always favored Thomas Jefferson over
Alexander Hamilton. But not only was Hamilton more progressive for his
time, he has lessons for our response to climate change.
Two hundred years ago, Alexander Hamilton was mortally wounded by then Vice President
Aaron Burr
in a duel at Weehawken, New Jersey. Their conflict, stemming from
essays Hamilton had penned against Burr, was an episode in a larger
clash between two political ideologies: that of Thomas Jefferson and the
anti-Federalists, who argued for an agrarian economy and a weak central government, versus that of Hamilton and the
Federalists, who championed a strong central state and an industrial economy.
In the American political imagination, Jefferson is rural,
idealistic, and democratic, while Hamilton is urban, pessimistic, and
authoritarian. So, too, on the US left, where Jefferson gets the better
billing. Michael Hardt recently edited
a sheaf of Jefferson’s writings for the left publisher Verso.
Reading “Jefferson beyond Jefferson,” Hardt casts him as a theorist
of “revolutionary transition.” We like Jefferson’s stirring words about
“the tree of liberty” occasionally needing “the blood of patriots and
tyrants,” and his worldview fits comfortably with a “small is beautiful”
style localism. We recall Jefferson as a great democrat. When Tea
Partiers echo his rhetoric, we dismiss it as a lamentable
misunderstanding.
But in reality, Jefferson represented the most backward and
fundamentally reactionary sector of the economy: large, patrimonial,
slave-owning, agrarian elites who exported primary commodities and
imported finished manufactured goods from Europe. He was a fabulously
wealthy planter who lived in luxury paid for by slave labor. Worse yet,
he raised slaves
specifically for sale.
“I consider the labor of a breeding woman,” Jefferson wrote, “as no
object, and that a child raised every 2 years is of more profit than the
crop of the best laboring man.”
Even if it could somehow be dislodged from the institution of
slavery, Jefferson’s vision of a weak government and an export-based
agrarian economy would have been the path of political fragmentation and
economic underdevelopment. His romantic notions were a veil behind
which lay ossified privilege.
Hamilton was alone among the “founding fathers” in understanding that
the world was witnessing two revolutions simultaneously. One was the
political transformation, embodied in the rise of republican government.
The other was the economic rise of modern capitalism, with its
globalizing networks of production, trade, and finance. Hamilton grasped
the epochal importance of applied science and machinery as forces of
production.
In the face of these changes, Hamilton created (and largely executed)
a plan for government-led economic development along lines that would
be followed in more recent times by many countries (particularly in East
Asia) that have undergone rapid industrialization. His political
mission was to create a state that could facilitate, encourage, and
guide the process of economic change — a policy also known as
dirigisme, although the expression never entered the American political lexicon the way its antonym,
laissez-faire, did.
To be sure, Hamilton was living in the era of “bourgeois” revolutions
and the state he was building was a capitalist state, complete with the
oppressive apparatus that always involves. Hamilton did not oppose
exploitation. Like most people of his age, he saw child labor as normal
and defended the rights of creditors over debtors. But regarding
slavery, he firmly and consistently opposed it and was a founder of the
Society for Manumission of Slaves. It was Hamilton — not Jefferson — who had the more progressive vision.
Even today, Hamilton’s ideas about state-led industrialization offer
much. Consider the crisis of climate change. Alas, we do not have the
luxury of making this an agenda item for our future post-capitalist
assembly. Facing up to it demands getting off fossil fuels in a
very
short time frame. That requires a massive and immediate industrial
transformation, which must be undertaken using the actually existing
states and economies currently on hand. Such a project can only be led
by the state — an institution that Hamilton’s writing and life’s work
helps us to rethink.
Unfortunately, many environmental activists today instinctively avoid
the state. They see government as part of the problem — as it
undoubtedly is — but never as part of the solution. They do not seek to
confront, reshape, and use state power; the idea of calling for
regulation and public ownership, makes them uncomfortable.
And so green activism too often embodies the legacy of Jefferson’s
antigovernment politics. It hinges on transforming individual behavior,
or on making appeals to “
corporate social responsibility.”
Hamilton’s work, by contrast, reveals the truth that for capital,
there is no “outside of the state.” The state is the necessary but not
sufficient pre-condition for capitalism’s development. There is no
creative destruction, competition, innovation, and accumulation without
the “shadow socialism” of the public sector and state planning. We may
soon find that there is no potable water or breathable air without them,
either.
At the heart of Hamilton’s thinking
was a stark political fact — one that is now sometimes hard to recall.
The newly created United States was a mess. Politically disorganized,
economically underdeveloped, and militarily weak, its survival was in no
way guaranteed.
All the more alarming was the international context. The world was
dominated by the immense power of the British, French, and (admittedly
declining) Spanish Empires. Hamilton saw that the colonists’ victory
over Britain, won by the direct military intervention of France, would
only be secured if the new nation built up its economy.
Hamilton learned the danger of weakness early on. Born of humble
origins in the Caribbean, he was an “illegitimate” child and then
orphaned at age thirteen. Taken in by friends, he found work as a
shipping clerk. Having a prodigious intellectual talent, Hamilton also
applied himself to study with fanatical discipline. Soon he was penning
essays for the local press. One piece caught the attention of St. Croix
notables, who in 1772 sent the young Hamilton to preparatory school in
New Jersey and then to Kings College, now Columbia University.
In 1775, as conflict between British soldiers and colonial irregulars
began, Hamilton joined the newly formed New York militia. Hamilton
began studying artillery and then formed the New York Provincial Company
of Artillery. Before long, Hamilton became Washington’s most important
aide-de-camp
and artillery, Hamilton’s forte, became crucial to Washington’s
strategy. (Even then, the American style of warfare was capital
intensive.)
Hamilton wanted to command troops in the field and disliked
Washington, whom he found crass and dull. Washington nonetheless kept
the young savant on as part of “the family,” as the general called his
staff.
Hamilton’s time in the Continental Army included wintering at Valley
Forge. It was an object lesson in the dangers of political
decentralization and economic underdevelopment.
The Continental Congress, operating under the loose Articles of
Confederation, would levy taxes on the states; only a fraction of the
resources would be delivered, but Congress had little power to compel
payment. As a result, soldiers died and went hungry, territory was lost,
and the new nation gave signs of fragmenting when prominent leaders
(including Jefferson) deserted Congress and Washington’s army for their
respective state governments and militias.
All this shaped Hamilton’s politics. He saw his adopted nation as
being in a similar position to himself — in search of strength, but
profoundly weak — and he had a firm grasp on economic realities. Because
Jefferson had slaves and a plantation, he could maintain the illusion
of independence and write fetishistic peaens to the yeoman farmer while
enjoying the luxury to which he had become accustomed. Hamilton operated
with an acute sense of his own vulnerability. He depended on patrons
throughout his career; he appreciated structures of power for what they
were, and what they made possible, and developed the ability to adapt
and graft himself on to them. Even his attraction to artillery (the
mechanization of war) seems like a comment on the utility of power.
At the war’s end, Hamilton resigned his commission and studied law.
Meanwhile, the country’s economy was in shambles. Officers and farmers
were growing restive. Parts of the backcountry of North Carolina
declared themselves an independent state, and a similar attempt at
secession was made in Pennsylvania’s Wyoming Valley. By 1786-87, class
tensions in western Massachusetts had boiled over in the form of Shays’
Rebellion: Armed and indebted farmers marched on the state government
and were violently crushed by the militia.
In moments of despair, Hamilton predicted a future of interstate
warfare and re-colonization.“A man must be far gone in Utopian
speculations,” Hamilton wrote in
Federalist No. 6,
who can seriously doubt, that if these States should
either be wholly disunited, or only united in partial confederacies, the
subdivisions into which they might be thrown would have frequent and
violent contests with each other. To presume a want of motives for such
contests, as an argument against their existence, would be to forget
that men are ambitious, vindictive and rapacious.
Hamilton knew that economic recovery was the key to peace. In the same
Federalist paper, he wrote:“If SHAYS had not been a
desperate debtor
it is much to be doubted whether Massachusetts would have been plunged
into a civil war.” To prevent national disintegration and push the
economy back into action, Hamilton sought to control the centrifugal
forces of “faction” — a term which referred to both class and geographic
conflict. He labored hard to draft and ratify a new Constitution and
create a strong central government.
Recall the Supremacy Clause: “This Constitution, and the Laws of the
United States… shall be the supreme law of the land; and the judges in
every state shall be bound thereby, anything in the constitution or laws
of any state to the contrary notwithstanding.” In other words, federal
law always trumps state and local laws.
In
Federalist 11, Hamilton laid out the economic logic of a strong central state in terms of a defense against European imperialism:
If we continue united, we may counteract a policy so
unfriendly to our prosperity in a variety of ways. By [creating]
prohibitory regulations, extending, at the same time, throughout the
States, we may oblige foreign countries to bid against each other, for
the privileges of our markets.
Here, Hamilton is outlining the central mechanism of economic
nationalism: the state creates economic conditions; it does not merely
react to them. Before the Revolution, Britain’s mercantilist policies
sought to maintain captive markets and thereby enforced
under-development on its American colonies. Britain had banned export to
America “of any tools that might assist in manufacture of cotton,
linen, wool, and silk.” None of that changed with independence. And
Britain was soon harassing American trade, stopping and searching ships
at sea, seizing American sailors as alleged deserters.
For Hamilton, the crucial components of real independence were
industrialization led by a strong federal government, combined with a
permanent military that could serve both political and economic
functions — defending the new nation while driving and absorbing the
output of a new manufacturing sector. (It was, in effect, military
Keynesianism before the fact.)
After ratification of the Constitution
in 1790, Hamilton was recruited by the Washington administration to be
the nation’s first Secretary of the Treasury. In this capacity, he
issued a series of detailed economic reports to Congress outlining a
program for the development of the US economy that rested on three core
policies: federal assumption of state debts, creation of a national
bank, and direct government support for domestic manufacturing.
The linchpin of his economic proposal was a system of public credit
and a national money system with a government supported Bank of the
United States at its center. “Public utility,” wrote Hamilton, “is more
truly the object of public banks than private profit.” In 1790, three
new bond issues backed by the Federal Government replaced the miscellany
of various state and federal bonds that had structured the new nation’s
debt. Early the following year, Congress chartered the Bank of the
United States for twenty years. With that, the first two pieces of his
system were in place.
But in all this, Hamilton faced the opposition of Jefferson and the
Southern planter class. Comparative economic history shows that
semi-feudal agricultural elites, like Jefferson’s Virginia squirearchy,
hold back political and economic development. To paraphrase Perry
Anderson, semi-feudal elites extract economic surplus from the immediate
producers by customary forms of extra-economic violence and coercion;
they do so by demanding labor services, deliveries in kind, or rents in
cash, and preside over areas where free commodity exchange and labor
mobility are relatively rare. They prefer stasis to change.
For Jefferson, this was expressed in his romantic praise of rural
life: “Corruption of morals in the mass of cultivators is a phenomenon
of which no age nor nation has furnished an example.” He condemned
manufacturing as morally and politically corrosive:
While we have land to labor then, let us never wish to
see our citizens occupied at a work bench… let our work shops remain in
Europe. It is better to carry provisions and materials to workmen there,
than bring them to the provisions and materials, and with them their
manners and principles … The mobs of great cities add just so much to
the support of pure government as sores do to the strength of the human
body.
Put differently, Jefferson feared the proletariat.
For Hamilton, conversely, national survival depended on
industrialization. He pushed Congress to foster domestic manufacturing
with a program known as “the American School” that had four central
policies: 1) tariffs on imports; 2) direct subsidies, or “bounties,” for
domestic manufacturers; 3) a partially public-owned national bank; 4)
broad public investments in infrastructure, or “internal improvements,”
like roads, canals, and ports.
The young Treasury Secretary’s most famous statement of his analysis is
The Report on the Subject of Manufactures,
submitted to Congress on December 5, 1791. It begins with a critique of
the Physiocrats — a school of thought in France that Karl Marx would
call “the true fathers of modern political economy.” They established a
labor theory of value, but restricted its realm to agriculture. In their
view, all other labor and economic activity was parasitic upon farming.
They were pioneering but myopic. In their analysis, Marx said,
“bourgeois society is given a feudal semblance.”
Hamilton’s critique of the Physiocrats was sharp and devastating. “It
has been maintained, that Agriculture is, not only, the most
productive, but the only productive species of industry,” he wrote.
The reality of this suggestion in either aspect, has,
however, not been verified… It is very conceivable, that the labor of
man alone laid out upon a work, requiring great skill and art to bring
it to perfection, may be more productive, in value, than the labour of nature and man combined, when directed towards more simple operations and objects.
In dismantling the Physiocrats’ fixation with agriculture, Hamilton
was also taking aim at slavery and the self-delusions of the plantation
elite. The Southern elites were increasingly defensive of their
“peculiar institution.” Vermont outlawed slavery when it broke away from
New York in 1777. Pennsylvania severely restricted slavery in 1780,
while Massachusetts abolished it outright in 1783.
In reaction, Southern politicians and writers concocted a series of
elaborate but inconsistent defenses. They went from arguing that slavery
was a necessary evil to proclaiming it as a positive good, with
Southern agrarian society as the highest form of civilization. (From
this unhinged doctrine would eventually flow the South’s suicidal
project of secession and offensive war against the North.)
Next,
The Report addressed the laissez-faire line associated
with Adam Smith. “Industry, if left to itself, will naturally find its
way to the most useful and profitable employment, ” wrote Hamilton in a
summary of this then-new doctrine; “whence it is inferred, that
manufactures without the aid of government will grow up as soon and as
fast, as the natural state of things and the interest of the community
may require.”
He countered this with demands for protectionist policy, couched in
arguments about what we would now call “uneven development”: “To
maintain between the recent [industrial] establishments of one country
and the long matured establishments of another country, a competition
upon equal terms, both as to quality and price, is in most cases
impracticable.”
To level the playing field, the weaker economy had to rely on“the
extraordinary aid and protection of government.” And he pointed out that
other governments aided their manufacturing sectors — the doctrines of
British political economy notwithstanding.
Perhaps his most contemporary sounding defenses of an activist
government had to do with failure and innovation. Hamilton argued that
“it is of importance that the confidence of cautious sagacious
capitalists both citizens and foreigners, should be excited,” and their
fear of risk allayed by “a degree of countenance and support from
government” so they might “be capable of overcoming the obstacles
inseperable from first experiments.”
Deeper in
The Report, Hamilton made a number of detailed
policy recommendations. They included higher import duties on some
finished products (and even, if necessary, the outright prohibition of
some imports); lowering or removing duties and taxes on key raw
materials; subsidies paid to whole sectors of industry; government-paid
premiums for specific firms that excel at innovation and production;
government assistance for the immigration of skilled workers; an almost
patent–like style of artificial monopoly for the inventors and importers
of new technology; the creation of national regulations for, and the
regular inspection of, manufactured goods so as to improve quality;
government facilitation of a single national money system; and public
investment in roads and canals.
Pretty much all of this was achieved, despite Southern opposition
— and it remains the basis for the growth of American capitalism.
Throughout
The Report,
Hamilton tried to assuage Southern fears by arguing that a rising tide
lifts all boats. “If the Northern and middle states should be the
principal scenes of such [manufacturing] establishments, they would
immediately benefit the more southern [states], by creating a demand
for… Timber, flax, Hemp, Cotton, Wool, raw silk, Indigo, iron, lead,
furs, hides, skins and coals.”
And in time, his proposed tariffs would help pay for publicly funded
infrastructure that would expand internal markets and lower the cost of
exporting. “Good roads, canals, and navigable rivers,” Hamilton wrote
“by diminishing the expense of carriage, put the remote parts of a
country more nearly upon a level with those in the neighborhood of a
town.”
If the private sector could not consume enough to drive rapid
industrialization, the public sector would. Since few export markets
could absorb American manufactured goods, military procurement would
created an artificial internal market for them. America’s nascent
manufacturing sector relied heavily on military consumption — products
associated with shipbuilding, weapons, munitions, uniforms, and food
rations. This socialized demand would drive private sector accumulation,
investment, wages, and thus consumption.
Hamilton drew up the blueprints for a planned economy — a capitalist
economy, to be sure, but one that would be guided by a long-range sense
of the country’s problems and potentials. And that was just what worried
the reactionaries of his day. The line of development that Hamilton
envisioned spelled the doom of a political economy based on slavery.
One of the few who was honest about this was North Carolina’s
Nathaniel Macon, who a decade after Hamilton’s death, explained to a
confused, young, canal-loving Southern politician: “If Congress can make
canals, they can with more propriety emancipate.”
In the decades after Hamilton, the
struggle between the forces of pro-industrial modernization and the
forces of agrarian underdevelopment continued. Hamilton’s “American
School” of economics had it successor in the “American System” of Henry
Clay of Kentucky, with its package of policy ideas drawn from
The Report: a high tariff, a national bank, public funding of infrastructure or “internal improvements.”
Clay and his supporters added a commitment to maintaining
artificially high public land prices. This boosted the government
revenue needed to fund land surveys, roads, canals, ports, and later
railroads. High public land prices also benefitted eastern
manufacturing, since cheap land would draw off labor and force up wages.
Ultimately, the American System was only partially realized and more
often than not at the state level, as in the famous New York state-built
Erie Canal. The developmentalist camp — the largely northern, urban,
manufacturing and financially-oriented interests that followed Clay
— ultimately coalesced into the Whigs, and then Lincoln and the
Republican Party.
Only with war and the secession of southern states did the
Hamiltonian-inspired agenda make real headway with passage of the
Homestead Act, opening western lands to small farmers, and the Railroad
Acts which, at government expense, set off construction of the
transcontinental railroad.
This American
dirigiste model has had a major impact on
global history. As the South Korean economist Ha-Joon Chang has pointed
out, every successful case of industrialization has used some version of
the Hamiltonian model. A line runs directly from it to the postwar rise
of the developmental states of East Asia. During Henry Clay’s heyday as
John Quincy Adams’s Secretary of State, the German political economist
Fredrich List — who would formulate the developmentalist theory of
“infant industry” protection — moved to Pennsylvania where he soaked up
the statist ideas of Hamilton and Clay.
Now Clay’s “American System” morphed into List’s more detailed
“National System.” When he finally returned to Germany in the 1830s,
List and others associated with the German “Historical School” of
Economics rejected Adam Smith’s fixation on the individual as a category
of analysis; they held that economies were based on nations and states.
In place of classical political economy’s “general laws,” the
Historical School sought a theory based on national and historical
specificity. (At the level of applied policy, this meant pushing for
government support for railway construction and industrialization.)
Their ideas were studied closely in Meji Japan, where a state-led
project of land reform and industrialization began in the early 1870s.
The other classic
dirigiste economies of East Asian — Taiwan,
Singapore, South Korea, and now China — have also relied heavily on List
and the German Historical School.
In most of the world, the real story of capitalism is not the story
of laissez-faire — a doctrine the strong impose upon the weak — nor a
quaint story about egalitarian local economies, but the story of the
state presiding over a mixed economy. Hamiltonian developmentalism — the
unnamed ideology — is amoral, pragmatic, instrumentalist, and flexible.
So what is the lesson of this attenuated tale?
Like Hamilton, we face a profound crisis rooted in an economy that demands to be
remade.
The old redistributive agenda is not enough. Due to its dependence on
the environmental curse of fossil fuels, the economy must also be
significantly
rebuilt around a clean energy sector. And history
is very clear on the implications: In capitalist society, moments of
crisis and transformation have always involved an increased economic
role for the state. We are entering one of those periods.
As the waters rise and the storms grow more intense, the state and
the public sector will be called forth. What the state can or will
become as it “returns” is an open question — or rather, open to being
reshaped by pressure from social movements.
Unfortunately, American society is very far from facing the crisis.
And a huge part of the problem is the Jeffersonian notion that “the
government that governs best is the one that governs least.” While that
is true as regards individual liberty, it is absolutely dangerous to
think that way as regards the economy.
