The Rousseau of the Right

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Rousseau’s wish to free the current majority from all restrictions, to dissolve the people into a homogeneous mass, abolish decentralization, and remove representative institutions could not be in sharper contrast to American traditions of constitutionalism, federalism, localism, and representation.

~ Claes G. Ryn, America the Virtuous, p. 73

In his important book, America the Virtuous, Professor Claes Ryn of Catholic University makes the compelling case that Rousseau is the ideological inspiration for the neoconservative movement, which he calls the new Jacobinism. Rousseau conjectured that some nebulous "general will" of the people was always right, and therefore government should have absolute power over a highly centralized and militarized state, all in the name of promoting if not imposing "democracy."

It is not at all surprising, then, that another of the neocons’ American idols is Alexander Hamilton, whom historian Cecelia Kenyon labeled "the Rousseau of the Right" (Cecelia Kenyon, "Alexander Hamilton, Rousseau of the Right," Political Science Quarterly, June 1958, pp. 161—178). The neocon love affair with "the Rousseau of the Right" was on display recently in a Sunday, April 25 New York Times book review of a new biography of Hamilton (Alexander Hamilton, by Ron Chernow) by Times op-ed columnist and house neocon David Brooks. Brooks is just wild about Hamilton, crediting him with nothing less than "creating capitalism." (He also seems gratified that the Chernow book supposedly does a "devastating destruction job on Thomas Jefferson").

Now, Alexander Hamilton can and should be admired for many things. But the one thing that Brooks says was his "greatest achievement"— his role as Treasury Secretary — should not be. Hamilton was a mercantilist. This was the corrupt system of political patronage and special privilege held into place by economic superstition in the Europe of Hamilton’s day (and before). As such, he championed protectionism, corporate welfare, central banking, excessive excise and property taxation, and government debt. Adam Smith’s Wealth of Nations was a critique and repudiation of mercantilism and a defense of capitalism. Brooks and Chernow have it all backwards when they write that these policies were capitalistic. In fact, they were just the opposite.

As Larry Schweikart writes in The Entrepreneurial Adventure: A History of Business in the United States (p. 63), Hamilton’s central bank, the Bank of the United States (BUS) "brought out the mercantilist Hamilton" and "fit perfectly with the mercantilist view of using business in the service of government." (This was also the view of the Italian and German governments during the 1920s and u201830s). The BUS was thankfully disbanded by President Andrew Jackson after several decades of corruption, inflation, and political mischief making. It did serve, nevertheless, as a precursor of the Fed.

Far from being a champion of capitalism, Hamilton was a champion of economic interventionism. Historians have long thought of him as "among the most eloquent defenders of state activism in the economy," writes Schweikart (p. 61).

Hamilton championed and did more than anyone to create the national debt, arguing successfully that it should be created as a means of taking over the state debts that were incurred to finance the Revolution. (Brooks praises this has having "bound the states together" and centralized more power in the nation’s capital). The reason Hamilton gave for the national debt, however, was that making property-owning taxpayers "reliant on the federal government for redemption of the debts they held would generate greater future support for federal taxation and centralization of financial policy. . . he wanted to make the wealthy dependent on the government so that in the future he could take more of their wealth!" (Schweikart, p. 61). He was a scheming plunderer, in other words, and the public debt was an integral part of his statist scheming.

Hamilton popularized the "infant industry" argument for protectionism, arguing that young industries needed to be protected from competition. Well, it turns out that industrial infants never grow up. Hamilton’s protectionism has only led to the permanent infantilization of industry. For example, the 1861 Morrill Tariff was vigorously promoted by steel manufacturers and congressmen Thaddeus Stevens of Pennsylvania and Justin Morrill of Vermont because it "protected" steel from international competition. In keeping with the Republican Party’s big-government roots, one of the first things President George W. Bush did upon taking office 140 years later, almost to the day, was to place 50 percent tariffs on steel, which he apparently believed had not yet grown up.

The Hamilton/neocon notion that the national debt is a "blessing" repudiates the thinking of most of the other founders on the issue. Government debt has always been an underhanded means of disguising the true costs of government to the public by forcing future generations to pay for government spending that benefits only the current population. It allows politicians to plausibly promise the public something for nothing by deferring the tax bill to future generations of taxpayers.

If you think Hamilton’s idea of a national debt is a blessing, consider this: according to recent news reports the total U.S. federal debt is $7.2 trillion. In the past year alone, the Hamilton/Lincoln-loving neocon cabal that runs the Bush administration has increased the national debt by $700 billion, which equates to almost $100,000 for every second of every eight-hour working day according to financial advisor Sean Corrigan. This is more debt than was run up in the first 200 years after the Declaration of Independence. Some blessing.

Hamilton did as much as anyone to destroy his own political party, the Federalist Party, with his excessive taxation schemes. He persuaded Congress to impose the hated Whiskey Tax (to help pay for the states’ debts, which the central government had assumed), which led to the Whiskey Rebellion in western Pennsylvania. The Official View of the Whiskey rebellion used to be that it was a successful example of the putting down of a rebellion or insurrection by George Washington himself, and therefore cemented into place the taxing power of the central government. But this view is now recognized as fallacious. In fact, virtually no whiskey taxes were ever collected, and despite Washington’s show of force, no tax rebels were punished; all were given amnesty. Furthermore, the entire episode fueled the anti-tax mentality that was so prevalent during the Revolution, and helped elect Thomas Jefferson president in 1800. Jefferson abolished all of the hated federal excise taxes. (See Murray Rothbard, "The Whiskey Rebellion: A Model for Our Time.")

Hamilton created another tax rebellion with his national property tax. This time the rebellion was in Massachusetts. When some of the tax rebels were imprisoned a man named John Fries organized a march on the courthouse and freed the tax protesters. Fries was imprisoned and sentenced to be hanged for treason. President John Adams pardoned him despite the strongest of protests by Hamilton, who was the leading proponent of hanging Fries. (See Charles Adams, Those Dirty Rotten Taxes: The Tax Revolts that Built America, pp. 70-72). Early Americans despised taxation with representation as much as taxation without representation. Hamilton’s tax-raising "activism" led directly to the death of the Federalist Party and the success of the Jeffersonians.

David Brooks also credits Hamilton with literally creating "the fluid capital markets that are today the engine of world capitalism." Well, not exactly. As Nathan Rosenberg and L.E. Birdzell, Jr. write in their treatise, How the West Grew Rich: The Economic Transformation of the Industrial World (p. 220): "The earlier stock exchanges . . . trace their origins to . . . the Amsterdam market, formed at the beginning of the seventeenth century," though there were also precedents in "Italy, France Spain, the Hanseatic towns, and . . . in German mines at the Leipzig fair as early as the fifteenth century." "In London, securities traders formed their own exchange in 1773. In New York, systematic trading was conducted on the street (literally), beginning in 1792."

Moreover, the large-scale trading of stocks in industrial corporations that Americans think of today was not invented by any one man, even a man as brilliant as Alexander Hamilton, but "traces its origins to trading in the trust certificates issued by the trusts of the 1880s" (Rosenberg and Birdzell, p. 223). The hated late nineteenth-century "trusts" invented the large-scale trading of stocks, not "the Rousseau of the Right."

Such fantasies are typical of the neocons or neo-Jacobins, as Claes Ryn would call them. They seem unaware of or unwilling to accept the fundamental idea that the civil society is the result of the peaceful efforts of many individuals who collaborate and cooperate for their own mutual benefit. It is not created by any one Great Central Planner. "Democracy" cannot be created by political fiat; the institutions of democracy evolved over many centuries. The same is true of the institutions of capitalism, as Rosenberg and Birdzell explain in painstaking detail.

David Brooks does hit the nail right on the head with regard to one point that he makes in his New York Times review. Hamiltonian mercantilism, which he confusingly labels the "activist, pro-market Hamiltonian tradition," was "later embraced by Henry Clay and the Whig Party, by the early Republicans in the age of Lincoln, and by Theodore Roosevelt-style progressives." This of course is one of the main themes of my book, The Real Lincoln: The North’s victory in the War to Prevent Southern Independence was, among other things, a Triumph of Hamiltonian Mercantilism that led inevitably to so much government corruption that historian Mark W. Summers wrote an entire book about the period entitled The Era of Good Stealings!

Thomas J. DiLorenzo [send him mail] is the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is How Capitalism Saved America: The Untold Story of Our Country’s History, from the Pilgrims to the Present (Crown Forum/Random House, August 2004).

Thomas DiLorenzo Archives at LRC

Thomas DiLorenzo Archives at Mises.org

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