by Thomas J. DiLorenzo
by Thomas J. DiLorenzo
hagiography n.1. the writing of the lives of saints; 2. uncritical or idealized biography.
~ Oxford Encyclopedic English Dictionary
Most Americans have been taught what William Lind calls a comic book version of their own country's history. One aspect of American comic book history, invented in the post-1865 era, is that from the time of the founding the citizens of the Northern states were generally more civilized, educated, and above all else, moral, than their hillbilly, slave-owning, gun-toting, tobacco-growing, fellow countrymen from the Southern states.
A second element of American comic book history is that the "nation" and its economy were supposedly created by a few Great Men. Lincoln, for example, is said to be a "redeemer president" who single-handedly gave us "a new birth of freedom." "Everything that is good in America today we owe to Lincoln," the Lincoln idolater Harold Holzer once told a television interviewer.
Similarly, Alexander Hamilton is frequently portrayed as a saintly, god-like, and super-human figure by America's court historians because of his fierce and highly effective advocacy of heavy taxation, public debt, central banking, protectionism, mercantilism, hyper-regulation, centralization of governmental power, and Big Government in general. Biographer Ron Chernow calls Hamilton, a mercantilist who publicly rebuked the writings of Adam Smith, "the prophet of the capitalist revolution in America." Neoconservative pundit David Brooks has absurdly claimed that Hamilton single-handedly "created capitalism"; Forrest McDonald once gave Hamilton all of the credit for America's becoming "the richest, most powerful and freest nation in the history of the world"; neoconservatives William Kristol and David Brooks began their crusade for "national greatness conservatism" (on display today in Iraq) with a 1997 Wall Street Journal article that called for a reinvigoration of "the nationalism of Alexander Hamilton"; and when the Republicans took over Congress in 1994 House Speaker Newt Gingrich told Time magazine that his number-one hero was Alexander Hamilton (followed John Wayne, Kemal Ataturk, and Father Flanagan).
One of the most recent examples of comic book history is a July 5 article in the Wall Street Journal Online entitled "Alexander Hamilton's Capital Compromise," by Fergus M. Bordewich. The article celebrates the fact that the house Hamilton lived in in New York City is being transformed into a shrine of sorts. In true hagiographic fashion, Bordewich makes several false claims about his saintly hero. The first claim, probably motivated by the fact that Hamilton advocated manumission — the ability of slaves to purchase their own freedom — is that Hamilton was "one of the most ardent abolitionists of his generation." There are several major problems with this assertion, however: Hamilton was a slave owner; he never advocated the abolition of slavery per se; he once purchased six slaves at a slave auction (for his brother-in-law, says biographer Ron Chernow); and he once returned runaway slaves to their owner.
Hamilton's wife Eliza was from a wealthy New York slave-owning family, the Schuylers, and retained some of the "house slaves" after marrying Hamilton. This fact is mentioned by Hamilton's hagiographers, but is usually excused. For example, in Alexander Hamilton and the Constitution Clinton Rossiter wrote that "Hamilton may have had a slave or two around the house," and "was too much a man of his age . . . to push for emancipation." Moreover, what kind of "abolitionist" is it who attends a slave auction, purchases six slaves, and watches as they are manacled and delivered to a relative where they are doomed to be enslaved for the rest of their lives?
In his short article Bordewich presents the usual portrayal of moral and civilized Northerners like the "abolitionist" Hamilton, in comparison to retrograde Southerners like Jefferson. But even Ron Chernow writes of how, in Hamilton's time, "Slavery was well entrenched in much of the north" and "New York and New Jersey retained significant slave populations" long after the Revolution. "New York City, in particular, was identified with slavery." By the late 1790s one in five New York City households, like Hamilton's, owned slaves who were "regarded as status symbols." Slavery was not ended in New York City until the early 1850s (see Slavery in New York by the New York Historical Society).
Bordewich also praises Hamilton for his "audacious plan to consolidate the states' debts, and to create a system of credit for the national government which would enable it to recover the trust of the foreign bankers upon whom it depended for future loans." Mostly Southern Anti-Federalists "fiercely opposed the plan, predicting that it would lead to overbearing centralization and tyranny by New York and Philadelphia money men." The Anti-Federalists were right.
Hamilton schemed to nationalize the war debt, and all the debt held by the states not because he thought it would be the fiscally responsible thing to do, but because he wanted to create a large national debt, period. If the states were permitted to pay off their own war debts, this would not be possible. Hamilton called the public debt "a public blessing" because of his belief that it would tie the wealthy (who would own the government's bonds) of the country to the government, and they would in turn provide political support for higher and higher taxes, to make sure that there was enough money in the treasury to pay off their principal and interest. In his book Alexander Hamilton, William Graham Sumner wrote that the "controlling motive" of Hamilton with regard to the public debt was "political expediency," not fiscal responsibility. His purpose was "to strengthen our infant government by increasing the number of ligaments between the government and the interests of individuals." Wealthy individuals, that is.
Hamilton's policy of having the federal government nationalize all the old (state) government debt was an enormously corrupt scheme. New bonds were issued, backed by revenue from a new tariff that Hamilton was instrumental in putting into place. The old war debt was to be cashed out at face value. The plan "immediately became public knowledge in New York City," wrote John Steel Gordon in Hamilton's Blessing, "but news of it spread only slowly, via horseback and sailing vessel, to the rest of the country." This created tremendous arbitrage opportunities for Hamilton's friends and political supporters. New York speculators embarked on a mad scramble down the eastern seaboard to purchase bonds from hapless and unsuspecting war veterans at prices as low as 10 percent of full value. As Claude Bowers described in his book, Jefferson and Hamilton: "Expresses with very large sums of money on their way to North Carolina for purposes of speculation in certificates splashed and bumped over the wretched winter roads . . . . Two fast-sailing vessels, chartered by a member of Congress . . . were ploughing the waters southward on a similar mission."
John Quincy Adams would later write to his father of how "Christopher Gore, the richest lawyer in Massachusetts, and one of he strongest Bay State supporters of Hamilton's [political] machine, had made an independent fortune in speculation in the public funds." New York newspapers speculated that Robert Morris, a staunch Hamilton supporter, made $18 million, while Governor George Clinton of New York pocketed $5 million. Hamilton himself purchased some of the bonds, but he insisted that they were "for his brother-in-law," just like the slave purchases that he made.
Hamilton succeeded in turning many wealthy people into lobbyists for statism. As Douglas Adair, an editor of The Federalist Papers, explained: "With devious brilliance, Hamilton set out, by a program of class legislation, to unite the propertied interests of the eastern seaboard into a cohesive administration party, while at the same time he attempted to make the executive dominant over the Congress by a lavish use of the spoils system. In carrying out this scheme . . . Hamilton transformed every financial transaction of the Treasury Department into an orgy of speculation and graft in which selected senators, congressmen, and certain of their richer constituents throughout the nation participated."
Hamilton's "system of public credit for the national government," which is praised by Bordewich and all other Hamiltonian hagiographers, was in reality a recipe for financial irresponsibility and corruption. As John C. Miller wrote in The Federalist Era, after Hamilton's "system" was put into place, "the national debt soared to a total of over $80 million. To service this debt, almost 80 percent of the annual expenditures of the government were required. During the period 1790—1800, payment of the interest alone of the national debt consumed over 40 percent of the national tax revenue. For a nation whose government had been tottering on the brink of bankruptcy a few years before, this might well be regarded as a staggering burden of debt."
Hamilton prevailed politically despite the fact that his crackpot idea of a large public debt being a "public blessing" was a result of the fact that his economic thinking was "befogged in the mists of mercantilism," as William Graham Sumner wrote.
July 14, 2008
Thomas J. DiLorenzo [send him mail] professor of economics at Loyola College in Maryland and the author of The Real Lincoln; Lincoln Unmasked: What You're Not Supposed To Know about Dishonest Abe and How Capitalism Saved America. His latest book, Hamilton's Curse, will be published on October 21.
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