Jefferson Contra Hamilton: Too Tame, Too Late
by Albert Jay Nock
from chapter 5 of Albert Jay Nock's Jefferson.
over funding and assumption [of the states' Revolutionary War debt]
was at its height when Mr. Jefferson took his place in the cabinet.
There was relatively little trouble about funding, but assumption
was dragging its keel; it failed in the House, but was restored
by the Senate and sent back to the House for reconsideration.
to the President's one day," Mr. Jefferson wrote in a private
letter two years later,
I met Hamilton,
as I approached the door. His look was sombre, haggard, and
dejected beyond description; even his dress uncouth and neglected.
He asked to speak with me.
He walked Mr.
Jefferson back and forth before the president's house for half an
hour, urging him to use his influence with the Virginian members
in behalf of assumption. He put it as a matter of preserving the
Union, and quite sincerely; there was a great deal in what he said.
New England, which comprised the principal creditor states, was
in a position to hold the threat of secession over the rest of the
country, as in fact it did at intervals for many years.
aware, as he wrote Dr. [George] Gilmer, that "the question
had created greater animosities than I ever yet saw take place on
any occasion," was properly impressed by Hamilton's representations.
If assumption failed outright, he could see that the failure might
amount to "something very like a dissolution of the government."
He had no sentimentalist's
repugnance to the idea of secession. At the end of his first term
in the presidency, he wrote frankly to Dr. Joseph Priestley that
"Whether we remain in one confederacy, or break into Atlantic
and Mississippi confederacies, I believe not very important to the
happiness of either part." If now he "could scarcely contemplate
a more incalculable evil than the breaking of the Union into two
or more parts,"
or if he condemned with indignation the machinations of parricides
who have endeavoured to bring into danger the Union of these States,"
it was because of his ever-present fear that the country would be
picked up piecemeal by "the plundering combinations of the
in some form then should be admitted; but as he told President Washington,
he hoped it would be "put into a just form, by assuming to
the creditors of each State in proportion to the census of each
State, so that the State will be exonerated towards its creditors
just as much as it will have to contribute towards the assumption."
More than this he could not say. The formulation of the thing was
in Hamilton's department, not his, and while he had an instinctive
dislike of Hamilton's terms, he knew himself to be "really
a stranger to the whole subject."
Moreover, he felt himself quite incompetent in financial matters
at large; he had naively written the Treasury Board from Paris in
1785 that they were "very foreign to my talents."
to the practical matter of effecting assumption, however, he saw
that it must be one of political trade-and-deal; it could not be
anything else. The quid pro quo was the location of the national
capital. The members from the middle states wanted the capital at
Philadelphia or Baltimore and were indifferent about assumption,
save as a trading point with "the Eastern members, who have
had it so much at heart."
Madison and Hamilton discuss the matter at his own dinner table
the day after Hamilton had accosted him on the street, Mr. Jefferson
decided that "the least bad of all the turns the thing can
was to let Hamilton have his way on condition that the capital should
be established at Georgetown on the Potomac. If there must be a
bargain, it might as well be one from which the producer as well
as the speculator especially the Virginian and midwestern
producer would stand to get something. He had written Washington
the year before that he considered the union of the Ohio and Potomac
rivers by the proposed Potomac canal, as
strongest links of communication between the eastern and western
sides of our confederacy. It will moreover add to the commerce
of Virginia, in particular, all the upper parts of the Ohio
and its waters.
In view of
this, he now thought that placing the capital at the foot of the
canal would tend to "vivify our agriculture and commerce."
Thus Mr. Jefferson
made what he afterwards called, with some exaggeration, the greatest
political error of his life. Really, what he did or did not do in
the premises was of little practical consequence to the ultimate
issue: namely, what economic interests should control the government
of the United States. He simply did not see the end of Hamilton's
plan; nor, it must be said, did Hamilton himself clearly see it,
except with the eye of instinct.
When one examines
this collision of statesmanship, one is most struck, perhaps, by
the rapidity with which one's instincts invariably outrun one's
own interpretation of them. Both men represented an economic class
interest in government; in any proper use of the term, Mr. Jefferson
seems to have been but little more a theoretical democrat than Hamilton.
To view him as a theoretical or doctrinaire democrat is to disregard
the most inadmissible inconsistencies, both in his public acts and
in his expressions of governmental theory inconsistencies
which resolve themselves immediately when one views him as the representative
of an economic class interest.
He was for
control of government by the producing class; that is to say, by
the immense majority which in every society actually applies labor
and capital to natural resources for the production of wealth. His
instincts reacted like the reflex action of an eyelid against anything
that menaced that interest. Hamilton's instinct reacted as promptly
against anything that threatened to disturb the preponderance of
the exploiting class the minority, that is, which in every
society appropriates without compensation the labor products of
account which both gave themselves of the operation of this instinct,
however, was as inadequate and sprawling as such accounts invariably
are. Mr. Jefferson's infatuation with Hamilton's monarchism and
Anglomania, for instance, his habitual view of him as "chained
by native partialities to everything English,"
and his public character "bewitched and perverted by the British
all this, however sincere, is no more competent than Hamilton's
own loose talk about "a womanish attachment to France and a
womanish resentment against Great Britain."
more quick than Mr. Jefferson to assess the economic implications
of Hamilton's fiscal system. The science of economics was then in
its cradle. By an odd coincidence, Mr. Jefferson had stood by the
bedside of its birth in Paris; he knew its parents and godparents,
both personally and by their writings, and yet seems never quite
to have known what manner of child had been brought forth. As late
as ten years before his death, he remarked that economics assumed
the form of a science
the hands of the political sect in France, called the Economists....
Quesnay first, Gournay, Le Frosne, Turgot and Dupont de Nemours
... led the way in these developments.
But the tone
of his discussion is purely academic, never showing a sense of the
vital relation which the work of these men bore to the fiscal system
which he instinctively opposed. He had occasional brilliant flashes
of insight into fundamental economics and its relation to government,
but they were too brief and unsteady to be illuminating; they but
deepened the darkness that followed them.
almost immediately applied to Hamilton's system a kind of homespun
economic analysis that reached to its bottom. In dealing with funding
and assumption, Rep. John Francis Mercer of Maryland, Rep. James
Jackson of Georgia, and Sen. John Taylor of Virginia at once penetrated
to the fundamental truth that all largesse to the speculator must
ultimately be paid out of production, and that Hamilton's proposal
therefore was actually to put a gratuitous first lien on future
labor. They also took the same ground of public policy in opposing
the bank bill.
The bank project
was simply a continuous monopoly of public funds, raised by taxation,
by investors in a semiprivate corporation or rather, nominally
semipublic but really private, since so large a proportion of the
Senate and House were themselves investors who had already profited
egregiously by funding and assumption, and who would certainly become
shareholders in the new bank. All this, they insisted, was to be
brought about at the uncompensated expense of production.
A levy of taxes
for this purpose was, according to Taylor, an outright conversion
of labor-made values into law-made property, vested in hands which
had done nothing to produce them. "An annuity to a great amount
is suddenly conjured up by law," said Taylor.
It is paid
out of labour, and labour in all countries falls on the poor....
But the aristocracy, as cunning as rapacious, have contrived
to inflict upon labour a tax, constantly working for their emolument.
had laid down the same principle a little earlier. "All public
revenue or private income," he declared, "is a contribution,
mediate or immediate, of the labour of the industrious farmer or
It does not
appear that Mr. Jefferson's mind ever quite struck through to this
fundamental ground of economic objection to Hamilton's fiscal system,
or that it ever effectively followed those which did. He sometimes
speaks somewhat in the language of Taylor and Mercer, but his precision
of terms seems rather casual than studied as when, for instance,
he wrote to John Adams in 1819, protesting against the sacrifice
of "our citizens, their property and their labour, passive
victims to the swindling tricks of bankers and mountebankers."
He had a clear
view of Hamilton's system, considered by its aspect of pure financiering.
"The bank has just notified its proprietors," he wrote
may call for a dividend of ten per cent on their capital for
the last six months. This makes a profit of twenty-six per cent
per annum. Agriculture, commerce, and everything useful must
be neglected, when the useless employment of money is so much
He had already
written Edmund Pendleton in 1791, concerning Hamilton's general
the delirium of speculation is too strong to admit sober reflection.
It remains to be seen whether in a country whose capital is
too small to carry on its own commerce, to establish manufactures,
erect buildings, etc., such sums should have been withdrawn
from these useful pursuits to be employed in gambling.
to the total wealth of the country, these sums were indeed so huge
that one can quite understand a proximate and partial view of their
employment, to the exclusion of economic theory. While an earthquake
is going on, one does not generalize about the persistence of force.
Mercer estimated the entire public debt, after its egregious inflation
by Hamilton, at "one-fourth of the whole value of the property"
of the United States. This is probably an exaggeration; but even
cutting it down by one-half, one can imagine the menacing predominance
of a single vested interest equal to one-eighth of a country's total
wealth. No wonder Mr. Jefferson complained bitterly that "the
more debt Hamilton could rake up, the more plunder for his mercenaries."
all, Mr. Jefferson saw the political effect of Hamilton's efforts
in rearing up "that speculating phalanx, in and out of Congress,
which has since been able to give laws to change the political complexion
of the government of the United States."
He wrote to President Washington in 1792 that,
Hamilton's system flowed from principles adverse to liberty,
and was calculated to undermine and demolish the Republic by
creating an influence of his Department over members of the
Legislature. I saw this influence actually produced, and its
first fruits to be the establishment of the great outlines of
his project by the votes of the very persons who, having swallowed
his bait, were laying themselves out to profit by his plans.
He gives a
most vivid picture of the state of things ensuing upon the first
trial of Hamilton's strength in Congress, with reference to the
funding and assumption bill. When it became known what form the
bill would take,
known within doors sooner than without, and especially than
to those in distant parts of the Union, the base scramble began.
Couriers and relay horses by land, and swift-sailing pilot boats
by sea, were flying in all directions. Active partners and agents
were associated and employed in every State, town and country
neighborhood, and this paper was bought up at five shillings,
and often as low as two shillings in the pound, before the holder
knew that Congress had already provided for its redemption at
par. Immense sums were thus filched from the poor and ignorant.
... Men thus enriched by the dexterity of a leader, would
follow of course the chief who was leading them to fortune,
and become the zealous instruments of all his enterprises.
In great measure,
no doubt, his concern with the immediate political bearings of Hamilton's
system diverted his attention from its theoretical economics. In
this he was far from exceptional. On the one side, Oliver Wolcott,
Jr., one of Hamilton's most interested supporters, wrote explicitly
that he attached no importance to the funding measure save as "an
engine of government," and that "without the assumption
the political purposes which I have enumerated can not be attained."
On the other
side, Jackson brought out the historical parallel, taken from Blackstone,
of the political reasons for creating the British national debt:
"because it was deemed expedient to create a new interest,
called the moneyed interest, in favor of the Prince of Orange, in
opposition to the landed interest, which was supposed to be generally
in favor of the King."
Mr. Jefferson wrote Washington to the same effect, that "[t]his
exactly marks the difference between Colonel Hamilton's views and
mine, that I would wish the debt paid tomorrow; he wishes it never
to be paid, but always to be a thing wherewith to corrupt and manage
Of the bank project also, he wrote in retrospect, nearly 20 years
after the event,
of the Funding system and of the Assumption would be temporary.
It would be lost with the loss of the individual members whom
it had enriched, and some engine of influence more permanent
must be contrived while these myrmidons were yet in place to
carry it through all opposition. This engine was the Bank of
the United States.
then, Mr. Jefferson's official memorandum on the constitutionality
of the bank bill does not lead into the large question of public
policy exhibited by the economics of the measure. When the bill
came up for the president's signature, Washington asked the four
members of his cabinet to prepare him each a written opinion for
his guidance. Hamilton wrote an affirmative opinion, of great ability;
General Knox, secretary of war, a good soldier, quite out of his
depth in any matter of this kind, agreed with him. Mr. Jefferson
and Edmund Randolph, the attorney general, wrote negative opinions.
took strictly legalistic ground, not passing from this to the ground
of public policy, though it was well open to him. He enumerated
the legal principles contravened by the bill, demolished the doctrine
of the federal government's "implied powers," and laid
down as fundamental to the Constitution the formula of the Tenth
Amendment, that "all powers not delegated to the United States
by the Constitution nor prohibited by it to the States, are reserved
to the States or to the people." Beyond this he did not go;
it was a lawyer-like pronouncement, but in the premises hardly,
perhaps, to be called statesmanlike.
It was not,
at all events, the production of a man desirous of making himself
the focus of a great popular movement of insurgency. It had a curious
effect upon his reputation as a public man curious, that
is, until one remembers the tendency of terms originally fresh,
vivid, and special in their significance, to divest themselves of
their original meaning, and either degenerate into mere petrifactions,
or else to take on a new and different content. Mr. Jefferson's
legalistic attitude towards Hamilton's fiscal system placed him
before the country as a doctrinaire advocate of state rights and
of strict constitutional construction; whereas he was really neither.
of both was occasional. Class interest led him almost always to
the side of the smaller political unit against encroachment by the
larger, because the greater the power of local self-government,
as a rule, the better for the producer and the worse for the exploiter.
Thus he was quite regularly for state rights against the Union,
for county rights against the state, for township rights or village
rights against the county, and for private rights against all. But
in this he was far from doctrinaire; when the producer's interest
lay in the other direction, he promptly changed sides.
He showed himself
as little doctrinaire, also, towards construction of the Constitution.
He was always well aware that law, even fundamental law expressed
in a Constitution, is merely something that succeeds in getting
itself measurably well obeyed, and that a Constitution must therefore
be, in the last analysis, a device by which anything can be made
to mean anything. "Some men look at constitutions with sanctimonious
reverence," he wrote in his old age, "and deem them like
the arc of the covenant, too sacred to be touched."
He had seen
too much lawmaking and law-mongering to entertain any such illusions;
his view was always practical:
I am certainly
not an advocate for frequent and untried changes in laws and
constitutions. I think moderate imperfections had better be
borne with; because when once known, we accommodate ourselves
to them, and find practical means of correcting their ill effects.
of state in 1792, he says in an official opinion that where a phrase
in the Constitution is susceptible of two meanings, "we ought
certainly to adopt that which will bring upon us the fewest inconveniences."
Yet when the interest of the producer leaned that way, he could,
and invariably did, stand out as stiffly as anyone for the letter
of the law, and for the "safe and honest meaning contemplated
by the people of the United States at the time of its adoption."
had always a sound and clear view of the function of capital as
a factor in production, always drawing a sharp distinction between
capitalism and monopoly. He would not have understood a condemnation
of Hamilton's system because it was capitalistic, any more than
he would have sympathized with idle conjurations of a "menace
of capitalism" in general:
existence of banks of discount for cash, as on the continent
of Europe, there can be no objection ... I think they should
even be encouraged, by allowing them a larger than legal rate
on short discounts, and tapering thence in proportion as the
term of discount is lengthened.
He did not
object, even, to a national establishment of merchant banking, but
rather advocated it. "The States should be urged," he
wrote in 1813, "to concede to the General Government, with
a saving of chartered rights, the exclusive power of establishing
banks of discount for paper."
It was the monopoly feature, the element of law-created economic
privilege, to which he objected. He perceived, in short, the difference
in economic status held by the industrial or merchant banker, furnishing
capital for productive enterprise, and the banker who underwrites
and hawks a lien which a government imposes, through an exercise
of the taxing power, upon the products of future labor.
The last of
Hamilton's fiscal measures was a protective tariff, and here again
Mr. Jefferson showed a sound instinct outstripping a rather hamstrung
economic interpretation. He was a natural free trader. During the
Revolution he had urged upon Franklin, then at the French court,
the advisability of supporting public credit by securing "free
trade by alliance with some naval power able to protect it,"
and in his official report on foreign commerce, in 1793, he recurs
to the same step-by-step policy. "Would even a single nation
begin with the United States this system of free commerce, it would
be advisable to begin it with that nation; since it is one by one
only that it can be extended to all."
He saw international
commerce in the large general terms of "an exchange of surpluses
for wants between neighbor nations." If this exchange could
be made free, it would be a great natural stimulus to production
all round "the greatest mass possible would then be
produced of those things which contribute to human life and human
happiness; the numbers of mankind would be increased, and their
On the other
hand, he accepted the doctrine of retaliatory tariffs, apparently
without perceiving that as an economic weapon, any form of tariff,
boycott, or embargo kicks farther than it carries, and that the
best reason for a tariff is invariably a better reason against one.
He never anticipated, for example, the appalling economic consequences
brought indirectly upon the producer by the great embargo, which
he imposed upon the country in 1807.
correctly calls tariff-taxes "duties on consumption,"
he assumes that they are paid at first hand instead of being passed
along. He also assumes that taxation should be based on ability
to pay, rather than on a rental basis determined by the value of
economic privilege received from government. "Taxes,"
he says, "should be proportioned to what may be annually spared
by the individual."
of taxation set forth by the Economists seems not to have stirred
his usually sensitive curiosity. He regarded it as an academic matter
of little interest:
may be the merit of their principles of taxation, it is not
wonderful they have not prevailed; not on the questioned score
of correctness, but because not acceptable to the people, whose
will must be the supreme law.
Hence it is
not surprising to find him accepting a revenue tariff as a device
for making the rich pay all the taxes. As the tariff-taxes "fall
principally on the rich," he writes the Comte de Moustier in
1790, "it is a general desire to make them contribute the whole
money we want, if possible."
This failure to trace the actual incidence of taxation may be said
to have made his own fiscal measures almost as bad for the producer,
in the long run, as Hamilton's.
In their economic
judgment on the protective system, Mr. Jefferson's contemporaries
again outran him. His Virginian neighbor, Taylor, seems to have
caught sight of the fundamental principle that in international
trade as well as in domestic trade, goods can be paid for only in
goods or services, and that money, or any form of credit which apparently
pays for them, does not really pay for them, but is merely a device
for facilitating their exchange. "Currency is the medium for
exchanging necessaries" it must have goods behind it,
and whatever medium has the guarantee of goods behind it is valid
should follow the natural lines set by purchase in the cheapest
market and sale in the dearest; and any mechanism of interference,
like a tariff, is disabling. He also saw that a tariff, by artificially
raising prices to the domestic consumer, is a "distribution
of property by law" by political means, in other words,
rather than by economic means. Moreover, by successive shiftings,
the final incidence of this tax falls inevitably on production,
for any governmental "bounties to capital are taxes upon industry."
Tightening his terms a little, the values absorbed by the "chartered
monopoly" created by a tariff law, must come from somewhere,
and there is nowhere for them to come from, finally, but out of
production. By the last analysis somebody, in Mr. Jefferson's phrase,
must "labor the earth" to produce them.
stood out against Hamilton in every cabinet meeting, but he always
lost. He was a poor disputant; contention of any kind was distasteful
to him, as having at best a touch of vulgarity about it. Unable
even formally to concur with Hamilton, as the president hoped he
might, he at last told Washington that
was of much less importance than he seemed to imagine; that
I kept myself aloof from all cabal and correspondence on the
subject of the government, and saw and spoke with as few as
I could. That as to a coalition with Mr. Hamilton, if by that
was meant that either was to sacrifice his general system to
the other, it was impossible. We had both, no doubt, formed
our conclusions after the most mature consideration; and principles
conscientiously adopted, could not be given up on either side.
request he continued to hold office in an ad interim fashion
for a time, but a series of stirring events in the following year,
1793, determined him; he resigned on the last day of that year and
shortly afterwards went home. Washington's administration was headed
straight for the rocks; and Mr. Jefferson, quite indisposed to martyrdom
for a cause he did not believe in, went overboard and struck out
for Monticello and safety.
Thomas Jefferson, The
Jeffersonian Cyclopedia: A Comprehensive Collection of the Views
of Thomas Jefferson, ed. John P. Foley (New York: Funk
& Wagnalls Co., 1900): p. 60.
p. 891 (Jefferson to George Washington, 1792).
p. 890 (Jefferson to the General Assembly of North Carolina, Jan.
p. 455 (Jefferson to Dr. George Logan, 1816).
p. 59. [Note: This source cites a letter to Francis Eppes, not
Thomas Jefferson, The
Anas / From the Writings of Thomas Jefferson: Volume 1,
ed. Albert Ellery Bergh (Washington, DC: Thomas Jefferson Memorial
Association, 1903): p. 275.
Cyclopedia, p. 5 (Letter to Samuel Osgood).
p. 58 (Jefferson to Dr. George Gilmer, June 1790).
p. 126 (Jefferson to George Washington, 1789).
p. 59 (Jefferson to Dr. George Gilmer, June 1790).
p. 396 (Jefferson to William H. Crawford, 1816).
Anas, p. 279.
from Alexander Hamilton to Col. Edward Carrington (May 26,
p. 272 (introduction to A Treatise on Political Economy,
by Destutt de Tracy, p. vi ).
See Charles A. Beard, Economic
Origins of Jeffersonian Democracy (New York: The MacMillan
Company, 1905): p. 207.
p. 576 (Thomas Jefferson to John Adams, 1819).
p. 71 (Jefferson to Plumard de Rieux, 1792).
Anas, p. 273.
George Gibbs, ed., Memoirs
of the Administrations of Washington and John Adams, Edited from
the Papers of Oliver Wolcott, Secretary of the Treasury
(New York: William Van Norden, 1846): p. 43 (Oliver Wolcott, Jr.,
to Oliver Wolcott, Sr., New York, March 27, 1790). [Editor's note:
Wolcott, Jr., was auditor of the Treasury in 1790 Hamilton's
deputy and he succeeded Hamilton as treasury secretary
of Congress 1790, p. 1214. [Editor's note: Jackson is
speaking here of the Glorious Revolution of 1688, where the Prince
of Orange, later King William III, deposed King James II.]
See Henry S. Randall, The Life of Thomas Jefferson, vol.
2 (New York: Derby & Jackson, 1857): p. 80.
See R.B. Bernstein, Jefferson
(Oxford: Oxford University Press, Inc., 2003): p. 184 (Jefferson
to Samuel Kercheval, July 1816).
p. 40 (opinion on Apportionment Bill).
p. 193 (Reply to Address, March 1801).
p. 80 (Jefferson to J.W. Eppes, Nov. 1813).
p. 78 (Jefferson to J.W. Eppes, Nov. 1813).
p. 362 (Foreign Commerce Report, Dec. 1793).
p. 858 (Jefferson to James Madison, Dec. 1784).
p. 272 (Introduction to Tracy's Political Economy).
John Taylor, An
Inquiry Into the Principles and Policies of the Government of
the United States (Fredericksburg, Va.: Green and Cady,
1814; Union, N.J.: The Lawbook Exchange, Ltd., 1998): p. 273.
Citation to the Lawbook edition.
Jay Nock (18701945) was an influential American libertarian
author, educational theorist, and social critic. Murray Rothbard
was deeply influenced by him, and so was that whole generation of
free-market thinkers. See Nock's The
State of the Union.
Best of Albert Jay Nock