Main currents in American thought

Of the disciplined forces that put to rout the disorganized party of agrarianism, the intellectual leader was Alexander Hamilton, the brilliant Anglo-French West Indian, then just entered upon his thirties. A man of quite remarkable ability, a lucid thinker, a great lawyer, a skillful executive, a masterly organizer, a statesman of broad comprehension and inflexible purpose, he originated and directed the main policies of the Federalist group, and brought them to successful issue. For this work he was singularly well equipped, for in addition to great qualities of mind and persuasive ways he was free to work unhampered by the narrow localisms and sectional prejudices that hampered native Americans. He was rather English than American, with a certain detachment that refused to permit his large plans to be thwarted by minor, vexatious details, or the perversity of stupid men. He was like the elder Pitt in the magnificence of his imperial outlook.

Such a man would think in terms of the nation rather than of the state. He would agree with Paine that the continental belt must be more securely buckled. The jealousies and rivalries that obstructed the creation of a centralized Federal government found no sympathy with him. He was annoyed beyond all patience with the dissensions of local home rule. In his political philosophy there was no place for “the political monster of an imperium in imperio”; he would destroy all lesser sovereignties and reduce the several commonwealths to a parish status. For town-meeting democracies and agrarian legislatures he had frank contempt. The American villager and farmer he never knew and never understood; his America was the America of landed gentlemen and wealthy merchants and prosperous professional men, the classes that were most bitterly anti-agrarian. And it was in association with this group of conservative representatives of business and society that he took his place as directing head in the work of reorganizing the loose confederation into a strong and cohesive union. When that work was accomplished his influence was commanding, and for a dozen years he directed the major policies of the Federalist party. His strategic position as Secretary of the Treasury enabled him to stamp his principles so deeply upon the national economy that in all the intervening years since he quitted his post they have not been permanently altered.

That we still follow the broad principles of Hamilton in our financial policy is a remarkable testimony to the perspicacity of his mind and his understanding of the economic forces that control modern society. And hence, because the Hamiltonian principles lie at the core of the problem which has proved so difficult of solution by modern liberalism, the life and work of Hamilton are of particular significance in our democratic development.

Hamilton was our first great master of modern finance, of that finespun web of credit which holds together our industrial life; and because his policies opened opportunities of profit to some and entailed loss upon others, they have been debated with an acrimony such as few programs have endured. About the figure of the brilliant federalist the myth-makers have industriously woven their tales, distorting the man into either a demigod or a monster. The individual has been merged in the system which he created, and later interpretation has been shot through with partisan feeling; political and economic prejudice has proved too strong for disinterested estimate. Any rational judgment of Hamilton is dependent upon an interpretation of the historical background that determined his career, and in particular of the state of post-Revolutionary economics; and over such vexing questions partisans have wrangled interminably. Thus Sumner, in his life of Hamilton, asserts dogmatically that Federalism was no other than the forces of law and order at war with the turbulent, anarchistic forces unloosed by the Revolution, and that the putting down of the scheme of repudiation was the necessary preliminary to the establishment of a great nation. In the light of such an interpretation, Hamilton the far-seeing, courageous and honest master of finance, was the savior of nationality, the one supreme figure rising above an envious group of lesser men.

But, as has been sufficiently pointed out in preceding chapters, the historical facts are susceptible of quite other interpretation; and as our knowledge of the economic struggle then going on becomes more adequate, the falsity of such an explanation becomes patent. If, on the other hand, we concede that the crux of the political problem in 1787 was economic—the struggle waging between farmer and business groups for control of government—then the position of Hamilton becomes clear; he was the spokesman of the business economy. He thought in terms of nationality and espoused the economics of capitalism, because he discovered in them potentialities congenial to his imperialistic mind.

The career of Hamilton followed logically from the determining facts of temperament and experience. He came to New York an alien, without position or influence, ambitious to make a name and stir in the world; and in the America of his day there could be little doubt what doors opened widest to preferment. He made friends easily, and with his aristocratic tastes he preferred the rich and distinguished to plebeians. Endowed with charming manners and brilliant parts, he fascinated all whom he met; before he was of age he was intimate with all the Whig leaders, civil and military, on Washington’s staff and elsewhere, lending his brains to the solution of knotty problems, prodding stupider minds with illuminating suggestions, proving himself the clearest thinker in whatever group he found himself. It was by sheer force of intellect that he gained distinction. Singularly precocious, he matured early; before his twenty-fifth year he seems to have developed every main principle of his political and economic philosophy, and thereafter he never hesitated or swerved from his path. He was tireless in propaganda, urging on the proposed Constitutional convention, discussing with Robert Morris his favorite project of a national bank, outlining various systems of funding, advocating tariffs as an aid to domestic manufacture, and sketching the plan of a political and economic system under which native commercialism could go forward.

His reputation as an acute and trustworthy financial adviser was well established with influential men north and south, when the new government was set up, and Washington turned to him naturally for the Treasury post, to guide financial policies during the difficult days immediately ahead. But so able a man could not be restricted within a single portfolio, and during the larger part of Washington’s two administrations Hamilton’s was the directing mind and chief influence. He regarded himself as Prime Minister and rode roughshod over his colleagues. Major policies such as that of no entangling alliances must receive his careful scrutiny and approval before they were announced; and in consequence more credit belongs to Hamilton for the success of those first administrations than is commonly recognized.

But when we turn from the administrator and statesman to the creative thinker, there is another story to tell. The quickness of his perceptions, the largeness of his plans and efficacy of his methods—his clear brilliancy of understanding and execution—are enormously impressive; but they cannot conceal certain intellectual shortcomings. There was a lack of subtlety in the swift working of his mind, of shades and nuances in the background of his thought, that implied a lack of depth and richness in his intellectual accumulation. Something hard, almost brutal lurks in his thought—a note of intellectual arrogance, of cynical contempt. He was utterly devoid of sentiment, and without a shred of idealism, unless a certain grandiose quality in his conceptions be accounted idealism. His absorbing interest in the rising system of credit and finance, his cool unconcern for the social consequences of his policies, reveal his weakness. In spite of his brilliancy Hamilton was circumscribed by the limitations of the practical man.

In consequence of such limitations Hamilton was not a political philosopher in the large meaning of the term. In knowledge of history he does not compare with John Adams; and as an open-minded student of politics he is immensely inferior to Jefferson. Outside the domain of the law, his knowledge does not always keep pace with his argument. He reasons adroitly from given premises, but he rarely pauses to examine the validity of those premises. The fundamentals of political theory he seems never to have questioned, and he lays down a major principle with the easy finality of a dogmatist. Compare his views on any important political principle with those of the greater thinkers of his time, and they are likely to prove factional if not reactionary. The two tests of eighteenth-century liberalism were the doctrine of individualism, and the doctrine of the minimized state; and Hamilton rejected both: the former in its larger social bearing, and the latter wholly. He was not even abreast of seventeenth-century liberalism, for that was strongly republican, and Hamilton detested republicanism only a little less than democracy. Harrington and Locke were no masters of his; much less were Bentham or Priestley or Godwin. He called the French revolutionary writers “fanatics in political science”; to what extent he read them does not appear. The thinkers to whom he owed most seem to have been Hume, from whom he may have derived his cynical psychology, and Hobbes whose absolute state was so congenial to his temperament. But political theory he subordinated to economic theory.

He was much interested in economics. With the Physiocratic school and its agrarian and sociological bias he could have no sympathy, but with the rising English school that resulted from the development of the industrial revolution, he found himself in hearty accord. Capitalism with its credit system, its banks and debt-funding and money manipulation, was wholly congenial to his masterful temperament. He read Adam Smith with eagerness and The Wealth of Nations was a source book for many of his state papers. To create in America an English system of finance, and an English system of industrialism, seemed to him the surest means to the great end he had in view; a centralizing capitalism would be more than a match for a decentralizing agrarianism, and the power of the state would augment with the increase of liquid wealth.

But granted that he lacked the intellectual qualities of the philosopher, it does not follow that his significance diminishes. On the contrary his very independence of contemporary European theory enlarged his serviceableness to party. He was free to employ his intelligence on the practical difficulties of a new and unprecedented situation. English liberalism did not answer the needs of Federalism, if indeed it could answer the needs of the country at large. The time had come to decide whether the long movement of decentralization should go further, and confirm the future government as a loose confederacy of powerful states, or whether an attempt should be made to check that movement and establish a counter tendency towards centralized, organized control. If the former, it meant surrendering the country to a democratic laissez faire, and there was nothing in the history of political laissez faire as it had developed in America, that justified the principle to Hamilton. It had culminated in agrarianism with legislative majorities riding down all obstacles, denying the validity of any check upon its will, constitutional, legal or ethical. The property interests of the minority had been rendered insecure. There had been altogether too much laissez faire; what was needed was sharp control of legislative majorities; the will of the majority must be held within due metes and bounds. Even in the economic world the principle of laissez faire no longer satisfied the needs of the situation.

Parliamentary enactments had aided British interests in their exploitation of America before the war; it was only common sense for an American government to assist American business. The new capitalism that was rising stood in need of governmental subsidies. Business was languishing; infant industries could not compete on even terms with the powerful British manufacturing interests, long established and with ample capital. From a realistic contemplation of these facts Hamilton deduced the guiding principle that has since been followed, namely, that governmental interference with economic laws is desirable when it aids business, but intolerable and unsound when it aims at business regulation or control, or when it assists agriculture or labor.

Throughout his career Hamilton was surprisingly consistent. His mind hardened early as it matured early, and he never saw cause to challenge the principles which he first espoused. He was what a friendly critic would call a political realist, and an enemy would pronounce a cynic. With the practical man’s contempt for theorists and idealists, he took his stand on current fact. He looked to the past for guidance, trusting to the wisdom of experience; those principles which have worked satisfactorily heretofore may be expected to work satisfactorily in the future. Whoever aspires to become a sane political leader must remember that his business is not to construct Utopias, but to govern men; and if he would succeed in that difficult undertaking he must be wise in the knowledge of human nature. At the basis of Hamilton’s political philosophy was the traditional Tory psychology. Failure to understand human nature, he believed, was the fatal weakness of all democratic theorists; they put into men’s breeches altruistic beings fitted only for a Utopian existence. But when we consider men as they are, we discover that they are little other than beasts, who if unrestrained will turn every garden into a pigsty. Everywhere men are impelled by the primitive lust of aggression, and the political philosopher must adjust his system to this unhappy fact. He must not suffer the charge of cynicism to emasculate his philosophy; “the goodness of government consists in a vigorous execution,” rather than in amiable intentions; it is the business of the practical man and not of the theorist.

It needs no very extensive reading in Hamilton to discover ample justification for such an interpretation of his political philosophy; the evidence lies scattered broadly through his pages. At the precocious age of seventeen he laid down the thesis, “A vast majority of mankind is entirely biassed by motives of self-interest”; and as political systems are determined by the raw material of the mass of the people, they must be conditioned by such egoism. A year later he discovered in Hume the central principle of his philosophy:

At the age of twenty-seven he reiterated the doctrine, “The safest reliance of every government, is on men’s interests. This is a principle of human nature, on which all political speculation, to be just, must be founded.”⁠[2] Obviously this was not a pose of youthful cynicism, but a sober judgment confirmed by observation and experience.

Accepting self-interest as the mainspring of human ambition, Hamilton accepted equally the principle of class domination. From his reading of history he discovered that the strong overcome the weak, and as they grasp power they coalesce into a master group. This master group will dominate, he believed, not only to further its interests, but to prevent the spread of anarchy which threatens every society split into factions and at the mercy of rival ambitions. In early days the master group was a military order, later it became a landed aristocracy, in modern times it is commercial; but always its power rests on property. “That power which holds the purse-strings absolutely, must rule,” he stated unequivocally. The economic masters of society of necessity become the political masters. It is unthinkable that government should not reflect the wishes of property, that it should be permanently hostile to the greater economic interests; such hostility must destroy it, for no man or group of men will be ruled by those whom they can buy and sell. And in destroying itself it will give place to another government, more wisely responsive to the master group; for even a democratic people soon learns that any government is better than a condition of anarchy, and a commercial people understands that a government which serves the interests of men of property, serves the interests of all, for if capital will not invest how shall labor find employment? And if the economic masters do not organize society efficiently, how shall the common people escape ruin?

Such are the fundamental principles which lie at the base of Hamilton’s philosophy. He was in accord with John Adams and James Madison and Noah Webster, in asserting the economic basis of government, with its corollary of the class struggle. He not only accepted the rule of property as inevitable, but as desirable. As an aristocrat he deliberately allied himself with the wealthy. That men divide into the rich and the poor, the wise and the foolish, he regarded as a commonplace too evident to require argument. The explanation is to be sought in human nature and human capacities. For the common people, about whom Jefferson concerned himself with what seemed to Hamilton sheer demagoguery, he felt only contempt. Their virtues and capacities he had no faith in. “I am not much attached to the majesty of the multitude,” he said during the debate over the Constitution, “and waive all pretensions (founded on such conduct) to their countenance.” His notorious comment—which the American democrat has never forgiven him, “The people!—the people is a great beast!”—was characteristically frank. Hamilton was no demagogue and nothing was plainer to his logic than the proposition that if the people possessed the capacity to rule, their weight of numbers would give them easy mastery; whereas their yielding to the domination of the gifted few proves their incapacity. A wise statesman, therefore, will consider the people no further than to determine how government may be least disturbed by their factional discontent, and kept free to pursue a logical program.

Under a republican form good government is difficult to maintain, but not impossible. The people are easily deceived and turned aside from their purpose; like children they are diverted by toys; but if they become unruly they must be punished. Too much is at stake in government for them to be permitted to muddle policies.

It is sufficiently clear that in tastes and convictions Hamilton was a high Tory. The past to which he appealed was a Tory past, the psychology which he accepted was a Tory psychology, the law and order which he desired was a Tory law and order. His philosophy was not liked by republican America, and he knew that it was not liked. Practical business men accepted both his premises and conclusions, but republicans under the spell of revolutionary idealism, and agrarians suffering in their pocketbooks, would oppose them vigorously. He was at pains, therefore, as a practical statesman, to dress his views in a garb more seemly to plebeian prejudices, and like earlier Tories he paraded an ethical justification for his Toryism. The current Federalist dogma of the divine right of justice—vox justiciae vox dei—was at hand to serve his purpose and he made free use of it. But no ethical gilding could quite conceal a certain ruthlessness of purpose; in practice justice became synonymous with expediency, and expediency was curiously like sheer Tory will to power.

In certain of his principles Hamilton was a follower of Hobbes. His philosophy conducted logically to the leviathan state, highly centralized, coercive, efficient. But he was no idealist to exalt the state as the divine repository of authority, an enduring entity apart from the individual citizen and above him. He regarded the state as a highly useful instrument, which in the name of law and order would serve the interests of the powerful, and restrain the turbulence of the disinherited. For in every government founded on coercion rather than good will, the perennial unrest of those who are coerced is a grave menace; in the end the exploited will turn fiercely upon the exploiters. In such governments, therefore, self-interest requires that social unrest shall be covered with opprobrium and put down by the police power; and the sufficient test of a strong state lies in its ability to protect the privileges of the minority against the anarchy of the majority. In his eloquent declamation against anarchy Hamilton was a conspicuous disciple of the law and order school. From the grave difficulties of post-Revolutionary times with their agrarian programs, he created a partisan argument for a leviathan state, which fell upon willing ears; and in the Constitutional convention, which, more than any other man, he was instrumental in assembling, he was the outstanding advocate of the coercive state.

In his plan of government presented to the Convention, the principle of centralized power was carried further than most would go, and his supporting speeches expressed doctrines that startled certain of his hearers. He was frankly a monarchist, and he urged the monarchical principle with Hobbesian logic. “The principle chiefly intended to be established is this—that there must be a permanent will.” “There ought to be a principle in government capable of resisting the popular current.”

The only effective way of keeping democratic factionalism within bounds, Hamilton was convinced, lay in the erection of a powerful chief magistrate, who “ought to be hereditary, and to have so much power, that it will not be his interest to risk much to acquire more,” and who would therefore stand “above corruption.” Failing to secure the acceptance of the monarchical principle, he devoted himself to the business of providing all possible checks upon the power of the democracy. He “acknowledged himself not to think favorably of republican government; but he addressed his remarks to those who did think favorably of it, in order to prevail on them to tone their government as high as possible.”⁠[4] His argument was characteristic:

The argument scarcely needs refuting today, although curiously enough, it was rarely questioned by eighteenth-century gentlemen. It was the stock in trade of the Federalists, nevertheless Hamilton was too acute a thinker not to see its fallacy. It denied the fundamental premise of his political philosophy. If men are actuated by self-interest, how does it come about that this sovereign motive abdicates its rule among the rich and well born? Is there a magic in property that regenerates human nature? Do the wealthy betray no desire for greater power? Do the strong and powerful care more for good government than for class interests? Hamilton was fond of appealing to the teaching of experience; but he had read history to little purpose if he believed such notions. How mercilessly he would have exposed the fallacy in the mouth of Jefferson! It was a class appeal, and he knew that it was a class appeal, just as he knew that success knows no ethics. He was confronted by a situation in practical politics, and in playing ignobly upon selfish fears he was seeking to force the convention towards the English model.

He had no confidence in the Constitution as finally adopted, and spoke in contemptuous terms of its weakness; whereas for the British constitution he had only praise, going so far, according to Jefferson, as to defend the notorious corruption of parliament on the ground of expediency: “purge it of its corruption”—Jefferson reports him as saying—“and give to its popular branch equality of representation, and it would become an impracticable government; as it stands at present, with all its supposed defects, it is the most perfect government which ever existed.”⁠[6] The argument savors of cynicism, but it is in keeping with his philosophy; the British constitution owed its excellence to the fact that in the name of the people it yielded control of the state to the landed aristocracy.

It was as a statesman that the brilliant qualities of Hamilton showed to fullest advantage. In developing his policies as Secretary of the Treasury he applied his favorite principle, that government and property must join in a close working alliance. The new government would remain weak and ineffective so long as it was hostile to capital; but let it show itself friendly to capital, and capital would make haste to uphold the hands of government. Confidence was necessary to both, and it was a plant of slow growth, sensitive to cold winds. The key to the problem lay in the public finance, and the key to a strong system of finance lay in a great national bank. This, Hamilton’s dearest project, was inspired by the example of the Bank of England. No other institution would so surely link the great merchants to government, he pointed out, for by being made partners in the undertaking they would share both the responsibility and the profits. It was notorious that during the Revolution men of wealth had forced down the continental currency for speculative purposes; was it not as certain that they would support an issue in which they were interested? The private resources of wealthy citizens would thus become an asset of government, for the bank would link “the interest of the State in an intimate connection with those of the rich individuals belonging to it.” “The men of property in America are enlightened about their own interest, and would easily be brought to see the advantage of a good plan.” Hence would arise stability and vigor of government.

Moreover, the bank would be of immense service in the pressing business of the public debt. In regard to this difficult matter Hamilton was early convinced that only one solution was possible: all outstanding obligations, state and national, must be assumed by the Federal government at face value, and funded. Anything short of that would amount to repudiation of a lawful contract, entered into in good faith by the purchaser; and such repudiation would destroy in the minds of the wealthy the confidence in the integrity of the new government that was vital to its success. It was true that speculators would reap great and unearned profits; but the speculators for the most part were the principal men of property whose support was so essential that any terms were justifiable, and nothing would bind them so closely to the government as the knowledge that it would deal generously with them. It was true also that thousands of small men would lose by such a transaction; but under any existing social economy the small man was at a disadvantage, and the present state of affairs was not such as to justify Utopian measures. To alienate the rich and powerful in order to conciliate the poor and inconsequential seemed to him sheer folly. The argument of expediency must prevail over abstract justice; the government must make terms with those in whose hands lay the success or failure of the venture.

His report on the public credit, of January 14, 1790, is one of the significant documents in the history of American finance. It is the first elaboration by an American statesman of the new system of capitalization and credit developed in eighteenth-century England, and it laid a broad foundation for later capitalistic development. To less daring financiers of the time the public debt was no more than a heavy obligation to be met; but to Hamilton it offered an opportunity for revivifying the whole financial life of the nation. Let the debts be consolidated and capitalized by a proper system of funding, and the augmented credit would multiply capital, lower the rate of interest, increase land values, and extend its benefits through all lines of industry and commerce. It was a bold plan and it encountered bitter opposition, which was not lessened by the heavy taxation that it called for. In his tax proposals Hamilton revealed his political philosophy so nakedly as almost to prove his undoing. His doctrine of the blessing of a national debt smacked rather too strongly of English Toryism for the American stomach.

A further struggle was encountered over the proposals of an internal revenue and a tariff. In his advocacy of the former Hamilton encountered the vigorous opposition of the backcountry. The total lack of adequate means of transportation rendered the problem of a grain market a chronic difficulty to the frontier farmers. The most convenient solution lay in distilling, and so whisky had become the chief commodity of the farmer that was transportable and brought a cash price. In placing a tax upon distilled liquors, therefore, Hamilton struck so directly at the economic interests of thousands of backwoodsmen, as to bring a rebellion upon the new administration. He knew what he was doing, but he calculated that it was safer to incur the enmity of farmers than of financiers; nevertheless the fierceness of the opposition surprised him, and aroused all the ruthlessness that lay in the background of his nature. He called for the strong arm of the military and when the rising was put down, he was angered at Washington’s leniency in refusing to hang the convicted leaders. In his advocacy of a tariff he was on safer ground, for he was proposing a solution of the difficult situation confronting the manufacturers. Something must be done to revive industry so long stagnant. The old colonial machinery had been destroyed and new machinery must be provided. Industrial independence must follow political independence; and the easiest way lay in providing a tariff barrier behind which the infant industries of America might grow and become sufficient for domestic needs.

In his notable report on manufactures, submitted on December 5, 1791, Hamilton showed his characteristic intelligence in his grasp of the principles of the industrial revolution. Certainly no other man in America saw so clearly the significance of the change that was taking place in English industrialism, and what tremendous reservoirs of wealth the new order laid open to the country that tapped them. The productive possibilities that lay in the division of labor, factory organization, the substitution of the machine for the tool, appealed to his materialistic imagination, and he threw himself heart and soul into the cause of industrial development in America. He accepted frankly the principle of exploitation. He was convinced that the interests of the manufacturers were one with the national interests, and he proposed to put the paternal power of the government behind them. With the larger social effects—the consequences to the working classes, congestion of population, the certainty of a labor problem—he concerned himself no more than did contemporary English statesmen. He was contemptuous of Jefferson’s concern over such things. He had no Physiocratic leanings towards agriculture; material greatness alone appealed to him; and he contemplated with satisfaction the increase in national wealth that would accrue from levying toll upon the weak and helpless.

If the material power and splendor of the state be the great end of statesmanship—as Hamilton believed—no just complaint can be lodged against such a policy; but if the well-being of the individual citizen be the chief end—as Jefferson maintained—a very different judgment must be returned.

Although the fame of Hamilton has been most closely associated with the principle of constitutional centralization, his truer significance is to be found in his relation to the early developments of our modern capitalistic order. In his understanding of credit finance and the factory economy, he grasped the meaning of the economic revolution which was to transform America from an agrarian to an industrial country; and in urging the government to further such development, he blazed the path that America has since followed. “A very great man,” Woodrow Wilson has called him, “but not a great American.” In the larger historical meaning of the term, in its democratic implications, that judgment is true; but in the light of our industrial history, with its corporate development and governmental subsidies, it does not seem so true. As the creative organizer of a political state answering the needs of a capitalistic order—a state destined to grow stronger as imperialistic ambitions mount—he seems the most modern and the most American of our eighteenth-century leaders, one to whom our industrialism owes a very great debt, but from whom our democratic liberalism has received nothing.