- MUST READS
- PRODUCTS
- RESOURCES
- MULTIMEDIA
- ENFACTLOPEDIA
- FSM AUTHORS
- ABOUT US
- CONTACT US
- FSM BLOG
- DONATE
- PRESS COVERAGE
SEARCH FSM
- IN THIS SECTION
January 7, 2009
Exclusive: What Would Alexander Hamilton Do?
January 11th is the birthday of Alexander Hamilton, considered by many to be the most important American statesman never to have served as president. He fought for American independence, played a major role in shaping the Constitution, and laid down the founding economic principles of the United States.
Hamilton was born in the West Indies in 1755, the son of a Scottish merchant. At the age of 12, Hamilton went to work in a counting house as a clerk and apprentice. At the age of 15, Hamilton was put in charge of the business, indicating his early genius for business and finance. Family friends provided him with the means to pursue a formal education in the American colonies. He graduated after only a year of study from King’s College in New York in 1774. That same year, Hamilton made an impassioned speech denouncing British policies at a mass meeting in New York City, and started his prolific writing career with pamphlets advocating the colonial cause.
He joined a militia unit at King’s College, and would take an active military role in the War of Independence. He became a captain of artillery and fought at White Plains in October 1776. Hamilton’s gallant service caught the eye of General Nathaniel Greene who introduced him to George Washington. Hamilton became Washington’s confidential aide and secretary. At the battle of Monmouth (June 28, 1778) Hamilton rallied retreating American troops and led them in a counterattack. He persuaded Washington to give him a combat command and personally led the final assault at Yorktown (Oct. 14, 1781). Almost a year earlier, Hamilton had married Elizabeth Schuyler, the daughter of General Philip Schuyler. Alexander and Elizabeth would have eight children.
With the war over, Hamilton obtained a law degree and opened an office on Wall Street in 1783. He was elected to the Continental Congress, and became a critic of the weak Articles of Confederation system of government. The country he had fought to create seemed to be falling apart. He became one of the prime movers for the Annapolis Convention to reform the government. At the September1786 convention, he supported James Madison in the move to expand the scope of reform. Hamilton drafted the call to summon the Federal Convention of May 1787 that drafted the Constitution in Philadelphia. New York was reluctant to place itself under a centralized Federal government, but Hamilton led the successful fight for the state’s ratification. He wrote three-quarters of The Federalist Papers explaining the basis of the Constitution and its principles, a project to which Madison and John Jay also contributed.
When George Washington became the first U.S. President, he named Hamilton as Secretary of the Treasury, considered the lead position in the cabinet. Hamilton had long championed "energy in the executive" as essential to effective government. The creation of the presidency and the executive branch were the most important accomplishments of the Constitution, which replaced a Confederation based solely on an ineffectual Congress.
The current economic crisis bears a resemblance to the situation Hamilton faced during the Washington administration. His policy had three main elements. To put the nation's finances on a firm footing, he had the Federal government assume the bad debts that the State governments had run up during the war (Report on the Public Credit, January 14, 1790). This pumped money back into the economy and restored faith in the credit system. He also championed a national bank, an early forerunner of the Federal Reserve. His model was the Bank of England which had given London the financial means to become a global superpower (Report on a National Bank, December 13, 1790). To accomplish the goal of building an America that could act "independent of foreign nations" he wrote his justly famous Report on Manufactures (December 5, 1791) calling for government to promote and support industrial development to advance national wealth, security, and progress.
It was roughly a century after Hamilton's untimely death in 1804 that America became the world's leading economy, after having marched across the continent. The debate over trade and industrial policy had ebbed and flowed. The victory of the more advanced North under the Republican Party in the Civil War proved Hamilton’s point. By the turn of the century, statesmen like William McKinley and Theodore Roosevelt had led a Hamiltonian revival to political dominance. As President, Teddy Roosevelt praised Abraham Lincoln for “consciously carrying out the Hamiltonian tradition.” The Republican Senate leader Henry Cabot Lodge wrote a biography of Hamilton for the famous American Statesman series (1904) claiming that his case for “industrial independence” had never been refuted.
Unfortunately, too many Republicans now seem to have strayed from this proud legacy. When the $700 billion plan to rescue the banks was approved by the Senate on October 1st, the bipartisan vote was 74-25, with Republicans voting 35-14 in favor. Yet, when a far smaller $14 billion plan came up to save the American auto industry, GOP Senators voted 31-10 to kill it by filibuster. Fortunately, Hamilton’s “energetic executive” acted where the Senate had failed.
Over the holidays, the Republican Bush Administration offered $13.4 billion in loans to General Motors and $4 billion to Chrysler to buy the American auto industry time to reorganize. On December 29th, the Treasury also purchased $5 billion in senior preferred stock in GMAC, the financial arm of GM. The core of the nation's manufacturing sector has been brought to the brink of collapse by the deep recession triggered by the debacle on Wall Street. The funds will come from the Troubled Asset Recovery Program, which was created to combat the impact of the financial meltdown on the real economy. Like Hamilton’s financial reforms, TARP was not created to bailout banks (and bankers), but to provide funds through the system to support industry and productive work.
But in some cases, speed and effectiveness require bypassing the floundering banking system with the direct funding of strategic industry. As Hamilton wrote in 1796, after leaving the Treasury, “As a general rule, manufactories carried upon public account are to be avoided. But every general rule may admit to exceptions.” The actions of today’s Treasury are fully justified in the current economic situation. They also confirm Hamilton’s wisdom about the need for strong leadership.
The real source of Detroit's problem is foreign competition. The Japanese and South Korean auto industries were created by government policy, and rest on protected home markets. Health care programs, import barriers, tax breaks, subsidized financing, and currency manipulation have given foreign automakers large advantages against their American rivals. China has entered the fray, with Beijing setting the goal of becoming “the world's largest automotive assembler and parts producer by 2010.” The United States is losing the trade war, running $700 billion annual deficits, because foreign governments utilize the Hamiltonian principles too many Americans have forgotten.
Historian Richard B. Morris said of Hamilton, his “brand of conservatism meant holding to the tried and proven values of the past, but not standing still....He could scarcely be expected to allow government to stand inert while the economy stagnated or was stifled by foreign competition.” Republicans need to understand this same imperative in today's world of ambitious overseas rivals and increasing global competition for the highest stakes. It is easy to pick the winners in economic policy. When American firms are in the game, support should always go to the home team. The President has saved his party's reputation, and his own legacy, by acting with “energy” to stave off an economic disaster.
FamilySecurityMatters.org Contributing Editor William R. Hawkins is a consultant specializing in defense and trade issues. E-mail him at HawkinsUSA@aol.com.
Reader Comments: Submit Your Comment (0)
| Print This E-mail This |
|
