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As a life-long Jeffersonian, I never carried a very high opinion of Hamilton. However, many years ago, I read Hamilton's Report on Manufactures and was simply blown away. Few had a more accurate view of what would become the future and how to get there. Unlike Jefferson, Hamilton was one of the founding pantheon, along with many of those gathered beside him that long ago summer in Philadelphia, who not only cared little about democracy, but feared it. At the constitutional convention, despite being a prime mover in its convocation, Hamilton sat quietly for the first few weeks, finally speaking for six hours, laying bare his anti-democratic thinking and hope for oligarchic rule.
In his notes from that day, Hamilton writes,
“Gentlemen say we need to be rescued from the democracy. But what the means proposed?
A democratic assembly is to be checked by a democratic senate, and both these by a democratic chief magistrate.
The end will not be answered—the means will not be equal to the object.
It [the federal government] will, therefore, be feeble and inefficient.”
Starting with “Gentlemen,” very much a class tinged pseudo-aristocratic title at that point, Hamilton's argument made clear his distaste for democracy and his push for a strong, vibrant, and centrally controlled government.
Hamilton advocates his solutions,
“This check is a monarch.”
“The aristocracy ought to be entirely separated; their power should be permanent, and they should have the caritas liberorum – [a little founding irony].
The monarch must have proportional strength. He ought to be hereditary.
The advantage of a monarch is this—he is above corruption.”
Such ancient drivel, mythologizing about aristocracy and even worse monarchy, an institution corrupt in its very nature.
The new constitutionally united states didn't get Hamilton's monarchy, but did get a federal structure very much less democratic than more. It created a new centralized federal government in direct opposition to the numerous existing distributed democratic systems of local communities and the thirteen states. The majority gathered in Philadelphia conceived the states as the true constitutional check on their new central government, and local governments as a check on the states. Yet, over two and half centuries, just as Hamilton hoped, government power gradually concentrated in DC, revealing the checks and balances on the constitution’s federal structure weak indeed.
Today, we live in Hamilton's America. William Hogeland's, The Hamilton Scheme: An Epic Tale of Money and Power in the American Founding, explains how Hamilton was more than any single person responsible for constitutionally instituting the oligarchy that helped define America. By no means an always worthless or completely predatory oligarchy, such as the one presently afflicting our now archaic republic, in various ways due some admiration despite their faults, but never never a love or respect for democracy.
Hamilton understood the control of money as a fundamental component of the rule of the modern state. At the time or now for that matter, he was one of a very few to understand the role debt played as the foundation of modern money. As the first Secretary of the Treasury, in a report to President Washington, Hamilton astutely noted “government debt had a 'capacity for prompt convertibility' to currency, potentially rendering transfers 'equivalent to a payment in coin.'” In part, the constitution was established to make good the debt incurred during the revolution. Just as importantly, Hamilton understood the new federal government incurring greater debt would help unite and develop the infant nation.
A united money system required several components. First, if debt was to be used as the basis for money, people needed to believe the debt they held would be paid-off. Hamilton's first step as Treasury Secretary was assuring the debt created to fund the revolution and the simultaneous debt that had been created by the states was consolidated under the new federal government. Hogeland explains,
“With literally all of American public finance consolidated in the Congress, the federal government would become the exclusive site of public interest payments and public investment, drowning the states’ economic power in federal economic power and yoking every hope of the small financial elite throughout all states to federal, not state, government. It was federal assumption of the States’ Debt, ultimately, that would usher in the amazing national future of the United States.”
Along with consolidation under the federal government, the past debt was all paid at full face value, despite much having been bought and sold at a fraction of its original value, with ownership concentrated in ever fewer hands over the intervening years. Yes, it can be accurately said the American money system was founded by the first, by no means the last, bailout of large bondholders.
Secondly, based on the Bank of England, Hamilton advocated the US needed a national bank. There's a variety of reasons, good and bad, for a national bank, but top of the list for Hamilton was intertwining the private big money houses of the time into the value of government debt through partial ownership of the bank, which he insisted was private, the government only one shareholder. Not only was a full value bailout of revolutionary debt essential to the founding money system, but the preliminary offering of the First Bank of the United States became the new republic's first financial bubble.
Finally, a claim of full faith and credit of the United States needed revenue to back it up. For a large part of US history much government revenue was accomplished through tariffs on foreign goods, but also taxes, including what were called excises on domestic products. The first excise was on alcohol, much of it distilled from corn grown on the west side of the Appalachians then shipped across to the more populated coast. From the founding, America has always been a hard-drinking nation. This excise was unpopular to the hardscrabble farmers of the west, especially, in a most Hamiltonian fashion, it was a regressive tax hitting small distillers harder than larger conglomerations.
Hogeland tells the great but all forgotten tale of the Whiskey Rebellion centered around several counties of western Pennsylvania. Organized in a most democratic fashion, the small farmers refused to pay the excise, an affront to the new federal government, most especially to Hamilton. The former aide de camp, now Secretary of Treasury, backed by his former general, now new President, sought to squash the tax-rebels with military force.
Hogeland excellently documents the tax's opponents, especially their democratic organizing led in part by Albert Gallatin, a Swiss born immigrant to the new independent states, very much a man of his era, unlike Hamilton, very much a democrat. In one of the great lines of the book, Hogeland states the small distillers' goal “wasn’t resisting government but becoming government” – a fundamental ethos of self-government, too often forgot by most today. Along with many others, Gallatin understood nonviolent resolution as a democratic imperative.
Gallatin would later serve three-terms as Secretary of the Treasury under Jefferson and Madison. Gallatin thought “the relationship between the states and the national government was symbiotic precisely because it involved conflict.” In Discourses on Livy, Machiavelli stated the great vitality of the Roman republic was the perpetual conflict between the concentrated oligarchic power of the patricians and the distributed, democratic power of the plebs. Similar conclusions two centuries apart, both notably opposite of the contemporary contention such conflict is always destructive and needs by all means to be subverted, replaced instead with some mythical, mystical cherished unity.
Hamilton's money scheme instantly met Jefferson's worst fears concerning the constitution's new centralizing powers. Jefferson understood democracy was distributedly organized. He had a farmer's historical aversion to debt, an aversion as old as ancient Mesopotamia. To the debtor, debt always comes with a certain subservience. Across history, farmers need money/resources to sow that can't be paid back until the crop is reaped. By hard experience, they long well understood the crushing power of debt wielded by those who controlled it. From Sumerian kings to today's global financial houses, debt, the modern money system, has been almost exclusively centrally controlled. In recorded history, there has never been a democratic money system. Two centuries later, with the resulting centralization and intertwining of public and private money power, it’s difficult to call the United States a democracy at all. Hamilton would not be concerned.
Hamilton's scheme developed not without troubles and opposition along the way. Twenty years in, the charter for the First Bank was not renewed. A second national bank was killed two decades later by Andrew Jackson. Mr. Lincoln really and militarily instituted DC's money monopoly. Just as Hamilton understood a national bank's ability to better fund national power, Lincoln incorporated several private national banks to help fund his war.
Fifty years later, the third National bank, the Federal Reserve would be instituted, once again its initiators claiming it was a private institution owned by the nation's banks. In the time since, debt – federal, state, local, and corporate – has grown exponentially. In recent decades, the Fed provides ever larger bailouts to ever more leviathan financial corporations. As it was in the beginning, so shall it be in the end. Though at the founding, the idea debt needed to be paid was fundamental to value, today it is interest only that must be paid, while principal is perpetually rolled and infinitely leveraged.
Hamilton never held elected federal office, in the lyricism of Mark E. Smith, “and look what he did.” Hogeland's book provides a fine education on the functioning of the United States from its founding, most critically Hamilton's shaping of the money system. The constitution purposely created mechanisms to centralize power, both public and private. Today, after two centuries of industrialization and now a half-century of compute technologies, this centralization, and its resulting oligarchy are not simply overbearing, but grow ever more detrimental to the future. Our “democratic” politics, such that one can call it that, a ridiculous TV wrestling match over who controls DC, more accurately and much worse, a billions of dollars advertising puke marketing which incapable person lives in the White House. The presidency is now afforded such inhuman expectations, hopes, and fears, atop institutional dysfunction and corruption, not even a most extraordinarily exceptional political talent like Alexander Hamilton would have any hope of succeeding.
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