Monday, July 4, 2011

Alexander Hamilton Is Smiling.

And that's good reason why you shouldn't be. This is a response to this editorial in the Minneapolis Star-Tribune. The author wants us to celebrate the federalists, especially Alexander Hamilton, for ensuring as strong a federal government as possible. The author suggests that the policies favored by Hamilton are largely to thank for our prosperity and are largely good. The author makes the logical error of supposing that big government and large taxes to finance the government are good, therefore any policies directed towards enlarging government and increasing taxes are good. But the point is that there is much disagreement about the proper size of government, and its proper role. So it is a logical fallacy to say Hamilton is someone we should thank. If you think large government is bad for prosperity, then you should be anti-Hamilton, and favor Jefferson.

As the author of the editorial discussed why we should revere Hamilton, I'm going to discuss why we shouldn't. First, despite the author's intimations to the contrary, Hamilton had a very poor understanding of economics. He was a mercantilist and sought to establish the English economic system of tariffs and cronyism in the U.S. Hamilton established the first national bank, and set the stage for central banking in the U.S. generally.

The first national bank was an unmitigated disaster. In the first five years of its existence, it created 72% inflation where there had been none before. It also instigated several bank panics, and eventually failed. But, as I said, central banking was here to stay and as we are starting to find out, central banking is hazardous to our financial health. Of course, Austrians have known all along that any monopoly is bad news, and money production is no different. But I digress.

Hamilton also favored a large public debt, something the author of the editorial thinks is good because it lets the government provide more services. But Hamilton didn't favor a large public debt for this reason. Rather, he wanted to use the debt as a way of tying the interests of the wealthy to the interests of the state.

The author indicates the ability to issue debt is important to pay for wars, as indeed it has been used for that. Lest I misread the author, I hope he is not favoring war itself, but rather saying that if a war is necessary, then having the debt available is important. That may be, but I can see the argument easily on the other side: if a country is debt-constrained, it cannot wage wars against other countries, and so must seek peace. Isn't peace preferred to war? Well, not for Hamilton.

Hamilton, as the author approvingly mentions, himself led a "small" (actually 15,000 conscripts) army to put down the "Whiskey Rebellion" and arrested around two dozen men. Hamilton wanted to hang them, Washington pardoned them. First, conscription is slavery, and second 15,000:24 is a little ridiculous, no? I'm finding it pretty hard to like Hamilton, but I'm not really surprised he is favored by big government types.

Finally, the author indicates that Hamilton wanted a "strong presidency." Indeed. Hamilton favored a permanent president (read "king") who would appoint state governors. The president would also be able to veto all state legislation. This is anathema to the concept of a voluntary union. Hamilton wanted a country like what he saw in Europe. His vision was counter to the vision of the revolution.

My take on this whole thing is that when we look back at the founding fathers, we look with our own eyes, and our own prejudice and our own values. People who value freedom will find that Jefferson is their man. People who value big government and cronyism like Hamilton. I suppose these are the battles we are doomed to fight.

Well, in the words of Virgil: Tu ne cede malis sed contra audentior ito: "do not give in to evil but proceed ever more boldly against it." I oppose crony capitalism; I oppose the warfare state; I oppose stealing from the productive to give to the indolent; I oppose the police state; I oppose wealth transfers from the poor and middle class to the politically favored businesses. Give us freedom and we will be strong. 


  1. Nice post. Did you copy furnish this to the newspaper?

    Hey, aren't you guys without a functioning state government at the moment?

  2. I sent a shorter version as a letter to the editor.

    Yes on the second point. Not that I've noticed.

  3. You know what would make a good post: crony capitalism. I suppose firms have long sought the favor of the legislature to stifle their competition, but the problem seems to be accelerating, due in large part to these massive pieces of legislation like Dodd-Frank, Obamacare, etc.

    Passing laws filled with incomprehensible language that span thousands of pages is reprehensible and affront to each American's liberty. Yet we just sigh and go on. Argh!