By Nancy Spannaus
July 2, 2022—The Declaration of Independence, whose approval we celebrate this weekend, was a watershed moment in our history as a nation, and in world history as well. But to the most prescient of the Founding Fathers, it was clear that winning the war for independence would only be the first step; to secure our future, and defend our liberties, we would have to establish our economic independence as well.
Foremost among those far-sighted Founders was Alexander Hamilton, the man destined to be the First Treasury Secretary of the United States. Even as the Revolutionary War proceeded, Hamilton came to realize that American freedoms could only be secured with the proper economic measures. Political freedom would be tenuous, and ultimately fatally undermined, if the United States continued to be dependent upon its enemy, Great Britain, for its economic survival. Hamilton was determined to be the father of our true economic independence.
Hamilton laid out his thinking on this matter most fully in his masterwork, The Report on the Subject of Manufactures. Prosperous nations require the development of home markets and manufactures, promoted by government support, he asserted. Industrialization benefits all sectors of the economy, including agriculture, and must be advanced in the interest of the General Welfare.[1]
“All the Essentials”
There are many who believe that Hamilton’s concern for developing U.S. manufactures was restricted to the need for military defense. A thorough reading of the Report on Manufactures should disabuse them of that idea. This quote from that report encapsulates the idea:
Not only wealth, but the independence and security of a Country, appear to be materially connected with the prosperity of manufactures. Every nation, with a view to those great objects, ought to endeavor to possess within itself all the essentials of national supply. These comprise the means of Subsistence, habitation, clothing, and defence. (emph. in original)
Not to secure those essentials domestically meant depending upon the good will of the supplier, among other conditions (weather and war, for example), he argued. While it might appear advantageous to rely on sales of our abundant raw materials, and purchase cheap manufactured goods from England and elsewhere, such reliance meant we would continue to be de facto colonies. Should England decide to raise prices on essential goods, or demand concessions in order to continue purchasing, we would have no recourse but to submit.
Hamilton envisioned the United States as a fully sovereign nation, controlling its own finances and ensuring continuous economic growth and prosperity. This vision animated his vital contributions to the Revolutionary War, creation and ratification of the Constitution, establishment of a national financial system and the First National Bank, and propelling the new United States out of bankruptcy in only a few short years. He knew that, without that economic freedom, political liberties could easily become a mere charade.
Who Disagreed?
Unfortunately for our nation, there were many powerful people who disagreed with Hamilton, First and foremost, of course, was the British Empire, which was determined to subvert the development of U.S. manufactures and independence in every way it could. The policy was most glaringly enunciated in 1815 (right after the War of 1812) by British Lord Brougham, who spoke of stifling American manufactures in the cradle. But in fact, that same British policy was pursued continuously up until the Union victory in the Civil War.
Domestically, the most vocal opposition to Hamilton’s vision came from Thomas Jefferson. Jefferson explicitly denounced the idea of making the U.S. a manufacturing nation, claiming it would bring corruption and misery. As if the plantation system and labor-intensive farming on the frontier were idyllic modes of life!
More fundamentally, Jefferson’s opposition to U.S. manufactures de facto allied him with the British intent to keep the United States subjugated economically. While accusing Hamilton of being pro-British, Jefferson himself was serving their interests. Under his idea of economy, we had no economic independence.
But the Jeffersonians were not the only domestic opponents of Hamilton’s perspective. Leading merchants in Massachusetts and New York City, in particular, also opposed the manufacturing perspective, which they knew to be hated by their clients in Britain. These merchants made their money with what was called the carry trade, and claimed to fear a reduction in the transatlantic trade of U.S. raw materials for British manufactured goods.
American System[2] proponent Henry Clay identified the nature of the opposition from both the planters and the merchants in his famous speeches on that System in 1824 and 1832. What unites these two opponents of a tariff to protect manufactures, Clay said, is their dependence upon the British. This dependence, he charged,
“is, in effect, the British colonial system that we are invited to adopt; and, if their policy prevail, it will lead substantially to the recolonization of these states, under the commercial domination of Great Britain.”
Hamilton’s Manufacturing Project
Faced with opposition to his plans for Federal government promotion of manufacturing, Alexander Hamilton acted according to his character: he forged ahead with what he could do. Among those actions was the establishment of the Society for Useful Manufactures at the Passaic Falls in New Jersey. That project should be understood as a pilot project for his vision of a diversified industrial nation; it also marked the establishment of the city of Paterson.
As an email I received today from the Hamilton Partnership for Paterson[3] pointed out, Hamilton chose Independence Day July 4, 1792 to found the city that hosted his manufacturing project. The symbolism was clearly not accidental; it underscored Hamilton’s understanding that the development of manufactures was essential to preserving American independence. You can read a short version of the Paterson’s success story from that email here.
Happily, Hamilton’s vision was ultimately realized far beyond Paterson. Defeated in the short term, advocates of the manufacturing perspective fought on. The disastrous results of Jeffersonian abandonment of Hamilton’s principles in the War of 1812 had a salutary effect in convincing the U.S. population of the need for economic independence. Dramatic progress was made during the 1820s, only to be sabotaged with the accession of President Andrew Jackson. But Hamiltonian ideas could not be squelched; especially in periods of crisis, like the Lincoln and FDR eras, national leaders seized the opportunity to promote a manufacturing renaissance, leading ultimately to U.S. industrial pre-eminence worldwide.
And Today?
The dramatic decline of U.S. manufacturing and infrastructure over recent decades corresponded with the virtual abandonment of Hamilton’s vision. Over the last few years, there has been a discernible attempt to reverse course, including discussion of industrial policy, onshoring of manufacturing, and Federal incentives for advanced technology industries. But the momentum has been sluggish, to say the least.
Meanwhile, the consequences of the decline in productivity and prosperity which inevitably followed from putting finance above manufacturing, have hit hard, bringing increasing social disintegration, pessimism, and even threats of civil war.
Just as there was no way of preserving independence from Great Britain without achieving economic independence, there is no way to preserve “democracy” without adopting a vigorous plan for reindustrialization and economic development. Hamilton was the man on the spot back in the 1790s. The principles inspiring his program then, are the ones we need to save our country today.[4]
So, as we celebrate Independence Day, let us rededicate ourselves to achieving true economic independence.[5] Let us celebrate, study, and apply the wisdom of Founding Father Alexander Hamilton.
[1] For a comprehensive discussion of that Report and how it was implemented at home and abroad, see Hamilton Versus Wall Street: The Core Principles of the American System of Economics, written by the author, and available at https://www.iuniverse.com/BookStore/BookDetails/788568-hamilton-versus-wall-street
[2] For a primer on the American system, click here
[3] The Hamilton Partnership for Paterson is a non-profit organization dedicated to supporting the Paterson National Park and “enhance its educational, social, and economic benefits for Paterson and the nation.”
[4] Readers can learn more about the fight for Hamiltonian principles today by visiting the website of the Coalition for a National Infrastructure Bank.
[5] To be clear, Hamilton’s economic principles do not, and should not, apply only to the United States, but to all sovereign nation states. Denial of technological development is an imperial policy which must be rejected everywhere. (See What is an American System Foreign Policy?)
Tags: Alexander Hamilton, economic independence, Fourth of July, manufactures, Nancy Spannaus