A Report on a Lecture by Nancy Spannaus to a Treasury Group

By Nancy Spannaus

July 22, 2022—The following is the text I prepared for a Zoom presentation to the Treasury Historical Association on July 19. While I have covered certain aspects of this story in a number of blog posts, I believe it useful to pull it all together as I have done here.  My presentation included PowerPoint illustrations, some of which are included here to illustrate my point. Unfortunately, the speech was not recorded, so this written version will have to stand.

It is well-established that Abraham Lincoln subscribed to the economic policies of Alexander Hamilton. Ways and Means, the recent book by Roger Lowenstein, for example, emphasizes that point throughout his detailed review of how Lincoln transformed our economy.

But there’s a story behind the story here, which I want to concentrate on today.  Just how conscious was Lincoln’s adoption of Hamiltonianism? How did Hamilton’s ideas get transmitted to this self-educated lawyer from Illinois? And what were the core ideas of Hamilton’s economics anyway?

Abraham Lincoln entered political life in 1832, a high point of combat over Hamilton’s chief economic proposals. That year saw President Andrew Jackson going on the warpath against the Bank of the United States, claiming that it was a “monster” eating out the substance of the common people. Jackson had also vetoed a bill for federal support for internal improvements, and had shown his intent to reduce the tariffs which the manufacturing sector’s political proponents considered necessary to secure domestic industry.

Hamilton’s image on an 1862 Greenback

All three of these policies – national banking, internal improvements, and government support for industry – had been put forward in Hamilton’s magnum opus, the Report on Manufactures, back in 1791. They had been matters of bitter contention then, and throughout the subsequent decades.

In his declaration of candidacy, Lincoln came out squarely for this Hamiltonian program. He declared: “My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank. I am in favor of the internal improvement system, and a high protective tariff. These are my sentiments and political principles.”  As a politician and President, Lincoln not only never veered from these policies, but he deepened his understanding of the principles they represented.

How Did Hamilton’s program survive?

With the onset of the Jeffersonian era in 1800, and the virtual dissolution of the Federalist Party after its infamous conduct during the War of 1812, Alexander Hamilton’s economic ideas would appear to have been dead and buried. But that was not the case. A faction of the Democratic-Republican Party went to work in support of Hamilton’s ideas.

Mathew Carey and Henry Clay

The key transmission belt, so to speak, was the Irish émigré Mathew Carey. With a financial advance provided by the Marquis de Lafayette, Carey started a publishing business in Philadelphia in 1787. His first venture was the American Museum, a subscription magazine that reprinted a large number of the influential founding documents of the Republic.  Among them was the full Report on Manufactures.

Hamilton Shaped Lincoln's Economics
Mathew Carey, publicist and organizer for Hamilton’s American System

While the American Museum folded in 1792, Carey not only continued in the publishing business, but also began a career as a political organizer and pamphleteer.  And while he declared his adherence to Jefferson’s Democratic-Republican Party, which appealed rhetorically to his strong anti-British and democratic beliefs, Carey also insisted that Hamilton’s manufacturing perspective had to be carried through. Undoubtedly, British systematic destruction of the Irish economy had taught Carey a good deal about what the lack of a manufacturing base would mean for his newly adopted nation.

The first major organizing venture Carey was involved with, was the Pennsylvania Society for the Encouragement of Manufactures and the Useful Arts, established in collaboration with Philadelphia merchant Tench Coxe [1] in 1787. Later he campaigned for a Hamiltonian policy by playing a major role with the Philadelphia Society for the Promotion of National Industry, and helping organize conventions in support of government backing for canals and tariffs.

Carey’s first activity on the national scene, however, occurred during the 1810 Congressional debate over whether to renew the charter of Hamilton’s first Bank of the United States.  Carey left home to go to Washington, D.C. to organize for the re-charter and wrote a major document[2] warning of dire consequences should it be allowed to expire.

As you know, it did expire, by the tie-breaking vote of Vice-President George Clinton; financial disaster, and nearly military disaster, ensued. Thus, at the end of the war, Carey produced his most influential work, The Olive Branch, whose circulation is considered to rival that of Thomas Paine’s Common Sense. That extensive pamphlet blasted both political parties, the Federalists and Democratic-Republicans, for having put the country through hell. The Democrats’ failure, Carey charged, lay not only in eschewing necessary preparations for military defense, but for having abandoned Hamilton’s Bank.

Hamilton Shaped Lincoln's Economics
Carey’s 1814 pamphlet

Clearly this document did not have a direct impact on Abraham Lincoln; he was five years old at the time. But Carey began a whirlwind organizing effort to create a Hamilton revival after the War of 1812 – ranging from re-establishing the Bank of the United States, to raising tariffs to protect industry, and demanding federal support for necessary infrastructure. One of his several revisions of the Olive Branch began with a major excerpt from Hamilton’s Report on Manufactures.

Here is a short excerpt from Carey’s later writings, his address to the Philadelphia Society for the Promotion of National Industry in 1819:

  • Industry is the only sure foundation of national virtue, happiness, and greatness; and in all its useful shapes and forms, has an imperious claim on governmental protection.
  • No nation ever prospered to the extent of which it was susceptible, without due protection of domestic industry.
  • Throughout the world, in all ages, wherever industry has been duly encouraged, mankind have been uniformly industrious.…
  • Free government is not happiness. It is only the means, but, wisely employed, is the certain means of insuring happiness.
  • The interests of agriculture, manufactures, and commerce, are so inseparably connected, that any serious injury suffered by one of them must materially affect the others.
  • The home market for the productions of the earth and manufactures, is of more importance than all the foreign ones, even in countries which carry on an immense foreign commerce.
  • It is impossible for a nation, possessed of immense natural advantages … to suffer any great or general distress, in its agriculture, commerce, or manufactures (wars, famines, pestilence and calamities of seasons excepted) unless there be vital and radical errors in its system of political economy….[3]

These Hamiltonian ideas lay at the base of the “American System,” which the political leader Henry Clay championed, and which is primarily associated with his name today. These ideas were put into action in the John Quincy Adams administration. That system was at the center of the faction of the Democratic-Republican Party which in 1833 became the Whigs.

Henry Clay, spokesman for the American System and Lincoln’s political ideal.

These days, the Whig Party tends to be characterized as the party of the elite, in contrast to the populist Democrats whose standard bearer from Day One was Andrew Jackson. But in fact, the Whig Party had major support from the small farmers and businessmen who populated the West. They wanted access to credit to improve their farms and expand their businesses, improved roads and canals to market their produce, and support for their products against British dumping.  People from what was then the frontier – like Illinois – were therefore quite supportive of the Whig Party.

Abraham Lincoln was a passionate Whig and saw Henry Clay as his “beau ideal of a statesman.”

Lincoln Fights for Hamilton’s Policies

Campaigning for the National Bank

Lincoln’s first state election campaign cited his support for the American System, but the first example we have of Lincoln taking up the Hamiltonian cause on the national stage occurs in 1840, during the presidential campaign of the Whig William Henry Harrison. The Whig strategy during that campaign was to avoid policy issues and instead play up Harrison’s role as a war hero, born in a log cabin, etc., etc. – you’ll recall it as “Tippecanoe and Tyler too.” But Lincoln chose instead to address one of the core issues which separated the Whigs from the Democratic Party: national banking.

Hamilton Shaped Lincoln's Economics
Abraham Lincoln as a young man.

The United States in 1840 was still mired in a deep depression, the outcome of the period of wildcat banking and speculation brought in by Jackson’s elimination of the First Bank of the United States. Economic matters were at the very forefront of most Americans’ minds, and Lincoln decided they should be addressed on a policy level. So, in his stumping for Harrison’s election, he took on the banking issue directly, giving innumerable speeches calling for the re-establishment of a Bank of the United States. Only one of these speeches is available to us today; it was given on December 26, 1839.

Lincoln framed his argument by contrasting the advantages of a National Bank against the Sub-Treasury system which the van Buren administration was in the process of enacting into law. Although he never refers to Hamilton by name, Lincoln echoes our First Treasury Secretary’s rigorous arguments in favor of national banking.

Where Lincoln follows Hamilton most closely is in his first point: that the Subtreasury system “will injuriously affect the community by its operation on the circulating medium.” He first describes how effective the previous National Banks were in creating a credit system in which government revenues are not “locked up,” but are in constant circulation to fund national enterprise. Under the Subtreasury system, on the other hand, government revenues are to be put away until ready to be spent, thus eliminating a significant source of credit. In addition, taxes that could be paid in Bank notes, will now have to be paid in specie, creating significant hardship for the taxpayers and removing money from circulation.

Hamilton had made a similar point in his Second Report on Public Credit, known as the Report on the National Bank (1790). He put it this way:

Gold and Silver, when they are employed merely as the instruments of exchange and alienation, have been not improperly denominated dead Stock; but when deposited in Banks, to become the basis of a paper circulation, which takes their character and place, as the signs or representatives of value, they then acquire life, or, in other words, an active and productive quality.

Lincoln’s second and third points were two additional detrimental effects of the Subtreasury system: 1) that it will be more expensive, and 2) that it will be a less secure depository and more liable to corruption.

The Second Bank of the United States

The Whig Party decided to reprint Lincoln’s speech in a pamphlet which was circulated throughout the country as part of the presidential campaign, giving Lincoln his first national exposure. In addition, the momentum created behind the Whig push for a new Bank of the United States resulted in passage of a bill for a version of that institution in the Congress elected in 1840.

Upon Harrison’s untimely death, however, his vice-president John Tyler took a Jefferson-Jackson stance and vetoed the bank bill, arguing that it was unconstitutional, in opposition to Chief Justice John Marshall’s famous 1819 ruling to the contrary.

The Influence of Henry C. Carey

State legislator Lincoln’s intervention in the 1840 presidential campaign shows that he had moved beyond his concern with fostering internal improvements in Illinois, to seeking to master the general principles of political economy. His own writings and observations of friends confirm that he embarked on an intensive study of economics during the early 1840s.

Hamilton Shaped Lincoln's Economics
Henry C. Carey, Lincoln’s chief economic adviser

According to Lincoln biographer Sidney Blumenthal, Lincoln was particularly captivated in this period by the work of Henry C. Carey, son of Mathew Carey. Henry embarked on a career as an author on political economy in the 1830s. The focus of his first major work, Essay on the Rate of Wages (1835), was a refutation of the British economist Ricardo’s argument that profits depended on driving down wages. (Blumenthal calls it “a missile aimed at the political economy of scarcity.”) This approach led Carey to further develop his theory of economic development, which rejected the idea of managing scarcity, and emphasized the need for active government intervention on infrastructure and the market in order to serve the common good (what the Constitution calls the “general welfare”).

Carey was a prolific writer and researcher, who backed up his theories of economic development with detailed comparative studies of the history of various nations and regions. He openly embraced Henry Clay’s American System and elaborated its fundamental principles in writings such as the book Principles of Political Economy (1837-38) and the internationally circulated Harmony of Interests (1851). Two years later, he specifically addressed how his economic proposals would address the major issue ripping the nation apart in his book, The Slave Trade, Domestic and Foreign.

There is strong evidence that Lincoln read all of Carey’s major writings, and he definitely embraced his point of view on many issues. That evidence includes a Lincoln document found in his Collected Works entitled “Fragments of the Tariff discussion,” in which Lincoln outlined his views on tariffs, which were nearly identical to Carey’s.

A modern reprint of Carey’s Harmony of Interests

At the core of both Carey and Lincoln’s economic outlook was a view of human identity which contrasted sharply with that of Classical economists, especially from England. In a speech he gave on money in 1857, Carey castigated those economists “who regard man as an animal that must be fed and will procreate,” and “can be made to work only under the pressure of a strong necessity.” “Were they, however, to look, for once, at the real Man – the being made in the image of his Creator, and capable of almost infinite elevation – they would perhaps, arrive at a conclusion widely different.”

This view of humanity gibes perfectly with Lincoln’s, as expressed in his speech on Discoveries and Inventions, among many other places.

Carey’s view of economics, especially as he became a stronger and stronger advocate of government protection of manufactures and building infrastructure, put him squarely in the Hamiltonian tradition. There is at least one essay in which he used the nom de plume Hamilton.

Championing Hamilton in Congress

Lincoln served in the Illinois State legislature until 1842. In 1846, he was elected to Congress, where he served one term. Once again, he became a leading standard-bearer for Hamiltonian policies, specifically the contribution of the Federal government to building internal improvements which would increase the productivity of the economy as a whole.

The Federal contribution to internal improvements such as roads, canals, and railroads had begun in earnest in 1824, with the passage of the National Survey Act. That Act authorized the President to have the Army Corps of Engineers make surveys of routes for roads and canals “of national importance, in a commercial or military point of view, or necessary for the transportation of public mail.” It allocated $30,000 toward that job. While Monroe began the process, incoming President John Quincy Adams, who considered internal improvements “a sacred duty,” commissioned the Corps of Engineers to not only survey routes but carry out projects all around the country.

Hamilton Shaped Lincoln's Economics
A map showing the route of the Illinois-Michigan Canal, Lincoln’s example of a project that aided both the local shippers and those in New Orleans and New York.

President Jackson chose to cut back sharply on this commitment, as did his successor Martin van Buren. But in the summer of 1846, Congress passed a Rivers and Harbors act, which would have allocated Federal funds to improvements in 40 different projects around the country. President Polk vetoed it immediately, claiming that it was unconstitutional because it didn’t confine itself to ports with foreign trade and thus allegedly benefited only certain localities.

Congressman Lincoln was elected that Fall and became actively involved in challenging Polk’s view.  He attended a national conference on Rivers and Harbors in Chicago in the summer of 1847.  Then on June 20, 1848, Lincoln gave a major speech in Congress addressing the issue. Two of his five major points echo Hamilton.

First is his argument that there is no internal improvement that does not contain both local and general benefits, and thus a worthy project should not be discarded on that basis. In pursuing this line of reasoning, Lincoln said:

The true rule, in determining to embrace, or reject any thing, is not whether it have any evil in it; but whether it have more of evil, than of good. There are few things wholly evil, or wholly good. Almost every thing, especially of governmental policy, is an inseparable compound of the two; so that our best judgment of the preponderance between them is continually demanded.

Hamilton used almost identical argumentation in his Report on a National Bank. I quote:

If the abuses of a beneficial thing are to determine its condemnation, there is scarcely a source of public prosperity, which will not speedily be closed. In every case, the evil is to be compared with the good; and in the present case such a comparison will issue in this, that the new and increased energies derived to commercial enterprise, from the aid of banks, are a source of general profit and advantage; which greatly outweigh the partial ills of the overtrading of a few individuals, at particular times, or of numbers in particular conjunctures.

Lincoln also addressed Polk’s claim that using Federal funds for internal improvements is unconstitutional.  He approached the issue modestly, limiting himself to citing the opinions of New York jurist James Kent (the author of Commentaries on American Law) and Associate Supreme Court Justice Joseph Story, an authoritative commentator on U.S. Constitutional law. The issue of the constitutionality of internal improvements had never come before the Supreme Court, Lincoln concluded, but the preponderance of evidence, as indicated by these authorities, seemed to show that Congress’s enumerated powers over the economy made funding internal improvements constitutional.

Hamilton had addressed the issue of the Federal government’s powers over transportation (a key element of internal improvements) and other objects of the General Welfare in the Report on Manufactures, concluding that they should be construed “liberally.”

Congress did not overturn Polk’s veto, as you might suspect. But Abraham Lincoln was not done with this issue, not by a long shot.

Lincoln’s Hamiltonian Presidency

Lincoln’s acquaintance with Henry C. Carey was destined to move far beyond the study of the economist’s writings. For in 1856, when Lincoln joined the Republican Party in Illinois, Henry Carey also moved into the political arena as a Republican in Pennsylvania.  He actually chaired the first Republican nominating convention, which was held in Philadelphia. While involving himself in political organizing, Carey simultaneously became the leading economic spokesman for the new political party.

Hamilton Shaped Lincoln's Economics

As such, Carey became the author of the economic planks of the 1860 Republican Party platform, a platform that included a commitment to providing just wages and compensations to workers and farmers (the tariff), and to internal improvements such as upgrading rivers and harbors, and building a transcontinental railroad. And when Lincoln was elected, Carey continued on as his economic advisor, and was intimately involved in the decisions taken to finance the war and prepare ultimately for the peace.

The first Hamiltonian initiative of the Lincoln presidential era, the Morill tariff, is widely attributed to the influence of Carey. That was just the beginning.

Key to Carey’s thinking, as well as that of other Hamiltonians, especially those from Pennsylvania, was the need to expand the industrialization of the country into the South.  Carey had argued that it was the lack of industrialization that had kept labor and living standards in general in such a miserable condition in the Southern states, in addition to preserving the immoral and economic disaster of slavery. He therefore advised, and Lincoln agreed, upon the need to expand rail infrastructure into the South, starting with the border states as a priority. Lincoln included that proposal in his first address to Congress in December 1861.

Carey’s hand can also be seen in the financial measures which Lincoln took to restore economic sovereignty to the nation and finance the war. He was a close collaborator of Ways & Means Committee chairman Thaddeus Stevens and was in constant touch with Treasury Secretary Salmon Chase and his staff. He championed the idea of the greenbacks, the first American currency based on the full faith and credit of the Federal government, calling them the “people’s money.”

Hamilton Shaped Lincoln's Economics
President Lincoln and Treasury Secretary Chase working on Lincoln’s National Banking System.

Carey was not the only one who brought Hamiltonian ideas to bear in support of Lincoln’s move to firmly establish national economic sovereignty and use Federal credit to build a unified and technologically advancing national economy.  Another powerful individual was Elbridge Spaulding, a Congressman from New York State, who introduced the greenback bill. By his own testimony, Spaulding had studied Hamilton’s work, and determined that his view of the Federal government’s role in establishing a sovereign currency and sound credit was correct.

Spaulding also played a crucial role in the passage of the National Currency Bank Act of 1863. This is the act that established our current system of federally chartered but privately owned national banks, which had the ability to loan the newly created national banknotes in return for the banks’ purchase of Treasury bonds. This arrangement, like Hamilton’s first Bank of the United States, brought private capital into collaboration with the Federal government to provide credit to build the economy.

Spaulding gave a major speech explaining his reasons for championing the Bank Bill on February 19, 1863, one week after it had been signed into law by President Lincoln. He used his time to review the history of the fight for a national sovereign currency from the time Alexander Hamilton first advocated a national bank in 1779-1780. “It is now most apparent that the policy advocated by Alexander Hamilton, of a strong central government, was correct,” Spaulding said. That policy, like the currency bill Spaulding was advocating, was aimed at wedding private capital to the national interest, providing for the moneyed men to make a reasonable profit if they put their resources toward supporting the general welfare.

Let me refresh your recollection on how that worked in the Banks of the United States. Both banks were 75% capitalized by the investment of Treasury bonds owned by private capital (i.e., Federal government debt) in exchange for bank stock. That stock was to pay a slight premium of interest over the original bonds, but the nation as a whole would benefit by the creation of a source of productive capital that could be invested in the economy.  Thus, all of society would benefit and the national debt (should it not be too excessive) would become a national blessing.

Hamilton Shaped Lincoln's Economics
A  painting of Hamilton at his desk

Hamilton’s original plan, like Lincoln’s, did not give the private banks free rein.  The first Secretary of the Treasury had the authority to review the books of the BUS “no more often that once a week.” The Lincoln bill was more specific, establishing the Comptroller of the Currency which had the mandate to establish capital requirements and otherwise monitor the banks’ operations.

The Lincoln administration did far more in a Hamiltonian direction than create a national banking system, of course. Believing, like Carey and Hamilton, that the real source of wealth was the creative power of the individual, Lincoln promoted the spread of science, technology, and knowledge in the form of the Department of Agriculture and the Land Grant College Act. He used government credit to carry out multi-state infrastructure projects needed to unify the nation and improve its productivity; the transcontinental railroad is only the most notable. And he moved to end slavery.

A partial picture of the book Hamilton Versus Wall Street.

Lincoln did not live to carry out his full vision, but what he accomplished put the United States on the pathway to becoming the most advanced industrial nation in the world. And for that, we have not only him, but Alexander Hamilton to thank. All the more reason we should apply ourselves to studying Hamiltonian principles today.

[1] Tench Coxe was Hamilton’s deputy Treasury Secretary and heavily involved in preparing the data for the Report on Manufactures.

[2] Ðesultory Reflections upon the Ruinous Consequences of a non-renewal of the charter of the Bank of the United States.

[3] Address no. 1, excerpted by Salisbury, Allen, The Civil War and the American System, America’s Battle with Britain, 1860-1876, Campaigner Publications, New York, 1978, pp. 394-395.


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