A Rejoinder to Walter Russell Mead
By Nancy Spannaus
September 2, 2024—It’s no accident that in times of crisis, leading American policymakers tend to turn toward the policies of First Treasury Secretary Alexander Hamilton. Hamilton’s extraordinary ability to create an economically viable nation out of the chaos and ruins of the Revolutionary War, made him an ideal advisor for presidents such as Abraham Lincoln and Franklin Delano Roosevelt, who had to deal with existential crises for our nation.
Thus, Hamilton has been on the mind of many American leaders today, especially those concerned with the devastating economic and political effects of the deindustrialization of our country. Back in March, Bloomberg News published an extensive interview with economics professor Christian Parenti, in which Parenti, author of Radical Hamilton, Economic Lessons from a Misunderstood Founder, elaborated on how Hamilton’s ideas underpin industrial policy. The up-and-coming conservative blog The American Compass has also touted Hamiltonian economic policies, as have FDR enthusiasts such as Professor Robert Hockett and the Coalition for a National Infrastructure Bank.
Now comes Walter Russell Mead, arguably a senior member of the U.S. intellectual establishment, who wrote a major article in the September/October edition of Foreign Affairs entitled “The Return of Hamiltonian Statecraft: A Grand Strategy for a Turbulent World.” Foreign Affairs is the mouthpiece of the Council on Foreign Relations, and its articles should be taken seriously.
Mead’s lengthy article, which I describe and critique below, urges the U. S. foreign policy establishment and big business to follow what he considers Hamilton’s three major ideas: “the centrality of commerce to American society, the importance of a strong national identity and patriotism, and the need for an enlightened realism in foreign affairs.” Despite some apt points here and there, I think Mead misses the mark. This is glaringly clear when he approvingly cites, in the context of U.S. competition with China, “the marriage between the White House and Wall Street.”
As the author of Hamilton Versus Wall Street: The Core Principles of the American System of Economics, I must dissent. Let’s examine the arguments.
Hamilton Versus Wall Street
Mead describes Hamilton’s crucial idea on economy as follows: “business is the foundation not only of the United States’ wealth (and, therefore, of its military security) but also of its social and political stability.” He elaborates by citing Hamilton’s support for ensuring adequate physical infrastructure (transportation especially) and for government using its power to promote some types of enterprise over others through tariffs and other measures.
He claims that Hamilton’s tariffs were “a way to tilt the balance of American development away from agricultural commodities to manufactured goods and financial services.”
I see several serious problems with this description. First, as Mead makes clear throughout, by business he means major U.S. corporations, including Big Tech and Big Finance. He repeatedly insists that the government act to ensure their profitability and success, as he asserts Hamilton calls for. I think he has it backwards.
In his Report on Manufactures and Second Report on Public Credit (for the National Bank), Hamilton urged that the Federal government act to create the conditions to promote the General Welfare,[1] not the profitability of business per se. The objective was to increase the prosperity of the nation. And how was that defined? It meant ensuring that the nation could provide for the population’s basic needs (housing, food, clothing, and defense[2]) by fostering the growth of agriculture, industry, and commerce.
Thus, the financial system he devised was based on getting wealthy businessmen to invest in the growth of the nation as a whole, because, as Mead correctly says, economic growth and prosperity were essential foundations for the nation’s security and stability (one might add unity).
There’s all the difference in the world between having the Federal government serve the interests of business corporations, and have it regulate those corporations and the credit provided in defense of the general welfare. Hamilton is on record as advocating the latter.
And I see no indication at all that Hamilton wanted to promote the financial services industry (a contradiction in terms). The dramatic growth of the financial services sector has been a concomitant of de-industrialization – just the opposite of what Hamilton knew was necessary for the welfare of the nation – making money, at the expense of building the nation’s real wealth and living standards. Hamilton opposed financial speculation – it was the deadly enemy of his Society for Useful Manufactures and the financial infrastructure of the nation. As I headlined the first chapter of my book, he would have been the foremost opponent of Wall Street’s usurious and predatory practices today.
Today’s financial services sector has brought in what it commonly called financialization —the elevation of short-term profit-taking above investment in long-term economic growth. Examples abound, from the flood of corporate share buybacks, to the dangerous disinvestment in engineering at companies such as Boeing, which have prioritized increasing their payoffs to investors above their duty to safety for the public.
Hamilton’s focus on political economy was subsidiary to his primary purpose: building an economically independent, viable United States of America. He was not advancing policies for business against agriculture, but policies that would bring prosperity to the entirety of the country, and even serving such elevated purposes as “cherish(ing) and stimulat(ing) the activity of the human mind.”
Patriotism
Only twice does Mead reference the idea of the “common good” (a synonym for the General Welfare). That comes in the context of his addressing his second “critical idea” from Hamilton, loyalty to the United States as opposed to a corporation considering itself a “citizen of the world.” His essential point is that corporations have to be seen as patriotic in order to get the support they need from the populace, and thus the Federal government. Yet the General Welfare was a keystone of Hamilton’s policies.
The backdrop for Mead’s argument is clear: multinational corporations (and Wall Street!) have notoriously hollowed out the industry and living standards of a large portion of the U.S. population by sending industry overseas in their search for the greatest profit. This reality is the cause of much of the rage we’ve seen characterizing American politics over recent decades. Unfortunately, the real source of these decisions has generally been obfuscated. In industry after industry, the culprit has been Wall Street itself, which threatened to withhold credit for industries who refused to shut down their American factories, and move them to cheap labor places like China.[3] So much easier to blame China, now that the damage has been.
The recent anti-globalist moves toward reshoring U.S. industry correspond to Mead’s call for corporations to once again prioritize the welfare of Americans. But rather than being measures to appear patriotic and win support, such re-industrialization should be guided by true Hamiltonian principles: building up the physical industrial and agricultural strength of the nation to promote the General Welfare. Patriotism is not defined by showing the flag, but by actions for the common good.
Realism in Foreign Policy
Mead’s identification of “realism in foreign policy” as Hamilton’s third crucial idea would appear to be straightforward and correct. Hamilton was clear-eyed about the flaws in humanity, and had gone to great lengths (in Federalist No. 6, for example) to show that democratic systems do not necessarily lead to peace between nations. And as Mead writes, Hamilton, like Washington, believed that commerce between nations could make the world more peaceful.
Mead’s case in point is the U.S. policy following World War II, where Washington offered support for rebuilding Germany and Japan, and integrating them into the post-war order. This was “enlightened realism,” he writes. But he then goes on to attack those nations whom he says “rejected the kind of order the United States hoped to build” in the post-war period—China, Russia, Iran, and North Korea. The United States has to be prepared to deal with the “threat” of these countries dominating certain areas of the world.
The problem with this analysis is that it ignores the reality of what kind of order that was. With the death of Franklin Roosevelt, the U.S. vision of the post-war order changed dramatically – from one vectored to the end of imperialism and opportunities for economic development for all, to one of supporting our allied but still colonial empires (Britain and France) and pursuing geopolitical confrontation with those nations which opposed their domination. Russia, which had sacrificed more than any other nation to defeat Nazi Germany, was denied economic assistance and designated enemy number one; China, which had suffered from almost a decade of Japanese imperialist assault, was subject to intelligence warfare which exacerbated internal tensions and ultimately turned it into an enemy of the United States.
A greater contrast with the policy of those great Hamiltonians Abraham Lincoln and Henry C. Carey couldn’t be found. In the period between 1860 and the mid-1870s, U.S. administrations pursued a policy of spreading Hamiltonian economics (called the American System) to nations throughout the world. Lincoln’s Ambassador to Russia Cassius Clay preached the American System, as did American economist E. Peshine Smith, who was sent to Japan under the Grant administration to promote Hamiltonian principles. Economic development in those countries was not seen as a threat, but a boon to other nations, including the United States.
These policies are what I would call real Hamiltonian statecraft.
Much More to Learn
There is an inherent difficulty in trying to apply Hamiltonian policies from the 18th century to the world of today. The United States is no longer a fledgling nation, having risen to a position of a global superpower. As a realist, Hamilton would clearly have adapted his policies to this dramatic change.
Yet, I believe that Hamilton’s Report on Manufactures, in particular, does contain generalizable principles which are essential to be re-adopted today. It was a surprise to me that Mead never quotes Hamilton. As you will see in Hamilton Versus Wall Street, Hamilton had much to say on the level of principle – as his followers have made clear over the last two centuries.
Let me list a few: 1) sovereign control of the nation’s currency; 2) the need for Federally backed credit to spur technological progress and build the nation’s infrastructure; 3) promotion and protection for the productive powers of labor; and 4) energetic Federal leadership to create “a more perfect Union” and promote the General Welfare.
In sum, our national security does not depend on or require a “marriage between the White House and Wall Street.” On the contrary, that has been one of the major problems of the last 50 years. Let’s turn again to Hamilton’s American System principles. And I have just the book to launch you on your studies: Hamilton Versus Wall Street. You can get it here.
[1] Hamilton had a broad construction of the meaning of the General Welfare. See Hamilton Versus Wall Street, page 40.
[2] Hamilton’s terms are “subsistence, habitation, clothing and defense.” See the Report on Manufactures.
[3] For a clear example, see Beth Macy, Factory Man: How One Furniture Maker Battled Offshoring, Stayed Local – and Helped Save an American Town, Back Bay Books, Little Brown & Company, 2014.
Tags: Alexander Hamilton, Foreign Affairs, Nancy Spannaus, patriotism, statecraft, Wall Street, Walter Russell Mead