Alexander Hamilton was a committed nationalist who was fearful of the promise of states’ rights. As one of the authors of The Federalist Papers, Hamilton talked frequently about the cause of the union. Hamilton’s nationalism was evident in two key areas: his authorship of most of The Federalist Papers and his later plans for the fiscal and monetary policy of the early United States.
THE NEW CONSTITUTION
Although they were allies in drafting The Federalist Papers, Hamilton and James Madison would later become political opponents over the nature of national power. This disagreement was evident even in their early defense of the new Constitution. The Federalist No. 17 was written by Hamilton, and in it he argued that under the new Constitution, the federal government will be able to act directly upon the citizens of the states to regulate the common concerns of the nation, which, he believed, was absolutely essential to the preservation of the union. The Articles of Confederation were far too weak to serve the nation, he argued. A stronger and more centralized system was necessary. While arguing for the necessity of the union and stronger national government, Hamilton did attempt to assuage the fears of many citizens of the states that the proposed new national government would destroy state sovereignty and subordinate the legitimate interests of the states to the national government. But he was quite firm on the necessity of a strong national government in areas of finance, national security, and domestic disorder. The Federalist Papers that were written by Madison were much more precise regarding specifics in the Constitution. Again, though Madison was at this time a supporter of the new Constitution, the different tone in authorship foreshadowed later, and bitter, disagreements over the nature of national versus state power.
THE NATIONAL BANK
As secretary of the treasury during the administration of George Washington, Hamilton furthered his call for a stronger national government. Thomas Jefferson, the secretary of state, emerged as Hamilton’s main opponent. Jefferson tells a story of a conversation he had with John Adams and Hamilton early in Washington’s tenure: Adams offered his opinion that the British system of constitutional monarchy, without the corruption, would be the best system of government in the world. Hamilton replied that the British system was already the best possible form of government. Jefferson was horrified by such comments; he believed in pure democracy and thought that men were capable of governing themselves. Hamilton and Adams, on the other hand, had a pretty bleak view of human nature: they thought that a type of benevolent dictator was necessary to keep people from destroying each other. This translated into support for a very strong national government, one shaped by strong executive power removed from popular passions.
A key component of the strong national government was the creation of a national bank in 1791. The bank was not a private entity, but a government agency that had the power to print money and make loans. It acted like most of the central banks of Europe. And as such, it was very likely the biggest point of contention between those who wanted a strong central government and those who did not: these divisions would form into incipient political parties, the Federalists and Republicans.
Hamilton was responsible for settling the issue of the debt accrued from the Revolutionary War. A major part of this task entailed finding out what each state’s war debt was, how these debts were serviced, how much of the debt had been paid off, and who owned the debt. This was a fairly major task.
There were many ways of paying off the debt. Virginia had paid off almost all of its debt and was none too interested in having the national government assume the debt of other states like Massachusetts, which had paid off very little of its debt. Hamilton came up with a very promising but somewhat controversial plan for dealing with the debt: a central bank. It is not at all surprising that Hamilton would propose such a bank; it was a British idea that was created during the mid-seventeenth century by Prime Minister Robert Walpole. A central bank changed the nature of wealth by making paper money a viable form of wealth, whereas before then land had largely been the main form of wealth.
Hamilton wanted a bank because he worried that the lack of a national paper currency would restrict the development of commerce. Hamilton envisioned the United States as a national administrative republic engaged in commerce. The national bank would issue bank notes, stimulate commercial growth, provide a safe haven for federal revenues, and finance short-term loans. In the Hamiltonian vision, the national bank would foster a mercantilist economy where the central government would organize economic activity. To a great extent, the commercial states of the North, New England and New York, supported Hamilton.
Jefferson led the opposition and was supported by the plantation-based economy of the South, where land and property were the primary manufacturers of wealth. Southerners also opposed the bank because it was to be partially funded by tariffs. Hamilton wanted to put tariffs on imports that competed with indigenous manufacturing efforts. In other words, products that we could make here in the United States would have very high tariffs; those not made here would have very low tariffs. The Southerners did not favor such a system because they were free traders: they made cash crops of tobacco and cotton that they exported to Europe, and they were afraid that high tariffs might cause the Europeans to respond in kind, thus damaging the southern economy. Hamilton was able to win over Washington to his cause, and the bank was given a twenty-year charter by Congress. Slowly Washington, despite his protestations to the contrary, moved in the Federalists’ direction. Hamilton’s vision of a strong national government organizing economic life would become a hallmark of political and economic life in the latter part of the twentieth century.
Richard Brookhiser, Alexander Hamilton: American (New York: Free Press, 1999); and Milton Cantor, ed., Hamilton (Englewood Cliffs, NJ: Prentice Hall, 1971).