ARBOR OUTLOOK: Fashioning the American economic landscape
Columnist’s note: This is the second in a two-part series on the influence of Alexander Hamilton on American economic history and traditions.
“Learn to think continentally.” — Alexander Hamilton
Alexander Hamilton, the orphan immigrant from the West Indies, was the founding father of America’s economic system, but his remarkable contributions are often obscured by his controversial life. His accomplishments are lauded in song and dance in the current Broadway play bearing his name.
Practicing out of his Wall Street law office, his first large clients were British aristocrats who had occupied colonial homes during the Revolution. He also served as a member of the Continental Congress and the New York State legislature; founded the U. S. Coast Guard and the New York Post newspaper; helped James Madison revise the Articles of Confederation; partly penned the Federalist papers and campaigned for the adoption of the Constitution. Hamilton, brilliant but abrasive and shrewd, feuded politically with John Adams, Thomas Jefferson, and Aaron Burr. Burr, fed up with 15 years of Hamilton’s political attacks, shot and killed him in a duel in 1804. Tragically, Hamilton’s oldest son Phillip had died three years earlier in a similar showdown.
Hamilton’s background in international commerce allowed him to envision the future of the young country in ways that his contemporaries did not. As our first Secretary of the Treasury, Hamilton convinced Washington’s cabinet and other power brokers that the Constitution allowed for the new nation to assume the former government’s old debts and to make good on debts owed by the states. To pay for these expenses, Hamilton’s Treasury Department issued federal government bonds, levied a tariff on imports and taxed whiskey. The financial sector, including wealthy businessmen and banks, supported his economic vision and united in the Federalist Party. Hamilton also encouraged trade with the recently vanquished British, adding to the controversy surrounding all his economic proposals.
Hamilton helped establish the U.S. currency that was adopted and used by the states — no small accomplishment. He also created the Bank of the United States, which helped stabilize that new currency. Hamilton understood the value of England’s central bank, and after the idea overcame much opposition, the first central bank was chartered and located in Philadelphia, where it still stands.
Hamilton was dissatisfied with the young nation’s emphasis on agriculture and the export of raw materials, which were being purchased by Britain and utilized by its burgeoning manufacturing industry. Hamilton’s vision was that the U.S. should develop and trade our own manufactured products as well. To achieve this Hamilton proposed a system of subsidies and tariffs that provided financial incentive for domestic production.
Despite his controversial legacy, Hamilton was the first American to apply modern principles of credit, debt and centralized economic organization to our country’s young democracy. He exerted a permanent footprint on the American economic landscape.
Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin.