The life and times of Alexander Hamilton

, by Alonso Campos

The life and times of Alexander Hamilton
Benjamin Franklin, George Washington and Alexander Hamilton sign the Connecticut Compromise during the Constitutional Convention of 1787 Source: gerald / Needpix

When the European Council approved the “Next Generation EU” package for the post-pandemic recovery of the EU, this was hailed as a historic moment by those who want a stronger EU, capable of tackling its main issues and improving the lives of its citizens. In particular, the agreement was praised for allowing the Union as a whole, for the first time, to raise debt on behalf of its members, with many analysts saying that the EU had witnessed its “Hamiltonian moment”. But why are they referencing an old USA Treasury Secretary, and what is such a “moment”?

The early years

Alexander Hamilton was born in 1757 in Nevis Island, then one of the British Caribbean colonies. After being orphaned at a young age, he started working as a clerk in a trading company, where his intelligence and self-taught cultural knowledge caught the attention of the local community. With only sixteen years of age, a local fund collection helped pay his education in New York’s King’s College (now Columbia University).

At King’s College, he began making a name for himself, as he participated in the most important political matter of the day: whether the British American colonies should secede or not. Hamilton supported the revolutionary cause, and argued against the loyalists’ positions in various pamphlets and articles. When the war broke out in 1775, Hamilton joined the militia and quickly rose through the ranks, catching the attention of many for his abilities as a soldier and an officer. He was soon approached by General George Washington to be his aide de camp. Whilst Hamilton desired a field command, he knew that serving directly under the Army’s most prestigious official would ultimately be his best shot at rising up through the ranks of American society.

In accepting Washington’s offer, Hamilton had to dispatch with many other military officials and various envoys, but most importantly for the development of his political thinking, he was Washington’s voice and representative in front of the Continental Congress. At the time, the Thirteen Colonies came together as the United States under the Articles of Confederation, which provided for a very weak confederal government consisting of a Continental Congress, where each State had a single vote to cast, ordinary decisions had to be taken by two-thirds majority and any reforms to the Articles had to be unanimously agreed. All of this favoured smaller States over bigger ones.

Most importantly, while Congress had (on paper) the power to levy troops and taxes from the States, it had no instrument with which to coerce the States into providing the required quantities. Congress could emit debt and currency, but so could the States with their own coins, and whilst Congress had powers to sign and enforce treaties with foreign nations, in reality the States signed their own treaties with others, and constantly quarreled with one another. Similarly, the central government did not have the power to regulate international or inter-State trade.

The extreme weakness of such a federal government immediately became apparent to Hamilton, as both him and Washington repeatedly wrote to Congress asking for more money, supplies, and men, only to be met with silence. The States were obviously completely dismissive of Congress’ demands for support, and with each State using its own currency (and many madly printing paper money), the United States’ economic weakness was abundantly clear. Thus, Congress was forced to finance the Continental Army almost exclusively through debt, accruing massive amounts by the end of the war. In the last days of the conflict, Congress’ Treasurer, Robert Morris, was forced to pay the salaries of many men in the army out of his own pockets.

The war and its aftermath made Hamilton conclude that the Union itself could be in peril unless something was done to strengthen the federal government and curb the States’ powers and sovereignty. Indeed, he was not alone in that sentiment, as multiple crises assailed the newborn nation: the debt crisis, the push for paper money, the absolute trade disarray, outright armed rebellions, and a long list further.

Thus, Hamilton, alongside James Madison and others, manoeuvred to arrange a meeting of the States to amend the Articles of Confederation, which quickly turned into a full-blown Constitutional Convention which was to draft a completely new text. While there was general agreement that something had to be done, the specifics of the new arrangement divided the delegates of the Convention. In particular, the extent of the powers of the federal government over the States and the balance of power at the federal level between the smaller and bigger States were very thorny issues. Hamilton distinguished himself by making a passionate, six-hour-long speech on his proposal for a centralized government in which the President would serve for life, and the States would be reduced to provinces whose Governors would be appointed by the President.

The Federalist Papers

To a certain extent, Hamilton was a radical even within the pro-reform (“federalist”) camp, wanting a highly centralised and elitist government. Above all, however, he was a pragmatist, who knew when to compromise to achieve his goals. Thus, when a new Constitution (based mainly on Virginia’s strongly federal plan) was drafted by the Convention and sent to the States for review and approval, Hamilton became its staunchest defender.

With the country completely divided, Hamilton recruited James Madison and John Jay to write a series of essays, entitled The Federalist Papers, defending the new US Constitution. Throughout 85 essays, they put together one of the most brilliant and passionate defences of the principles of federalism and liberal representative democracy ever written.

At this stage however, the differences between Hamilton and Madison that would mark much of the early political life of the new polity which was beginning to surface. While Madison saw an expanded federal government as a necessary evil to avoid strife between the States and wanted to limit the powers of the federal government, Hamilton sought instead to greatly increase the powers and “energy” of the federal government to make it competitive with foreign powers.

This dispute came to a head when Washington (as the United States’ first President) chose Hamilton as the first Secretary of the Treasury. Hamilton quickly put himself to work, with the aim of fixing the Union’s deep debt crisis, and restoring public faith and trust in the American government. He started by presenting a plan that would consolidate the whole of the American debt, that held by the States as well as that held by the federal government, in the hands of the latter.

Hamilton’s plan would serve several purposes: it would give debt relief to those States that had accrued more debt during the Independence War, and it would ease the payment of the debts by placing them under a single holder. This, of course, infuriated those States who had little debt and would stand to pay more for other States’ debt, such as Madison’s and Thomas Jefferson’s Virginia. Months of political squabbling followed, until Hamilton reached a compromise with Jefferson and Madison, by which Hamilton’s debt plan would be approved in exchange for placing the nation’s new capital on the Potomac river, in Virginia.

Thus, the States’ debt was transferred to the federal government and the “Hamiltonian moment” happened. What Madison and Jefferson did not realize, however - which Hamilton did - was that the debt deal not only strengthened the federal government directly by allowing it to pursue more projects to pay down its debt. Also, by shifting the debt from the States to the federal government, Hamilton ensured that the loyalty of the “moneyed interests” (creditors and the soon-to-be-born bourgeoisie) would always remain with the federal government, and not the States. Since the federal government was their debtor now, and not the States, Hamilton understood that the rich and wealthy now would have a very important stake in the survival of the Union, lest the federal government falls and they lose all their investment.

The same, of course, applies to the modern-day EU: as more and more debt is borrowed at the European level, “the powers that be” will have an even bigger stake in its survival, and appropriate instruments (read: taxation powers) will have to be provided to allow the EU to pay its obligations.

Having secured the centralization of all the American debt, Hamilton now quickly moved to the next step of his plan as Secretary of the Treasury: how to efficiently service the payment of that debt. To do this, he presented a payment plan and two main initiatives to gather the money necessary. The first initiative was a simple bill raising import tariffs on various goods (collecting tariffs had been made an exclusive federal power by the new Constitution), and he further proposed a tax on the brewery of whiskey, which soon proved to be highly unpopular in many rural areas.

The second initiative was much more ambitious: Hamilton proposed to Congress the creation of a National Bank, with $10 million to be raised as starting capital, and be sold as shares. The bill quickly became very popular among speculators and the wealthy, while others decried the National Bank as a way of encouraging speculation, usury, and doing away with the simple agrarian life of many Americans.

The second initiative was much more ambitious: Hamilton proposed to Congress the creation of a National Bank, with $10 million to be raised as starting capital, and be sold as shares. The bill quickly became very popular among speculators and the wealthy, while others decried the National Bank as a way of encouraging speculation and usury, and of doing away with the simple agrarian life of many Americans.

In particular, Jefferson and Madison attacked the proposal not only on moral grounds, but by taking a strict, literal reading of the Constitution and stating that it does not contain provisions allowing the federal government to create banks. Hamilton countered that the creation and support of a National Bank was within Congress’ powers under the Constitution, since (he argued) it fell under the clauses allowing Congress to “collect taxes [...] to provide for [...] the general welfare of the United States” and “to make all laws necessary and proper to carry into execution” Congress’ powers.

This situation opened the debate, ongoing to this day, about the need to literally interpret the Constitution or not. Throughout the years, the American federal government has successfully argued that the “general welfare” clause and the clause allowing Congress to regulate inter-State commerce allowed it to increase its executive and legislative powers into new areas.

For any federalist, the USA’s example might be a dire warning on the risk of encroachment into the States’ powers by the federal government. It is important to note, however, that the American Constitution is a pre-industrial document, and as such its outlook and provisions would render the federal government almost incapable if the Constitution was to be read literally. While it is important to learn from the American case to better protect future federal systems, we should acknowledge the risk is much lower today, unless social changes on par with the Industrial Revolution were to happen in the near future.

In any case, Jefferson’s and Madison’s complaints went unheard, and Congress passed the National Bank bill by a huge margin, setting the precedent for future expansions of federal power beyond the literal words of the Constitution. After some initial weeks of wild speculation with its shares (which Hamilton managed to eventually control), the National Bank fulfilled its role in America’s new financial system, and by the time Jefferson reached the presidency, it was so institutionally and economically entrenched he did not manage to remove it.

In the next years, Hamilton would establish a new mint to restore the USA’s currency credibility (thereby creating the dollar, basing it off the Spanish colonial peso); create a society for the promotion of manufacturing and industry; and get embroiled in many other political rows with Jefferson and Madison. However, by 1794, almost five years since Hamilton became Secretary of the Treasury, resentment over Hamilton’s “whiskey tax” had mounted, with farmers attacking tax collectors, and eventually rising up in full-scale rebellion against the federal government in Pennsylvania.

Washington and Hamilton did not lose a second, and quickly raised an army of 13,000 militiamen to suppress the uprising. The rebels scattered even before this force arrived to the region. This had been the definitive proof for the new Constitution: where the old confederal Congress had completely failed at controlling rebellions and insurrections, the new federal government had the will, authority and power to efficiently and forcefully enforce its laws.

Hamilton’s dual dream of a strong central government and long-term economic and financial stability had therefore been achieved, setting the foundations for the incredible economic development the USA would experience during the Industrial Revolution. Shortly after the Whiskey Rebellion, Hamilton resigned as Secretary of the Treasury due to family issues, and would die in 1804 after throwing away his shot in a duel with Aaron Burr, caused by Hamilton repeatedly insulting and publicly rebuking the ex-Vicepresident.

Hamilton’s legacy

In the last few years, Alexander Hamilton’s figure has received increasing attention on both sides of the Atlantic, owing to the great musical in his name and to the new developments in the EU. To European federalists, his life and work can be a very interesting source of inspiration and learning, as the process of uniting the Thirteen Colonies and creating its new government that Hamilton was heavily involved in mirrors well our own European Project.

However, it is important not to be blinded by Hamilton’s overwhelming personality and work capacity when assessing him and his legacy. As discussed above, Hamilton was not what we would today call a federalist: instead, he favoured a far more centralised government, completely unsuitable to both the Colonies’ and Europe’s political cultures. Similarly, Hamilton held somewhat contradictory views on social relationships, being a staunch abolitionist on the issue of slavery on the one hand, but displaying very elitist attitudes on the other, believing that the country should be governed exclusively by the educated, who knew what was best for all (interestingly, Jefferson and Madison held almost opposite views on both issues).

Hamilton strengthened the American federal government, and opened the way to the great increases in federal power of the 19th and 20th Centuries. While some of said powers are needed for a functioning modern society, there are obviously others in which the federal government has encroached those of the States - and of course multiple instances were federal power has been (and is still) used against democracy.

Hamilton’s views and work are highly highly relevant to many of our modern European debates. It only by studying the subject in a balanced manner, however - understanding both the darker and brighter parts of Hamilton, Jefferson and their contemporaries - that can we fully apply that knowledge to political developments in Europe and beyond.

- Ron Chernow. Alexander Hamilton. Penguin Press, 2004.
- Alexander Hamilton, James Madison, John Jay. The Federalist papers. 1788.

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