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The Founding Wizard
Two hundred years ago the United States was a weakling republic prostrate beneath a ruinous national debt. Then Alexander Hamilton worked the miracle of fiscal imagination that made America a healthy young economic giant. How did he do it?
July/august 1990 | Volume 41, Issue 5
One price of political greatness is to be forced to campaign even long after death. The Founding Fathers, particularly, have been constantly dragged from their graves for partisan purposes. The shades of Washington, Jefferson, Hamilton, and Madison have been invoked right up to the present by American politicians seeking to add luster to their own political agendas.
In 1923 Arthur H. Vandenberg, not yet a United States senator but already a power in Republican politics, went so far as to write an entire book called If Hamilton Were Alive Today . In it Vandenberg presumed to know how Alexander Hamilton would have reacted to the great questions facing the country in the post-World War I era. Deeply conservative himself, Vandenberg not surprisingly thought that Hamilton would come down on the conservative Republican side of all the issues.
Hamilton, he was sure, would have opposed joining the League of Nations, opposed limiting the powers of the Supreme Court (then a conservative bastion), and opposed giving unbridled freedom to radicals, reds, and other supposed menaces to public order. Vandenberg’s Hamilton would also have opposed free immigration and labor’s unlimited right to strike. On the other hand, he would have favored enforcing Prohibition (although Vandenberg suspected he would have been unhappy to see it made into law in the first place).
It is, of course, easy to enlist the political support of the dead. They can’t issue a denial. But Vandenberg, who had already written a hagiographic biography of Hamilton, was doing his personal hero no service. Rather, he trivialized him by dragging him into the transient issues of the day. The real Alexander Hamilton, like all truly great men, was a man for all seasons and all parties, not merely for the conservative Republicans who are most apt to invoke his name.
Since the dawn of the Republic, whenever an American has expressed an unpopular opinion, he has had Jefferson, above all others, to thank for the certainty that no official retribution would come of it. Equally, whenever he has made a bank deposit or bought a U.S. Treasury bond, it has been because of Hamilton that he knew the value would still be there when he needed the money back. While this may seem a lesser accomplishment than Jefferson’s, without it the American economy could not have flourished so abundantly and made the overwhelming majority of us so rich. Without Hamilton, Jefferson’s freedom might easily have become “just another word for nothing left to lose.”
He was not like the other Founding Fathers. He was the only one not born in what is now the United States, and he was not from the higher levels of society.
Because of his singular success in establishing the financial foundations of the American economy, along with his contributions to the Constitution itself and to the Federalist papers, Hamilton has a claim to the title Founding Father that few can match.
With the exception of the United Kingdom and its unique unwritten constitution, the United States today has the oldest continuously constituted government on earth. It is hard for Americans even to imagine the situation that confronted the country on April 30, 1789, as George Washington was inaugurated as the nation’s first President.
But in that April, as the new government came together in New York’s City Hall, there was only the barest outline of how to proceed, provided by the seven thousand words of the Constitution that had been hammered out two years earlier. There was an enormous amount of work to be done. The new government had to prove itself and engender loyalty among its citizens, who overwhelmingly still regarded themselves as citizens of the individual states. The executive departments, virtually unmentioned in the Constitution, had to be created and their duties allocated.
Equally important, the country’s disastrous financial situation had to be addressed at once. As current events in the Soviet Union confirm, bankruptcy is often the mother of serious political reform. And it was the financial chaos caused by the expenses of the American Revolution, together with the incapacity of the government under the Articles of Confederation to deal with its debts or even to fund its current expenses, that finally impelled the creation of a strong federal government.
It is hard for us to imagine, but in 1789 the United States was little more, economically, than a very large banana republic. As early as 1779 the Continental Congress had issued fully two hundred million dollars in Continental currency to pay for the Revolution. This fiat money, along with that issued by the state governments, depreciated rapidly. In March 1780 Congress itself repudiated this debt, revaluing it to one-fortieth of its old value. Much of this paper remained in private hands, some held by speculators who hoped that it would one day be redeemed at more than they had paid for it. Meanwhile, “not worth a Continental” had become a stock phrase in this country.