Alexander Hamilton (73 page)

Hamilton wasn’t content just to demonstrate the practicality of American manufacturing on a New Jersey riverbank. He felt compelled to make the theoretical case, which he did in his classic
Report on Manufactures,
submitted to Congress on December 5, 1791. The capstone of his ambitious state papers, it had fermented in his brain for some time. Nearly two years earlier, the House had asked him to prepare a report on how America might promote manufacturing. Hamilton now generated a full-blown vision of the many ways that the federal government could invigorate such economic activity. The report was the first government-sponsored plan for selective industrial planning in America, the tract in which, in the words of one Hamilton chronicler, he “prophesied much of post–Civil War America.”
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The impetus for the report had been largely military and strategic in nature. Washington had admonished Congress that a “free people” ought to “promote such manufactories as tend to render them independent [of] others for essential, particularly for military supplies.”
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Remembering the scarcity of everything from gunpowder to uniforms in the Continental Army—a by-product of Britain’s colonial monopoly on most manufacturing—Hamilton knew that reliance on foreign manufacturers could cripple America in wartime. “The extreme embarrassments of the United States during the late war, from an incapacity of supplying themselves, are still matter of keen recollection,” he noted in the report.
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To prepare for this study, the indefatigable Hamilton canvassed manufacturers and revenue collectors, quizzing them in detail about the state of production in their districts. As usual, he aspired to know everything: the number of factories in each district, the volume of goods produced, their prices and quality, the spurs and checks to production provided by state governments. To obtain a firsthand feel for American wares, he even wanted to touch them, to feel them. “It would also be acceptable to me,” he told revenue supervisors, “to have samples in cases in which it could be done with convenience and without expence.”
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As he accumulated swatches—wool from Connecticut, carpets from Massachusetts—Hamilton, with a flair for showmanship, laid them out in the committee room of the House of Representatives, as if operating a small trade fair, an altogether new form of lobbying.

Hamilton’s previous state papers had been purely the coinage of his own mind—he never employed ghostwriters—whereas he received critical assistance on the
Report on Manufactures
from Tench Coxe, who had drafted an early sketch urging American self-sufficiency in gunpowder, brass, iron, and other items. Eventually, Hamilton came to regard Coxe as a conceited, devious fellow who overrated his own talents. He later said, “That man is too cunning to be wise. I have been so much in the habit of seeing him mistaken that I hold his opinion cheap.”
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But at this juncture, Coxe’s expertise was vital. Hamilton revised and elaborated Coxe’s preliminary paper. He embroidered Coxe’s proposals with esoteric economic theory and an assertive vision of American political might through manufacturing. Far more than just a technical document, the
Report on Manufactures
was a prescient statement of American nationalism.

In his advocacy of manufacturing, Hamilton knew that he would encounter stout resistance from those who feared that factories might hurt agriculture and menace republican government. His opponents cited abundant land and deficient capital and labor as reasons that America should remain a rural democracy. Jefferson, in particular, foresaw an enduring equation between American democracy and agriculture. Shortly before returning from France, he wrote that circumstances rendered it “impossible that America should become a manufacturing country during the time of any man now living.”
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From the outset, Hamilton emphasized that he was not scheming to replace farms with factories and that agriculture had “
intrinsically a strong claim to preeminence over every other kind of industry.
” Far from wishing to harm agriculture, manufacturing would create domestic markets for surplus crops. All that he recommended was that farming not have “an exclusive predilection.”
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Since manufacturing and agriculture obeyed different economic cycles, a downturn in one could be offset by an upturn in another. Throughout the report, he contested the influence of the Physiocrats, the school of French economists that extolled agriculture as the most productive form of human labor and condemned government attempts to steer the economy. Hamilton refuted their belief that agriculture was inherently productive while manufacturing was “barren and unproductive.”
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Displaying an intimate familiarity with Adam Smith’s
The Wealth of Nations,
Hamilton demonstrated that manufacturing, no less than agriculture, could increase productivity because it subdivided work into ever simpler operations and lent itself to mechanization. He also insisted that America’s focus on agriculture was not just a natural by-product of geography but had been foisted on the country by European trading practices.

Hamilton evoked a thriving future economy that bore scant resemblance to the static, stratified society his enemies claimed he wanted to impose. His America would be a meritocracy of infinite variety, with a diversified marketplace absorbing people from all nations and backgrounds. Though slavery is nowhere mentioned in the report, Hamilton’s ideal economy is devoid of the feudal barbarities of the southern plantations. Hamilton’s list of the advantages of manufacuturing has a quintessentially American ring: “Additional employment to classes of the community not ordinarily engaged in the business. The promoting of emigration from foreign countries. The furnishing greater scope for the diversity of talents and dispositions which discriminate men from each other. The affording a more ample and various field for enterprise.”
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Manufacturers and laborers would flock to a country rich in raw materials and favored with low taxes, running streams, thick forests, and a democratic government. And that influx of workers would eliminate one of the most pressing obstacles to American manufacturing: high wages.

While Hamilton’s emphasis on “diversity” may please modern ears, his stress on child labor is more jarring. Of the productive British cotton mills, he commented: “It is worthy of particular remark that, in general, women and children are rendered more useful, and the latter more early useful, by manufacturing establishments than they would otherwise be.” In Britain’s cotton mills, it was “computed that 4/7 nearly are women and children, of whom the greatest proportion are children and many of them of a very tender age.”
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Hamilton’s approval of this may sound callous, and it is certainly fair to fault him for not foreseeing the brutality of nineteenth-century mills. On the other hand, child labor in farms and workshops was then commonplace—Hamilton himself had started clerking in his early teens, and his mother had worked. Hamilton didn’t see himself as inflicting grim retribution upon the indigent so much as giving them a chance to earn decent wages. For Hamilton, a job could be an ennobling experience: “When all the different kinds of industry obtain in a community, each individual can find his proper element and can call into activity the whole vigour of his nature.”
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Hamilton did not equate child or female labor with exploitation.

In the best of all possible worlds, Hamilton preferred free trade, open markets, and Adam Smith’s “invisible hand.” He wrote late in life, “In matters of industry, human enterprise ought doubtless to be left free in the main, not fettered by too much regulation, but practical politicians know that it may be beneficially stimulated by prudent aids and encouragements on the part of the government.”
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At this early stage of American history, Hamilton thought aggressive European trade policies obligated the United States to respond in kind. He therefore supported temporary mercantilist policies that would improve American self-sufficiency, leading to a favorable trade balance and more hard currency. For a young nation struggling to find its way in a world of advanced European powers, Realpolitik trumped the laissez-faire purism of Adam Smith.

Reluctant to tinker with markets, Hamilton knew that he had to present a cogent brief for any government direction of investment. There was an obvious objection: wouldn’t smart entrepreneurs spot profitable opportunities and invest capital without bureaucratic prompting? Yes, Hamilton agreed, entrepreneurs react to market shifts, but for psychological reasons they sometimes respond at a sluggish pace. “These,” he wrote, “have relation to the strong influence of habit and the spirit of imitation; the fear of want of success in untried enterprises; the intrinsic difficulties incident to first essays toward a competition with those who have already attained to perfection in the business to be attempted.”
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Young nations had to contend with the handicap that other countries had already staked out entrenched positions. Infant industries needed “the extraordinary aid and protection of government.”
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Since foreign governments plied their companies with subsidies, America had no choice but to meet the competition.

After doing the intellectual spadework for government promotion of manufactures, Hamilton listed all the products he wanted to promote, ranging from copper to coal, wood to grain, silk to glass. He also enumerated policies, including premiums, bounties, and import duties, to protect these infant industries. Wherever possible, Hamilton preferred financial incentives to government directives. For instance, knowing that tariffs taxed consumers and handed monopoly profits to producers, Hamilton wanted them to be moderate in scale, temporary in nature, and repealed as soon as possible. He preferred bounties because they didn’t raise prices. In some cases, he even wanted
lower
tariffs—on raw materials, for instance—to encourage manufacturing. And to speed innovation, he wanted to extend patent protection to inventors and adopt the sort of self-protective laws that Britain had used to try to hinder the export of innovative machinery.

For Hamilton, the federal government had a right to stimulate business and also, when necessary, to restrain it. As Arthur Schlesinger, Jr., has observed, “Hamilton’s enthusiasm over the dynamics of individual acquisition was always tempered by a belief in government regulation and control.”
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In arguing, for instance, that government inspection of manufactured articles could reassure consumers and galvanize sales, he anticipated regulatory policies that were not enacted until the Progressive Era under Theodore Roosevelt: “Contributing to prevent fraud upon consumers at home and exporters to foreign countries—to improve the quality and preserve the character of the national manufactures—it cannot fail to aid the expeditious and advantageous sale of them and to serve as a guard against successful competition from other quarters.”
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He also recommended that the government inspect flour exports at all ports, “to improve the quality of our flour everywhere and to raise its reputation in foreign markets.”
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Endorsing still another form of government activism, Hamilton claimed that nothing had assisted Britain’s industry more than its network of public roads and canals. He therefore touted internal improvements—what we would today call public infrastructure—to meld America’s scattered regional markets into a single unified economy.

Even though he devoted only two skimpy paragraphs to the manufacture of gunpowder, Hamilton never lost sight that his
Report on Manufactures
was initially driven by the need for self-sufficiency in arms. Determined not to be caught shorthanded in case of war, Hamilton supported “an annual purchase of military weapons” to aid “the formation of arsenals.”
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So vital were supplies to national security that Hamilton did not rule out government-owned arms factories.

In closing, Hamilton made clear that the energetic programs he described were not suited to all countries at all times but were devised for an early stage of national development: “In countries where there is great private wealth much may be effected by the voluntary contributions of patriotic individuals. But in a community situated like that of the United States, the public purse must supply the deficiency of private resources.”
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Hamilton’s
Report on Manufactures
ultimately came to naught. Unlike his magnificent state papers on public credit, the mint, and the central bank, this report charted a general direction for the government, not solutions to specific, urgent problems. The House of Representatives shelved the report, and Hamilton made no apparent effort to resurrect it from legislative oblivion. For a document never translated into legislation, the report aroused exceptional apprehension because of its broad conception of federal power. As always, Hamilton cited constitutional grounds for his program, invoking the clause that gave Congress authority to “provide for the
common defence
and
general welfare.
”
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Owing in part to Hamilton’s generous construction of this clause, it was to acquire enormous significance, allowing the government to enact programs to advance social welfare.

Madison was deeply alarmed by these arguments. Thus far, he said, those expounding a liberal interpretation of the Constitution had argued only for leeway in the
means
to attain ends spelled out in the Constitution. But no mention was made of manufacturing as an
end
of government. “If not only the
means,
but the
objects
are unlimited,” Madison groaned, “the parchment had better be thrown into the fire at once.”
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Nor could Jefferson conceal his horror at the report, which called for an even more sweeping arrogation of power than had Hamilton’s bank. In one postbreakfast talk with Washington, Jefferson mentioned Hamilton’s latest position paper and wondered somberly whether Americans still lived under a limited government. He dreaded the powers that would accrue to government under his colleague’s loose reading of the Constitution. He grumbled that “under color of giving
bounties
for the encouragement of particular manufactures,” Hamilton was trying to insinuate that the “general welfare” clause “permitted Congress to take everything under their management which
they
should deem for the
public welfare
.”
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For Jefferson, this opened wide the floodgates to government activism.