Alexander Hamilton (76 page)

Contrary to his image as a tool of England, Hamilton enlisted early on in a scheme to challenge British supremacy in textiles. In January 1789, excited investors crowded into Rawson’s Tavern on Wall Street to feast on wine and cake and consecrate the New York Manufacturing Society. Two months later, Hamilton’s name appeared among charter subscribers investing in a new woolen factory scheduled to open on Crown Street (later Liberty Street) in lower Manhattan. In the end, the facility suffered from a fatal shortage of water power and closed a year or two later, but the experience initiated Hamilton into the mysteries of the new industrial order.

Around this time, a young man named Samuel Slater slipped through the tight protective net thrown by British authorities around their textile business. As a former apprentice to Sir Richard Arkwright, Slater had sworn that he would never reveal his boss’s trade secrets. Flouting this pledge, he sailed to New York and made contact with Moses Brown, a Rhode Island Quaker. Under Slater’s supervision, Brown financed a spinning mill in Rhode Island that replicated Arkwright’s mill. Hamilton received detailed reports of this triumph, and pretty soon milldams proliferated on New England’s rivers. With patriotic pride, Brown predicted to Hamilton that “mills and machines may be erected in different places, in one year, to make all the cotton yarn that may be wanted in the United States.”
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Hamilton’s policies were consistent with the drive for autarky and trade on equal terms with England that had fired the American Revolution in the first place. The colonists had rebelled against an imperial system that restricted their manufactures and forced them to hawk their raw materials to the mother country, stifling their economic potential. Before the Revolution, England had imposed a law banning the export to America of any tools that might assist in the manufacture of cotton, linen, wool, and silk. The British manufacturers of hats, nails, steel, and gunpowder had impeded American efforts to make comparable articles. It was Hamilton’s vision of America as a manufacturing behemoth, not Jefferson’s of a society of yeomen farmers, that threatened the British.

The shape of Hamilton’s future industrial policy was foreshadowed in May 1790 when Tench Coxe replaced William Duer as assistant treasury secretary. The move possessed vast symbolic meaning, for Coxe was a well-known advocate of manufacturing and eager to raid Britain’s industrial secrets. That February, he had written a long letter to Hamilton, praising America’s maiden efforts at industry but citing a shortage of both capitalists and large-scale capital as retarding the introduction of labor-saving machinery. He regretted that because of Britain’s pugnacious defense of her technological superiority in textiles the United States was not “yet in full possession of workmen, machines and secrets in the useful arts.”
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Hamilton and Coxe teamed up in a daring assault on British industrial secrets. Coxe decided that the best way to achieve industrial parity with England was to woo knowledgeable British textile managers to America, even if this meant defying English law. Right before joining Treasury, he posted a man named Andrew Mitchell to England to snoop around factories and surreptitiously make models of textile machinery. Additionally, on January 11, 1790, Coxe had signed an agreement with a British weaver, George Parkinson, who also had studied at Arkwright’s feet and bragged openly that he “possessed…the knowledge of all the secret movements used in Sir Richard Arkwright’s patent[ed] machine.”
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In exchange for passage to Philadelphia, Parkinson agreed to provide Coxe with a working model of a flax mill that incorporated Arkwright’s designs. On March 24, 1791, the U.S. government granted patents for Parkinson’s flax mill, even though he had admitted that they were “improvements upon the mill or machinery…in Great Britain.”
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Clearly, the U.S. government condoned something that, in modern phraseology, could be termed industrial espionage. Building upon this precedent, Hamilton put the full authority of the Treasury behind the piracy of British trade secrets.

By April 1791, Hamilton had lent his prestige to Coxe’s plan for a manufacturing society operated by private interests that would enjoy the general blessings of government. It would be a pilot project, a laboratory for innovation. The Society for Establishing Useful Manufactures (SEUM) was lauded by a later historian as “the most ambitious industrial experiment in early American history.”
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It was almost certainly Hamilton, with an assist from Coxe, who wrote the eloquent prospectus for the society that appeared on April 29. He left no doubt as to how he envisaged America’s future, writing that “both theory and experiences conspire to prove that a nation…cannot possess much
active
wealth but as a result of extensive manufactures.”
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The society intended to create more than a single mill. It projected an entire manufacturing
town,
with investors profiting from the factory’s products and the appreciation of the underlying real estate. The prospectus listed a cornucopia of goods—including paper, sailcloth, cottons and linens, women’s shoes, thread, worsted stockings, hats, ribbons, blankets, carpets, and beer—that the society might manufacture. Hamilton hoped that through the “spirit of imitation,” the society would spawn comparable domestic businesses.
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Thus far, the major hindrance to such enterprise had been “slender resources,” but lack of capital had now been remedied by the government’s funded debt. Once again, Hamilton used one program to advance the fortunes of another in an ever expanding web of economic activity. The society needed five hundred thousand dollars in seed capital, and the prospectus pointed out that it could be paid for partly in government bonds, promoting public debt and the industrial city at one stroke. “Here is the resource which has been hitherto wanted,” Hamilton boasted.
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That Hamilton was prepared to ransack European industrial secrets was made plain when the prospectus said that “means ought to be taken to procure from Europe skilful workmen and such machines and implements as cannot be had here in sufficient perfection.”
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Hamilton did not lend his prestige to the scheme from afar. In July 1791—the same month investors gobbled up bank scrip and he began his dalliance with Maria Reynolds—he traveled to New York to drum up support for the society’s first stock offering, which sold out instantly. He then attended the subscribers’ inaugural meeting in New Brunswick, New Jersey, in August. In choosing directors later that year, Hamilton blundered by turning to his freewheeling companion, the speculator William Duer. He packed the board with local financiers—seven directors from New York, six from New Jersey—instead of striving for broad geographic representation. The board was also excessively crammed with financiers when men with industrial credentials were sorely needed.

Early on, Hamilton and Coxe settled on New Jersey as the optimal place for this venture. The state was densely populated, possessed cheap land and abundant forests, and enjoyed easy access to New York money. Most critically, it was well watered by rivers that could spin turbine blades and waterwheels. That August, Hamilton dispatched scouts to investigate these waterways. He and other society members were swamped with appeals from local landlords, touting the wonders of their riverside properties. It was later on concluded, largely at Duer’s insistence, that the Great Falls of the Passaic in northern New Jersey offered “one of the finest situations in the world.”
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Hamilton knew the secluded spot well. One day during the Revolution, he, Washington, and Lafayette had picnicked by the falls, enjoying a “modest repast” of cold ham, tongue, and biscuits in a sylvan setting that momentarily banished thoughts of war. The Great Falls mark a scenic bend in the Passaic River, the foaming water—up to two billion gallons per day—plunging seventy feet into a deep, narrow gorge of brownish-black basalt, blowing a rainbow-forming spray into the air. The society decided to call the new town Paterson to flatter Governor William Paterson. On November 22, 1791, the governor returned the favor, granting the society a charter (likely written by Hamilton) that gave it monopoly status and a ten-year tax exemption. The society bought seven hundred acres and carved it up into parcels, not just for factories but for a brand-new town—one that became the third largest city in New Jersey.

Incredibly, Hamilton, with his ever growing roster of projects, personally recruited supervisors for the first cotton spinning mill. This glorified adviser hired as foreman the same George Parkinson who had plundered British secrets for flax-spinning machinery; the Treasury subsidized Parkinson’s living expenses. In July, Hamilton had received an extraordinary letter from another renegade employee of Sir Richard Arkwright, Thomas Marshall, who also came to America armed with British textile secrets. Having been superintendent at Arkwright’s huge Derbyshire mill, he bragged to Hamilton that he had toured the mill again on a reconnaissance mission the previous fall: “I was all over his works and am consequently fully acquainted with every modern improvement.” Marshall had no misgivings about snatching English mechanics for the society’s projects and suggested that a “master of his business in the weaving branch and in possession of all or most of the fashionable patterns now worn in England will be very useful.”
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That August, Hamilton negotiated contract after contract with British textile refugees, including William Hall, who had learned to stain and bleach fabrics, and William Pearce, who had erected a Yorkshire cotton mill. That December, when the society’s board met to consider personnel for the new operation, it rubber-stamped all of Hamilton’s choices.

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.