Jefferson and Hamilton: The Rivalry that Forged a Nation, Part I

Thomas Jefferson is a beloved American founding father and is quoted far more often than his formidable adversary, Alexander Hamilton. But Hamilton, to some people’s delight and to others’ chagrin, was instrumental in kickstarting America’s state-based capitalism that transformed this agrarian country into a global imperialist superpower. Studying the bitter rivalry between Jefferson and Hamilton serves as a good shortcut into politics, economics, and how political parties are formed. The phrase “Rivalry that Forged a Nation” comes from John Ferling, author of Jefferson and Hamilton: The Rivalry That Forged a Nation.

Biographer Alf J. Mapp, Jr wrote Thomas Jefferson: A Strange Case of Mistaken Identity, which provides colorful details in the lengthy chapter, Struggle of Titans:

Thomas Jefferson received a letter from George Washington in late November 1789. Before he broke the seal, Jefferson knew of course that it was a formal request that he accept the post of Secretary of State. The domestic duties of the office, he learned, would include administration of all business in that category except war and finance. He was confident in foreign policy, but he thought the domestic burden would be formidable as replied in a December 15 written reply, but he did not flatly refuse to serve: “It is not for an individual to choose his post… you are to marshal us as may be best for the public good.”

Jefferson had just returned back to Virginia and to his Monticello home, having served as Minister Plenipotentiary (Ambassador) of France for 4 years. He was contemplating retirement. James Madison visited him at Monticello soon after his friend had returned from overseas and added his persuasive voice to Washington’s urgency.Jefferson feared that his new post would involve more domestic than foreign affairs. Again, Washington wrote his chosen appointee: ” the consider the successful administration of the general government as an object of almost infinite consequence to the present and future happiness of the the United States. I consider the office of Secretary for the Department of State as very important on many accounts, and I know of no person, in my judgment, could better execute the duties of it than yourself”. From New York, Madison wrote of the “universal anxiety” with which his decision was awaited. The master of Monticello sent Washington his acceptance.

Besides Jefferson, the department heads were Henry Knox, Secretary of War; Alexander Hamilton, Secretary of the Treasury; Edmund Randolph, Attorney General; and Samuel Osgood, Postmaster General. All these men were vital to the new government, but Jefferson and Hamilton were the giants alongside Washington in his new administration. Devoted to the ideal of democratic government without factionalism, Washington did not suspect that these two magnetic Secretaries would become the focuses of political polarization. Of  course, he could never foresee that popular opinion for generations would make them the simplistic symbols of opposing philosophies so that through history they would ride a seesaw of public esteem.

Jefferson found himself a worthy antagonist in Alexander Hamilton who was contemptuous of the common man, and certainly he himself was far from ordinary. Almost everything about him was, for better or worse, superior, exotic, or at least different. Of course, there were those who thought his aristocratic sympathies incongruous. John Adams once described him as the “bastard son of a Scotch peddler” in contrast to Hamilton’s self-description as the son of a West India merchant “of respectable connection in Scotland”. There was truth in both versions. His mother had been jailed for being “twice guilt, but his largey of adultery” before going to live with James Hamilton XV, whom she did not marry. James, an unsuccessful merchant who had sprung from a branch of the ducal family of Hamilton, was the grandson of Sir Robert Pollock, “created Baronet of Nova Scotia by Queen Anne in 1702”. Biographer Mapp has many more details, too many to fit into a blog post (but would help fill out future blog posts), so I rely on http://teachinghistory.org/history-content/ask-a-historian/24094 to succinctly answer the question: “How did the debate between Jefferson and Hamilton shape the political system of the United States?”

In George Washington’s Farewell Address (1796), he warned that the creation of political factions, “sharpened by the spirit of revenge,” would most certainly lead to “formal and permanent despotism.” Despite Washington’s cautionary words, two of his closest advisors, Thomas Jefferson and Alexander Hamilton, helped to form the factions that led to the dual party system under which the U.S. operates today. Other men, most notably James Madison and John Adams, also contributed to the formation of political parties, but Hamilton and Jefferson came to represent the divisions that shaped the early national political landscape.

Although both men had been active in the Revolutionary effort and in the founding of the United States, Jefferson and Hamilton did not work together until Washington appointed Jefferson the first secretary of State and Hamilton the first secretary of the Treasury. From the beginning, the two men harbored opposing visions of the nation’s path. Jefferson believed that America’s success lay in its agrarian tradition. Hamilton’s economic plan hinged on the promotion of manufactures and commerce. While Hamilton distrusted popular will and believed that the federal government should wield considerable power in order steer a successful course, Jefferson placed his trust in the people as governors. Perhaps because of their differences of opinion, Washington made these men his closest advisors. When George Washington’s administration began, the two camps that formed during the Constitutional ratification debates – those groups known as the Federalists and Anti-Federalists – had not yet solidified into parties. But, disagreements over the nation’s direction were already eroding any hope of political unity. In May of 1792, Jefferson expressed his fear to Washington about Hamilton’s policies, calling Hamilton’s allies in Congress a “corrupt squadron.” He expressed fear that Hamilton wished to move away from the Constitution’s republican structure, toward a monarchy modeled after the English constitution. That same month, Hamilton confided to a friend that “Mr. Madison cooperating with Mr. Jefferson is at the head of a faction decidedly hostile to me and my administration, and . . . dangerous to the union, peace and happiness of the Country.”

Hamilton’s economic plan for the nation included establishing a national bank like that in England to maintain public credit; consolidating the states’ debts under the federal government; and enacting protective tariffs and government subsidies to encourage American manufactures. All of these measures strengthened the federal government’s power at the expense of the states. Jefferson and his political allies opposed these reforms. Francophile Jefferson feared that the Bank of the United States represented too much English influence, and he argued that the Constitution did not give Congress the power to establish a bank. He did not believe that promoting manufactures was as important as supporting the already-established agrarian base. Jefferson deemed “those who labour in the earth” the “chosen people of God . . . whose breasts he has made his peculiar deposit for substantial and genuine virtue.” He advised his countrymen to “let our work-shops remain in Europe.”

When George Washington’s administration began, the two camps that formed during the Constitutional ratification debates – those groups known as the Federalists and Anti-Federalists – had not yet solidified into parties. But, disagreements over the nation’s direction were already eroding any hope of political unity. In May of 1792, Jefferson expressed his fear to Washington about Hamilton’s policies, calling Hamilton’s allies in Congress a “corrupt squadron.” He expressed fear that Hamilton wished to move away from the Constitution’s republican structure, toward a monarchy modeled after the English constitution. That same month, Hamilton confided to a friend that “Mr. Madison cooperating with Mr. Jefferson is at the head of a faction decidedly hostile to me and my administration, and . . . dangerous to the union, peace and happiness of the Country.”

By the time Jefferson and John Adams vied for the presidency in 1796, political factions had formed under the labels “Republicans” and “Federalists.” In fact, by 1804 the advent of political parties necessitated a constitutional amendment that changed the electoral process to allow president/vice president tickets on the ballot. The Federalists dominated the national government through the end of the 18th century. Despite President Washington’s efforts at unity, political differences proved to be too deep to promote consensus. The Republican Party emerged as organized opposition to Federalist policies, and despite Jefferson’s assurances in his first inaugural address that Americans were “all republicans” and “all federalists,” faction had solidified into party.

Ron Chernow comments in his biography of Hamilton: Over the past two centuries, Hamilton’s reputation has waxed and waned as the country has glorified or debunked businessmen. Historian Gordon Wood wrote: “Although late-nineteenth-century Americans honored Hamilton as the creator of American capitalism, that honor became a liability through much of the twentieth century”. All the conflicting emotions stirred up by capitalism–its bountiful efficiency, its crass inequities–have adhered to Hamilton’s image. In a nation of self-made people, Hamilton became an emblematic figure because he believed that government ought to promote self-fulfillment, self-improvement, and self-reliance. As Treasury Secretary, he wanted to make room foe entrepreneurs, whom he regarded as the motive force of the economy. Like Franklin, he intuited America’s special genius for business: “As to whatever may depend on enterprise, we need not fear to be outdone by any people on earth. It may almost be said that enterprise is our element”. Chernow credits Hamilton with a life offering an “extraordinary object lesson in social mobility and his unstinting energy illustrated his devout belief in the salutary power of work to develop people’s minds and bodies. He adds that Hamilton did not create America’s market economy so much as foster the cultural and legal setting in which it flourished. One of his principal motives for promoting the Constitution (as he envisioned it) was to address “the abysmal failure of the Articles of Confederation”. Hamilton wrote: “It is known that the relaxed conduct of the state governments in regard to property and credit was one of the most serious diseases under which the body politic laboured prior to the adoption of our present constitution and was a material cause of that state of public opinion which led to its adoption”. He converted the new Constitution into a flexible instrument for creating the legal framework necessary for economic growth. He did this by activating three still amorphous clauses—the necessary and proper clause, the general-welfare clause, and the commerce clause—making them the basis for government activism in economics. Washington’s first term was devoted largely to the economic matters in which Hamilton excelled. Chernow, whom American libertarians might call a “statist”, goes on to malign federalist John Adams along with Jefferson and Madison as “among the well-intentioned men who were woefully backward in finance” while conceding they were “forward-looking in politics”. These three men “adhered to a static, archaic worldview that scorned banks, credit, and stock markets”. So Hamilton was the “progressive” of his era, says Chernow, and the 3 critics were the “conservatives”.

An opposing viewpoint comes from Thomas DiLorenzo, senior faculty member of the Mises Institute and adherent of the Austrian school of economics, and author of Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution. He debunks “the Hamiltonian myths perpetuated in recent admiring biographies”:Hamilton, first as a delegate to the Constitutional Convention and later as the nation’s first and most influential treasury secretary, masterfully promoted an agenda of nationalist glory and interventionist economics—–core beliefs that did not die with Hamilton in his fatal duel with Aaron Burr. Carried on through his political heirs, the Hamiltonian legacy:

• Wrested control into the hands of the federal government by inventing the myth of the Constitution’s “implied powers”

• Established the imperial presidency (Hamilton himself proposed a permanent president—–in other words, a king)

• Devised a national banking system that imposes boom-and-bust cycles on the American economy

• Saddled Americans with a massive national debt and oppressive taxation

• Inflated the role of the federal courts in order to eviscerate individual liberties and state sovereignty

• Pushed economic policies that lined the pockets of the wealthy and created a government system built on graft, spoils, and patronage

• Transformed state governments from Jeffersonian bulwarks of liberty to beggars for federal crumbs

My response to the diametrically opposed views of Chernow and DiLorenzo is that I see merits to both their views. Capitalism evolved historically with state involvement in England, Holland, and Sweden. Queen Elizabeth chartered the British East India Company in 1600.  In 1602 the Dutch East India Company was born along with the world’s first stock exchange, The Amsterdam Stock Exchange. Sweden is noteworthy for creating the world’s first and oldest central bank, Sveriges Riksbank, in 1668. The Bank of England followed in 1694. Capitalism was bound up with imperialism and mercantilism and a pristine stateless form is more an object for idealization and rumination for academic economists and political theorists than a tangible functioning reality.  On the other hand, Jefferson’s pearls of wisdom against tyrannical bankers and advocacy for “limited government” certainly are appealing when we look at the bloated bureaucratic crony-capitalist plutocracy into which modern America has metastasized where consent seems restricted to huge banks and corporations. The Jefferson-Hamilton rivalry is too huge a topic for a single blog post, so I will do a follow-up to this one.