Hamilton’s Curse–Hamiltonian Hegemony


Nationalized banking, protectionist trade policy, corporate welfare–is this the definition of the current state of affairs (or those soon to come) in America? It likely will be. It is the definition of a mercantilist system of governance, and it is one that Alexander Hamilton advocated for during the period of the Constitutional convention. Those three legs were (and still are) the base of the stool of Federalist big-government nationalism.

It was, however, not the way government actually operated up until the latter part of the 19th century. Jeffersonian ideals of limited, divided sovereignty still held a pulse until that time, but the times, as the song goes, were a’changing. It took a “crisis” in order to knock the supports out from under the republican form of government.

The crisis, the War between the States, allowed the administration of Abraham Lincoln, the “greatest disciple” of Hamilton according to DiLorenzo, unprecedented opportunity to radically shift the country toward a truly mercantilist position. The method of the manipulation took the form of Congressional acts supported by Lincoln after the point in the conflict when southern Democrat members of Congress had exited.

In order to revive the national banking system, the Legal Tender acts of 1862 were put into place, and a paper money system (greenbacks) was locked into place with the National Currency Acts of 1863-64. The interface between government interest and the banking industry was noted by the New York Times as having “crystallized a centralization of power, such as Hamilton might have eulogized as magnificent” (quote from page 129 of the book).

DiLorenzo goes into a long account of Lincoln’s tariff policy, showing that protectionism and its cousin autarky (economic isolationism) were very welcome in the “house that Lincoln built”. Ohio’s own Clement Vallandigham was willing to speak out against this radical consolidation of power in the hands of the national government, but was deported by the administration for his troubles.

The third leg of the stool, the establishment and nurturing of corporate welfare, took the form of: railroad subsidies; land grants in order to give railroad owners free access to construct; the creation of powerful lobbies; and eventually bribes in order to keep the whole profit-taking scheme going (the Credit Mobilier scandal).

Now, such welfare takes the forms of: subsidies through various bureaucracies (think farm subsidies); favored corporation status (think FDA and other governmental barriers to competition in various markets); the creation of powerful lobbies; and “stimulus” or “TARP” acts to give taxpayer dollars directly to non-competitive private corporations that are “too big to fail” according to the national government.

Then, as now, the public reaction to such scandals as Credit Mobilier and AIG consists of a demand for more governmental control of business, which happened to be the problem in the first place. Not that this is something that the corporations are really trying to avoid. In fact, the public is being hustled by very crafty operators all around. The public naivete is best summed up by DiLorenzo while quoting Butler Shaffer on page 141 “‘government regulation has generally served to further the very economic interests being regulated’ and that the advantages businesses sought were those ‘denied them in the marketplace.'”

From Lincoln through Obama, the mercantilist system advocated and advanced by Alexander Hamilton has grown steadily along with the growth of governmental power and control over all aspects of American life.

It’s just another part of the “curse”.

Series NavigationHamilton’s Curse- The Founding Father of Crony Capitalism