Thursday, May 15, 2014

The Flawed Legacies of Hamilton and Jefferson

Two ideas that libertarians hold dear, free market capitalism and limited government have been poisoned by the flawed legacies of two arch rivals in George Washington’s first cabinet, Thomas Jefferson and Alexander Hamilton.

Alexander Hamilton may have been the United States’ first big time political operative.  Hamilton sought his fortune in the corridors and the backrooms of power.  He cozied up to President Washington, the most powerful man in America and ingratiated himself with the financial elites of New York and Philadelphia.
Hamilton used his office as Treasurer to direct largesse to his powerful big city friends.  One of his first initiatives was to pay of the States’ War debts using Federal funds. 

Many Revolutionary War veterans were holding state war bonds that were virtually worthless.  They saw no prospect of ever being paid.  As Secretary of the Treasury, Hamilton put forward a plan whereby the Federal government would buy these state bonds at full face value.

His plan had two moral failings.  The first was that he gave his wealthy friends inside information on the plan so that they purchased the debt from the poor vets at pennies on the dollar and then reaped a windfall when the Feds paid them off in full.  The second was that that the Southern states had already paid their war debts.  Therefore the Southerners wound up shouldering a big chunk of the Northeast’s obligations.  The first bail out.

Hamilton financed this boondoggle for his cronies by putting an excise tax on the sale of whiskey.  Hardscrabble backwoods farmers made whiskey from their unsold grain as a means of preserving its utility rather than seeing it rot.  This sparked an uprising known as the Whiskey Rebellion.  Enraged local farmers refused to pay this unfair tax.  President Washington dispatched over 12,000 troops to western Pennsylvania, under the command of Hamilton, to suppress this uprising for the benefit of his cronies. 

Hamilton also successfully established the first American central bank which was both unconstitutional and a source of ready money for the Eastern financiers.  He also advocated for a British style mercantile economy whereby politically connected merchants would receive subsidies and grants of monopoly privilege from the Federal government.  This was the exact system that Adam Smith denounced in The Wealth of Nations.
Being a political man, his policies produced no wealth.  He only moved the rightful property of others to favored friends.

By contrast, Thomas Jefferson was a producer.  He ran a working plantation which grew crops for trade as well domestic essentials such as meat and vegetables for consumption.  Other homespun enterprises included a blacksmith shop a carpentry operation as well as manufacturing facilities for textiles and nails.  He was an architect, scientist, designer, philosopher and writer.

As a disciple of John Locke, Jefferson believed in the sovereignty of the individual and envisioned a government whose functions would be limited to protecting and upholding each individual’s God-given natural rights.

If Jefferson was the prototypical libertarian, Hamilton may be regarded as the archetypal fascist, advancing an unholy entanglement of state and private interests.  In fact, his Federalist Party went so far as to enact the Sedition Act that made dissent with their policies illegal.

And herein lays the problem.  Many modern writers hold up Hamilton as the father of American capitalism and he was nothing of the sort.  They mistake his brand cronyism as the model for capitalist enterprise and rightfully turn away in disgust.  This was the beef of the Occupy movement as well as Tea Party populists.

Jefferson, on the other hand, was guilty of the most heinous hypocrisy.  While he and other like minded Southerners advanced the causes of individual self determination, limited government and states’ rights, they also held slaves.  Civil rights charlatans can now cast words like “liberty”, “states’ rights” and “limited government” as codes  for rolling back the protections that they believe shelter them from racial assaults.

Sadly, because of the Hamiltonian tradition, most people misunderstand true free markets capitalism.  To them Capitalism is a dirty word, an insider’s game that is rigged so that all fail except for the privileged few.  Likewise, libertarian arguments for limited government are oft perceived as thinly veiled racism.  Minorities and their friends have mistakenly come to view government as their protector rather than the plunderer that it is.

It is incumbent upon activists in the liberty movement to address these misconceptions, to debunk crony capitalism and to reach out beyond our white male core if we are ever to arrest the statist onslaught, let alone see liberty in our time.

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