Alexander Hamilton

by Charles A. Conant

This discussion of the subject took place at a time when monetary principles were not very well fixed, when the standard and the state of the currency had hardly been settled on an orderly basis in any country, and when the means of transportation for the precious metals were much slower and less efficient than under modern conditions, and the cost was much greater. Hamilton endeavored to find the true commercial relation between gold and silver as a basis for the coinage values, in the hope that this would not change sufficiently to upset a bimetallic system founded upon such a basis. He was not a victim of the delusion that government can arbitrarily give value by law to money, but declared, "There can hardly be a better rule in any country for the legal, than the market proportion; if this can be supposed to have been produced by the free and steady course of commercial principles."

The report on manufactures and the bill providing for an excise were parts of the project of Hamilton for building up a vigorous and self-supporting nation. The report on manufactures was not presented to Congress until the beginning of the long session at the close of 1791, and was not carried out in legislation. It consisted chiefly of an argument for the encouragement of young industries in an undeveloped country. Hamilton strongly favored the diversification of the industries of the country between agriculture and various forms of manufacture, because he believed it would contribute to the solidity of the industrial system and to the financial independence of the United States. His conception of the best method for promoting American industries differed materially, however, from more recent developments of the protective system. He recommended bounties and premiums in many cases in preference to protectionist customs duties, in order to avoid the rise in the price of articles to the consumer which often results from such duties. The customs duties which he proposed, moreover, ranged only from seven and a half to fifteen per cent., and the latter rate was to be levied on only a few articles.

The country was not yet ripe for extensive industrial enterprises. The manufactures then existing were chiefly for supplying local needs, the factory system had not been introduced, and the capital had not been accumulated for the creation of large establishments. The country needed many foreign manufactured articles to put it upon the highroad to industrial development, and it was at a much later period that the manufacturing interests acquired the power which enabled them to increase the scale of duties. When this time came, they turned to the arsenal of Hamilton's report for weapons in support of the policy of diversifying industries; but they used these weapons in behalf of a scale of duties which was not recommended by him and they ignored his arguments for premiums and bounties for the protection of the consumer against excessive prices.

Whether Hamilton would have favored the policy of protection in its later developments, it is useless to inquire. It is idle to claim for any thinker of the past that he anticipated all future discoveries and reasoning in the fields of politics or economics. It is not necessary, in order to give a statesman a high place in history, to worship blindly all that he did or said or to make such deeds and words an authority for later generations. What can be said of Hamilton without reasonable ground of denial is that he did not recommend in any of his writings the high scale of duties advocated by some protectionists in recent years. On the contrary, he urged a scale of duties which would be treated by the protectionist of to-day as below even the level of a "tariff for revenue only." That his ideas were far from extreme is indicated by the project which he drew up in 1794 for a reciprocity treaty with Great Britain, which proposed to limit American import duties on the leading textiles and manufactured articles of metal to ten per cent. of their value. He even criticised Jefferson's message of 1801 for recommending the repeal of the internal revenue taxes, upon the ground that the duties on imports were high and that if any taxes were to be repealed, they should be those which weighed on commerce and navigation.

A measure which led to more immediate results than the report on manufactures was the report on the excise. Hamilton found it necessary, in order to obtain sufficient funds to meet the interest on the debt and other charges, to recommend an excise tax upon distilled liquors produced in the United States. The bill passed Congress in January, 1791, and was soon put in force. Violent resistance was made in western Pennsylvania, where the manufacture of whiskey was more extensively carried on than in any other part of the Union. The federal collector for Washington and Allegheny was tarred and feathered, and deputy marshals did not dare serve writs against those guilty of the outrage. Washington's journey through the South had a good effect in softening the opposition to the law, which first showed itself in Virginia and North Carolina; but in Pennsylvania conditions went from bad to worse, until it became necessary to give the federal government additional powers for collecting the tax and putting down insurrection. Masked mobs terrorized those who were inclined to obey the law, and forced them to publish the injury done to their stills. In order to protect themselves by embroiling the whole community, some of the insurgent leaders had the mail stopped, the militia called out on their side, and threatened to lay Pittsburg in ashes (July, 1794).

The opportunity had come for testing the question whether the Union was strong enough to put down rebellion by force. It was an opportunity which Hamilton did not shirk. At his earnest solicitation, an army was dispatched to the disturbed districts. Washington showed no hesitation in supporting the authority of the federal government. He obtained a certificate from a judge of the Supreme Court, setting forth that the laws of the United States were set at naught and that the courts were unable to enforce them. He then issued a proclamation commanding the insurgents to submit to the laws, and made a requisition for 12,950 militia from Pennsylvania, Maryland, Virginia, and New Jersey, to move on September 1, 1794, towards the disaffected districts.

The firmness of Washington put an end to the insurrection. Governor Mifflin of Pennsylvania, who had hesitated to put down the disturbances by the strong hand of the state, recovered his courage, and aided the federal government by proclamations and by his full quota of troops. Hamilton accompanied the army as it moved towards the West, and remained with it after Washington turned back to attend the opening of Congress. The strong display of force made by the government overawed the insurgents and finally compelled their submission. Albert Gallatin, although a citizen of the disaffected section and an opponent of the party in power, exerted his influence on behalf of order. Negotiations were set on foot between commissioners of the President, and a committee of citizens, of which Gallatin was a member. When this committee met to decide whether they would recommend compliance with the law, they were surrounded by riflemen who were ready to shoot if their leaders showed signs of yielding. But they adopted the clever device of a ballot upon which both yea and nay were written, with the option of destroying either word. A small majority voted to submit. Some of the obstinate spirits held out, but as the people fell away from them, they were arrested and put on trial, and the authority of the federal government was no longer disputed.

This suppression of the "Whiskey Rebellion," as it was called, was one of the most important steps in the consolidation of the Union. Many who had observed the aggressive and comprehensive projects of Hamilton, and seen them daily binding closer the bonds of union, did not believe that they would stand the test of armed conflict. They feared that the power of the government would wither and the people split into warring factions when men were called upon to march in arms against their fellow-citizens. The event proved that the new government had vindicated its right to exist, and that the sentiment of union was daily gaining a stronger hold upon the hearts of the people. That this new power had not only built up a cohesive financial system, but had shown its capacity to put down resistance to its lawful authority with a strong hand, was largely the work of Hamilton. It may be said that it was wholly his work, so far as any great national policy can be projected and carried out by a single man, independently of the support of his associates in the government and of the body of public opinion which make possible the execution of his plans.

The time had come when Hamilton felt that his constructive work was done. He withdrew from the cabinet (January 31, 1795), and Oliver Wolcott of Connecticut was appointed his successor. Hamilton chose the moment for retiring from office with a tact and judgment unusual with public men. He was moved partly by the desire to provide for his family upon a more liberal scale than his modest salary under the government permitted. He was too patriotic, however, to have abandoned his post until he felt that his constructive work was complete. It was with conscious satisfaction that in his report on the public credit at the beginning of 1795 he was able to marshal the measures already taken towards restoring order to the national finances and point out their results. The credit of the country had been raised from the lowest abyss of dishonor to that of the most enlightened nations of the old world; an adequate system of taxation had been provided for meeting the public obligations; the business interests had been knit together in support of the government by a national bank; a monetary system had been established; the Treasury had been organized in its various branches upon a basis which has survived to our day; and finally the strength of the fabric of the Union and of the financial system had been subjected to the test of a rebellion which, without serious bloodshed, but with a strong display of force, had been fully and firmly subdued.