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Alexander Hamilton, 1757-1804.
American lawyer, military officer, federalist statesman, first US
Secretary of the Treasury and grandfather of the "the
American System".
Alexander Hamilton was born in in 1757 (some say 1755) in Charlestown , on
the island of Nevis in the British West Indies. Hamilton's father was a
Scottish merchant from St. Kitts, his mother descended from Huguenot
planters in St. Croix. The parents separated, and Alexander and his
brother were initially raised by their mother on St. Croix. After her
death in 1769, the Hamilton brothers were effectively orphans. Alexander
apprenticed as a clerk in a general store at the age of 12. In 1772,
with financial assistance from his aunts, Alexander immigrated to New
York in 1772, and enrolled at King's College (future
Columbia) in 1773.
With the outbreak of the American revolutionary war in 1775, Hamilton
interrupted his studies and raised a volunteer militia company in New
York, rising to the position of captain of the artillery. Participating
in the New York military campaigns, Hamilton's abilities were noticed by
his superiors. On March 1, 1777, general George Washington appointed the
twenty-year-old Alexander Hamilton as an aide-de-camp in his general
staff. Washington and
Hamilton maintained a close relationship for the next few years,
although they had a falling out in February 1781. Hamilton continued in
military service until the end of 1783, when he retired with the rank of
colonel.
Hamilton took up a new career as a lawyer in New York, being admitted to
the bar in 1782. In June 1782, he was appointed receiver of taxes
and later that year entered as delegate to Congress November 1782, but
resumed his law practice in 1783.
Hamilton had first articulated his ideas for a national bank in a 1779-80 letter to Robert Morris, the superintendent of finances of the US confederation (lett). In 1781, Hamilton wrote up the draft proposal that led superintendent Robert Morris to found the Bank of North America in Philadelphia in 1781 (lett). Hamilton founded his own commercial bank, the Bank of New York in June 1784, with a capitalization of $500,000 (Hamilton's Bank of New York would continue operating as an independent bank for over two centuries, until its merger with Mellon in 2007).
A long-standing "nationalist", Alexander Hamilton deplored the
fragmentary structure of the United States under the 1777 Articles of
Confederation (e.g. 1780
letter to Duane). Through the early 1780s, Hamilton conducted
extensive correspondence with other nationalists, like George
Washington, John Jay and James Madison, deploring the parochial jealousy
of individual states and the ineffectiveness of the Continental
Congress.
Hamilton was part of the New York delegation to the Annapolis Convention
in Maryland in September 1786, originally designed to coordinate
interstate commerce. Hamilton drafted the Annapolis proposal
recommending a constitutional convention, to amend the articles of
confederation. Naturally, Hamilton was a New York delegate to the
convention that met in Philadelphia on May 14, 1787. In the course of
the convention, Hamilton made a controversial six-hour speech
outlining his plan for a constitution. Hamilton outlined an extremely
centralized quasi-monarchical government, with a president and senate
elected for life, and where individual states were little more than that
administrative geographic units of a unitary state, with
centrally-appointed governors [June 18
plan,
speech]. Historians still debate whether Hamilton's extreme
scheme was a deliberate strategic ploy to make James Madison's "Virginia
plan" appear moderate by comparison, and make it more acceptable to the
delegates. Hamilton and
Madison led the "committee of style" that wrote
up the language of the final draft of the US Constitution, which was
finally signed in Philadelphia on September 17, 1787.
In response to a series of anti-constitution screeds, Alexander Hamilton
began writing a series of articles defending the proposed constitution
under the pseudonym "Publius", which began appearing in the New York
press in October 1787, and continued through the first half of 1788 .
Hamilton got John Jay and subsequently James Madison to contribute
articles to the series. The first bound volume of articles, titled
The Federalist, was published in March 1788, and a second volume in
May. The last articles in the series were concluded by Hamilton in
August 1788. Hamilton shepherded the ratification of the
constitution through the New York convention in 1788.
The Constitution adopted, the first United States Congress assembled in
New York in April 1789. The former revolutionary war general George
Washington was unanimously elected by the electoral college as the first
president of the United States, and Massachusetts lawyer John Adams as
vice-president. The very second act was the passage of the
"Madison tariff" in June 1789, a temporary and primarily
revenue-oriented ad valorem duty of
5%, with higher rates for some luxury goods. A Department of the Treasury was subsequently
established on September 2, and Alexander Hamilton appointed first Secretary of the
Treasury on September 11, 1789. This was followed up later that month by
the establishment of the Supreme Court, and the appointment of
Hamilton's federalist confrere John Jay as chief justice.
The Washington cabinet was dominated by the rivalry between Hamilton and
Virginian lawyer Thomas Jefferson, who had been appointed Secretary of
State (foreign minister). Fellow Virginian James Madison, despite his
earlier collaboration with Hamilton, gravitated to Jefferson, and become
the leading Jeffersonian ally on the floor of the House of Representatives.
In January 1790, Hamilton submitted his first Report on Public Credit
to Congress, recommending means to address the war debt. Hamilton
estimated the total public debt to stand around $77m - of which $11m was owed to
foreign creditors, $40m to domestic public, and some $25m in state debts.
Long unserviced, US debt certificates circulated far below par.
Nonetheless, arguing the importance of restoring credit of the new US
government, Hamilton asked Congress to redeem them at face value, with
interest arrears, and pledge the bulk of future customs and tonnage
duties to paying it down. He also asked that state debts be assumed by
the federal government. Hamilton's report was opposed on most
grounds by House leader James Madison, soon joined by Sec of State
Thomas Jefferson. Madison noted that
much of the debt certificates had been accumulated by a small number of
commercial houses and bankers (mostly from New York and Philadelphia) at
a hefty discount from the original holders (many of them poor veterans
from rural states), so redeeming them at face value would be merely
rewarding big fortunes for speculation. Madison proposed instead
to pay the current holders only the purchase price for their
certificates, and pay the remainder to the original veteran holders.
Madison also opposed federal assumption of state debt as some states
(notably, Madison's own Virginia) had already paid off most of theirs.
Nonetheless, Hamilton pressed for full redemption declaring the
concentration of debt-holders a minor issue, that the big fortunes would
likely be invested in commercial and manufacturing enterprises
beneficial to US growth. Finally, Hamilton noted that the crux of the matter was not
who got paid, but the restoration of US credit, and
that stabilized debt certificates would serve the role of as paper
money, and energize the US economy.
Hamilton's public debt plan was defeated by the Madison-led house in April, 1790. But a compromise was famously reached over a private dinner on June 20, between Hamilton, Jefferson and Madison, where the Virginians dropped their opposition to Hamilton's debt scheme, while Hamilton agreed to a special exemption for Virginia, and to support a proposed move of the federal capital from New York to a "District of Columbia" on the Potomac River. The relocation act was passed into law in 1790, and Hamilton's scheme for redemption and assumption was passed in August 1790. That same month, Congress authorized the formation of a "sinking fund" to manage the repayment of the public debt. The sinking fund's board of trustees consisted of Hamilton, John Adams, Thomas Jefferson and John Jay (soon replaced by Edmund Randolph).
Still that same month (Aug 1790), on Hamilton's recommendations in a series of reports, Congress passed a new tariff act (the "Hamilton Tariff"), setting the revenue tariff on a permanent basis, with a mix of specific and ad valorem duties, slightly higher than the 1789 Madison tariff, but still principally gained towards revenue, and only very mildly protective of manufactures. The Hamilton tariff would remain the baseline of US tariff law until 1816.
In December 1790, Hamilton delivered his famous First and Second Report on Public Finance The first report recommended the establishment of a internal tax on distilled spirits ("Whiskey Tax"), justified partly as a measure to pay down the massive war debt, partly as 'social discipline'. In the Second Report, Hamilton recommended the establishment of a National Bank, to serve as a depositary institution for the Treasury, a provider of short-term government finance and supply a unified national currency. Hamilton proposed funding the bank with $10 million in stock, to be 20% owned by the federal government (via a loan advanced by the bank itself), the remaining 80% sold to private shareholders. The bank, however, would have no supervisory powers. Outside of its depository role for the government, the bank would otherwise be a normal private commercial bank, making loans to the general public, etc. (at the time there were only three commercial banks in the US - the Bank of North America in Philadelphia (est. 1781), Bank of Massachusetts (est. 1784) and Hamilton's own Bank of New York (est. 1784). Among other conditions proposed Hamilton, the national bank would be the only federally-chartered bank for the next twenty years, until 1811 (although it did not preclude states from chartering other banks in the interim), that foreigners could only own non-voting shares, and, to avoid exploitation, the bank would be prevented from buying government bonds nor issue notes beyond its capital value. The two reports were following quickly by a third report on January 1791, calling for the establishment of a national mint.
Despite fierce opposition from Jefferson and Madison, Hamilton's proposals passed Congress virtually intact in a short period. The act chartering the First Bank of the United States in Philadelphia was passed February 25, 1791. The Whiskey Tax took more wrangling, but was also passed on March 3, 1791.. The mint was authorized by Congressional resolution on the same day, but the actual legislation establishing the US Mint had to wait a year, and was passed only during the next session of Congress (April 2, 1792)
In December 1791, Hamilton produced the Report on Manufactures,
another of his series of famous reports. Here, Hamilton recommended more
openly setting the United States on Mercantilist footing not only
through high protective tariffs (higher than the Hamilton tariff of
1790) but also direct subsidies ('bounties') to select industries, paid
for with
revenues raised from the tariffs. This was the first articulation of
what some would later call the "the
American System" (as opposed to the liberal "British
System" of free trade). However celebrated, the Hamilton
report had next-to-no impact on legislation. Jefferson disdained Hamilton's protectionist tendencies,
recommending instead to pursue reciprocal trade agreements signed with
foreign countries (except Britain). Hamilton tried to
push for restructuring the tariff in this vision, but only a slight
general rise was agreed to in May 1792, its structure otherwise
unchanged. Protective tariffs would not be introduced until 1816.
Attempts to collect Hamilton's 1791 whiskey tax led to a rebellion in
the Appalachians in 1794, starting out in western Pennsylvania, and
stretching all the way down to Georgia. The rebellion was crushed by
November, but the Whiskey Tax went largely unenforced thereafter, and
was finally abolished in 1803.
Later that same year (November 1794), John Jay was sent to London to
negotiate a treaty between the United States and the United Kingdom.
Following Hamilton's instructions, the Jay Treaty settled outstanding
matters from the revolutionary war, including the removal of British
garrisons from the northwest territories and the referral of other
disputes- notably the restitution of loyalist property and the
US-Canadian border - to arbitration. Critical economic clauses of the
treaty include opening American access to British colonial trade, in
return for a voluntary US export restraint on cotton. The reaction
to the Jay Treaty inside the United States was vociferous. The
attack on the treaty was led by the rabidly anti-British Thomas
Jefferson. Despite sometimes violent expressions of popular disapproval,
the Jay Treaty was nonetheless ratified by Congress in July 1795. It is
around this time that the party terms "Federalist" (for Hamilton's supporters)
and "Democratic Republicans" (for Jefferson's party) began to be used
with frequency.
On January 31, 1795, Hamilton resigned as Secretary of the Treasury,
returning to his law practice. This was mostly for pecuniary reasons
(salary as a civil servant was inadequate), but also partly from
exhaustion from the House inquiries into the State of the Treasury. Before leaving, Hamilton submitted
another Report on Public Credit, asking Congress to make earlier
taxes permanent, secure their enforcement and calling for new taxes to
pay down the public debt. After his resignation,
Hamilton continued involved in politics, trying to play the role of
eminence grise, advising his successor in the Treasury Oliver
Walcott, Jr, as well as the new Secretary of State Timothy Pickering and
Sec of War James McHenry.. Hamilton continued to enjoy a very close
personal relationship with Washington, and had grown used to being a
dominant advisor, and even drafted Washington's farewell address in
1796.
The ascension of John Adams as president in 1797 dimished Hamilton's
political influence. Although both were federalists, Adams had a
considerable personal dislike of Hamilton, which only increased with
Hamilton's continued political intrigues. Hamilton had marred
Adams's election with a hare-brained scheme to elbow Adams off the top
of the ticket. Hamilton's scheme misfired, and Adams ended up
having to cohabit with rival Thomas Jefferson as vice-president.
But Hamilton was unrepentant. Adams inherited Washington's cabinet
wholesale, and Hamiltonian allies Walcott, Pickering, McHenry, etc. were
a focal point of opposition to Adams.
The Jay treaty and Washington's neutrality proclamation (both advised by
Hamilton) naturally infuriated the French Republic, which had been under
the impression until then that the 1778 American-French alliance was still in
effect. The French subsequently began to treat the US as an undeclared
British ally. After a series of seizures of American ships and notice of
French privateers prowling the east American coast in 1797, Hamilton led
a call for war against France. Hamilton returned to
military life, assuming the office of major-general in the US army
during the undeclared "quasi-war" of 1798-1800. But tensions were eventually
defused by Adams's diplomatic efforts..
Hamilton's intrigues against president Adams intensified - he
published a public Letter in 1800 accusing Adams of misconduct,
splitting the federalists. When the election of 1800 came down to a vote
in the House, Hamilton held his nose and gave his voting bloc to
Jefferson, placing personal spite ahead of party ideology. As a result,
Jefferson became president in 1801. Blamed for the denouement,
Hamilton's reputation suffered greatly and his influence evaporated
Hamilton's most fateful rivalry was with fellow New Yorker, Aaron Burr,
Jefferson's vice-president.
Formerly friends, Hamilton and Burr had fallen out over a variety of issues - Burr's setup of a rival Bank of Manhattan,
Burr's switch to George Clinton and the
Democratic Republicans in New York state politics, etc. During the
1804 race for governor of New York, Hamilton wrote a screed denouncing Burr's
character, which led Burr to challenge him to a duel with pistols. Burr and Hamilton met at the appointed hour on July
11, 1804, in Weehawken, New Jersey. Hamilton missed, but Burr did not..Fatally wounded,
Alexander Hamilton died the next day. (Burr was formally
charged with murder, but subsequently acquitted).
Hamilton is buried in the grounds of Trinity Church, in lower Manhattan.
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