It is a pleasure to read, think about, and respond to the three insightful and knowledgeable critiques of Alexander Hamilton’s Report on Manufactures that have appeared in this Liberty Law Forum. These are also fair-minded critiques, since they all give Hamilton due credit for his many virtues, even as they take him to task for his errors or omissions.
Hans Eicholz finds fault with Hamilton for not being able to leave the free market alone. Eicholz warns of the dangers of government intervention in the economy, and reminds us that the market is a much better mediator of the complex information that is necessary to making sound economic decisions. He therefore concludes that we should not look to Hamilton’s Report on Manufactures for guidance today.
Eicholz’s concerns are reasonable; I think Hamilton would have admitted as much. As noted in my essay, Hamilton was not a statist, even though he did see some role for state intervention in the economy in certain circumstances. He gave a forceful statement of the laissez faire theory, and conceded that it carried considerable weight. But he did not think that a prudent statesman could allow himself to be guided by it absolutely.
It is also worth noting that, despite his deviation from free market economics when it came to trade policy, Hamilton was a strong defender of the foundation stones of a free economy in other areas. Like the other Americans of his generation, he regarded British taxation of the colonies as a violation of the right to property—a right he held to be natural and fundamental to a just society.
In his Report on Public Credit, moreover, he made a point of instructing his fellow citizens on the vital importance of the government’s strictly observing, and not attempting to tamper with, the obligations of contracts. Respect for contracts was demanded, he taught, by both justice and sound public policy.
Michael Federici focuses on Hamilton’s errors of omission. The Treasury Secretary’s vision was not necessarily wrong but incomplete: He emphasized the needs of the nation, but tended to forget the importance of flourishing local communities. He sought prosperity for his adopted country, but he should also have paid attention to the “higher ends of civilization.”
These are sound observations. It seems to me Hamilton tended to neglect these things not because he thought them unimportant, but in part because he took them for granted, and in part because he thought his duties as a statesman lay elsewhere. In Hamilton’s day, America had flourishing local communities, and these, in turn, sustained a web of mores, laws, and institutions that cultivated human beings with a view to the higher ends of civilization. But while the local communities were strong, the nation and the nation’s government were weak. Strengthening them was the work of a political lifetime, so Hamilton dedicated his political service almost entirely to that work.
By the same token it was possible, in Hamilton’s view, for local communities to be too strong, in a sense. He thought people’s spontaneous attachments were focused so much more on the state governments than on the government of the Union that differences among the former might bring tensions that could threaten the stability of the latter. It was therefore prudent, he believed, to pull in the other direction and try to build up the authority and the prestige of the federal government. His concerns in this regard were not unjustified, as the Civil War would later prove.
According to Jeremy Bailey, Hamilton’s ambitions in writing the Report on Manufactures are more far-reaching, and more troubling, than they might at first appear. Hamilton, Bailey says, is arguing not “for manufacturing in addition to agriculture,” but for the superiority of manufacturing over agriculture. Moreover, in making this argument, Hamilton is putting forward a particular understanding of human nature—one that teaches that human beings really “care more about their economic advancement than their natural rights.”
This is a very tempting interpretation of Hamilton. He is, after all, very clearly the most “capitalistic” of the leading Founders. This interpretation is nevertheless incorrect, I believe, and the concerns arising from it accordingly unfounded.
Bailey grounds this interpretation on his reading of the Report’s account of manufacturing and immigration. According to Bailey, Hamilton contends that “the way to persuade immigrants” to come to America “is to offer economic incentives.” Immigrants would be drawn by the prospect of a better price for their products, cheaper materials, and freedom from the taxes and regulations characteristic of Europe. They would not come to be farmers.
In fact, this passage in no way undercuts Hamilton’s open profession, made earlier in the Report, that he does not mean to contend for the absolute superiority of manufacturing to agriculture. In his discussion of immigration, Hamilton is not arguing that people in general will be more drawn to manufacturing and its economic promise. He is instead arguing that Europeans engaged in manufacturing would be more likely to come to America if they knew the country had an established manufacturing economy in which they could ply their trade, and ply it with more prospects of success than in Europe.
His argument depends not on any belief in the general superior attractiveness of manufacturing, but on the sober and realistic observation that people don’t like to change the line of work to which they are accustomed. Thus he begins the relevant section by noting that “men reluctantly quit one course of occupation and livelihood for another, unless invited to it by very apparent and proximate advantages,” and that many who would immigrate if they had the prospect of working more profitably in their accustomed profession would fail to be attracted by, or be less attracted by, “the hope of doing better in some other way.”
Nor, by the way, does Hamilton’s desire to draw immigrant manufacturers to America suggest that he was contending for the superiority of manufacturing. He was appealing to the view—widely held, as Bailey notes—that America needed to encourage immigration across the board. In that case, Hamilton argued, it made sense to ensure that European manufacturers would know that America’s economy held a place for them, too. “If it be true then, that it is the interest of the United States to open every possible avenue to emigration from abroad, it affords a weighty argument for the encouragement of manufactures; which, for the reasons just assigned, will have the strongest tendency to multiply the inducements to it.”
The Report shows Hamilton’s willingness to admit the attractions and merits of agriculture. He says that it “has intrinsically a strong claim to pre-eminence over every other kind of industry” for a variety of reasons, including its involvement with “a state most favorable to the freedom and independence of the human mind”—words that Jefferson himself surely could have appreciated. Indeed, even in his discussion of the immigration of manufacturers, he voiced his expectation that it would also benefit agriculture, because “many” such manufacturers “would afterwards yield to the temptations” that America “holds out to agricultural pursuits.”
Also, contrary to Bailey’s fears, Hamilton’s treatment of immigration does not commit him to the view that human beings care more about their economic advancement than their natural rights or their political or religious freedom. He in fact stresses greater political and religious liberty—along with more favorable economic conditions—as holding appeal for European manufacturing workers. He mentions the factors Bailey mentions (better prices, cheaper materials), and then he extends the list of “powerful invitations” to include “greater personal independence and consequence, under the operation of a more equal government” as well as “a perfect equality of religious privileges,” which is “far more precious than mere religious toleration.”
Bailey acknowledges this passage in passing, but then proceeds to argue as if it carried no weight. He notes correctly that Hamilton’s view implies that “political and religious liberty alone” are “insufficient” to induce immigration: “freedom and farming are not attractive enough to people who live under less free governments.” But he then reformulates this as a claim that “economic advantage and employment, not a government based on securing political rights, is what makes America attractive.”
The latter claim does not follow from the former, and Hamilton did not make the latter claim but had instead emphasized that America is attractive to immigrants both for its economic opportunities and its political and religious freedom. Accordingly, Hamilton’s thought as expressed in the Report on Manufactures does not carry the unwelcome and troubling implication that the “longing for economic improvement” is “deeper than and prior to a concern for political and religious liberty.”
Operating a specific enterprise, whatever its aim or product, requires focusing on measurable quantities of inputs and their measurable effects on outputs. Qualitative factors may enter into that equation, but only as they are necessary to the successful attainment of the specific object in question. That is the mindset of the manager of an “enterprise…
Carson Holloway’s Liberty Forum essay provides an opportunity to discuss an important historical document with current debates about the American economy in mind. The chief issues that Alexander Hamilton raises in his 1791 Report on Manufactures are the role of manufacturing in the economy and government’s role in encouraging it. It should be remembered that the…
The great insight of Alexander Hamilton is that all serious nations take serious measures on behalf of their own security and prosperity. This is what good governments do. There is a clarity here that is absent from our current partisan debates, if only because Hamilton unapologetically offers good government as a foundation for republican government.…