Saturday, July 26, 2008

Alexander Hamilton's Anglo-American Vision

Alexander Hamilton and his Vision of an Anglo-American World

For most of the 20th century, the world looked the way Alexander Hamilton would have wanted it to look. The United States, supported effectively and solidly by Great Britain, led the free world. Indeed, the Anglo-American friendship of the United States and the British Empire (later Commonwealth) dominated much of western culture, policy, and trade from the mid-1800s through the end of the 20th century.

The collapse of the Soviet Empire in the late 1980s and early 90s, which ended the Cold War, set in motion a "New World Order" - a multilateral world, in which the rules of economy, warfare, and culture began to rapidly change. And in the midst of this "New World Order," Europe has increasingly reorganized itself as a cautious friend and indirect economic competitor with the United States.

What's more, Asia (particularly India and China) has emerged as a mammoth presence on the international scene, threatening to overwhelm the Anglo-American order Mr. Hamilton would have loved. This all, of course, doesn't even begin to address the fact that nations such as Russia have reasserted themselves into the mix.

Where does all this leave us? And what would Alexander Hamilton have thought? And what would he do about it, were he on the scene today?

Hamilton's America

Let there be no mistake. Thomas Jefferson fought Hamilton's economic policies, during President Washington's administration, but Hamilton won the war.

It's true that results were a little more clouded in the short term. Hamilton got the National Bank (later defeated by Jefferson admirer Andrew Jackson) and the assumption of state debts, but Jefferson won the hearts of the South and the West. Hamilton's immediate popularity and influence receded, while Jefferson's climbed -- all the way to two terms as the President.

Indeed, Alexander Hamilton thoroughly self-destructed in a series of ethical and egotistical missteps that cost him his prestige, split the Federalist Party, and helped defeat John Adams in the election of 1800. Not only that, but Hamilton's personal rivalries (especially with one Aaron Burr) would cost him his life.

In spite of Hamilton's political demise, he was indisputably successful in the long term. Like William Jennings Bryan, the three-time (and always unsuccessful) presidential candidate of the late 1800s and early 1900s, Hamilton's mark was made more in social and legislative change than in electoral success.

For example, Hamilton got his national bank, and though it was ended by President Jackson, it lives on - at least partially - in the Federal Reserve Board, the Securities and Exchange Commission, and so on. In addition, Hamilton wanted a flexible "construction" (i.e., interpretation) of the U.S. Constitution. He got it. Even Jefferson, the super strict constructionist, became a practical loose constructionist, when Napoleon sold him Lousiana. (Of course, not even Hamilton would be pleased with the extreme 'loose constructionism' we see today).

Hamilton had a vision, and it was straightforward. He wanted to make the United States an economic power-house. Hamilton understood the economic strength translates into military power, national security, and international influence. To that end, he set himself upon the task of rebuilding (really, building) America's economy after the Revolutionary War and reestablishing (really, establishing) America's international credit.

Lewis Lehrman of the Gilder-Lehrman Institute of American History writes:

No one who has read carefully into the history of state and congressional legislative irresponsibility, and studied the catastrophic inflation of the era of the Articles of Confederation, can fail to be astonished by the economic prosperity set off by the Hamiltonian economic plan of the new republic.

But fashioning a strong American economy depended ultimately, Hamilton realized, on several key decisions. Among them was a commitment to free market capitalism and a strong trading relationship with Great Britain. Each of these policies rankled the Jeffersonians, especially the one about Britain. For the Jeffersonians, an economic friendship with Britain was tantamount to betraying the French and undermining what the American Revolution was about (namely independence from Great Britain).

But as Lehrman explains:

The first Secretary of the Treasury thought Anglo-American entente indispensable to protect our vital commercial interests, not to mention his respect for the centrality of the hegemonic British navy, which, after 1815, insulated the young nation from the threat of entanglements and dismemberment by the competing great powers of Europe.

The United States effectively pursued a policy of neutrality (which was, off and on, a default preference in trade for Britain) until the War of 1812. After the War of 1812, the U.S. and Britain each recognized that further violence was futile and counter-productive. In the decades ahead, they would forge a friendship that Hamilton would've welcomed.

The Anglo-American Modern World

During the 1800s, the Anglo-American alliance was loose, but effective where it needed to be. Britain and the U.S. both agreed that a Latin America, free of French and Spanish influence, was in their best interests. Thus, the Monroe Doctrine, articulated by the Americans, was enforced by the British navy.

In the 20th century, the Anglo-American friendship was much more formalized, with other nations, such as France, eventually joining in. By the mid-20th century, the United States and Britain led the western world (with the US assuming the primary leading influence).

Author Walter Russell Means explores the role of America and Britain in the 20th century with his book God and Gold: Britain and America and the Making of the Modern World.

You can read a Claremont Institute review of God and God by clicking here.

What about China, India, and the "Decline" of Anglo-American Dominance?

Asia is rapidly emerging, especially the nations of China and India. Would Alexander Hamilton be alarmed? Should we be?

Not according to commentator John Stossel. In a opinion piece, Stossel writes:

It is certainly true that China's economy is expanding dramatically -- 10 percent last year. The Chinese build factories like crazy to pump out the inexpensive exports we Americans love to buy. To do that, Chinese producers have to purchase oil, steel and lots of other commodities. The new demand drives prices up.

And as the Chinese and other people get richer, they improve their diets and eat more meat, putting pressure on world food prices.

So media handwringers suggest we should worry about the poor becoming rich.

Actually, we shouldn't. It would be a sad world if one person's economic success depended on another's failure?

Hamilton would probably agree with Stossel's economic idealism, but if we were to take a cold, Machiavellian look at the picture, we would be tempted to say: "Yeah, but this is Business." In other words, the United States (looking at it like Machiavelli would) is a "Business" - and it's a business losing ground to China and India. Right?

In fact, it's also losing ground to Britain. A report commissioned by New York City mayor Michael Bloomberg shows that New York could be supplanted by London as the world's preferred financial center. This would not be good for the American economy, though it would certainly help the British. But this is a subject for a different article.

The truth is that a Hamiltonian America has little to fear from Indian and Chinese prosperity. Why? Because a Hamiltonian America is a capitalist America fully committed to commerce, industry, technology, and opportunity. And such an America sees a rising China and India as new opportunities -- not as threats.

It's a Jeffersonian America that sees China and India as a threat. Some of my conservative friends will be offended by this, pointing out that Jefferson favored smaller government, states' rights, and so forth. This is only partly true (though it's mythically popular). Again, too much for this article. Look for a future analysis of Jeffersonian ideals. For now, by "Jeffersonian America," I refer to those Americans frustrated with a changing social order and who are suspicious of Big Business and "greedy" investors.

First, liberal economic policies, which include minimum wage laws, onerous regulations, and high taxes are partly to blame for all this. These are among the reasons why so many jobs have been shipped overseas and why American manufacturing has lost its position of dominance. But....

All is not lost. The United States can still continue as a major force in technology, information, investment, and trade - if, that is, the politicians don't mess things up.

George Mason University economics professor Alexander Tabarrok explains: "As India, China and other countries become wealthier, companies will increase their worldwide R&D investments." Tabarrok cites "pharmaceuticals, new computer chips, software and chemicals" as examples of R&D expenditures.

"Most importantly," says Tabarrok, "as markets expand, companies and countries will put to work the greatest asset of all for the betterment of mankind: brain power."

Stossel concedes that, in the short term, "richer Chinese and Indians bid up the prices of things." But, he cautions, that's just "the beginning of the story," since "increased demand and higher prices create opportunities for entrepreneurs." That means, if we're ready, American entrepreneurs.

As Tabarrok and Stossel see it (and as Hamilton would certainly have seen it), a more prosperous Asia is good for America -- if (and it's a big 'if') the United States is allowed to take advantage of these expanding markets and opportunities.


The Hamilton image is courtesy of...

Founding Fathers information

1 comment:

Tim Polack said...

Very informative post. It's always interesting to posit 'what the founders' would think'. While always on risky ground I'm sure you'd agree, it's truly interesting to look at this possible Hamiltonian view. Maybe gives more insight into Hamilton than on the existing economic situation.