Hamilton’s Governors or Jefferson’s Governed
Updated on April 21, 2015
Alexander Hamilton (1757-1804) is the subject of “Hamilton,” a Broadway play that celebrates the service of the 19–year-old officer during the American Revolution and as the first Secretary of the Treasury in the cabinet of President George Washington.
Confusion about the political philosophies of Hamilton and Thomas Jefferson (1743-1826) is reflected in columnist David Brooks’ editorial review in The NYT (2/24/15). Brooks writes:
Hamilton assaulted Jefferson because he did not believe that a country dominated by oligarchs could be a country in which poor boys and girls like him would have space to rise and grow.
The opposite is true: Jefferson was a democrat with faith in the capacity of people to participate in their own governance. Hamilton’s speeches at the Constitutional Convention in 1787 described ordinary people as a confused mob who should not participate in their own governance.
Hamilton grew up on a small island in the Caribbean where a few thousand Whites tried to manage over 20,000 African slaves working the sugar fields.
He looked at the world through a dark filter and had a better sense of human limitations. Jefferson viewed the world through a rose-colored prism and had a better sense of human potentialities.
Paradoxically, Jefferson was part of the Virginia gentry. Typical of the Founders, Jefferson’s respect for ordinary citizens did not include African Americans. He never freed his slaves.
As Secretary of Treasury, Hamilton built a financial structure to fund a navy and army and protect the new Republic. He also cultivated the oligarchy with privileges to speculate with borrowed money, thereby initiating the domination of the American economy by financial capitalists. That cycle continues to the present: Those with the money favor those with the political power, and those with the political power favor those with the money. Jefferson, on the other hand, believed that banks were invented:
“To enrich swindlers at the expense of the honest and industrious.”
Jefferson had studied various economic philosophers during his years in France and knew that diffusion of political power depends on diffusion of economic power. His understanding proved right: Concentration of economic and political power has caused inequality of wealth and repetitive recessions from 1818 through to 1929 and beyond to the recent Great Recession in 2007-2008.
In Washington’s cabinet, Jefferson lost too many arguments to Hamilton, so he quit and went home. Later he became Adam’s Vice-President and the third President after Washington and Adams. He and Adams both died many years later on the Fourth of July 1826. Adams was famous for his bad temper. He lost his election as a first-term President, left in the middle of the night and did not welcome the new President Jefferson. Adams described Hamilton as “the bastard son of a Scottish peddler.”
As President, Jefferson warned his Secretary of the Treasury, Albert Gallatin, about domination by finance capitalism:
It is the greatest duty we owe to the safety of our Constitution to bring this powerful enemy to a perfect subordination.
Jefferson, however, did not know how to prevent speculation with borrowed money that caused asset inflation in stocks and real estate. The Panic of 1818 was the result, and thousands lost their jobs and hundreds were jailed for $20 debts.
Subordination of finance capitalism requires modification of the economic and political structure. Concentration of wealth in the hands of the 1% must give way to more money in the hands of workers who then recycle their money to buy goods and services to keep the economy growing. Economists call it the “multiplier effect.” This was Keynes’s persistent argument on how to reverse a recession and prevent inequalities of wealth. This goal of a balanced economy can be achieved in several ways:
• By raising wages, as Ford did in 1915 in order for his workers to buy the cars they were building.
• Through profit sharing and corporate ownership opportunities.
• By tax laws that move the trillions of dollars now sitting in corporate surplus into growth investments and dividends, instead of wasting it on stock buy backs to boost the managers’ stock options.
• By tax laws that bring home trillions of dollars of corporate surplus sitting idle in foreign accounts.
• By putting tens of thousands of people to work on the several trillion dollars worth of overdue infrastructure repair.
• By limiting speculation with borrowed money.
All Presidents shared an inability to prevent asset inflation, or don’t even try. Workers continue to lose jobs and families continue to suffer. Asset inflation can be limited by adding a risk premium for speculation to the cost of money, and by increasing the capital gains tax penalty for short-term gains.