The Yankee Combination: Hard Money and Urban Industry

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(Alexander Hamilton was born on January 11, 260-or so years ago. He was the first Secretary of the Treasury and created the National Bank of the US, the precursor of the Federal Reserve System. His life is the subject of the hottest play on Broadway today. His likeness is on the $10 bill and some have proposed dumping it in favor of a female likeness. Not a bad idea, but I’d suggest dumping Jackson off the $20 instead, as he was an ardent opponent of any ‘national bank’. Were he alive today, he’d be mortified at being featured on money backed by the ‘Fed’. Just ask Rand Paul.)

Any arguments about the future destiny of the country revolved around the reality of relative equality. By 1776, the British rural reality was fast becoming one of large landowners and dispossessed or landless village people. Part of the driving force behind the Revolution in America had to do with the possibility that this notion of a landed aristocracy coupled with landless poor might be transplanted to North America, no matter how impractical that might be in reality. Even after the Revolution, some of those who had now risen to the top had some public ruminations about re-creating an upper class in imitation of the ‘Tories’ they had expropriated or thrown out of the country, but these interests were in political decline.

Thomas Jefferson approached the question in paradoxical fashion. While a slave-owner and plantation-owner himself, in the 1790s, he saw the future of the country as one of independent “yeoman” farmers, all land-owners, existing by exporting the surplus from their farms. His vision was based on his reading of the history of the Roman Republic, which reached its zenith as a country that ran its affairs on a balance between plantation owners and free small-landholding farmers. In part, Jefferson’s vision was fulfilled, in the next century by the federal government surveying and selling frontier land for farm development.

The true adversaries of Jefferson’s vision were not primarily those who looked to the creation of an American landed aristocracy. Instead, they saw a nation of cities and industry. The British industrial revolution sparked a degree of envy and desire for emulation in America. The most prominent spokesman for an urban industrial vision was Alexander Hamilton, a contemporary of Jefferson and a fellow Cabinet member in Washington’s first administration. Though his life was cut short in a duel in 1801, he exercised enough influence though the 1790s, the first decade of a united American state, to give inspiration to a generation and more of American business people.

An effective state was, to Hamilton, the first step in promoting an American industrial policy. He produced two reports on public support for manufacturing and for the creation of a National Bank. Hamilton wanted a new Bank of the United States that would act more like what we know as a central bank today. In a famous deal in the first Washington Administration, he supported Jefferson’s prized national capital on the Potomac in return for Jefferson’s reluctant help in setting up the Bank. It settled Revolutionary War debts, created a currency and put the national finances on an even keel. While Jefferson opposed Hamilton’s call for what was, in effect, a national industrialization plan. Washington himself recognized the military importance of a manufacturing base and supported Hamilton.

Hamilton later tried to realize his dream at the falls of the Passaic River at the village of Paterson, NJ. The concept was to create a new town around factories that would be powered by the head of water above the falls. This was copied from the basic approach of British industrialization at the time. The site was then a day’s journey west of New York City and close to the Philadelphia market as well. Nothing practical came of these plans. Instead, the real beginnings of American industry took place along a rough, north-south line from Lowell MA through Waltham MA to Providence RI.

(Adapted from Chapter 5 of ‘The Yankee Road’)


 

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