COMPETING VISIONS: ALEXANDER HAMILTON AND THOMAS JEFFERSON

Two of the most brilliant men in the Washington administration were Secretary of State Thomas Jefferson and Secretary of the Treasury Alexander Hamilton. Hamilton was a huge admirer of the British economic system and wanted to turn America, which was still largely agrarian, into a manufacturing society like Britain. Hamilton wanted to institute strong mercantilist policies and proposed economic union with Great Britain, Hamilton believed that a strong national government was necessary for economic growth and believed in a broad interpretation of the Constitution. By this interpretation, the federal government had many powers not specifically mentioned in the Constitution and was only denied those powers specifically given to the states.

Jefferson (supported by James Madison) proposed a radically different view of America. He proposed an America that would remain largely agricultural, with industry serving only as “a handmaiden to agriculture.” While Hamilton supported the mercantilist policy of high tariffs on foreign goods, Jefferson proposed a system of free trade (which would keep prices low). Jefferson came to be influenced by the events of the French Revolution and was fearful of the power of the federal government (emphasizing the importance of state power instead). Jefferson also favored a strict interpretation of the Constitution; by this interpretation the federal government only had the powers it was specifically given in the Constitution.

From these differences emerged the two-party system in the United States. Hamilton and his supporters called themselves Federalists: mercantilism would impel them to propose a strong government hand in economic affairs. Jefferson and his followers were called Republicans: as stated previously, they favored laissez-faire economic principles and the continued vision of America as a largely agricultural nation. The plans of Hamilton were most popular in the commercial cities of the Northeast and the port cities of the South, while the Republican plan was most popular in the Western and Southern sections of the country.

The Plan of Alexander Hamilton

Determined to turn the United States into a manufacturing power, Hamilton began a gigantic economic reform of America. In his “Report on the Public Credit” Hamilton proposed that the United States had the obligation to redeem in full all notes that had been issued by the government established by the Articles of Confederation. In addition, he proposed that the federal government take over all of the debts of the individual states. Hamilton also proposed the chartering of a national bank, which could provide loans to developing industries, Hamilton proposed that the federal government use subsidies and tax incentives to spur industrial growth. Hamilton proposed that these measures could be paid for largely by high tariffs on foreign imports.

Jefferson and Madison opposed these plans on both practical and philosophical grounds. They maintained that the commercial elite would be the ones to benefit from these programs, largely at the expense of the farmer. Most of Hamilton’s programs were adopted, although the plan to increase industrial growth was not. Hamilton’s economic vision provided a system of public credit and a steady stream of government revenue through tariffs.