5 December 1791

‘Report on Manufactures’

‘After independence, Americans melded the free trade doctrines of Adam Smith’s Wealth of Nations (1776) with their revolutionary cause.’

– Paul B. Abrahams (2001)

‘I happen to believe the Founders were libertarians. They didn’t want to regulate the market nor did they want to regulate personal lifestyles.’

-Ron Paul (2010)

‘Hamilton is the complete libertarian devoted to a system of “perfect liberty”... [He] follows Adam Smith so plainly and completely.’

-Louis M. Hacker (1964)

Critiques of Standard Historiography

‘Hamilton was the godfather of economic interventionism and big government.’

Alexander Hamilton (1755/1757~1804)

Contributed to U.S. Constitution, Federalist Papers

Secretary of Treasury from 1789-95 in early 30s

Killed in a duel against Aaron Burr

The First Party System

1790s~1820s

Hamilton forms Federalist Party Stronger federal

government, pro-industry, pro-British, support in North

Thomas Jefferson and James Madison forms Democratic-Republican Party States’ rights, pro-farmer,

pro-French, support in South and West

Mercantilist Theories

‘sell more to strangers yearly than we consume of theirs in value’

Importance of Balance of Trade: export more than import

Exporting cotton and importing textiles increase U.S. trade deficit – financial dependency

‘do as I say, not as I did’

Classical Economics after Ricardo insist on free trade to get rich

EVERY EUROPEAN POWER rejected this idea under mercantilism

Policy Recommendations

Tariffs and import bans to discourage consumption of imports, encourage consumption of domestic goods

Public Subsidies to reduce risks in investment and increase productivity, while keeping prices competitive

Public investment in infrastructure to facilitate domestic trade to create a common national market

Quality standards for exports to ‘preserve the character (image) of the national manufactures’ abroad

Hamilton’s Legacy…

Tariffs, subsidies exceed Hamilton’s recommendations after his death

Jefferson in 1816 ‘…experience has taught me that manufactures are now as necessary [as agriculture] to our independence.’

Tariffs on Imports throughout U.S. history

Source: U.S. Department of Commerce

‘For close to 200 years US industrial policy has been torn between Alexander Hamilton’s theories and ideas of an active state and Thomas Jefferson’s ideas and that “a government that governs the least, governs the best”. In reality this tension has been pragmatically solved by combining Jeffersonian rhetoric with Hamiltonian practices.’

-Erik S. Reinert (2006)