Hamilton modeled the Bank of the United States after the Bank of England. But in truth, the monopoly privileges of the BOE and other national banks of Europe were badges of mercantilism, and drags on financial and economic activity by comparison with free competition in banking services. A more wholesome, solid, and beneficial credit system could be observed in Scotland at the time, with free entry into nationwide branch banking. Hamilton’s “masterpiece” was oblivious to the benefits of competition in banking, much less the separation of banking and state. In his banking policy views, as in his tariff policy views, Hamilton was a retrograde mercantilist.Hamilton was absolutely a mercantilist. He recognized that the US was in competition with mercantilist England and that the nascent republic was in no position to experiment. Hamilton's plan was to emulate success.
Although Hamilton’s Report on the Bank alludes to Smith’s understanding of how banking promotes the wealth of a nation, Hamilton either didn’t understand Smith’s policy message — the more banks competing the better — or rejected it as not helpful to his own mission of empowering the federal government, for which his chosen means was to forge an alliance between the government and a new privileged financial elite.Good historical article, if this is your thing.
Alt-M
Alexander Hamilton, Banking Mercantilist
Larry White
I agree with the MMT view on mercantilism. but it is enlightening to see how it played out in the past, is now largely misunderstood by mainstream economists (no surprise there, The Other Canon group is worth a read http://www.othercanon.org/papers/tree.html) and was undeniably beneficial to some nation states in a critical period of history, namely, the period of colonialism, with massive knock-on effects on the current economic geography of the world.
ReplyDeleteFor a long-term large-scale perspective on Mercantilism, and how economists get it wrong, see Mercantilism and the Rise of the West: Towards a Geography of Mercantilism
"He recognized that the US was in competition with mercantilist England "
ReplyDeleteYes but competing for WHAT Tom? WHAT were they competing for?
Websters: 'compete: to try to get or win something (such as a prize or reward) that someone else is also trying to win'
WHAT something were they both 'trying to get'?
Look at the metalo-erotic language here:
ReplyDelete"By multiplying the means of gratification, by promoting the introduction and circulation of the precious metals, those darling objects of human avarice and enterprise, it serves to vivify and invigorate the channels of industry, and to make them flow with greater activity and copiousness..."
You cant just ignore this in ANY analysis of that era...
Matt-
ReplyDeleteWhat do they win????
They win the gold. You ever see pictures of those Gold vaults the Fed's Got with each country having its own cage of gold. And they would literally wheel the stuff around from cage to cage to settle international payments. So its like good job workers we added another couple gold bars to our cage over at the Fed this month....winning.
So you sacrifice your national wages and agenda all to the gold gods in an attempt to accumulate some bars of this shiny metal that literally nobody will ever touch except for the gold wheelers in the Fed basements. Hell all that gold is still there!
ReplyDeleteAlthough to be fair, to sacrifice your national wages and agenda all to the fiat gods in an attempt to accumulate some of these digital number entries on the Fed's computer spreadsheet sounds jjust as insane.
At least we dont hurt the environment digging for fiat digits to input into our computers.
(should have labeled that excerpt from Hamilton's Federalist 12)
ReplyDelete"you sacrifice your national wages and agenda all to the gold gods"
Yeah but if you go back to the era when we actually operated the temples of the pagan gods EVEN THEN we werent so stupid as to let those operations interfere with righteous public purpose they in fact operated IN SUPPORT of that... at least then we knew the difference between some metals in Column 13 of the periodic table and our dealings with our fellow man...
The metals subsequently completely f-ing took over and you ended up with metalophaelia nut-jobs like Hamilton in charge of setting up the systems...
Matt: Yes but competing for WHAT Tom? WHAT were they competing for?
ReplyDeleteWhat do mercantilists compete for? Hint: Hamilton was a gold bug.
BTW, Hamilton was not acting stupidly here. Everyone was well aware of the fact the Continental.
ReplyDeleteThe Continental was required because mercantilist England was draining its colonies of precious metals to finance its empire, which required significant military expenditure. Back in the day, gold backing was needed.
The result was that the colonies were stuck in permanent deflation or forced to print currency that risked becoming worthless.
This was the dilemma that Hamilton realized he had to avoid.
Pretty good comments by Tom. Everyone, including the writer of the article, seems to forgetting the other part of the story. Who was Adam Smith? Adam worked (indirectly) for the East India Trading Company i.e. the people "kicking away the ladder" as Ha Joon Chang puts it so his ideas are suspect to say they least.
ReplyDeleteThe other half of what Hamilton did was import substitution which is the basis for all economic development historically aka economic independence from the colonial powers. You can't have independence on a "Free Trade" based economy because you can't expand the skill base of labor without protection. Hamilton was actually being nice to Smith.
If you read the next generation of American economists like Matthew Carey they openly mocked Smith's writings as a sophistry and a conspiracy against the idea of republicanism and they where right as can see today that democracy has no place within the neoliberal New World Order.
Hamilton's idea to get as much gold into circulation makes if you on a gold standard because as Tom said if you don't then deflation. The use of "commodity money" is a sign of a low trust economy and nobody at the time was betting on the USA staying around and becoming a stable government much less a world power so the gold standard was the only thing to work with at the time.
We might have been able to transition to something like the post 1932 system much earlier if the traitor Jackson hadn't destroyed the Bank and "payed off the national debt" which destroyed the rail line projects planned for the South which would have ended slavery, prevented the genocide of the 5 civilized tribes and turned the USA into a world power by the 1860s instead a civil war.
Instead, the Gold-Bug Libertarian Jackson set us on course for the panic of 1837, resulting the disaster of the gold rush and war with Mexico cause we lacking a National Bank had to borrow gold from the British Rothchild and Barring Banking Empire.
Hamilton was much better on economics than the libertarian Jefferson because he was a Nationalist and we know that Nationalism is the basis of good economics see the EU as example of anti-nationalist anti-sovereignty colonial projects take even the mot advanced societies and turn them into insane basket cases.
As far as I can see the left's criticism of MMT is based on the idea that MMT is a nationalist conception of an economist system and thus "pro-capitalist" and should be opposed because it would prevent the "worker's global revolution" that Marxist's are constantly wanking off to.