Hamilton's Role as the Secretary of Treasury - Research Paper Example

Examining Alexander Hamiltons role in establishing US Treasury and laying foundations for American Economic System: Alexander Hamilton, alongside such luminaries as Benjamin Franklin, George Washington, Thomas Jefferson, John Adams and James Madison is rightly considered as a founding father of the United States of America. In the second half of the eighteenth century, when British colonies in America entered a period of fervent political change, intellectuals such as Hamilton played pivotal roles in guiding and influencing this process. This essay will argue that Alexander Hamilton had indeed played a pivotal role in the establishment of U.S. Treasury and his ideas continue to influence economic policy even today. Although lesser studied when compared to other Founding Fathers, Hamiltons contribution in shaping the new American republic is substantial. For example, “The most practical nation builder of the Founding Fathers, Hamilton (1755-1804) fought tirelessly for ratification of the Constitution, played a pivotal role in creating a centralized and powerful nation-state, and argued persuasively for a strong presidency and an independent judiciary. It was Hamilton, at the beginning of the nations history, who provided a prophetic vision of the United States as a global power stabilized by capitalism and with a military second to none.” (White 2000, 186) While Hamilton contributed to all aspects of government formulation, he is best remembered for his role in designing the young nations economic system. During and after his lifetime Hamilton was overshadowed by his more popular adversary Thomas Jefferson. While Jeffersons dominant image persists today, “the irony is that Hamiltons concept of the federal government, not Jeffersons, is what has evolved and endures” (White 2000, 186). This is particularly valid with respect to the countrys economic system and the organization of its constituent agencies such as the U.S. Treasury. Hamilton could rightly be considered a visionary, who saw the importance of economic growth and technological innovation. His state papers on the subject of economy is considered by modern scholars to be a monumental effort “toward establishing a rational basis for planning and legislation; his Report on Manufacturers and his advocacy of federal public works are remarkably modern descriptions of the relationship between government and technology” (White 2000, 186). As the first Secretary of the Treasury and the unofficial aide to George Washington, Hamilton was instrumental in designing the American bureaucracy, which prevails even to this day. In this unofficial capacity as the confidante and aide of the first President, Hamilton also wrote many of the Presidential addresses, most notable of which is the Farewell Address delivered by Washington at the end of his second term. Hamiltons contribution to the development of the economic system is more profound though. Inspired by such economic thinkers as Postlethwayt, Richard Price, Adam Smith and Wyndham Beawes, Hamilton strongly supported a market-based economy in which private enterprise would be encouraged. (White 2000, 186) Renowned historian and biographer John Gordon, offers us some key insights into Hamiltons role as the Secretary of Treasury. According to Gordon, Hamilton conceived and implemented the corporate income tax and the conception of national debt, which incidentally has grown from $80 million in 1792 to more than $5 trillions today. It was due to the institutionalizing of national debt that the nation was saved from bankruptcy in its early days. Further, Hamiton transformed the nation from a “deadbeat borrower, unable to repay public bonds and engulfed in near-worthless paper scrip into a solid international creditor. Through a series of reforms, including a simple, workable tax system, an independent central bank, and a dollar tied to gold, Hamilton converted the national debt from a liability into an asset and provided liquidity to a cash-starved economy. Again, Hamilton was well in advance of his time. On several occasions, he argued that government-supported industry strengthens rather than weakens agriculture, creates opportunities for enterprise and investment, makes jobs for workers, and attracts immigrants”. (Rust, 1999, 46) The growth trajectory of the American economy in the last two centuries will reinforce the lasting legacy of Hamiltons ideas. Firstly, the financial panic of 1792 was largely withstood due to the safety mechanisms already put in place by him as Secretary of the Treasury. The policies of economic nationalism proposed by Hamilton had been pivotal in the United States catching up leading economies of the nineteenth century like Britain. By the time Hamiltons term as Secretary of Treasury was completed in 1795, the United States economy was comprised of six crucial institutional elements that continue to shape contemporary economic outcomes as well. These are “stable public finances and debt management; stable money; an effective central bank; a functioning banking system; active securities markets; and a growing number of business corporations, financial and non-financial”. (Rust, 1999, 46) Such economic foundations laid by Hamilton also contributed to lifting agrarian and backward regions such as the American South and West toward industrialization. The effects are easy to see, as by the end of the nineteenth century, the South was home to several manufacturing industries. One could trace the eventual economic and industrial development of the United States to the reports Hamilton presented to the Congress in his capacity as the Secretary of Treasury. His key insights in matters of public credit, manufacturing and national banking would transform the countrys economy from agrarian to industrial. (Rust, 1999, 46) And finally, the real importance of Hamiltonian ideas and initiatives can only be realized by comparing his efforts to that of modern day economists. In recent decades, many analysts have credited Alan Greenspan for keeping afloat the economic system during the Wall Street crash of 1897, the Russian Long-Term Capital Management (LTCM) crisis of 1998, the busting of the stock-market bubble in 1999, etc. But Greenspans accomplishments pale in comparison with that of Hamilton, who handled the crisis in 1792 without having the advantages of crisis-management theories and historical statistical data to base his analysis on. Indeed, the resolution of financial crises in early U.S history clearly demonstrates that it was Hamilton, as opposed to Keynes, Bagehot or Greenspan, who should be credited with developing many key modern central-banking crisis-management techniques (Sylla et. al. 2009, 63). Hence, his influence on the American economic system continues to this day and his legacy as one of the founding fathers of this vibrant republic is well-deserved. Works Cited Miller, John C. 1959. Alexander Hamilton: Portrait in Paradox. New York: Harper & Brothers. Rust, Michael. 1999. Hamiltons Ups and Downs: Scholars Revive Interest in a Misunderstood Founding Father, Alexander Hamilton, Whose Pragmatic Ideas Could Help the United States through Its Current Confusion. Insight on the News, May 17, 45+. Sylla, Richard, Robert E. Wright, and David J. Cowen. 2009. Alexander Hamilton, Central Banker: Crisis Management during the U.s. Financial Panic of 1792. Business History Review 83, no. 1: 61+. White, Richard D. 2000. Political Economy and Statesmanship: Smith, Hamilton, and the Foundation of the Commercial Republic. Public Administration Review 60, no. 2: 186. Read More