How to Save a Republic Part One: Hamilton’s Genius

By Matthew Ehret

Today’s world calls out desperately for a systemic change. This means not only a change in thinking about diplomacy, the superiority of win-win cooperation over “might makes right”, but it also means a change in thinking about value itself. Everyone agrees that money is useful and few people would say that they don’t want more money… but is money’s “value” derived from the simple desire people have it? Is it caused by the willingness of consumers to pay for a thing which gives that “thing” value? Before answering in the affirmative, think about heroine. Does heroine have value? How about prostitution or gambling? Certainly all of these things generate trillions of dollars in measurable GDP globally every year… but do they hold actual value? Or is it merely ephemeral?

Some might say that there is no such thing as intrinsic value and that all value is ephemeral based on the fluctuating “tastes” of the day… but would those people wish to go a week without food or water? Would the 7.8 billion lives on earth do well if the energy needed to sustain human existence disappear? Of course not. So why do economists today fail to differentiate the false vs actual value of money associated with activities which are inherently destructive to our nations and children from those activities that enhance the lives of our people and nations?

Whatever the causes for this intellectual (and moral) blindness prevalent in academia and public servants alike, the fact is that this deficit exists and to the degree that we fail to rectify this problem, we as a civilization will be morally unfit to navigate through the oncoming storms set to befall western civilization amidst an economic meltdown.

Some Elementary Principles of Natural Law

While this essay will review some elementary facts of recent history that provide keys to solving these intellectual and moral obstacles, a few general truths are worth enumerating here upon which the new economic order must be premised.

1) A respect of national sovereignty under a win-win system of cooperation and NOT a system of supranational controls under the control of an unelected elite. This is the foundation of the multipolar alliance which has emerged in recent years and which an America freed of the likes of Pompeo and other China-bashing war hawks may yet tap into.

2) Large scale, long term infrastructure projects which uplift the standards of living of all people, as well as the cognitive powers of all people and the productive powers of labor of all people simultaneously. To illustrate what this looks like, inspect the effects of the New Silk Road across Eurasia and Africa over the past 5 years.

3) That this process has the natural effect of increasing national capital and consumer consumption per capita and per square kilometer (since higher quality lives lived longer equates to higher rates and quality of consumption both individually and nationally). A viable modern guidebook to explore this system scientifically can be found in the writings of the late American economist Lyndon LaRouche with a focus upon his 1984 book So You Wish to Learn All About Economics and short accompanying video The Power of Labor.

Taken together, these three variables would tend towards an increase of humanity’s carrying capacity conditional upon the factor of something ivory tower mathematicians and computer modellers dominant in today’s econometric and climate science worlds detest: HUMAN CREATIVE REASON.

The Role of Creative Thought in Economic Systems

Abraham Lincoln understood this fact all too well 170 years ago when he said in 1860

“Man is not the only animal who labors; but he is the only one who improves his workmanship. This improvement, he effects by Discoveries, and Inventions.”

This idea was amplified by Lincoln’s leading economic advisor Henry C. Carey who said in 1872

“The more his power of association, the greater is the tendency toward development of his various faculties; the greater becomes his control of the forces of nature, and the more perfect his own power for self-direction; mental force thus more and more obtaining control over that which is material, the labors of the present over the accumulations of the past…”

If you haven’t noticed it, both Lincoln and Carey recognized that it is by increasing rates of discoveries of unknown organizing principles of the universe which allows our species to translate those new discoveries into greater rates of scientific and technological progress. This overcoming of our limits to growth by leaping to new technologies and resources would then establish a guiding framework for planning future investments into R & D with a focus on activities that push the frontiers of human knowledge with an emphasis on space exploration in the macrosmos and discovering the geometries of the atom (and the relationship of matter to energy) on the microcosmos.

This process embodied by Lincoln and Carey was once known far and wide as the “American System” and it isn’t a coincidence that EVERY SINGLE American president who died while in office (eight in total) were supporters of this system.

American System leaders (Left to Right): Alexander Hamilton, Abraham Lincoln and Henry Charles Carey

The Origins of the American System

During the crisis of 1783-1791, The newly established American republic was an agrarian economy in financial ruins with no means to pay off its debts or even the soldiers who fought for years in the revolutionary war. It was only a matter of time before the fragile new nation would come undone and be reabsorbed back into the fold of the British Empire.

The solution to this unsolvable crisis was unveiled by Washington’s former Aide de Camp and now Treasury Secretary Alexander Hamilton who studied the works of the great dirigiste economists like France’s Finance Minister Jean-Baptiste Colbert, and introduced a four-fold solution:

  1. – Consolidate all unpayable state debts into a singular federal debt secured by the issuance of new bonds. This was done via his 1790 Report on Public Credit.
  2. – Tie these new bonds to internal improvements like roads, canals, academies and industrial growth which would create a qualitatively new form of debt that would permit the nation to produce its way out of poverty which would lead to “the augmentation of the active or productive capital of a country”. In this sense Hamilton distinguished bad debt from good debt using the important guiding principle that the “creation of debt should always be accompanied with the means of extinguishment.” [to illustrate this more clearly: think of a farmer taking on a debt in order to feed a gambling addiction vs investing his loan into new farm supplies and a tractor.] The thrust of this conception was found in his Report on the Subject of Manufactures of 1791.
  3. – Guide that new national power over finance by a system of national banks subservient to the Constitution and the General Welfare (instead of a system of central banks under the British model that ensured nation states would forever be subservient to the laws of usurious finance). This was illustrated in Hamilton’s 1790 Report on a National Bank and his 1791 On the Constitutionality of a National Bank.
  4. Use protective measures where necessary to block foreign dumping of cheap goods into the nation from abroad which essentially makes it more profitable to purchase industrial goods and farm products locally rather than from abroad. Hamilton also promoted federal incentives/bounties to encourage private enterprises to build things that would be in alignment with the national interests.

Hamilton’s idea for the national bank was premised on the unification of private profit with the welbeing of the whole nation in order to overcome the dichotomy of state vs individual rights which has plagued so much of philosophy and human history. Describing the importance of a national bank, Hamilton wrote:

“A nation, that has no mines of its own, must derive the precious metals from others; generally speaking, in exchange for the products of its labor and industry. The quantity, it will possess, will therefore, in the ordinary course of things, be regulated by the favourable, or unfavourable balance of its trade; that is, by the proportion between its abilities to supply foreigners, and its wants of them; between the amount of its exportations and that of its importations. Hence the state of its agriculture and manufactures, the quantity and quality [emphasis in the original] of its labor and industry must, in the main, influence and determine the increase or decrease of its gold and silver…. The support of industry is probably in every case, of more consequence towards correcting a wrong balance of trade, than any practicable retrenchments, in the expenses of families, or individuals: And the stagnation of it would be likely to have more effect, in prolonging, than any such savings in shortening its continuance. That stagnation is a natural consequence of an inadequate medium, which, without the aid of Bank circulation, would in the cases supposed, be severely felt.”

In opposition to the Jeffersonian crowd promoting British Free Trade and attacking the idea of manufactures or a strong federal government, Hamilton wrote that there is:

“a general principleinherent in the very definition of Government and essential to every step of the progress to be made by that of the United States; namely—that every power vested in a Government is in its nature sovereign, and includes by force of the term, a right to employ all the means requisite, and fairly applicable to the attainment of the ends of such power; and which are not precluded by restrictions & exceptions specified in the constitution; or not immoral, or not contrary to the essential ends of political society.”

Hamilton added that this must exist “to give encouragement to the enterprise of our own merchants, and to advance our navigation and manufactures.”

Throughout all of his works, Hamilton is clear that value is not located in land, gold, money, or any arbitrary value favored by followers of the British School like Adam Smith. In defending the growth of manufactures and internal improvements, Hamilton states that: 

“To cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients, by which the wealth of a nation may be promoted.”

The Overthrow of the American System

Although City of London-affiliated traitors in America like Aaron Burr established the speculative Bank of Manhattan which started Wall Street, killed Alexander Hamilton in 1804, and derailed many of Hamilton’s grand designs, the system was never completely destroyed despite the decades of attempts to do so. In 1824, the great German economist Frederick List came to America with the last surviving leader of 1776 Marquis Lafayette as part of an international effort to revive the sabotaged plans to create a world of sovereign republics modeled on the American experience of 1776.

While this effort failed with Lafayette’s supplication to the scheme of re-instating a French King in 1830 rather than declare himself the President (as I outlined in my recent paper on the Congress of Vienna), List studied Hamilton’s system and was the first to codify it as the American System of Political Economy (1827). This was the system which List transported to Germany by driving rail development, industrial growth, protectionism under the German Zollverein which finally blossomed under the rule of Chancellor Otto von Bismarck. List’s system was also studied, translated and applied in Russia by many “American System economists” with the greatest being the Transport Minister and Prime Minister Sergei Witte who oversaw the trans Siberian railway’s completion and envisioned a line eventually connecting the Americas to Russia via the Bering Straits.

In America, the clash between American vs British Systems defined all major conflicts from 1836 when a drunken racist named Andrew Jackson killed the 2nd National Bank (along with thousands of Cherokee) and brought the nation under the heal of British Free Trade, speculation, and cotton plantation economics. Following the IMF’s protocols that would be imposed onto victim nations 150 years later, Jackson cancelled all internal improvements in order to “pay the debt” and deregulated the banking system which resulted in the growth of over 7000 separate currencies issued by an array of state banks rendering the economy chaotic, bankrupt and prone to mass counterfeiting.

The defenders of the American System during this period (led by Whigs such as John Quincy Adams, and Henry Clay) played a rear-guard action hoping for an opening to occur at some point. When that opening finally arrived with the victory of Whig President William Harrison in 1840 a glimmer of hope was felt. Harrison swept to power with a mandate to “revive the national bank” and enact Clay’s American System of internal improvements but sadly the new leader found himself dead in a matter of only 3 months with legislation for the 3rd national bank sitting unsigned on his desk. Over his dead body (and that of another Whig president only 10 years later), the slave power grew in influence enormously.

It wasn’t until 1861 that a new president arose who successfully avoided assassination attempts long enough to revive Hamilton’s American System during a period of existential crisis of economic bankruptcy and foreign sponsored civil war which nearly destroyed the Union in ways not that dissimilar to the situation unfolding in America today.

In my next installment, I will introduce Abraham Lincoln’s revival of Hamilton’s American System with his incredible battle against the forces of Wall Street and the City of London who did everything in their power to ensure the success of the secessionist slave power.

Click here for Part II. and here for Part III, of this series.

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