Mises Daily Articles
Liberty vs. the Constitution: The Early Struggle
[Excerpted from chapter 5 of Albert Jay Nock's Jefferson]
The Constitution looked fairly good on paper, but it was not a popular document; people were suspicious of it, and suspicious of the enabling legislation that was being erected upon it. There was some ground for this. The Constitution had been laid down under unacceptable auspices; its history had been that of a coup d'état.
It had been drafted, in the first place, by men representing special economic interests. Four-fifths of them were public creditors, one-third were land speculators, and one-fifth represented interests in shipping, manufacturing, and merchandising. Most of them were lawyers. Not one of them represented the interest of production — Vilescit origine tali.
In the second place, the old Articles of Confederation, to which the states had subscribed in good faith as a working agreement, made all due provision for their own amendment; and now these men had ignored these provisions, simply putting the Articles of Confederation in the wastebasket and bringing forth an entirely new document of their own devising.
Again, when the Constitution was promulgated, similar economic interests in the several states had laid hold of it and pushed it through to ratification in the state conventions as a minority measure, often — indeed, in the majority of cases — by methods that had obvious intent to defeat the popular will. Moreover, and most disturbing fact of all, the administration of government under the Constitution remained wholly in the hands of the men who had devised the document, or who had been leaders in the movement for ratification in the several states. The new president, Washington, had presided over the Constitutional Convention. All the members of the Supreme Court, the judges of the federal district courts, and the members of the cabinet were men who had been to the fore either in the Philadelphia Convention or in the state ratifying conventions. Eight signers of the Constitution were in the Senate, and as many more in the House. It began now to be manifest, as Madison said later, who was to govern the country; that is to say, in behalf of what economic interests the development of American constitutional government was to be directed.
Mr. Jefferson was slow to apprehend all this. He had hitherto regarded the Constitution as a purely political document, and having that view, he had spoken both for it and against it. He had criticized it severely because it contained no Bill of Rights and did not provide against indefinite tenure of office. With these omissions rectified by amendment, however, he seemed disposed to be satisfied with it. Its economic character and implications apparently escaped him, and now that for the first time he began, very slowly and imperfectly, to get a sense of it as an economic document of the first order, he began also to perceive that the distinction between Federalist and anti-Federalist, which he had disparaged in his letter to [Francis] Hopkinson, was likely to mean something after all.
He set out on March 1, 1790, for New York, the temporary capital, where he found himself a cat in a strange garret. Washington and his entourage greeted him cordially, and the "circle of principal citizens" welcomed him as a distinguished and agreeable man. He had grown handsomer as he approached middle age, and his elaborate French wardrobe set him off well. His charm of manner was a reminiscence of Fauquier; he was invariably affable, courteous, and interesting.
The people of New York could have quite taken him to their hearts if they had not felt, as everyone felt in his presence, that he was always graciously but firmly holding them off. Yet if they had any suspicions of his political sentiments and tendencies, they put them in abeyance; his attitude towards the French Revolution had shown that he was amenable to reason. As soon, no doubt, as this well-to-do, well-mannered, highly cultivated, and able man of the world saw which way the current of new national ideas was setting, he would easily fall in with it.
At any rate, everything should be made easy for him. "The courtesies of dinner parties given me, as a stranger newly arrived among them, placed me at once in their familiar society." But every hour thus spent increased his bewilderment. Everyone talked politics, and everyone assiduously talked up a strong government for the United States, with all its costly trappings and trimmings of pomp and ceremony. This was a great letdown from France, which he had just left
in the first year of her revolution, in the fervor of natural rights, and zeal for reformation. My conscientious devotion to these rights could not be heightened, but it had been aroused and excited by daily exercise.
No one in New York was even thinking of natural rights, let alone speaking of them. The "principal citizens" held the French Revolution in devout horror. "I can not describe the wonder and mortification with which the table conversations filled me." Where indeed was the old high spirit, the old motives, the old familiar discourse about natural rights, independence, self-government? Where was the idealism that these had stimulated — or the pretence of idealism that these had evoked?
One heard nothing here but the need for a strong government, able to resist the depredations which the democratic spirit was likely to make upon "the men of property," and quick to correct its excesses. Many even spoke in a hankering fashion about monarchy. All this, manifestly, was nothing to be met with the popgun of Constitutional amendments providing for a Bill of Rights and rotation in office; manifestly, the influential citizenry of New York would but lift their eyebrows at a fine theoretical conception of the United States as a nation abroad and a confederacy at home.
Mr. Jefferson's ideas were outmoded; nothing was of less consequence to the people about him; he might have thought himself back in Paris in the days of Calonne, at a soirée of the Farmers-General. Other ideas were to the front; and when Washington's cabinet came together, Mr. Jefferson confronted the coryphaeus of those ideas in the person of a very young and diminutive man with a big nose, a giddy, boyish, and aggressive manner, whom Washington had appointed secretary of the treasury.
Alexander Hamilton came to the colonies at the age of sixteen, from his home in the West Indies, dissatisfied with the prospect of spending his days in "the groveling condition of a clerk or the like … and would willingly risk my life, though not my character, to exalt my station. … I mean to prepare the way for futurity."
This was in 1772. He found the country ripe for him. There was something stirring all the time, something that an enterprising young man might get into with every chance to make himself felt. At 18 he came forward in a public meeting with a harangue on the Boston Port Bill, and he presently wrote a couple of anonymous pamphlets on public questions, one of which was attributed by an undiscriminating public to John Jay, who, as Mr. Jefferson said, wielded "the finest pen in America," and therefore resented the imputation of authorship with a lively chagrin. He showed his bravery conspicuously on two occasions in resisting the action of mobs: once to rescue the Tory president of King's College, now Columbia; and once to rescue another Tory named Thurman.
He saw that war was almost certainly coming on, bearing a great chance of preferment to the few in the colonies who had learned the trade of arms; so he studied the science of war, and the outbreak of hostilities found him established as an artillery officer. He had an unerring instinct for hitching his fortunes to the right cart-tail. Perceiving that Washington would be the man of the moment, he moved upon him straightway, gained his confidence, and remained by him, becoming his military secretary and aid-de-camp.
But the war would not last forever, and Hamilton had no notion of leading the life of a soldier in time of peace. Arms were a springboard for him, not a profession. He served until the end of the campaign of 1781, when he retired with some of the attributes of a national figure and with the same persistent instinct for alliance with power. He always gave a good and honorable quid pro quo for his demands; he had great ability and untiring energy, and he threw both most prodigally into whatever cause he took up.
Money never interested him. Although he inaugurated the financial system which enriched so many, he remained all his life quite poor, and was often a good deal straitened. Even in his career as a practicing lawyer, conducting important cases for wealthy clients, he charged absurdly small fees.
His marriage in 1780 with one of the vivacious Schuyler girls of Albany, made him a fixture in "the circle of principal citizens" of New York; it was a ceremony of valid adoption. He was elected to Congress in 1782, he served as a delegate to the Constitutional Convention in 1787, and now he was in the cabinet as the recognized head of the centralizing movement.
The four great general powers conferred by the Constitution upon the federal government were the power of taxation, the power to levy war, the power to control commerce, and the power to exploit the vast expanse of land in the West. The task now before Congress was to pass legislation appropriate to putting these powers into exercise. There was no time to be lost about this. Time had been the great ally of the coup d'état.
The financial, speculative, and mercantile interests of the country were at one another's elbow in the large towns, mostly on the seaboard; they could communicate quickly, mobilize quickly, and apply pressure promptly at any point of advantage. The producing interests, which were mostly agrarian, were, on the other hand, scattered; communication among them was slow and organization difficult. It was owing to this advantage that in five out of the thirteen states, ratification of the Constitution had been carried through before any effective opposition could develop. Now, in this next task, which was, in Madison's phrase, to administration the government into such modes as would ensure economic supremacy to the non-producing interests, there was urgent need of the same powerful ally, and here was the opportunity for the great and peculiar talents that Alexander Hamilton possessed.
Perhaps throughout, and certainly during the greater part of his life, Hamilton's sense of public duty was as keen as his personal ambition. He had the educated conscience of the arriviste with reference to the social order from which he himself had sprung. A foreigner, unprivileged, of obscure origin and illegitimate birth, "the bastard brat of a Scots pedlar," as John Adams testily called him, he had climbed to the top by sheer force of ability and will.
In his rise he had taken on the self-made man's disregard of the highly favorable circumstances in which his ability and will had been exercised; and thus he came into the self-made man's contemptuous distrust of the ruck of humanity that he had left behind him. The people were "a great beast," irrational, passionate, violent, and dangerous, needing a strong hand to keep them in order. Pleading for a permanent president and Senate, corresponding as closely as might be to the British model of a king and a House of Lords, he had said in the Constitutional Convention that all communities divide themselves into the few and the many, the first being
the rich and well born, the other the mass of the people. … The people are turbulent and changing; they seldom judge or determine right. Give therefore to the first class a distinct permanent share of government. … Nothing but a permanent body can check the imprudence of democracy. Their turbulent and uncontrollable disposition requires checks.
He had no faith in republican government, because, as Gouverneur Morris acutely said, "he confounded it with democratical government; and he detested the latter, because he believed it must end in despotism, and be in the meantime, destructive to public morality."
But republican government was here, and he could not change it. Of all among "the rich and well-born" who talked more or less seriously of setting up a monarchy, there was none doubtless unaware that the republican system could hardly be displaced, unless by another coup d'état made possible by some profound disturbance, like a war. Hamilton, at any rate, was well aware of it.
The thing, then, was to secure the substance of absolutism under republican forms; to administration republican government into such absolutist modes as the most favorable interpretation of the Constitution would permit. Here was the line of coincidence of Hamilton's aims with the aims of those who had devised and promulgated the Constitution as an economic document. These aims were not identical, but coincident.
Hamilton was an excellent financier, but nothing of an economist. Insofar as he had any view of the economics of government, he simply took for granted that they would, as a matter of course and more or less automatically, arrange themselves to favor "the rich and well-born," since these were naturally the political patrons and protectors of those who did the world's work. In a properly constituted government, such consideration as should be bestowed upon the producer would be mostly by way of noblesse oblige.
The extent of his indifference to the means of securing political and economic supremacy to "the rich and well-born" cannot be determined, yet he always frankly showed that he regarded over-scrupulousness as impractical and dangerous. Strong in his belief that men could be moved only by force or interest, he fearlessly accepted the corollary that corruption is an indispensable instrument of government, and that therefore the public and private behavior of a statesman may not always be answerable to the same code.
Hamilton's general plan for safeguarding the republic from "the imprudence of democracy" was at bottom extremely simple. Its root idea was that of consolidating the interests of certain broad classes of "the rich and well-born" with the interests of the government. He began with the government's creditors. Many of these, probably a majority, were speculators who had bought the government's war bonds at a low price from original investors who were too poor to keep their holdings.
Hamilton's first move was for funding all the obligations of the government at face value, thereby putting the interests of the speculator on a par with those of the original holder, and fusing both classes into a solid bulwark of support for the government. This was inflation on a large scale, for the values represented by the government's securities were in great part — probably 60 percent — notoriously fictitious, and were so regarded even by their holders. A feeble minority in Congress, led by Madison, tried to amend Hamilton's measure in a small way, by proposing a fair discrimination against the speculator, but without success.
Before any effective popular opposition could be organized, Hamilton's bill was driven through a Congress which reckoned nearly half its membership among the security-holders. Its spokesmen in the House, according to [Sen. William] Maclay, who listened to the debate, offered little argument, and contented themselves with a statesmanlike recourse to specious moralities.
Ames delivered a long string of studied sentences … He had "public faith," "public credit," "honour, and above all justice," as often over as an Indian would the "Great Spirit," and if possible, with less meaning and to as little purpose. Hamilton, at the head of the speculators, with all the courtiers, are on one side. These I call the party who are actuated by interest.
Hamilton's own defense of indiscriminate funding was characteristic; he declared that the impoverished original holders should have had more confidence in their government than to sell out their holdings, and that the subsidizing of speculators would broadcast this salutary lesson.
Hamilton's bill contained a supplementary measure which reached out after the state creditors, united them with the mass of federal creditors, and applied a second fusing heat. The several states which had at their own expense supplied troops for the Revolutionary army, had borrowed money from their citizens for that purpose; and now Hamilton proposed that the federal government should assume these debts, again at face value — another huge inflation, resulting in "twenty millions of stock divided among favored States, and thrown in as pabulum to the stock-jobbing herd," as Mr. Jefferson put it.
Two groups of capitalist interest remained, awaiting Hamilton's attentions: one of them actual, and the other inchoate. These were the interest of trade and commerce, and the interest of unattached capital looking for safe investment. There was no such breathless hurry about these, however, as there had been about digging into the impregnable intrenchments of funding and assumption.
The first group had already received a small douceur in the shape of a moderate tariff, mostly for revenue, though it explicitly recognized the principle of protection; it was enough to keep them cheerful until more could be done for them. Considering the second group, Hamilton devised a plan for a federal bank with a capital of $10,000,000, one-fifth of which should be subscribed by the government, and the remainder distributed to the investing public in shares of $400 each. This tied up the fortunes of individual investors with the fortunes of the government, and gave them a proprietary interest in maintaining the government's stability; also, and much more important, it tended powerfully to indoctrinate the public with the idea that the close association of banking and government is a natural one.
There was one great speculative interest remaining, the greatest of all, for which Hamilton saw no need of taking special thought. The position of the natural-resource monopolist was as impregnable under the Constitution as his opportunities were limitless in the natural endowment of the country. Hence the association of capital and monopoly would come about automatically. Nothing could prevent it or dissolve it, and a fixed interest in the land of a country is a fixed interest in the stability of that country's government — so in respect of these two prime desiderata, Hamilton could rest on his oars.
In sum, then, the primary development of republicanism in America, for the most part under direction of Alexander Hamilton, effectively safeguarded the monopolist, the capitalist, and the speculator. Its institutions embraced the interests of these three groups and opened the way for their harmonious progress in association. The only interest which it left open to free exploitation was that of the producer. Except insofar as the producer might incidentally and partially bear the character of monopolist, capitalist, and speculator, his interest was unconsidered.
 Thomas Jefferson, The Anas / From the Writings of Thomas Jefferson: Volume 1, ed. Albert Ellery Bergh (Washington, DC: Thomas Jefferson Memorial Association, 1903): p. 270.
 Greek word literally meaning "leader of the chorus."
 14 Geo. 3 c.19. One of the so-called Intolerable Acts passed by the British Parliament in response to the Boston Tea Party; this bill closed the Port of Boston until restitution was made to the King's treasury and the East India Company.
 An apparent reference to Ralph Thurman, a New York merchant who ignored a colonist boycott of English goods. The Sons of Liberty "attempted to tar and feather him, but he fled." See Willard Sterne Randall, Alexander Hamilton: A Life (New York: Harper Collins, 2003): p. 86.
 Hamilton married Elizabeth Schuyler (1757-1854), the second daughter of Philip Schuyler, a former major general in the Continental Army and later a US senator.
 This relies on an account of Hamilton's June 18, 1787, speech to the convention by Robert Yates, a fellow delegate representing New York. Yates's original notes read as follows: "All communities divide themselves into the few and the many. The first are the rich and well born, the other the mass of the people. The voice of the people has been said to be the voice of God; and however generally this maxim has been quoted and believed, it is not true in fact. The people are turbulent and changing; they seldom judge or determine right. Give therefore to the first class a distinct, permanent share in the government. They will check the unsteadiness of the second, and as they cannot receive any advantage by a change, they therefore will ever maintain good government. Can a democratic assembly, who annually revolve in the mass of the people, be supposed steadily to pursue the public good? Nothing but a permanent body can check the imprudence of democracy. Their turbulent and uncontroling disposition requires checks." See "Notes of the Secret Debates of the Federal Convention of 1787, Taken by the Late Hon Robert Yates, Chief Justice of the State of New York, and One of the Delegates from That State to the Said Convention."
 Anne Cary Morris, ed., The Diary and Letters of Gouvernur Morris, vol. 2 (New York: Charles Scribner's Sons, 1888): p. 523.
 Edgar S. Maclay, ed., Journal of William Maclay, United States Senator from Pennsylvania 1789–1791 (New York: D. Appleton & Co., 1890): p. 197.
(The original punctuation, which Nock had altered, has been restored.)
 Jefferson, The Anas, p. 276.