J. L. BELL is a Massachusetts writer who specializes in (among other things) the start of the American Revolution in and around Boston. He is particularly interested in the experiences of children in 1765-75. He has published scholarly papers and popular articles for both children and adults. He was consultant for an episode of History Detectives, and contributed to a display at Minute Man National Historic Park.

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Saturday, August 18, 2012

Debate Over the Proper Role of Government

In his first address to Congress, on 8 Dec 1801, President Thomas Jefferson stated:
Agriculture, manufactures, commerce, and navigation, the 4 pillars of our prosperity, are the most thriving when left most free to individual enterprise. Protection from casual embarrassments, however, may sometimes be seasonably interposed. If in the course of your observations or inquiries they should appear to need any aid within the limits of our constitutional powers, your sense of their importance is a sufficient assurance they will occupy your attention.
Jefferson was quite vague on specifics, but his attitude toward government intervention in economic matters was clear: he didn’t think it was wise or proper, and implied that there were only a few exceptional circumstances.

The President’s rival in George Washington’s cabinet, Alexander Hamilton, replied to that message with a pamphlet that included this passage:
In France, England, and other parts of Europe, institutions exist supported by public contributions, which eminently promote agriculture and the arts; such institutions merit imitation by our government; they are of the number of those which directly and sensibly recompense labor for what it lends to their agency.

To suggestions of the last kind, the adepts of the new school have a ready answer: Industry will succeed and prosper in proportion as it is left to the exertions of individual enterprise. This favorite dogma, when taken as a general rule, is true; but as an exclusive one, it is false, and leads to error in the administration of public affairs. In matters of industry, human enterprise ought, doubtless, to be left free in the main; not fettered by too much regulation; but practical politicians know that it may be beneficially stimulated by prudent aids and encouragements on the part of the government. This is proved by numerous examples too tedious to be cited; examples which will be neglected only by indolent and temporizing rulers, who love to loll in the lap of epicurean ease, and seem to imagine that to govern well, is to amuse the wondering multitude with sagacious aphorisms and oracular sayings.
While nodding to the free-market ideal, Hamilton argued there were far more occasions, and far more opportunities, for the national government to “beneficially stimulate” business than Jefferson (an “indolent and temporizing ruler”?) believed in.

Within a few years, Jefferson’s embargo policy showed he was ready to intervene quite strongly in the economy—though to shut down trade he thought was dangerous rather than to aid industries or enterprises. By then Hamilton was dead. But his vision for the economy of the U.S. of A. ultimately proved more accurate, or perhaps more self-fulfilling, than Jefferson’s arcadian ideal.


Chris said...

Maybe you have addressed this in previous posts, but wasn't there a time of hyperinflation after the revolution and it was Hamilton's idea of the federal government taking on all the colonies debts and establishing the First Bank of the United States which is what put our fledgling nation on a secure financial footing? I wonder what Hamilton would think of the present state of politics.

J. L. Bell said...

There was bad inflation during the war, and economic difficulties afterward. Hamilton was part of the debate over how the national government should handle debts since 1783. By the time he got the new U.S. Congress to assume state debts, however, it was 1790 and I think those crises had eased.

When Hamilton and Jefferson had this dispute in 1801, the federal government definitely had a debt and the taxing power to pay it off, and the big issue of the day was the national bank.