Hamilton’s “Fortress America” Economic Policy
A skilled, if often mistaken, political commentator in his own right, Hamilton was the father of the direct antecedents to Donald Trump’s favored economic system. Over the course of almost 30 years in political life, Hamilton developed a program of sometimes nuanced but assertive economic nationalism. He believed that trade restrictions were crucial to the development of the fledgling nation’s “infant” industrial base, as well as a guardian against practices of European nations that he deemed unfair or harmful to American interests.
To attain this result, Hamilton advocated a complex and carefully tuned system of “bounties” (essentially, subsidies to boost American companies against their competitors abroad) and protective tariffs to insulate American industries from foreign competition. Hamilton and his political heirs coupled this prescription with an aggressive program of harbor, canal, and road infrastructure spending, often called “internal improvements.”
These public works projects would in turn provide the means to transport American-made products to American consumers, thereby bypassing the alleged “dependency” on Europe for manufactured imports. As an added bonus, their construction would supply American workers with jobs and industry in its own right.
Hamilton’s Plan to Make America “Grand and Glorious” Again
The parallels to Trump’s agenda are no accident. To quote the great classical liberal economist William Graham Sumner, Hamilton’s mind was “completely befogged in the mists of mercantilism.” This affliction lasted from his earliest forays into politics as a young soldier in the revolutionary army until his most famous economic treatise, the deeply protectionist “
Report on Manufactures,” that he wrote as Secretary of the Treasury in 1791. To Hamilton, economic “autonomy” — maintained through an extensive system of state regulations and economic management — was a primary feature of the American experiment.
“Food and clothing we have within ourselves,” he wrote in 1774. The rest could be cultivated with a policy of forced economic independence. Hamilton continued:
Our climate produces cotton, wool, flax, and hemp; which, with proper cultivation, would furnish us with summer apparel in abundance… We have sheep, which, with due care in improving and increasing them, would soon yield a sufficiency of wool…
It would be no unbecoming employment for our daughters to provide silks of their own country. The silk-worm answers as well here as in any part of the world. Those hands which may be deprived of business by the cessation of commerce, may be occupied in various kinds of manufactures and other internal improvements.
If, by the necessity of the thing, manufactures should once be established, and take root among us, they will pave the way still more to the future grandeur and glory of America; and, by lessening its need of external commerce, will render it still securer against the encroachments of tyranny.
Trumpilton Trade: Winners vs. Losers, Cheaters vs. Suckers
This aggressively autarkic pronouncement gave way to greater nuance as Hamilton’s politics matured, but protectionism always remained a constant feature of his message. In 1782, he pressed its strategic propriety in a blistering assault on the national government’s lack of regulatory powers under the Articles of Confederation.
“To preserve the balance of trade in favor of a nation ought to be a leading aim of its policy,” Hamilton declared. “The avarice of individuals may frequently find its account in pursuing channels of traffic prejudicial to that balance, to which the government may be able to oppose effectual impediments.”
Trade regulation, to Hamilton, was the essence of economic policy. Free trade, he complained, stood “contrary to the uniform practice and sense of the most enlightened nations.” Rather, commerce must be subject to “the encouragements or restraints of government.” The “power of regulating trade ought to have been a principal object of the Confederation,” he continued, laying out the case for a national authority to regulate commerce that would come to pass under the new Constitution of 1787.
Hamilton’s 1791 Report turned these sentiments into prescriptive policies. Deeming foreign demand for American agricultural products “too uncertain a reliance” for the fledgling nation, he called for the use of economic regulations, tariffs, and bounties to create “a substitute for it, in an extensive domestic market.”
The reason for these policies, according to Hamilton, was an allegedly unfair playing field abroad. “If the system of perfect liberty to industry and commerce were the prevailing system of nations,” he argued, free trade would have merit. “But the system which has been mentioned, is far from characterising the general policy of Nations. The prevalent one has been regulated by an opposite spirit.”
Echoing Hamilton, Trump advanced a boorish but conceptually identical argument in the March 10, 2016 Republican debate: “Take China as an example. I have many friends, great manufacturers, they want to go into China. They can’t. China won’t let them. We talk about free trade. It’s not tree free trade; it’s stupid trade. China dumps everything that they have over here. No tax, no anything.”
Who Could Be against “Improvements”?
To complement his managerial approach to international trade and domestic industry development, Hamilton also used the 1791 report to propose a national infrastructure plan. “Improvements” favoring the transportation of goods, he argued, were an object of any government. In this area, “The United States stand much in need.” He continued:
The symptoms of attention to the improvement of inland navigation which have lately appeared in some quarters, must fill with pleasure every breast, warmed with a true zeal for the prosperity of the country. These examples, it is to be hoped, will stimulate the exertions of the Government and citizens of every State.
There can certainly be no object more worthy of the cares of the local administrations; and it were to be wished that there was no doubt of the power of the National Government to lend its direct aid on a comprehensive plan. This is one of those improvements which could be prosecuted with more efficacy by the whole, than by any part or parts of the Union.
If these features sound familiar, consider the following line from Trump’s acceptance speech: “This new wealth will improve the quality of life for all Americans — we will build the roads, highways, bridges, tunnels, airports, and the railways of tomorrow. This, in turn, will create millions more jobs.”
It is more or less the same argument, updated by about 200 years of technological advance and distilled into the bombastic platitudes of an idiot.
