Jefferson and Hamilton

by John Ferling

  In the absence of a true national bank, Hamilton played an active role in the establishment of the Bank of New York in 1784. He served as its legal counsel, drafted its charter for approval by the state, and sat on its board of directors. He saw the bank’s potential as a provider of seed money for merchants and entrepreneurs, and he envisaged it as the sole source of sound currency in the state. On the latter score, Hamilton’s aspirations were not met, and in mid-decade the state turned to issuing paper currency and, as a hedge against inflation, it levied increased taxes on the wealthy. The episode was not unimportant for Hamilton. The city’s merchants became more aware of him. For his part, Hamilton became fully conscious of their seething impatience with shaky public credit and what they saw as the state’s unsound money policies.10

  In what must have been nearly record time for a newly minted attorney, Hamilton’s earnings enabled his family to live comfortably. After only a year in practice, he purchased for £2,100 in cash the Wall Street house he had been renting.11 Nor was he the only one who was thriving. For many, the 1780s was a very good decade. Newspapers were filled with poems and essays describing the United States as a “blest land” with a bright future. There appeared to be opportunities at every turn. Thousands crossed the Appalachians into what is now Kentucky and Ohio, eager to gain their own farms. Thousands of Loyalists had fled into exile, forfeiting their lands and businesses, and creating vacancies in the public and professional offices they had held. Before leaving to join her husband in Europe in 1784, Abigail Adams had remarked that every man in Boston who wanted a job could find one. Benjamin Franklin returned home the following year and proclaimed that he “never saw greater and more indubitable marks of Public Prosperity in any Country.” He, too, thought that “Working people have plenty of employ and high pay for their labour,” and he added that farmers were also prospering. Similarly, Washington’s letters to acquaintances in Europe painted a picture of a bustling America in which roads and bridges were under construction, rivers were being improved, and farms that had suffered during the war were back in operation. Jefferson concurred, observing in 1784 that his countrymen were “enjoying all the happiness which easy government, order and industry are capable of giving to a people.” Emigrants poured in, some twenty thousand annually to Pennsylvania alone. With the war at long last over, the future indeed looked bright.12

  Yet, troubles existed. Commerce suffered during and after the war. Britain’s decision to keep its ports closed to American exports was a punishing blow. So were the heavy taxes levied to retire state and national debts that were incurred from raising and supplying armies, and from borrowing, including foreign loans, chiefly those made by France. In 1784, the national government, needing almost one million dollars annually to service its debts, billed the states for nearly three-quarters of a million dollars. The following year it requested three million dollars from the states and stipulated that one-third was to be paid in hard money, that is, gold or silver.

  Much of postwar taxation was for compensating bondholders who owned public securities, essentially the promissory notes issued during the war as IOUs to army contractors and soldiers. Because money was largely worthless after 1778, few original holders of the notes owned them any longer. Along the way, nearly all the securities had been bought up by speculators drawn almost exclusively from among the wealthiest in society. Within a few years of the end of the war, only 2 percent of Americans owned bonds. Sixteen “stockjobbers,” as the speculators were often derogatorily called, owned half of Rhode Island’s bonds. In Pennsylvania, a dozen “monopolizers,” as the speculators were also sometimes labeled, held nearly 70 percent of that state’s bonds.13 Taxes provoke disgruntlement, and paying taxes to compensate some of the most affluent individuals in the land, few of whom had ever shouldered a weapon or been in harm’s way during the war, aroused a rancor in some quarters that nearly matched the burning anti-British indignation of the war years.

  The economy was not the only concern. When General Washington spoke of the “present Crisis” six months before he left the army, he was in part thinking about the new nation’s military weakness.14 He worried that the United States existed in a world filled with predatory, anti-republican, monarchical powers. Washington was equally troubled by the situation in the trans-Appalachia. Indians living beyond the mountains viewed the sudden flood of settlers as an invasion of their homeland. The Indians, moreover, were being armed by the British from Canada and western forts on American soil. According to the Treaty of Paris, the British were to relinquish those forts. But London declared that its army would not abandon those installations until the United States settled its prewar debts with British creditors, which the peace accord also required. The United States was powerless to cope. Unable to raise revenue, it could neither resolve the debt issue nor the lurking dangers in the Ohio Country.

  Yet another western problem begged for a solution. The western boundary of the United States was the Mississippi River, but the peace treaty made no mention of the southern boundary. The United States claimed the 31st parallel as its southern boundary. Spain, to whom Great Britain had returned East and West Florida, claimed the 32nd parallel as the Spanish-American boundary. Following the war, Madrid closed the Mississippi River to American commerce within what it claimed as Spanish territory, roughly the one hundred miles from Natchez to the Gulf of Mexico, including New Orleans. The feeble United States was without leverage to compel Spain to open the Mississippi, a vital artery at a time when most goods moved by water.

  When Washington had spoken of a crisis, he was alluding to the western threats, where “the flanks and rear of the United States are possessed by other powers.” He knew the settlers wanted not only security against the Indians, but also, in order to become prosperous commercial farmers, the ability to ship their commodities to eastern and foreign markets through New Orleans. He also understood that the “Western settlers … stand as it were upon a pivot—the touch of a feather, would turn them any way.”15 Washington was alluding to the danger of western secession, for he understood that Great Britain and Spain might offer concessions to the western settlers in return for their agreement to leave the United States. Should that occur, all hope would be dashed of a united America becoming a safe, strong land of opportunity.

  When independence was declared, Americans dreamed of the fruitful commerce that would come from breaking the shackles of colonialism. The dream had not been realized. Britain and Spain largely closed their ports to American ships, and neither Franklin nor Jefferson had enjoyed much success in expanding trade with France.

  John Jay, the Secretary of Foreign Affairs, sought to resolve America’s difficulties with Spain through diplomacy, but his discussions with Madrid only revealed the depth of the problem. In the spring of 1786, after a year of negotiation, the secretary told Congress that Madrid was ready to sign what would be called the Jay-Gardoqui Treaty. Spain, Jay said, would open its ports to American commerce, but on the condition that the United States would renounce navigation of the Mississippi River for decades. The opening of the ports would be a bonanza for the trade-starved northern maritime states, and every one of them supported ratification. But the five southern states were opposed. They looked on what is now the southeastern United States as their territory—and in fact the southern states of Kentucky, Tennessee, Alabama, and Mississippi would ultimately be carved out of the region. But if the treaty were ratified, settlers would shun the region, for if goods could not be gotten to market, the inhabitants were destined to be dirt-poor farmers. The treaty failed only because the northern majority in Congress fell one vote short of the two-thirds majority needed to sanction the pact. Many Southerners and Westerners were outraged at the North’s willingness to sell out their interests, and many Southerners saw themselves as a lonely minority in a Union in which the balance of power lay with the northern states. Those northern states, meanwhile, simmered with anger at the loss of a badly needed commercial opportunity.16


  The exuberant pride in the new American nation that had been so manifest in 1776, and which had led many men to bear arms, was waning. Growing numbers of Northerners and Southerners were embarrassed by a Congress so enervated that it often could not meet for a lack of a quorum, and when it did meet seemed to overflow with mediocrities. A widespread feeling set in that few “men of enlarged minds” any longer wished to serve in a body that was too weak to “coin a copper,” as one observer put it.17

  “No Morn ever dawned more favourable than ours did—and no day was ever more clouded than the present,” Washington declared in 1786. The “scurge” of feebleness was “shameful & disgusting,” he continued, and in more than one letter he reiterated what he had said before leaving the army: “a tone” must be given “to our Federal Government, as will enable it to answer” national interests. What Washington had labeled the “present Crisis” in 1783, he was calling “the impending storm” by 1786, and he gloomily predicted that if changes were not forthcoming, the “superstructure we have been seven years, raising at the expence of much blood and treasure” was doomed.18

  Concern over America’s debility, and its nearly feckless national government, was not misplaced. But some in the newly independent United States were alarmed for reasons having nothing to do with the West, or commerce, or national pride. Long before independence, Joseph Galloway, a conservative Pennsylvanian who later turned Tory, warned Congress that a break with the mother country would unleash democracy and social disorder. America, he predicted, would be victimized by “companies of armed, but undisciplined men … traveling over your estates, entering your houses … seizing your property, and carrying havock and devastation wherever they head—ravishing your wives and daughters.”19

  Galloway’s anxiety was exaggerated, but substantive political and social changes accompanied independence, just as he had forecast. Beginning in 1776, several state constitutions broadened suffrage rights, provided for more elective offices and more frequent elections, reduced the property qualifications for holding office, and corrected malapportionment in their assemblies. Men who had never before held political office ascended to positions of authority, and in New York a substantial portion of the colonial ruling elite—the Hudson River squirearchy, which included Hamilton’s in-laws—lost much of their pre-Revolution authority to men like Governor Clinton, who rode to power with the backing of small farmers from upstate. What was happening in New York was occurring elsewhere. For instance, before the Revolution, New Hampshire’s assembly consisted almost entirely of wealthy gentlemen from the eastern coastal region; by the mid-1780s most assemblymen were ordinary farmers, and a considerable percentage came from the western regions of the state.20 A sense of egalitarianism also took hold. It grew among small farmers and the propertyless, who were being asked to soldier, and die, for the United States, but it was inspired as well by the noble ideas of equality expressed in Jefferson’s Declaration of Independence.

  The traditional elite was no longer guaranteed political dominion, and some were unhappy about it. After losing a gubernatorial race to George Clinton, Philip Schuyler grumbled that the victor’s “family and connections do not entitle him to so distinguished a predominance.” Nor were all thrilled when their social inferiors were no longer deferential. The “spirit of independency was converted into equality” so that each country peasant now “conceives himself, in every respect, my equal,” fumed a Virginia aristocrat.21

  What Hamilton wrote for public consumption focused on the weaknesses of the national government, but in private he, too, raged at the growth of democracy. Democratic politics, he said with alarm in 1785, had brought men and factions to power who were not “disinterested.” These “new men” promoted local and selfish concerns, especially the authorization of paper money and assorted forms of debtor-relief, including stay laws. The state assembly, he said, was now open to increasing numbers of “the levelling kind,” so that the “despotism and iniquity of the Legislature” jeopardized “the security of property.”22 Aside from Governor Clinton, no political activist bothered Hamilton more than Abraham Yates, a man whose rise had been facilitated by the American Revolution.

  Yates’s background resembled that of other Founders. Like John Adams, Yates was raised on a small farm. Like Washington, he lacked formal education and became a self-educated surveyor. Like Hamilton, he took up the law after limited study. But there were substantive differences as well. Yates had never acquired the gentlemanly sheen that many realized through a liberal education. Before the war, Yates had risen to be a sheriff, but the American Revolution transformed him. In 1776, he was elected to New York’s provincial congress, where he helped write the state’s first constitution. He pushed for democracy and openly vowed to break the political stranglehold of the elite, or the “high-flyers,” as he called New York’s wealthiest and most powerful. Yates fought for more elective offices, annual elections, the secret ballot, graduated land taxes that fell most heavily on the wealthy, and the confiscation—and redistribution—of Loyalist estates. After the war, while a member of the state legislature, Yates resisted the augmentation of national powers, advocated inflationary monetary policies and other debtor-relief measures, and voted against the proposed impost that Congress sent to the states in 1782.

  New York’s conservative old guard hated Yates and other upstarts who sought to change the state politically and socially. They labeled these new men “antifederal peasants,” “little folks,” and “demagogues,” charging that they manipulated an unsophisticated citizenry already given to believe that men of “Abilities were … dangerous, and learning … a crime.” Both Hamilton and Philip Schuyler spoke of Yates’s supposed “ignorance and perverseness,” portraying him as a charlatan who played on class biases to gain more power.23

  Undergirding Hamilton’s assertions was a belief, common among the Founders, that their rule was disinterested. Their reasoning went like this: As they were wealthy, leisured gentlemen who were dependent on no one and no thing, they were worthy and virtuous, beholden to no sordid, local faction, and capable of governing for the greater public good. It was a noble conceit, but it was hooey. From the very first, America’s congressmen had shown their stripes as representatives of disparate sections, defending the interests of the colonies and states they represented in disputes over trade embargoes, the appointment of diplomats and the army’s general officers, whether or not to declare independence, what to seek from Great Britain at the peace table, and what, if anything, to accept of Spain’s offer regarding trade and the Mississippi River.

  Hamilton was more disinterested than most. He was neither a creditor nor a speculator in land or public securities, and though he was a shareholder in a bank, he owned exactly one share of stock. But others who railed against the likes of Yates, and who wrung their hands about democratic excesses that promoted narrow, local interests over what they presumed to be the national well-being, were hardly objective. Not a few sought to protect their wealth and investments, and to preserve the traditional social order and customary social distinctions. More and more of the most conservative Americans came to believe that the “vile State governments [were] sources of pollution,” as Henry Knox put it, or grew steadily more agitated about what a Massachusetts merchant called “plebian despotism” and the “fangs” of the citizenry. Hamilton shared their concerns. “All men of respectability” and “genius,” he said, “must for their own defence, unite to overset” radical, egalitarian democrats. They must ensure “that the power of government is intrusted to proper hands.”24 The sense was growing that the way to achieve this was through consolidation—the creation of a powerful national government safely under the sway of America’s traditional leaders, a government capable of addressing and resolving the new nation’s sundry problems, and simultaneously of foiling democratic excesses in the states.

  Within eighteen months of the end of the war, a consensus was building that Congress must have more power. Early on, New York and Massa
chusetts formally urged that the national government be strengthened, and in 1786 Virginia’s assembly proposed a “Continental Convention” to meet in Annapolis to consider “such regulations of trade as may be judged necessary.” In private, James Madison, who was every bit as much a consolidationist, or Nationalist, as Hamilton, made clear that he foresaw the Annapolis Convention as only a “first instance” toward fixing the “other defects” in the Articles of Confederation. If all went well, he said, “the present paroxysm of our affairs” would in due time be resolved by “bracing the federal system.” Other Nationalists thought it unwise to limit the Annapolis meeting to trade problems. A better strategy, they thought, would be to call a convention and put everything on the table. William Grayson, a Virginia congressman, thought it would be “fatal” to attempt only “a partial reformation.” He presciently advised that it would be preferable to consider all “grievances … at the same time,” as agreement on “one object will facilitate the passage of another, & by a general compromise perhaps a good government may be procured.”25

  Soon after Virginia urged the Annapolis Convention, Congress debated calling a national constitutional convention, though in the end it chose to appoint a committee to propose amendments to the Articles. In August, the committee reported seven amendments. Among other things, they would have given Congress authority to regulate trade, impose federally enforced penalties on states that did not meet national requisitions, and, as a last resort, empower the national government to collect taxes from recalcitrant states. But Congress tabled the proposed amendments. In all likelihood, the most conservative congressmen blocked their consideration. While the amendments would have given the national government the necessary authority to solve the nation’s economic problems, they would not have addressed the conservatives’ concerns about democracy. Furthermore, the conservatives despaired of Congress’s ever tackling that matter. Only a national convention, and only a convention composed of the proper sort of delegates, could truly cope with the democratic threats unleashed by the American Revolution.26