Our Founding Financial Dictator?
Friday, October 10, 2008
By Thomas J. DiLorenzo
LewRockwell.com
When
I appeared on MSNBC’s "Morning Joe" show recently to discuss
my new book, Hamilton’s
Curse, one of the first things fellow guest Pat Buchanan
said to me was, "How could you criticize Hamilton? He’s the
architect of the American economy!" Hamilton biographer Ron
Chernow claims that Hamilton was "the prophet of the capitalist
revolution in America"; and New York Times columnist
David Brooks has written that Hamilton single-handedly "created
capitalism." Forrest McDonald gives Hamilton almost all
of the credit for America’s becoming the richest nation "in
the history of the world."
What have
these men been smoking? If the study of economics has taught the
world anything over the past 250 years, it is that a capitalist
economy is the result of human action but not of human design, as
F.A. Hayek said. It is the result of the efforts of thousands, or
millions, of workers, consumers, entrepreneurs, inventors, marketers,
and business managers of all kinds. Not even the Russian communists
claimed that a socialist economy could possibly be the work of one
man: They "planned" their economy with politburos and
central-planning committees.
Hayek’s
most famous insight, which was the topic of his Nobel Prize acceptance
speech, was that no human mind could possibly process all of the
information that is required in even the smallest market society.
This is because most of the information that is used is not scientific
information but "information of time and place," i.e.,
the nitty-gritty, detailed information that millions of individuals
utilize to perform their jobs, from the butcher at the local grocery
store to the automobile technician, the school teacher, the farmer,
to the CEOs of the largest corporations. No computer is capable
of processing this information, which is constantly changing, day
by day. Hayek called the bogus notion that one man, or one committee,
could possibly be the "architect" of an entire economy
"the pretense of knowledge" and "the fatal conceit."
It helps to explain why socialism never worked, and it also explains
the foolishness of the claims about Hamilton that are made by his
worshippers who seem to think of him as some kind of Wizard of Oz
rather than as the rather egomaniacal, statist politician that he
was.
Nor was
Hamilton "the prophet of capitalism," as Ron Chernow has
said. Chernow apparently does not know what capitalism is, for Hamilton
was an enemy of free-market capitalism and early America’s foremost
proponent of mercantilism, the system of government-granted monopolies,
corporate welfare, protectionist tariffs, and other policies that
generally benefited politically-connected businesses at the expense
of the rest of society. It was exactly this system that the real
prophet of capitalism during Hamilton’s time, Adam Smith, criticized
so effectively in his great treatise The
Wealth of Nations
. Thomas Jefferson knew what he was talking
about when he said that Hamilton’s interventionist schemes, from
protectionism to corporate welfare to central banking were "the
means by which the corrupt British system of government could be
introduced into the United States." In his 1905 biography of
Hamilton William Graham Sumner wrote that Hamilton’s entire being
"quivered" with the urge to personally regulate and plan
all commerce in America. This impulse of Hamilton’s was not on behalf
of capitalism but of central planning, the hallmark of early twentieth
century socialism.
Hamilton
ignored or was unaware of most of the scholarship of economics of
his time, as well as the history of capitalism. As Nathan Rosenberg
and L.E. Birdzell, Jr. wrote in How
the West Grew Rich
, "By 1750, three hundred years of
gradual expansion of markets had been accompanied by a corresponding
expansion in production, both in agriculture and handicrafts."
And all of this occurred without any one "architect."
Indeed, the attempt by communist Russia to impose committees of
"architects" as central planners of the Russian economy
destroyed generations of accumulated capital and production, and
placed that country far behind the more capitalistic countries like
the U.S. in terms of economic growth and prosperity.
The institutions
of capitalism that were developed in Europe were imported to the
U.S. by British culture. Economic development was occurring all
around Hamilton as a result of the free market, although it was
hindered by various government regulations and taxes. Hamilton seems
to have been oblivious to all of this in his voluminous writings
on economics, which William Graham Sumner concluded were a mass
of confusion, "befogged in the mists of mercantilism."
By
the eve of the American Revolution, New England had developed a
highly successful commercial fishing industry that accounted for
10 percent of all exports to Europe. New Englanders pioneered the
whale oil industry (the chief source of light) and had become master
shipbuilders with the third largest fleet in the world.
The
South and the Mid-West developed America’s agriculture industry,
and by 1776 the American economy was ten times larger than it was
at the turn of the century. All of this occurred long before Hamilton
wrote any of his "reports" to Congress on manufacturing,
public debt and central banking, and without the benefit of any
central-planning architect.
The notion
that any one man could possibly be an "architect" of an
entire economy seems to be a form of adolescent hero worship that
some people have never outgrown. Opinion makers, columnists, and
book authors who make such claims are behaving in an extraordinarily
negligent way when they refuse to educate themselves on some of
these most elementary economic concepts – concepts that are routinely
taught to college freshmen – while making pronouncements about the
origins of American capitalism. Sometimes this negligence becomes
totally absurd. A recent historical exhibit in New York City was
labeled: "Alexander Hamilton: The Man Who Made America."
Thomas J. DiLorenzois professor of economics at Loyola College in Maryland
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