Born in 1757 in the Caribbean, Alexander Hamilton arrived in New York as a teenager to attend school, and later became a New York attorney. As a member of the Constitutional Convention, he was supported a strong federal government. As such, he authored 51 of the 85 ''Federalist Papers'' that called for support of the U.S. Constitution. A major purpose of his financial policy as Treasury Secretary in President George Washington's cabinet was to consolidate federal control over the American economy.
After the Revolutionary War, the U.S. had acquired $54 million in foreign debt. This was the worst financial crisis the fledgling country would face until the Great Depression in the 1930s. Hamilton believed people were essentially self-interested, and he did not believe Americans would come together to solve the debt problem out of goodwill. If the federal government established strong control over the country's economy, he reasoned, it could create incentives for people to participate in repairing the economy.
One way for the federal government to consolidate control over the financial system would be for it to oversee repayment of the national debt. Though Mid-Atlantic states like North Carolina, Virginia, Maryland and Pennsylvania had already repaid war debts and objected to Hamilton's plan, he got his way on this issue. Because of his insistence that the U.S. repay national debts with interest, the country established good credit. This brought significant international business into the country, which helped alleviate the financial crisis at hand.
Establishing a National Bank
Hamilton hoped to increase federal control of the economy by establishing a national bank like the Bank of England. Thomas Jefferson, James Madison and other influential members of the Constitutional Convention opposed this on the grounds that it would favor banking elites and create conflicts of interest between finance and government. Hamilton saw it as a way to ensure elite participation in the national economy. The Bank of the United States passed through the Convention despite opposition, but it only lasted until its expiration date in 1816 under President Andrew Jackson.
Influence on Modern Capitalism
Even though they were controversial, Hamilton's federalist economic policies would go on to shape the direction of modern American capitalism. Most of the ideas developed for the Bank of the United States -- such as the ability to regulate the money supply -- returned under the auspices of the Federal Reserve in the 20th century. The idea of a perpetual national debt became a feature not just of the U.S., but of the global economy.
- U.S. History: Hamilton's Financial Plan
- Spark Notes: Alexander Hamilton and Finance in the Washington Administration
- Spark Notes: Alexander Hamilton - Summary
- Digital History: Alexander Hamilton's Financial Program
- Blinn College: Alexander Hamilton's Fiscal Program, 1791-1793
- New York Times: Mr. Hamilton's Growth Strategy
- U.S. Department of the Treasury: About Alexander Hamilton
- U.S. News and World Report: Alexander Hamilton and the Start of the National Debt
- Biography: Alexander Hamilton
- PBS: Establishing a National Bank
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