Managing America- Alexander Hamilton’s views about National Wealth

History is a storehouse to be entered only as occasion requires is divided into natural and civil, treating the facts as natural non-human or actions of man. History without using interpretation is a reasonable method to report intrinsically important facts as intended by the author of the thought.

Alexander Hamilton-Secretary of the United States Treasury - 1789 to 1795

Hamilton sought strong central government acting in the interests of commerce and industry. He brought to public life a love of efficiency, order and organization. In response to the call of the House of Representatives for a plan for the "adequate support of public credit," he laid down and supported principles not only of the public economy, but of effective government.

Hamilton pointed out that America must have credit for industrial development, commercial activity and the operations of government. It must also have the complete faith and support of the people. 

There were many who wished to repudiate the national debt or pay only part of it. Hamilton however insisted upon full payment and also upon a plan by which the federal government took over the unpaid debts of the states incurred during the Revolution.

Hamilton also devised a Bank of the United States, with the right to establish branches in different parts of the country. He sponsored a national mint, and argued in favor of tariffs, using a version of an "infant industry" argument: that temporary protection of new firms can help foster the development of competitive national industries. These measures -- placing the credit of the federal government on a firm foundation and giving it all the revenues it needed -- encouraged commerce and industry, and created a solid phalanx of businessmen who stood firmly behind the national government.

Given the concept of economic thought is a recent, historically speaking, of modern man, what value can the study of antiquity be in today’s society?

The main thought that comes to mind is how true wealth was created.   

Wealth today is created by paper of a perceived value.  Paper money today is a promissory note. The value of stocks and bonds are based on a perceived value of another entity.

The question; what is the value of anything?

Mr. Secretary: What are your thoughts about national wealth and revenues?

Secretary Hamilton: “The nations with whose wealth and revenues we are best acquainted are France, Great Britain and the United Provinces. The real wealth of a nation consisting in its labour and commodities, is to be estimated by the sign of that wealth, its circulating cash. There may be times, when from particular accidents, the quantity of this may exceed or fall short of a just representative, but it will return again to a proper level, and in the general course of things maintain itself in that state.”

“The circulation of France is almost wholly carried on in the precious metals, and its current cash is estimated at from fifteen to Sixteen hundred millions of levirs. The nett revenue of the kingdom, the sum which actually passes in to the publick coffers, is somewhere between three hundred and sixty, and four hundred millions, about one fourth of the whole of its currency. An estimate of the wealth of this nation is liable to less fallacy than of that of the other two, as it makes little use of paper credit which may be artificially increased and even supported a Long time beyond its natural bounds.”

“It is supposed that the gross sum extracted from the people by the collectors of the revenue may be one third more than that which goes in to the treasury, but as their exactions are excessive and fall too heavy on particular orders who are by that means reduced to indigence and Misery it is to be inferred, that with moderate and reasonable expenses of Collection, the present revenue is as great as the Kingdom can well afford from its present quantity of wealth.”

Secretary Hamilton added: “The circulating cash of Great Britain in paper and specie may be stated at about forty Millions of pounds Stirling. Mr. Home supposes it to have been at the time he wrote his essay on the ballance of trade, about thirty millions; other writers have carried it to fifty and it is probably in a mediam that we shall find the truth. I do not include in this the whole amount of Bank notes, Exchequer bills, India bonds &c &c, but only such part as is really employed in common circulation and performs the offices of current. cash. In 1775 by Doctor Price's statement the nett revenue of Great Britain was ten millions-that is about one fourth of its current cash as in France.”

“I have never met with any calculation that might be Depended upon of the current cash of the Seven provinces. Almost the whole of their coin as well as large quantitys of plate and Bullion are shut up in the Bank of Amsterdam. The real wealth of the bank is beleived to he about fifteen Millions Sterling though upon the Strenght of this fund it has a Credit almost unlimited, that answers all the purposes of Cash in Trade. As the Dutch by their prudent maxims have commonly the rate of exchange throughout Europe in their favour, and a considerable balance of Trade, the use of paper credit (which in part also depends upon the particular nature of their Banks) has not the same tendency with them as in England, to banish the precious metals. We may therefore suppose these to be here as in France the true sign of the wealth of the nation. If to the fifteen Millions in bank we add two Millions of specie for the  retail circulation, and various transactions vi business we shall I imagine have nearly the true stock of Wealth of the United Provinces.”

Secretary Hamilton continued: Their revinues amount to something more than four millions: and bear the same proportion to the stock from which they are drawn as those of France and England. I confess however the data in their case are not sufficiently ascertaind to permit us to rely equally on the result. From these three examples we may venture to deduce this general rule-that the proportion of revenue which a nation is capable of affording is about one fourth of its circulating cash so far as this is a just representative of its labour and commodities.”

“This is only applicable to commercial countries, because in those which are not so, the circulating cash is not an adequate sign; a great part of domestic commerce is carried on by barter, and the state [must] receive a part of its dues in the labour and commodities the selves. The proportion however of the revenues of such a state to the aggregate of its labour and commodities ought to be the same, as in the case of Trading nations to their circulating cash, with this difference that the diffeculty of collection and transportation, the waste and embezzlment inseperable from this mode of revinue would make the real advantage and ultimate gain to the State infinnitly less, than when the public dues are paid in Cash.”

Secretary Hamilton concluded: “When I say that one fourth part of its stock of Wealth is the revenue which a nation is capable of af-fording to the Government, I must be understood in a qualified, not in an absolute sense. It would be pre-sumptuous to fix a precise boundary to the ingenuity of financiers or to the patience of the people; but this we may safely [say] that taxation is already carried in the nations we have been speaking of to an extent which does not admit of a very considerable increase without a proportionable increase of Industry. This suffices for a Standard to us, and we may proceed to the application.”

“From a comparison of the several estimates I have seen of the quantity of current-cash in this Country previous to the War (specie and paper) I have settled my opinion of the amount at thirty millions of Dollars, of which about eight might have been in Specie. One fourth of this by analogy was at that time the proper revenue of these states, that is seven and a half Millions of Dollars.”

Mr. Martin Chekel, a noted international businessman and author of the thought provoking “Managing America” six book series and the retrospective eight book series “The Diary of American Foreign Policy 1938 – 1945” that laid the foundation for US foreign policy the past seventy-four years.