Updated: Jan 26
Political policy and higher-end political initiatives are concerned with economics and economic structures. These concerns can only be addressed when a free society is created--a society such as America. In 1790, Alexander Hamilton began his crusade of initiatives to promote the establishment of a national bank in the new nation; a bank, in some part, devoted to Public Credit and using the former concept to introduce such an institution as a National Bank (“First National Bank;” Schweikart and Allen 137). Alexander Hamilton’s ideas of a national bank made lasting political and economic contributions to the American experiment. Hamilton himself was versed in such economic influence in the various national banks of the Europeans (Chernow 347; Schweikart and Allen 145). By using his economic and historical knowledge, he was able to create an economic system, through a national bank, that would advance the country at large. The primary purpose of such an institution was to create and stimulate economic opportunity while also serving the government (Chernow 347). These principles, admittedly, seem to be at odds. Serving the citizenry while simultaneously serving the government is an almost universally impossible task. Thus, while Hamilton saw the need for a national bank, he recognized that the placing of such a government function in early America would have to come from a strong intellectual case for its implantation. Public Credit may seem to be a secondary thought to a national bank, but to Hamilton, it was one of the first steps. The creation and major presentation of the idea of Public Credit along with its necessity were presented publicly in January of 1790 (Hamilton 151; Schweikart and Allen 137). Hamilton made a vast array of emphatic and seemingly dramatic, while openly partisan and opinionated--claims which supported his plan. He argued, for example, that, “...the material and aggregate prosperity of the citizen’s of the United States; their relief from the embarrassments they now experience; their character as a people; the cause of good government,” was all dependent on Public Credit in the United States (Hamilton 152-153). Furthermore, such an initiative would “promote the arts of every kind” if only it would be of “adequate and stable value” (152). With such claims and such reasons that Public Credit would greatly benefit Americans, Hamilton had now created an opportunity for himself to give evidence for legitimate reasons to the institution of a National Bank. Economies, it was recognized by this founding father, must be structured on the belief in the human desire for self-interest (Chernow 345). The National Bank, then, would have to serve the public good so as to become a legitimate proposal. Through the Bank’s potential influence to establish a national currency and aid individuals in depositing or borrowing money, many accepted the bank as a net positive for the country (“First National Bank”). However, others remained unconvinced. Thomas Jefferson, John Adams, and James Madison, for example, were all skeptics of banks, credit, and stocks (Chernow 346). Before the National Bank was accepted as a plausible idea, Jefferson was completely adverse to any bank in general (Chernow 351). Once widespread acceptance of a National Bank was recognized, Jefferson seemingly shifted his position to voice how state banks were helpful; just a National Bank would bring wreckage (“First National Bank”). His last stand against Hamilton can be summed up in the constitutionality of a National Bank and the argument over Article 1 Section 8 Clause 18 of the Constitution (“First National Bank”). After the bill for the National Bank breezed through the Senate and passed the house, Jefferson took action by requesting George Washington (currently president) to veto the bill; and, by such request, he gave Washington a written case against a National Bank (Chernow 351). To weigh opinions, Washington asked Hamiton to respond to Jefferson, which he did fifteen thousand written words and eight days later in a partly apoplectic manner (Chernow 352). Upon reading the response, Washington signed the bill into law, instituting a National Bank for twenty years. In essence, the National Bank would be run by various means. The bank was to have a worth of ten million dollars, up to two million of which could be held by the Federal Government; all other shareholders would be private (Schweikart and Allen 144; Chernow 349). Twenty-five men would sit on the board of directors and five of these would be chosen by the Government (Schweikart and Allen 145). Since Hamilton was averse to paper money, the bank would not print such a thing. However, it could issue banknotes wherein the note could be exchanged for gold or silver (Schweikart and Allen 145; Chernow 355-356). Loans could be taken out from the bank as well, allowing individuals more space to start businesses. This understanding of loans, or Public Credit, is perhaps the most understated function of the bank and one of the reasons by which Hamilton felt vigorously that a bank was necessary (Schweikart and Allen 146). In short, the bank would protect federal tax and land sale revenues, smoothen governmental financial affairs, administer government payroll, and produce currency (Schweikart and Allen 145-146). This debate on the National Bank created some of the first major tensions between supporters of the Constitution which developed into mainstream political parties (Chernow 351). Since Hamilton was the victor in this issue, he became, largely through his paper to Washington in response to Jefferson, the foremost and unparalleled interpreter of the Constitution (Chernow 355). In the present day, Americans still are affected by the waves of the First National Bank: it set not only an economic precedent but a constitutional precedent. Alexander Hamilton set a precedent for the economic involvement of the Federal Government. No man of the founding was so involved in both the political and economic structure of early America (Chernow 344). The National Bank in relation to Public credit is one of the most lasting contributions of Hamilton. It was not only the opening of minds to these ideas, nor was it merely the planting of them, but it was also their broad and wide-reaching effects. The debate over the National Bank slashed the ties of the Federalists and created the Republican party. It was also one of the first of many offenses that James Madison took with the Federalists making him become a Republican--indeed, a major political shift (Schweikart and Allen 147). It is difficult to overstate the importance of the National Bank and Public Credit in the economic development of the country. A National Bank and Public Credit were economic policies that forced political opinions, and nearly threatened the splitting of the country. Out of the Revolution came freedom, and the founders were faced with what to do with such freedom. Impossible it is to argue against the changes that the National Bank had on early Americans; foolish it is to neglect its political and economic effects. Alexander Hamilton’s contributions were not just to the National Bank, but to the political landscape that still exists today. A free society produces a place for political and economic policy that will promote the good of the citizenry; Hamilton was the United States’ foremost and longest-lasting political and economic policymaker. He was, in effect, the rock dropped in a lake of freedom--upon dropping the rock into the lake of freedom there was created undeniable political and economic waves.
Chernow, Ron. Alexander Hamilton. Penguin Books, 2005. Hamilton, Alexander. Selected Works of Alexander Hamilton (Word Cloud Classics). Canterbury Classics, 2018.
“Hamilton, Jefferson, and the First National Bank of the United States.” Digital History, 2007, www.digitalhistory.uh.edu/teachers/lesson_plans/pdfs/unit3_4.pdf.
Schweikart, Larry, and Michael Allen. A Patriot’s History of the United States: From Columbus’s Great Discovery to America’s Age of Entitlement, Revised Edition. 10th Revised ed., Sentinel, 2014.
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