Alexander Hamilton’s Contradictions

Who Gets to Claim the Founder’s Legacy?

By Erik W. Matson.

Moral authorities are indispensable elements of our political life. Contemporary movements often look to legitimate themselves by invoking the perspectives of great philosophers and statesmen, living or deceased. In America, such invocations often occasion debates about the opinions and principles of our founders.

There has recently been a fresh round of debate over the ideas of one of the most influential figures of the young American republic: Alexander Hamilton. Opposing groups within the conservative movement—the “national conservatives” and the “freedom conservatives”—have argued over Hamilton’s political economy and its consistency with the policy agenda of the Trump administration.

On the “national conservative” side, J.D. Vance has approvingly described the Republican Party as moving away from the ideas of Milton Friedman and toward those of Hamilton. US Treasury Secretary Scott Bessent argued in an address at The Economic Club in New York (subsequently published as an article in the Wall Street Journal) that Trump’s economic policy orientation is squarely in the Hamiltonian tradition.

Responding to Vance, David Bahnsen, an important figure in the “freedom conservative” movement, made the case that there is in fact not much daylight between the classically liberal outlook of Friedman and the sensibilities of Hamilton. Both men, according to Bahnsen, supported robust capital markets, economic dynamism, and the sanctity of private property. He claims that had Hamilton and Friedman been contemporaries, they would have been in broad agreement about the scope and direction of economic policy.

Phil Gramm and Don Boudreaux pointed out in the Wall Street Journal that, contra Bessent (and Vance and US Trade Representative Jamieson Greer), Hamilton was in fact not much of a protectionist. It is a stretch to say that the industrial policies and regulations favored by Trump, Vance, Bessent, and Greer accord with Hamiltonian principles.

Which side has the upper hand in this debate? Which faction of contemporary conservatives gets Hamilton? It is difficult to answer definitively. My own sense, however, is that the answer is probably “neither.”

It is understandable that national conservatives feel a certain kinship with Hamilton. Noted American protectionists since at least Henry Clay have looked to Hamilton for inspiration. Nonetheless, Hamilton’s preferred policies are themselves more nuanced and less intrusive than those preferred by contemporary national conservatives.

As Gramm and Boudreaux note in their article, one finds in Hamilton’s famous 1791 “Report on Manufactures” a much more limited advocacy for tariffs than normally assumed. Hamilton favored modest tariff rates mainly for revenue purposes, not for trade restriction—tariffs were the major revenue source for the federal government until the 20th century, and Hamilton was sophisticated enough to recognize that tariffs cannot easily be used for revenue and protection at once. (Exorbitant tariff rates diminish federal revenues, but low tariff rates do not offer much protection for domestic industry.)

Hamilton mainly preferred to encourage American industry with subsidies or “bounties.” His argument for bounties themselves was largely contingent on the fledgling state of early American industry. It presupposed low levels of capital accumulation and vast amounts of undeveloped land. (Henry Clay’s “American System” worked from similar presuppositions.)

The Hamiltonian arguments simply do not work for what the United States of America has become in 2026: an innovating and manufacturing powerhouse with a massive federal government financed mostly by direct income taxes.

It must also be mentioned that Hamilton strongly favored foreign capital inflows, which are themselves a natural consequence of imports. “Instead of being viewed as a rival,” he wrote, foreign capital investment “ought to be considered as a most valuable auxiliary, conducing to put in motion a greater quantity of productive labor, and a greater portion of useful enterprise than could exist without it… [every] farthing of foreign capital which is laid out… is a precious acquisition.” One of his arguments for supporting manufactures, moreover, was that an American manufacturing boom would increase immigration. He wanted immigrants to “flock from Europe to the United States, to pursue their own trades and professions.” These are hardly national conservative sentiments.

But if some elements of Hamilton’s political economy sit uneasily with national conservative policy preferences, they fare little better with those of freedom conservatives, not to mention classical liberals and libertarians. Hamilton might have espoused commitments to “upright and liberal policy,” but his political sensibilities were instinctively too hierarchical, too inclined toward centralized political authority, and, in my view, too skeptical of liberty for the freedom conservative cause.

The character of Hamilton’s sensibilities can be approached by way of three of his major initiatives during George Washington’s first administration that helped precipitate the origin of the first party system in America. These three initiatives influenced James Madison to break rank from his erstwhile Federalist ally and join Thomas Jefferson in spearheading the opposition movement that became the Democratic-Republican Party.

The 1791 “Report on Manufactures” was the third initiative. The first was Hamilton’s 1790 “Report on Public Credit.” In this report, he proposed that the newly constituted federal government assume state debts accumulated during the war and honor those debts at par, irrespective of whether they had been traded away by their original holders (upon whom the debts were frequently forced during the war in “exchange” for provisions for the Continental Army). The second initiative was his 1790 proposal that the federal government charter and purchase ownership stakes in the First Bank of the United States, which would in turn provide loans to the federal government and receive and hold federal tax revenue. By the time the “Report on Manufactures” appeared in 1791, Hamilton’s vision had become clear. He desired a consolidated and powerful national government with a revolving public debt—a government built on the back of a quasi-public bank that would actively intervene in economic affairs to favor certain industrial undertakings and promote military power.

Hamilton’s adversaries believed that his initiatives would transform the young American republic into the very thing it had set itself against when it declared independence from Britain: a corrupt empire financed by commercial restrictions and animated by a sickly intercourse between federal politicians, regulators, and financial speculators. In view of the advancement of Hamilton’s agenda, Benjamin Rush wrote to James Madison in 1790 that he wished his name “blotted out from having contributed a single mite towards the American Revolution.”

“We have,” continued Rush, “effected a deliverance from the national injustice of Great Britain only to be subjugated by a mighty Act of national injustice to the United States.” James Madison seemed to believe similarly (although it must be said that his views on the issue of the bank evolved during his presidency). Following the congressional chartering of the First Bank in 1791, Madison wrote to Jefferson that the speculators on bank shares would soon become “the praetorian band of the government—at once its tool & its tyrant; bribed by its largess, & overawing it by clamours and combinations.” Jefferson himself charged Hamilton with rearing up a “Speculating phalanx, in and out of Congress, which has since been able to give laws and to change the political complexion of the government of the US.”

There are clearly polemical elements to these charges, and they must be taken as utterances in the heat of party politics. One could reasonably argue that Hamilton was as committed to the revolutionary cause as his Democratic-Republican adversaries, and that he was a true friend of liberty. Perhaps he simply recognized, as his opponents did not, the great Humean adage: “[L]iberty is the perfection of civil society; but still authority must be acknowledged essential to its very existence: and in those contests, which so often take place between the one and the other, the latter may, on that account, challenge the preference.”

Perhaps Hamilton’s efforts to consolidate federal power were carried out with the goal of preserving freedom—the inalienable rights of life, liberty, and property—in mind. But it does seem hard to shake the sense that the spirit of his plan, when seen in its broader context, is not especially liberal, and does not accord with the priorities of contemporary freedom conservative movement’s goals of reducing the size, scope, debt, and discretionary authority of the federal government.

The real tell for Hamilton comes in the “Report on Manufactures” when he considers potential counterarguments to his positions. He spends the opening sections of the “Report” establishing the point that manufacturing is no less productive than agriculture. He proceeds to make his case that a booming manufacturing sector would serve America well—and be incredibly profitable. He then takes on the natural question: If manufacturing would be so profitable in America, why does the government need to subsidize it? His answer is surprising, and in a way, it is the centerpiece of his entire outlook in political economy.

Americans—like all people—in Hamilton’s view are too much inclined toward agriculture, too averse to risk-taking, and too committed to the status quo. Americans want to move westward and be left alone. Americans are not sufficiently aware of or interested in profit opportunities. Americans for Hamilton can perhaps be captured with J.R.R. Tolkien’s description of hobbits: “[T]hey love peace and quiet and good tilled earth: a well-ordered and well-farmed countryside was their favourite haunt. They do not and did not understand or like machines more complicated than a forge-bellows, a water-mill, or a hand loom, though they were skillful with tools.”

In Hamilton’s own words: “The desire of being an independent proprietor of land is founded on such strong principles in the human breast, that, where the opportunity of becoming so is as great as it is in the United States, the proportion will be small of those… who would be diverted from it towards manufactures.”

“Experience teaches,” continued Hamilton, “that men are often so much governed by what they are accustomed to see and practise, that the simplest and most obvious improvements, in the most ordinary occupations, are adopted with hesitation, reluctance, and by slow gradations.” So, Hamilton believed the federal government ought to subsidize industrial activity as a way of inspiriting an overly conservative, agricultural population to take up profitable industrial activities.

The irony is that Hamilton himself was an incredibly entrepreneurial and ambitious man, surrounded by an entire cohort of entrepreneurial, ambitious men who rebelled against the most powerful empire in the world and forged a brand-new model of government. Hamilton had every reason to think that Americans, by virtue of self-selection, were of all people less inclined to the status quo than most people and more attuned to profit opportunities. Tocqueville certainly thought so when he visited America in the 19th century: “The American follows not only a calculation of his gain, but an impulse of nature” in trade. But for one reason or another, Hamilton was simply distrustful of the natural market process (Don Boudreaux reflects similarly here) and the individuals that comprise it. That does not detract from his brilliance in other areas, nor does it mean that he was completely illiberal. But it does make it hard to square the tenor of his thought with the contemporary freedom movement.

Erik W. Matson is the Gibbons Fellow in Economics at the Catholic University of America and Co-Director of the Adam Smith Program at George Mason University.