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Source link: http://archive.mises.org/9111/hamiltons-counterfeit-capitalism/

Hamilton’s Counterfeit Capitalism

December 16, 2008 by

When history confirms that hands-off is the only effective and humane approach to a bust, and to prosperity generally, while hands-on brings ruination, why do governments today consider every option but free markets? George F. Smith asks us to look back to the founding and the baneful influence of Alexander Hamilton. His influence has been highly detrimental to the majority who live outside the rarefied reality of national politics. FULL ARTICLE


Yancey Ward December 16, 2008 at 8:40 am

The green eyeshades were a nice touch!

Michael December 16, 2008 at 11:23 am

And in addition to the repeal of the 16th and 17th Amendments, perhaps an amendment to dismantle the Federal Reserve System is in order.

Mike December 16, 2008 at 12:21 pm

“And in addition to the repeal of the 16th and 17th Amendments, perhaps an amendment to dismantle the Federal Reserve System is in order.”

You gradualists. Always the same. How about an amendment to outlaw government?

Abhilash Nambiar December 16, 2008 at 12:41 pm

How about an amendment to outlaw government?

Mike you have just made a contradiction in terms. Amendments is what governments pass. If you try to pass an amendment to outlaw the government you are in effect asserting the legitimacy of that governing body that passes that amendment.

Here is another way to look at it. Liberty is our natural right any government that affirms and protects it has the right to exist, others don’t plain and simple. It is in the Declaration of Independence.

Michael December 16, 2008 at 12:49 pm


Not only is Mike’s suggestion a contradiction of sorts, it’s certainly an impossibility. Why would a bunch of self-serving autocrats voluntarily mute the power of the autocracy?

I guess in view of this, my suggestion for abolishing the 16th, 17th amendments (and proposing a ratification of a 28th amendment that would abolish the Federal Reserve) is somewhat naive.

Tim Kern December 16, 2008 at 12:56 pm

Every Austrian economist I’ve ever talked to decries federal reserve notes and points out how they can do nothing but continue to lose value.

They miss the only valuable thing about these scraps of paper: they are the only things the government will take in payment of taxes. These “worthless” notes, therefore, are of inestimable worth: they keep us out of jail, and they are the only things that will!

Abhilash Nambiar December 16, 2008 at 1:04 pm

DiLorenzo seems to have a de-facto hatered towards National governments and seems to think smaller local governments would be more apt at protecting people’s liberties. A sentiment he shares with Hans-Herman Hoppe, even though he is an anarchist.

That need not be necessarily true tough. If for instance the majority of citizens in town A are red heads and decide by referendum that all non-red heads are to pack their bags and leave or else risk getting imprisoned or killed, we now have a situation where people’s rights are abridged democratically.

This is not my idea. James Madision first noted it in Federalist Paper #10. He called it factionalism. The threat to people’s liberties stemming from their own tendencies. That is why he felt a big government did have a role to play in preserving liberties by diluting the impact of local factions. And that is why despite differences in opinion, he sided with Alexander Hamilton on the need for a National government.

Big governments can destroy liberties of course. That is detailed very well here. Small governments can too. Lincoln may not have fought the war to free the slaves. But the war had its origin in the slave problem, a problem stemming from local governments suppressing individual liberties.

I wonder how much appreciation DiLorenzo and his colleagues have for this fact.

To me at the end of the day whether the government is on a short leash or a long leash is not the point. In many ways even the existence or the non-existence of any government is beside the point. The point as always is are my liberties secure? If not what is the greatest threat to it in today’s world?

Michael December 16, 2008 at 1:17 pm

Mr. Kern,

Perhaps. There intrinsic worth is on par with toilet paper and firewood kindling. Hell, stack a good layer of them and we might even have a decent roof to protect us from the elements.

The other thing that will keep us from jail is total revolution (peaceable or otherwise) whereas the liberty lovers rise up and demand true change from their government, and not some empty rhetoric version of “change”. I think we had that chance not to long ago with Dr. Paul’s candidacy for POTUS.

Mr. Nambiar,

Great thoughts. Any government is capable of factionalism; This is a central axiom of anarchism. And we’re witnessing this today. The Proposition Eight debacle in California is a contemporary example.

Lucas December 16, 2008 at 1:38 pm

Jefferson certainly attempted to stand in Hamilton and the Federalists’ way on interpreting the constitution, as you mention. His rhetoric was on par, but his actions were not. Jefferson’s presidency was marked by continued expansion of the federal government and presidency (de facto war, non-importation act, worst of all the Embargo Act).

Joe Stoutenburg December 16, 2008 at 1:47 pm

Abhilash’s comments bring to mind an idea that has been forming in my mind. As an anarcho-capitalist, I approve of some functions of government. I only oppose the coercion that forces every person to accept the particular “solution” proposed by government. As I consider the voluntary institutions that could arise to meet the legitimate needs currently met by government, it occurs to me that we could soon have organizations that are very much like government. The task of devotees to liberty is ensure that those organizations act based upon mutual, voluntary contract toward their customers/citizens.

As Abhilash states, “the point as always is are my liberties secure?” To deal with factionalism, we should broaden our view outside of ourselves. Our liberties will not long remain secure if the liberties of our neighbors are grossly infringed. In the case of our redheaded friends, the solution ought not to be to institute a larger despotic government. Rather, we should directly march to their aid, guns in hand.

SweetLiberty December 16, 2008 at 2:13 pm

If we concede that Hamilton, Jefferson, and all “Founding Fathers” fell prey to interventionist impulses beyond protecting person and property, we must also concede that the best start mankind has ever had for a system of government was flawed from its inception. If man’s nature when elected to a position of power is to “do good” by whatever subjective means he deems valuable, then the system is corruptible, despite his most noble intentions, as the law of unintended consequences shall bear out. If ambiguities exist such that philosopher kings (read: judges) must interpret them, then the laws which restrict government are elastic. And given that the majority will always vote themselves the wealth of the minority, governments and their influence on economics will continue to create cyclical disasters. Therefore, unless some future generation truly divines how to restrain government to the protection of person and property within an ironclad contract, aren’t we all just tilting a windmills?

Abhilash Nambiar December 16, 2008 at 2:52 pm

SweetLiberty , a quote from voltaire comes to mind,
‘There has never been a perfect government, because men have passions and if they did not have passions, there would be no need for government.’

Steve Cross December 16, 2008 at 3:52 pm

Chernow’s book “Hamilton” should be read in conjunction with DiLorenzo’s. Without Hamilton we don’t survive past 1800. Jefferson was a “common man” Francophile who hid at Monticello while Hamilton faced combat. The idea was to create a Republic, not a Democracy. The loss of state sovereignty is the culprit in our current mess.

SweetLiberty December 16, 2008 at 4:46 pm

Abhilash, I agree that there never has been a perfect government, but does that preclude there ever being a perfect government? In what objective form would a perfect government take? If we suppose the U.S. Constitution was the closest model to draw from, what must be changed for it to be solidified and immutable?

In the spirit of never present a problem without a solution, I propose three roles for the Federal Government broken down into: 1) The Common Laws of the United States (which would document and enforce laws common to all 50 states against person and private property), and 2) The United States Military providing for the common defense of the 50 states (and its allies? – debatable), and 3) The Common Currency of the United States tied to the Gold Standard and GDP (once set, this would be on automatic pilot and could not be manipulated by politicians). The State Governments would hold only the power to define uncommon laws as they pertain to person and property. Current Constitutional Amendments such as the First, Second, etc. would be superfluous as, by definition, the new structure would never give government the power to interfere with citizen freedoms unless they directly and adversely affect other citizens. Business Lobbyists would be eradicated because government could not pass laws interfering with the economy in the form of tariffs, subsidies, etc.. I believe it is only with this form of government that we approach “perfection” in that we limit government to only those few things they can do and, by definition, all additional interference would be excluded. When the ashes of our current collapse settle, anything but a government limited to these three concepts will inevitably lead to expansion and boom/bust cycles. The nation that figures this out first will be the strongest nation the world has ever known.

Jason December 16, 2008 at 5:35 pm

Man, we need to be more careful about the words we use. “perfect government”, “organizations like government”, “factionalism”. These terms are not accurate or correct. There are not organizations that are “like” government. We are so used to thinking of the state as government. It is not, it is the antithesis. Contract is law. Organizations that defend laws are government. To say that no government perfectly defends the law, is not to say that we should give up and not expect them to do so or not require to do so.

That is like saying, “Since no bank is going to honor 100% of it’s demand deposits, thus they should not be made to honor there contracts.”

Jason December 16, 2008 at 5:39 pm

Oh, and by the way. Factionalism is the most stupid word in use. The word obscures the fact that rights are being violated. Either property rights are being violated or they are not. Call it like I see it. The only reason why local government is better than “national” government is because you can get away from it. Run to somewhere else. Also, if the leaders get too crazy they actually have to look the people who gave them monopoly in the eye and face them.

Abhilash Nambiar December 16, 2008 at 7:12 pm

Jason, you do not seem to realize the real danger factionalism poses when it comes to property right violation. If the violation is popular it will take place. You can look at the crazy leader in the eye and do nothing about it. You may be able to leave but not with the property they stole from you.

And if we agree that it is a stupid word to use (which I don’t), then we can agree also agree that James Madison is stupid.

ProSecessionist December 17, 2008 at 12:26 am

Here we go, bashing Hamilton again!
Hamilton was simply copying from the strongest economy of the time, Great Britain. Why shouldn’t he want a strong central bank? London had done very well with such a device, after all. Even after losing the war, Britaun was still powerful. So stop bashing Hamilton! There were no libertarian tracts, or societies, for him to copy from. He did the best he could, with what he had.

Gil December 17, 2008 at 2:01 am

“There are not organizations that are “like” government . . .”

That’s bull! At the end of the day the ‘guvmint’ is ultimately public land ownership. Triple H liked to say that Monarchies ought to be better run than Democratic Republics (Democracy and Republic aren’t antonyms X( ) yet Monarchies are privately-owned land ownership. The revolutions which brought down the Western Monarchies amounted to the great disregard of private property ownership and brings another dilemma: what if private landowners in Libertopia don’t like redheads and turn their backs to them in a way that they feel compelled to leave because no one in a particular area will trade with them? Love it or leave it? Oopsies!

Paul Marks December 19, 2008 at 2:42 pm

There is a slight error in the article.

The article mentions a “general welfare clause” – there is no such clause in the Constitution of the United States. The words “common defence and general welfare” occur at the start of Section Eight of Article One – and this paragraph is then followed by the list of powers granted to Congress (allowing them, in Congress wishes, to build post roads, have a navy and so on).

The words “common defence and general welfare” are the purpose of the following powers – they are not powers in them selves. Otherwise (for example) one would not need to list the power of Congress to have an army and a navy as these things would be covered by “common defence” and one would not need to list such things as the right to build “post roads” as this would be covered by the “general welfare”.

It is a small error to think of the “common defence and general welfare” as general powers (rather than the purpose of the powers granted to Congress) – but it is an error that has vast implications.

The Ninth and Tenth Amendments put the matter beyond all reasonable doubt – there is no general “general welfare power” in the Constitution of the United States, the “common defence and general welfare” is the purpose for which the powers given to Congress are granted.

Alpheus July 1, 2011 at 4:38 pm

“Here we go, bashing Hamilton again!”

I would agree that Hamilton may have been a great man, doing the best he could do. Having said that, we need to deal with his legacy, which has brought great harm to us. It’s long past time to realize that copying Great Britain wasn’t a good idea, and to move on to ideas that work.

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