A History of the American People

Hamilton thought he had made his point and that the government had gained reputation and strength.’ Following his reports on the debt and the excise, Hamilton introduced two more in 1791, on a national bank and on manufacturing industry. The bank was not a new idea. England had created a national bank in the 1690s, which had successfully acted as a lender of last resort and an underwriter of the national money supply. In 1781 Congress had chartered the Bank of North America as the first private commercial bank in the country and the first to get government incorporation. This was a scheme of Robert Morris, who, as superintendent of finance, had been Hamilton's predecessor. The Bank opened in Philadelphia in 1782 with Franklin, Jefferson, Hamilton, James Monroe, and Jay among its original stockholders and depositors. It paid Washington's army and buttressed the faltering finances of the government. Hamilton's plan was more ambitious. His Bank of the United States was more like the Bank of England, a true central bank chartered for twenty-one years, with a board of twenty-five, a main office, and eight branches, serving as the government's fiscal agent. Most of its stock was held by the government, which was also its principal customer. Jefferson protested that the Constitution made no provision for a central bank, and that in creating such a federal institution the government was acting ultra vires. He also protested, even more vehemently, against Hamilton's fourth report on manufactures. In effect, Hamilton, building on Adam Smith's Wealth o f Nations, but going well beyond it, proposed that the federal government should deliberately and systematically promote the industrialization of the United States. Smith had opposed such state interference in the free- enterprise, capitalist economy as a throwback to mercantalism. Hamilton did not disagree in general, but thought thatpriming the pump' was necessary for a small, new nation,
overshadowed by the manufacturing power of its former imperial ruler, Great Britain. He
intended such help to be temporary, until American industry could stand on its own feet.
Jefferson and his friends protested against the scheme not on grounds of economic theory but
for much more fundamental reasons. He believed that the new republic would flourish only if the
balance of power within it was held by its farmers and planters, men who owned and got their
living from the soil. His reasoning was entirely emotional and sentimental, and had to do with
the Roman republic, where Cicero had made the same point. Farmers, he believed, were
somehow more virtuous than other people, more staunch in their defense of liberty, more suited
to run a res publica. Deliberately to create a huge manufacturing interest,' with thousands of money-grubbing manufacturers and merchants, clamoring for special privileges and tariffs, seemed to him the road to moral ruin. Hamilton scoffed at such (to him) puerile reasoning. But many important politicians, especially in the South, agreed with Jefferson. Patrick Henry, for instance, who was opposed to the centralization inherent in the Constitution anyway, linked the proposals for the creation of the central bank to what he calleda monied interest.' In an agricultural country like this,' he remonstrated,to erect, and concentrate, and perpetuate a large
monied interest [must be] fatal to American liberty.' It was `the first symptom of a spirit which
must either be killed, or will kill the Constitution of the United States.'
The farmers and planters of the South hated Philadelphia and its rich Quakers, they hated New
York and its rich lawyers, and, most of all, they hated Boston and its rich merchants and
shipowners, many of whom were already joining with the Northern churches in calling for an
end to slavery throughout the United States. They noted that the Boston rich-the Cabots, the
Lowells, the Jacksons, the Higginsons-were right behind Hamilton. These were the clever gentry
who had bought the public paper at 15 or 20 percent and, thanks to Hamilton, had it redeemed at
par. Farmers, large or small, had a long history of hatred for banks in the United States, which