Alexander Hamilton explains his economic policies (see From Bullets to Ballots, pp. 37-40, 44-52).
The Secretary of the Treasury, in obedience to the order of the House of Representatives of the 15th day of January, 1790, has applied his attention at as early a period as his other duties would permit to the subject of Manufactures; and particularly to the means of promoting such as will tend to render the United States independent on foreign nations for military and other essential supplies.
…. It ought readily to be conceded that the cultivation of the earthas the immediate and chief source of subsistence of manas the principal source of those materials which constitute the nutriment of other kinds of laboras including a state most favorable to the freedom and independence of the human mindone, perhaps, most conducive to the multiplication of the human specieshas intrinsically a strong claim to pre-eminence over every other kind of industry.
But, that it has a title to anything like an exclusive predilection, in any country, ought to be admitted with great caution. That it is even more productive than every other branch of industry requires more evidence than has yet been given in support of the position. That its real interests, precious and important as without the help of exaggeration, they truly are, will be advanced, rather than injured, by the due encouragement of manufactures, may, it is believed, be satisfactorily demonstrated. And it is also believed that the expediency of such encouragement in a general view may be shown to be recommended by the most cogent and persuasive motives of national policy….
…. Manufacturing establishments not only occasion a positive augmentation of the produce and revenue of the society, …they contribute essentially to rendering them greater than they could possibly be, without such establishments. These circumstances are
1. The division of labor.
2. An extension of the use of machinery.
3. Additional employment to classes of the community not ordinarily engaged in the business.
4. The promoting of emigration from foreign countries.
5. The furnishing greater scope for the diversity of talents and dispositions which discriminate men from each other.
6. The affording a more ample and various field for enterprise.
7. The creating in some instances a new, and securing in all, a more certain and steady demand for the surplus produce of the soil.
Each of these circumstances has a considerable influence upon the total mass of industrious effort in a community….
I. As to the Division of Labor.
It has justly been observed that there is scarcely anything of greater moment in the economy of a nation than the proper division of labor. The separation of occupations causes each to be carried to a much greater perfection than it could possibly acquire if they were blended…. This arises principally from three circumstances.
1stThe greater skill and dexterity naturally resulting from a constant and undivided application to a single object….
2ndThe economy of timeby avoiding the loss of it incident to a frequent transition from one operation to another of a different nature….
3rdAn extension of the use of machinery….
II. As to an extension of the use of machinery, a point which though partly anticipated requires to be placed in one or two additional lights….
It shall be taken for granted, and the truth of the position referred to observation, that manufacturing pursuits are susceptible in a greater degree of the application of machinery than those of agriculture. If so, all the difference is lost to a community which, instead of manufacturing for itself, procures the fabrics requisite to its supply from other countries. The substitution of foreign for domestic manufactures is a transfer to foreign nations of the advantages accruing from the employment of machinery, in the modes in which it is capable of being employed, with most utility and to the greatest extent.
The cotton mill, invented in England within the last twenty years, is a signal illustration of the general proposition which has been just advanced. In consequence of it, all the different processes for spinning cotton are performed by means of machines, which are put in motion by water and attended chiefly by women and children; and by a smaller number of persons, in the whole, than are requisite in the ordinary mode of spinning. And it is an advantage of great moment that the operations of this mill continue with convenience during the night as well as through the day.
The prodigious effect of such a machine is easily conceived. To this invention is to be attributed essentially the immense progress which has been so suddenly made in Great Britain in the various fabrics of cotton.
III. As to the additional employment of classes of the community not ordinarily engaged in the particular business.
This is not among the least valuable of the means by which manufacturing institutions contribute to augment the general stock of industry and production. In places where those institutions prevail, besides the persons regularly engaged in them, they afford occasional and extra employment to industrious individuals and families who are willing to devote the leisure resulting from the intermissions of their ordinary pursuits to collateral labors as a resource of multiplying their acquisitions or enjoyments.
The husbandman himself experiences a new source of profit and support from the encreased industry of his wife and daughters, invited and stimulated by the demands of the neighboring manufactories.
Besides this advantage of occasional employment to classes having different occupations, there is another of a nature allied to it and of a similar tendency. This isthe employment of persons who would otherwise be idle (and in many cases a burthen on the community), either from the bias of temper, habit, infirmity or body, or some other cause, indisposing or disqualifying them for the toils of the country. It is worthy of particular remark that, in general, women and children are rendered more useful, and the latter more early useful, by manufacturing establishments than they would otherwise be. Of the number of persons employed in the cotton manufactories of Great Britain, it is computed that 4/7 nearly are women and children, of whom the greatest proportion are children and many of them of a very tender age….
IV. As to the promoting of emigration from foreign countries. Men reluctantly quit one course of occupation and livelihood for another, unless invited to it by very apparent and proximate advantages. Many who would go from one country to another, if they had a prospect of continuing with more benefit the callings to which they have been educated, will often not be tempted to change their situation, by the hope of doing better, in some other way. Manufacturers who, listening to the powerful invitations of a better price for their fabrics, or their labor, of greater cheapness of provisions and raw materials, of an exemption from the chief part of the taxes, burthens and restraints which they endure in the old world, of greater personal independence and consequence under the operation of a more equal government, and of what is far more precious than mere religious tolerationa perfect equality of religious privilegeswould probably flock from Europe to the United States to pursue their own trades or professions if they were once made sensible of the advantages they would enjoy, and were inspired with an assurance of encouragement and employment, will with difficulty be induced to transplant themselves with a view to becoming cultivators of land….
V. As to the furnishing greater scope for the diversity of talents and dispositions which discriminate men from each other.
…. It is a just observation that minds of the strongest and most active powers for their proper objects fall below mediocrity and labor without effect if confined to uncongenial pursuits. And it is thence to be inferred that the results of human exertion may be immensely increased by diversifying its objects. When all the different kinds of industry obtain in a community, each individual can find his proper element and can call into activity the whole vigor of his nature. And the community is benefited by the services of its respective members in the manner in which each can serve it with most effect….
VI. As to the affording a more ample and various field for enterprise.
…. To cherish and stimulate the activity of the human mind by multiplying the objects of enterprise is not among the least considerable of the expedients by which the wealth of a nation may be promoted. Even things in themselves not positively advantageous sometimes become so by their tendency to provoke exertion. Every new scene which is opened to the busy nature of man to rouse and exert itself is the addition of a new energy to the general stock of effort….
VII. As to the creating, in some instances, a new, and securing in all, a more certain and steady demand for the surplus produce of the soil.
This is among the most important of the circumstances which have been indicated. It is a principal mean by which the establishment of manufactures contributes to an augmentation of the produce or revenue of a country, and has an immediate and direct relation to the prosperity of agriculture.
It is evident that the exertions of the husbandman will be steady or fluctuating, vigorous or feeble, in proportion to the steadiness or fluctuation, adequateness, or inadequateness of the markets on which he must depend for the vent of the surplus which may be produced by his labor; and that such surplus in the ordinary course of things will be greater or less in the same proportion.
For the purpose of this vent, a domestic market is greatly to be preferred to a foreign one, because it is, in the nature of things, far more to be relied upon….
…the foreign demand for the products of agricultural countries is, in a great degree, rather casual and occasional than certain or constant….
To secure such a market, there is no other expedient than to promote manufacturing establishments. Manufacturers, who constitute the most numerous class after the cultivators of land, are for that reason the principal consumers of the surplus of their labor.
This idea of an extensive domestic market for the surplus produce of the soil is of the first consequence. It is of all things that which most effectually conduces to a flourishing state of agriculture. If the effect of manufactories should be to detach a portion of the hands which would otherwise be engaged in tillage, it might possibly cause a smaller quantity of lands to be under cultivation, but by their tendency to procure a more certain demand for the surplus produce of the soil, they would, at the same time, cause the lands which were in cultivation to be better improved and more productive. And while, by their influence, the condition of each individual farmer would be meliorated, the total mass of agricultural production would probably be increased. For this must evidently depend as much, if not more, upon the degree of improvement than upon the number of acres under culture.
It merits particular observation that the multiplication of manufactories not only furnishes a market for those articles which have been accustomed to be produced in abundance in a country, but it likewise creates a demand for such as were either unknown or produced in inconsiderable quantities. The bowels as well as the surface of the earth are ransacked for articles which were before neglected. Animals, plants and minerals acquire a utility and value which were before unexplored….
VIII. Previously to a further discussion of the objections to the encouragement of manufactures which have been stated, it will be of use to see what can be said in reference to the particular situation of the United States against the conclusions appearing to result from what has been already offered….
If the system of perfect liberty to industry and commerce were the prevailing system of nations, the arguments which dissuade a country in the predicament of the United States from the zealous pursuits of manufactures would doubtless have great force. It will not be affirmed that they might not be permitted, with few exceptions, to serve as a rule of national conduct. In such a state of things, each country would have the full benefit of its peculiar advantages to compensate for its deficiencies or disadvantages.
If one nation were in condition to supply manufactured articles on better terms than another, that other might find an abundant indemnification in a superior capacity to furnish the produce of the soil. And a free exchange, mutually beneficial, of the commodities which each was able to supply on the best terms, might be carried on between them, supporting in full vigor the industry of each. And though the circumstances which have been mentioned and others which will be unfolded hereafter render it probable that nations merely agricultural would not enjoy the same degree of opulence, in proportion to their numbers, as those which united manufactures with agriculture, yet the progressive improvement of the lands of the former might, in the end, atone for an inferior degree of opulence in the mean time; and in a case in which opposite considerations are pretty equally balanced, the option ought perhaps always to be in favor of leaving industry to its own direction.
But the system which has been mentioned is far from characterizing the general policy of nations. The prevalent one has been regulated by an opposite spirit.
The consequence of it is that the United States are to a certain extent in the situation of a country precluded from foreign commerce. They can, indeed, without difficulty obtain from abroad the manufactured supplies of which they are in want; but they experience numerous and very injurious impediments to the emission and vent of their own commodities. Nor is this the case in reference to a single foreign nation only. The regulations of several countries with which we have the most extensive intercourse throw serious obstructions in the way of the principal staples of the United States.
In such a position of things, the United States cannot exchange with Europe on equal terms; and the want of reciprocity would render them the victim of a system which should induce them to confine their views to agriculture and refrain from manufactures. A constant and encreasing necessity on their part for the commodities of Europe, and only a partial and occasional demand for their own in return, could not but expose them to a state of impoverishment, compared with the opulence to which their political and natural advantages authorise them to aspire….
Whatever room there may be for an expectation that the industry of a people, under the direction of private interest, will upon equal terms find out the most beneficial employment for itself, there is none for a reliance that it will struggle against the force of unequal terms, or will of itself surmount all the adventitious barriers to a successful competition which may have been erected either by the advantages naturally acquired from practice and previous possession of the ground, or by those which may have sprung from positive regulations and an artificial policy….
One more point of view only remains in which to consider the expediency of encouraging manufactures in the United States.
It is not uncommon to meet with an opinion that though the promoting of manufactures may be the interest of a part of the Union, it is contrary to that of another part. The Northern & Southern regions are sometimes represented as having adverse interests in this respect. Those are called manufacturing, these agricultural states; and a species of opposition is imagined to subsist between the manufacturing and agricultural interests.
This idea of an opposition between those two interests is the common error of the early periods of every country, but experience gradually dissipates it. Indeed they are perceived so often to succor and to befriend each other that they come at length to be considered as one: a supposition which has been frequently abused and is not universally true. Particular encouragements of particular manufactures may be of a nature to sacrifice the interests of landholders to those of manufacturers, but it is nevertheless a maxim well established by experience, and generally acknowledged, where there has been sufficient experience, that the aggregate prosperity of manufactures and the aggregate prosperity of agriculture are intimately connected. In the course of the discussion which has [taken] place, various weighty considerations have been adduced operating in support of that maxim. Perhaps the superior steadiness of the demand of a domestic market for the surplus produce of the soil is alone a convincing argument of its truth.
Ideas of a contrariety of interest between the Northern and Southern regions of the Union are in the main as unfounded as they are mischievous. The diversity of circumstances on which such contrariety is usually predicated authorises a directly contrary conclusion. Mutual wants constitute one of the strongest links of political connection, and the extent of these bears a natural proportion to the diversity in the means of mutual supply.
Suggestions of an opposite complexion are ever to be deplored, as unfriendly to the steady pursuit of one great common cause, and to the perfect harmony of all the parts….
To constitute a fund for the operations of a Board, to be established, for promoting Arts, Agriculture, Manufactures and Commerce… Let a certain annual sum, be set apart, and placed under the management of Commissioners, not less than three, to consist of certain Officers of the Government and their Successors in Office.
Let these Commissioners be empowered to apply the fund confided to themto defray the expences of the emigration of Artists, and Manufacturers in particular branches of extraordinary importanceto induce the prosecution and introduction of useful discoveries, inventions and improvements, by proportionate rewards, judiciously held out and appliedto encourage by premiums both honorable and lucrative the exertions of individuals, And of classes, in relation to the several objects, they are charged with promotingand to afford such other aids to those objects, as may be generally designated by law….
In countries where there is great private wealth much may be effected by the voluntary contributions of patriotic individuals, but in a community situated like that of the United States, the public purse must supply the deficiency of private resource. In what can it be so useful as in prompting and improving the efforts of industry?