Lawrence White is a professor of economics at George Mason University. Courtesy | Wikiberal
While both Alexander Hamilton and Thomas Jefferson were aware of Adam Smith’s views on banking, neither of their plans for a national bank followed Smith’s economic principles, Lawrence White, professor of economics at George Mason University said in his speech “Hamilton vs. Jefferson: The First U.S. National Bank,” hosted by Hillsdale’s political economy club Praxis, April 17.
“Hamilton wanted to pay back the Revolutionary War debt of the Continental Congress, but also, he wanted to absorb the unpaid debts of the state governments that they had built up during the revolution,” White said. “This was controversial because some states had already paid back, and they didn’t want to be on the hook for helping to pay back the debt of the states that hadn’t already paid back.”
White said the goal of the Bank of the United States was to facilitate this process and that it was a means of not only lending money to the new government, but of collecting taxes. According to White, Hamilton was a “big fan” of public debt, and he is often associated with the maxim, “public debt is a public blessing.” Hamilton argued that, because the rich nations in Europe had national banks, the United States should also have one.
White said, in contrast, Thomas Jefferson wanted the federal government to be as weak as possible.
“Jefferson emphasizes that there’s nothing in the Constitution that says the federal government can charter corporations,” White said. “This remained so controversial that when the federal government first began to charter banks during the Civil War, they didn’t call them corporations, they called them national associations.”
According to White, there is irony in Jefferson arguing against monopoly, for the solution to a monopoly is chartering many nationwide banks.
“Jefferson didn’t want the federal government to charter any banks, so his solution to the monopoly of one bank is to have zero federal banks,” White said. “He’s right to complain that it’s a privileged monopoly, but as I said, the solution to a monopoly is: let anybody do it. But Jefferson didn’t want the federal government to be chartering any banks because that empowers the federal government at the expense of the state governments.”
Sophomore and President of Praxis Brian Shia said he appreciated White’s speech.
“Dr. White is a leading expert in money and banking, and he’s very knowledgeable,” Shia said. “He went deep into what Adam Smith thought about free banking versus a national bank, and how that influenced Hamilton and Jefferson.”
Shia said he found the discussion of the factional differences fascinating because they influenced Hamilton and Jefferson to turn away from Smith’s recommendations.
“Hamilton and Jefferson had read Adam Smith, and they recommended him to be read by other people. They were definitely aware of the arguments, but they had self-interest, and Smith would have predicted that too,” Shia said.
Carver Means, sophomore and member of Praxis, said he believes conservatives undervalue Hamilton.
“Hamilton often gets all the blame for big government, while Jefferson is praised as a proto-libertarian saint,” Means said. “The most fascinating insight from Dr. White’s talk was that, from a classical liberal perspective, Hamilton’s proposal for a national bank was actually better than Jefferson’s.”
Means distinguished between Smith, Hamilton, and Jefferson, saying they all disagreed on what constitutes a good banking system.
“Hamilton wanted one national bank, Jefferson wanted zero,” Means said. “Adam Smith would have preferred a free market of competing national banks, but one is better than nothing.”
