Published by EH.Net (January 2019)

Response to Robert E. Wright’s Review of Gregory May’s Jefferson’s Treasure: How Albert Gallatin Saved the New Nation from Debt — by Gregory May.

Robert Wright’s review of my political biography of Albert Gallatin completely misses the point: the book is about the failure of Jeffersonian fiscal and monetary policies. It traces those policies from their inspiration through their implementation to the military disasters and federal bankruptcy of the War of 1812. It shows why the policies went wrong, and it concludes with a few glimpses at related dysfunction during the following decades. Apart from criticizing the biography for failing to be an economic history, Wright has relatively little to say about any of that. He insists that the Jeffersonian Republicans did not undo “Hamilton’s fiscal constitution,” but he does not engage with the body of evidence to the contrary discussed at length throughout the book. He chooses instead to focus on a selection of “errors” that turn out to be his misunderstandings or differences in interpretation.

Take for example Wright’s assertion that I push the Jeffersonian canard that ownership of federal bonds in the 1790s was concentrated among wealthy men in Northern seaports. Wright’s own outstanding work on the bond registers has shown that the bonds were widely held, and I do not dispute that. I simply say, in the course of a swift synthetic introduction to the body of the book, that about two-thirds of the debt for which records survive was held by a few hundred wealthy men in coastal cities. The excellent quantitative appendices in Wright’s One Nation Under Debt (New York: McGraw-Hill, 2008) support that. They show that about 64.7% of the debt belonged to 183 persons in 1795. They also show that 27.9% of all bondholders lived in just seven of the coastal cities. And a look through the data set that Wright helpfully posted some years ago shows that most of the largest bondholders were among the coastal city dwellers.

Turn to Wright’s professed disappointment with my statement that Hamilton proposed the whiskey tax in order to raise revenue. The tax, Wright says, really aimed to offset the protection that import duties gave to domestic distillers. Although he refers to the inelasticity of demand for spirits, what he has described is the effect of substitution on domestic prices and collections from imports. In other words, even under Wright’s formulation, Hamilton proposed the whiskey tax in order to raise more revenue than he thought he could collect without it. In fact, analysis of Hamilton’s reports and papers indicates that his motives were broader and more complex. He did not push the whiskey and other excise taxes until he needed more revenue, and to the extent he had other important motives, they were to diversify the federal government’s tax base and to prevent the states from exploiting federal desuetude to gain a practical grip on desirable objects of internal taxation. Other historians sympathetic to Hamilton’s program have summarized all of this in exactly the same way that I did in the book. (See, for example, Stanley Elkins and Eric McKitrick, The Age of Federalism: The Early American Republic, 1788-1800 (New York, 1993), 226; and Forrest McDonald, Alexander Hamilton: A Biography (New York, 1979), 195-97.)

And now consider Wright’s suggestion that I either misuse a minor charivari incident to exaggerate Gallatin’s importance or, having missed Joanne Freeman’s first book on honor culture, simply misunderstand the meaning of the incident. As it happens, my book cites Freeman’s superb work repeatedly, and the description of the charivari incident comes shortly after my discussion of ritualistic folk violence during the Whiskey Rebellion. As that discussion indicates (and serious readers of literature from the period already know), the typical victims of rough music were not important persons. They were vulnerable women and men whom the illiberal perpetrators chose to chastise for some deviation from tribal norms.

The remainder of Wright’s review is a familiar peroration on the virtues of Hamilton’s financial program, and I do not disagree with most of it. The point is that Gallatin and the Jeffersonian Republicans did. And it would make little sense to criticize the different program that they adopted without first explaining their point of view and accounting for their actions on their own terms. If that effort to historicize Republican financial policies detracts in some unacceptable way from Hamilton’s reputation, I regret it. The United States (like other countries) long ago embraced central banking and deficit finance as matters of public policy, and although the fiscal and monetary policy debates of the founding era still resonate, our world obviously resembles the one Hamilton anticipated far more than anything Gallatin had in mind. But that is what makes Gallatin so important to our historical understanding of the early republic. It is through him and his efforts to find a pragmatic course between Hamiltonian and Jeffersonian extremes that we can better understand what the fuss was all about.


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