To celebrate America’s 250th birthday, I will publish a series of 12 essays exploring milestone events that shaped the American economy into what it is today – from the adoption of the Declaration of Independence to the Marshall Plan. I’ll pay particular attention to the country’s formative decades and tell the stories of ideas, policies, and innovations that helped build the world’s strongest economy.
2026 marks America’s 250th birthday. It’s also been just over 10 years since the debut of Lin-Manuel Miranda’s musical Hamilton, the most compelling dramatization of the nation’s founding in my lifetime.
People who love American history often divide into camps identified with Alexander Hamilton and Thomas Jefferson, implicitly taking sides in the monumental 1790s conflict over cities, industry, foreign policy, and federal power that created America’s party system. I’ve always been a Hamilton person, with due respect for the Sage of Monticello’s contributions.
Hamilton, America’s first treasury secretary, was a brilliant, courageous, dashing visionary, as Miranda captures in his show. But it’s also worth remembering what Hamilton did as the early republic’s most important economic policymaker that made him worthy of a hit Broadway musical.
More than any other founder, Hamilton developed a clear, startlingly modern vision for what America’s economy could become, as well as an all-encompassing plan to make his vision come true. Two and a half centuries later, we can safely say that America has mostly pursued Hamiltonian policies, even as Americans debate the details. As a result, America has grown into the world’s most innovative, prosperous nation, as Hamilton imagined.
America’s first treasury secretary
When Hamilton took office as George Washington’s treasury secretary in 1789, his immediate challenge was to translate the words of America’s new constitution into a working government. This meant creating stable revenues and institutions for collecting them. He also confronted the thorny problem of enormous Revolutionary War debts incurred by the Continental Congress as well as the 13 states. Looming over these issues was the unresolved question of what kind of economic future America should aspire to, which the founders had deferred while they focused on winning the war and framing the U.S. Constitution.
Hamilton had been thinking about these questions for years, as he showed with pamphlets he wrote as a precocious 20-year-old when the revolutionary struggle was getting underway. His grand design aimed to build America into a modern, continent-sized industrial and commercial economy centered on innovative entrepreneurs, firms, and cities. His plan represented a comprehensive strategy to mobilize the economic energies of the American people toward this goal, as Ron Chernow recounts in his book, Alexander Hamilton, on which Miranda based his musical.
Setting the stage for business to flourish in the new republic
Hamilton saw private businesses playing the leading role in building America’s economy, understanding that this required the government to create the best possible conditions for business to flourish:
- A creditworthy government with adequate revenues and the ability to borrow at large scale when necessary.
- Well-defined property rights and contract law.
- Capital that could be readily mobilized for new ventures, requiring standardized, transferable assets and well-functioning securities markets.
- Abundant bank credit.
- Money supply adequate for America’s needs but sufficiently constrained to prevent ruinous inflation.
- A reliable payment system.
- Public encouragement for manufacturing through infrastructure, a modern patent system to promote invention, and regulation to ensure product safety and quality.
- A business community aligned with the new federal government.
Hamilton’s supreme accomplishment was that he figured out how to solve all the short-term financial challenges confronting America’s new government – starting with Revolutionary War debts – with policies that also advanced all these long-term goals. Hamilton’s economic policies succeeded so well that even his most bitter enemies tacitly endorsed them in later decades.
These were his main initiatives:
- Convincing Congress to assume the states’ war debts.
- Refinancing war debts with standardized, low-interest Treasury bonds.
- Devoting a portion of tariff and excise tax revenues to paying down debt, assuring creditors that America would be a trustworthy borrower.
- Establishing a national bank to manage payments, provide money supply through transferable bank notes, and establish a credit system.
- Creating a uniform currency.
- Investing in infrastructure.
- Creating a patent system unlike anything the world had ever seen – a shared initiative with Thomas Jefferson that I’ll revisit soon.
- Encouraging new industry with temporary tariffs and subsidies.
All of Hamilton’s measures were controversial. Jefferson called his banking system “larceny.” Pennsylvania Senator William Maclay, a Jefferson ally, said the scheme would “damn the character of Hamilton as a minister forever.” But when Jefferson became president 12 years later, he did little to change the main direction of America’s economic policies.
Hamilton’s legacy
Today’s commentors frequently reinforce misconceptions regarding Hamilton’s legacy. Some cite a statement he made that the restructured federal debt would be a “national blessing” as evidence that Hamilton supported aggressive spending and was unconcerned about large debts. That’s not true: He said his bonds would play a useful but temporary role in creating much-needed liquid capital and insisted that America should fully pay off its war debts.
Others claim Hamilton as a supporter of permanent high tariffs to protect domestic manufacturers. But Hamilton viewed tariffs simply as a necessary revenue source that America should keep as low as possible and proposed only temporary protection to help young industries get off the ground. Contrary to fans of state-directed industrial policies, Hamilton called for only cautious use of subsidies, mostly to support domestic supplies of vital military goods, and disavowed policies then common in France focused on controlling private businesses for state purposes.
The idea that Hamilton championed an American aristocracy is also a caricature created by critics who unfavorably compare his legacy with the democratic vision for the country associated with Jefferson. In fact, Hamilton was convinced that a modern economy would become a disruptive force breaking up old pockets of privilege and moving capital into the hands of innovative businesspeople whose enterprise would improve the well-being of all Americans.
Hamilton’s policies ensured that America became the second country to achieve an industrial takeoff in the 19th century, after Britain. His legacy was the triumph of a modernizing vision of technological progress, vibrant markets, and economic growth over the static, backward-looking agrarian vision advocated by his opponents. Today’s Jefferson people can point to Jefferson’s eloquent words on political liberty and limited government, but on the economic history of the early republic, the Hamilton people are right.
