10/28/13 - our treasury secretaries were immigrants

In today's selection -- from The Founders and Finance by Thomas K. McCraw. At the founding of the United States, there was deep suspicion regarding banks -- and with good reason. In Europe, they had often made loans beyond their means and left depositors destitute. Furthermore, George Washington and his successors were large landholders not dependent on banks and therefore not inclined to view them as economic necessities. And yet, Alexander Hamilton, America's first Treasury Secretary, almost immediately succeeded in engineering the creation of the first national bank. He view this as critical in part because he was an immigrant, and his founding years had been spent overseas as a trader dependent on financing. In fact, both of the chief architects of America's economic systems -- Hamilton and Albert Gallatin -- were immigrants, and four of the first six secretaries of the treasury of the United States were born overseas:

"Because of the immense debt left over from the War of Independence, financial affairs [of the new United States] would be among the most critical concerns. The candidates George Washington considered for secretary of the treasury were Robert Morris, who had come from the English port of Liverpool, and Alexander Hamilton, who had emigrated from the Caribbean.

Twelve years later, when Thomas Jefferson took office in 1801 as the first Republican president (no relation to the present-day party of that name), he, too, appointed a foreign-born secretary: Albert Gallatin, who had come from Geneva; and he reappointed him in 1805. Jefferson's successor, James Madison, also appointed Gallatin -- in 1809 and again in 1813. Later, when Gallatin left office to negotiate the end of the war with Britain that had begun in 1812, Madison appointed, in sequence, two more immigrants: George W. Campbell (from Scotland) and Alexander James Dallas (from Jamaica). Thus, four of the first six secretaries of the treasury were born overseas. ...

"[That was unusual because] in 1816 the proportion of foreign-born was probably no more than about 4 percent, among the lowest in U.S. history. When the Revolutionary War began in 1775, many of the colonies had experienced at least 125 years of settlement. Almost all of the major founders came from families long resident in North America. John Adams's first American ancestor arrived in 1620 aboard the Mayflower; Benjamin Franklin's, in 1635; James Madison's, in 1653; George Washington's, in 1659; and Thomas Jefferson's, in 1672. By contrast, Alexander Hamilton came in 1772 and Albert Gallatin in 1780. ...

Did it make a difference that the most important architects of the American economy were immigrants? This is like asking whether it made a difference that four of the first five presidents, who served for thirty-two of the first thirty-six years under the Constitution, were slaveholding Virginia planters. Certainly they were iconic figures: George Washington, Thomas Jefferson, James Madison, and James Monroe. Yet they, like most people everywhere, tended to look at the world through the lens of their native milieu -- in their case, the landed class of colonial Virginia. As adults, each these four presidents came to own very large plantations. Their holdings in Virginia totaled about 23,000 acres -- the equivalent of almost thirty-six square miles.

"As Emerson wrote in 1860, 'If a man owns land, the land owns him.' The extent to which land (as opposed to liquid capital) dominated Virginia's culture is reflected in the number of banks chartered during the nation's first decades. In 1781, when Virginia was the largest and most populous state, not a single bank existed anywhere in the country. By 1837, there were 627. Of these, Massachusetts had 123 banks, New York 98, Pennsylvania 49, but Virginia only 6. Each bank increased the money supply in the state where it was chartered -- promoting commerce, manufacturing, and faster economic growth. ...

"In many countries, banks were viewed with justifiable suspicion. They often seemed to lend beyond their means and in economic downturns to run out of cash, leaving depositors destitute. 'But all that has been said against them,' Hamilton wrote Morris, 'only tends to prove that like all other good things they are subject to abuse and when abused become pernicious.' ... Hamilton -- still just twenty-four years old -- exhibited a sophisticated understanding of money and its relationship to a nation's 'real' economy of goods and services. Regardless of public prejudice, he was convinced that the United States had to have a banking system in order to promote the nation's credit, both public and private. Public credit 'gives power to the state for the protection of its rights and interests.' "


Thomas K. McCraw


The Founders and Finance


Belknap Harvard


Copyright 2012 by the President and Fellows of Harvard College


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