Reclaiming the State in Economics: “Radical Hamilton” and the Means of Statecraft

SINCE THE 1980s, the reign of free-market ideology has distorted the history of American statecraft, perpetuating a myth that rugged individualism, not federal policy, transformed the United States into an industrial and financial superpower. This myth buries America’s legacies of slavery and genocide, but also reinforces the country’s structural inequalities — so many of which the coronavirus pandemic has now laid bare. Faced with multiple crises, from the economy to climate change, millions of Americans have judged that the federal government has failed to meet its fundamental responsibilities. While special culpability lies with the Trump administration, it’s clear that the last four decades of unfettered capitalism have profoundly impaired government’s functions, with disastrous consequences.

Amid these dire conditions, Radical Hamilton: Economic Lessons from a Misunderstood Founder by Christian Parenti offers an unlikely reference in the fight against free-market ideology. Far from epitomizing pure capitalism, American political development owes much to Alexander Hamilton’s vision of a strong, centralizing state committed to public investment. This vision not only influenced the course of American industrialization, but also created an international blueprint for state-led development that Parenti believes today’s progressives can harness to redefine the government’s purpose and forge a new social contract.

Radical Hamilton begins by tracing Hamilton’s statist ideas to his experience of the Revolutionary War and the severe deflation that followed victory over the British. It conceives Hamilton as the prototypical homo publicus: his own professional ascent through the incipient American state led him to link the goals of national security, technological advancement, and economic integration. Within the Report on the Subject of Manufactures — a pivotal, overlooked 1791 text according to Parenti — statecraft and economic development are thoroughly symbiotic, and must be achieved through “the means proper.”

Hamilton’s means include the careful management of debt to invest in profitable and tax-generating industries; strong regulations; protective tariffs and direct subsidies; state-funded research and infrastructure; and even a government board for the general promotion of “Arts, Agriculture, Manufactures, and Commerce.” This conception of state power foreshadowed the relationship between industrialization and the modern welfare state. To discern the “radical” potential in Hamiltonian thought, however, we must identify the class status and ideology of the developmental state’s domestic opponents, as well as the forces within international politics that seek to harm it.

In his own era, Hamilton feared that slave-owning elites in a weak federal system would stagnate America’s economic development and imperil its tenuous sovereignty. Parenti writes that “[t]he states, with their competing petty sovereignties, threatened that larger schema” of what a new nation needed to embark upon to preserve its independence; Hamilton “worried that self-serving local elites would be susceptible to foreign meddling.” The solution lay in the social benefits of prolific and diversified manufacturing.

In Hamilton’s own words, manufacturing throughout the individual states would “advance the trade of each by an interchange of their respective productions, not only for the supply of reciprocal wants at home, but for exportation to foreign markets.” Well-dispersed economic development was, as put in the Report on the Subject of Manufactures, “necessary to the perfection of the body politic, to the safety as well as the welfare of society.”

Given the historical contingencies facing the struggling early American republic, it’s conceivable that Hamilton’s economic framework — and his belief in the national cohesion it would generate — offered more egalitarian potential in the long run than the neo-feudal Jeffersonian alternative. At its inception, the United States was a white settler nation, and the fusion of the founders’ competing theories of development deepened the subjugation of people of color while encouraging immigration from Europe. The slow churn toward white political equality often came at a terrible cost to the nonwhites excluded from the rights of citizenship. Parenti duly notes some of Hamilton’s own inegalitarian and undemocratic sentiments, but his objective is to retrieve Hamilton’s less examined significance. He knew international politics rendered the state a constant site of struggle against sectional oligarchy and foreign domination. The state was thus an imperfect but necessary vehicle to establish a prosperous and durable social peace, a conviction that social democrats of various hues — as well as Third World revolutionaries — would take up in the 20th century.

Of greater relevance to the present is Hamiltonism’s contrast with mainstream economics. In virtually every proposal that Parenti details, we can perceive Hamilton’s concern for its social dimension — there is no praise of economic life driven by “liberty” above all else. What we find is an intricate worldview that grasps the benefits of planned commerce, especially through the domestic exchange of technology and skilled knowledge. It’s a framework that clashes with the free-market gospel Republicans and most Democrats have espoused over the last few decades, and exhorted other countries to follow. Contrary to the received wisdom of the post–Cold War era, Hamilton knew it to be junk economics.

This underscores Radical Hamilton’s challenge to the conventional understanding of Hamiltonian thought, perhaps best distilled in Walter Russell Mead’s Special Providence: American Foreign Policy and How It Changed the World. In Mead’s reading, Hamiltonians have always sought to yoke the cause of big business to US foreign policy while refraining from using public finance to shape, or “engineer,” society. After World War II, Hamiltonians’ conversion from protectionism to a fervent belief in “free trade” helped lay the foundation for Ronald Reagan and the neoliberal turn in US and global politics. Before Trump’s election, the dominant belief for decades among both parties had been that an ever-growing sphere of doux commerce between nations would serve the United States’s superpower status.

Parenti suggests that Hamilton’s forgotten statism matters far more for how we interpret American political development and the influence of foreign policy goals upon industrialization. The thrust of state-led development in the United States during the 19th century is evident when we consider the country’s territorial expansion and economic integration. Federal public land policies, as examined in Paul Frymer’s Building an American Empire: The Era of Territorial and Political Expansion, were a precondition of securing a continental domestic market, which, Parenti notes, was realized through government support for canals and railroads. Economic integration further stimulated manufacturing, which spread at an extraordinary clip following Reconstruction. The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War by Robert J. Gordon documents the revolution in the standard of living that began at the turn of the 20th century, much of which was due to the innovations and industrial manufactures that altered daily life, but also resulted from public sanitation and the spread of public roads through the postal service.

Extending Parenti’s argument, Hamilton’s imprint upon American statecraft becomes most apparent in the New Deal era, when a newly activist federal government made public works a pillar of recovery from the Great Depression. It may have been patchwork and subject to frequent political constraint, but Hamilton’s vision, as put into greater historical context by Parenti, can often be discerned when state-backed technological advances and infrastructure combined with the necessities of public welfare and human development.

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If a critical component of Hamilton’s legacy is state-led development, one might ask to which political party it most belongs. The changing ideological and social formations of the United States’s two-party system since the Civil War prevents a facile answer, but, if we accept that Hamilton also influenced the emergence of industrialized, mixed economies throughout the world — as Parenti illustrates toward the end of his book — we must look to the effects of the Hamiltonian prescription that late 19th- and early 20th-century Republicans most adopted: the protective tariff.

Tariffs are dismissed today as circumstantial privileges that are extracted from politicians by powerful firms, but this ignores their special function in developing countries, including the United States from the Civil War through the Progressive Era. In developing countries, excessive dependence on raw material exports saps the revenue needed for technology transfers and research and development. Tariffs, which make imports more expensive, can consolidate a country’s transition from agrarian to industrial society by inducing consumers to purchase products from domestic firms. If properly structured, tariffs provide an incubation period for growing industries to deepen investment and improve productivity and innovation, while also securing tax revenue to help finance public works and other policies that fortify a diverse internal market.

When strategic, tariffs promote economic networks that map nodes of specialization across regions, fueling urban growth and the proliferation of merchants and services that underpin the communities clustering around key industries. Without exaggerating their impact, tariffs in the United States contributed to a cycle of demand and modernization that served magnates, city planners and administrators, and an increasing number of affluent middle-class and (to a much lesser extent) working-class households.

Equally if not more compelling are the fingerprints of Hamilton’s dirigisme that can be found elsewhere. Parenti shows its influence upon Germany in the late 19th century (and arguably throughout Western Europe during the three decades after World War II), as well as in East Asia and, perhaps most fitfully, in Latin America. Based on Parenti’s thesis, it wouldn’t be hyperbolic to conclude that Hamilton was the godfather of import substitution industrialization, a pivotal phase of development that can correct the structural imbalances between rich and poor countries that laissez-faire exacerbates. To the extent that we can reasonably identify a latent radicalism in Hamiltonian thought, it’s most legible when we consider the checkered history in Latin American countries where populist-developmental coalitions have sought greater independence from the United States and austerity-minded financial institutions.

Even if one is skeptical about Hamilton’s utility for progressive politics, Parenti shows that he contributed to the idea of the state as an engine of social investment, and thus the mediator between labor and capital. The constant thread between economic development and geopolitical sovereignty in Hamiltonian thought has also concerned every statesperson seeking prosperity and security for their people in the developing world. Before globalization, developing countries rightly identified state capacity as critical to reducing post-colonial disparities with the Global North. Following the example of Western industrialization, a strong public sector and protectionism were considered credible ways to reify national self-determination in a world system marked by formidable — and rapaciously extractive — power structures.

For Parenti, Hamilton was startlingly prescient about the integrative benefits that a well-administered industrial policy could produce. But state-led development isn’t necessarily benevolent. In the United States, the rise of protectionism coincided with the Gilded Age and frequently violent conflict between business and labor; aspects of the New Deal, moreover, excluded Black Americans from the “shared prosperity” of the postwar welfare state. In short, state-led development doesn’t ensure that policymakers are attuned to the disparities and social disruption that industrialization generates. Spared the pressures of organized social movements, it can proceed in a fashion unaccountable to the public and invite corruption.

Political culture further determines whether state-led development is inclusive or perpetuates hierarchy and exploitation. The truth is that development, the quest for empire, and racist policies share a long history. Indeed, the more we probe the history of industrialization, the more we find discomforting similarities between the nation-building projects of Western democracies and interwar fascism. As the populist right links their own ideas about economic sovereignty with opposition to immigrants and refugees, progressives must wrestle with the philosophical dilemma that shadows Radical Hamilton. Is the state a neutral terrain whose institutions can ensure justice, solidarity, and peace? Or is statecraft a process that can never be free from violence and subjugation, whether through the maintenance of borders or the need to acquire capital to fund projects that serve a “nation” delimited from other groups?

That debate is ultimately beyond Radical Hamilton’s scope. However, Parenti concludes with the idea that progressives can adapt Hamiltonian industrial policy to a Green New Deal, and eliminate the web of fossil fuel industries, deregulated financial markets, and self-enriching political elites fueling the climate crisis. The interplay between progressive ideas about economic sovereignty and international solidarity will determine what’s feasible — and whether public policy is effective before it’s too late. If Radical Hamilton’s core lesson is that progressives should embrace state authority to reshape economic life, then they shouldn’t hesitate, lest the day arrives where conservatives abandon the myths of the market and move to bind “the people” to an illiberal revival of state power.

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Justin H. Vassallo is a writer and researcher who specializes in party systems and ideology, political economy, American political development, and modern Europe.