The Return of Civic Republicanism
For nearly a decade, a populist wave has roiled America's governing institutions, as well as both political parties. The Tea Party election of 2010 was the start of the movement, which found its most pointed expression on the right with the presidential candidacy of Donald Trump. On the left, Barack Obama managed to fuse the establishment liberals and progressive elements of his party for a time, but in his absence the left took on a populist bent under the influence of Bernie Sanders, who continues to be a major force in Democratic politics.
Policymakers in Washington, D.C., have undoubtedly been puzzled by these developments, for it seems as though the populists do not have much of a practical governing agenda. Instead, their emphasis is on "taking government back" — from business, elites, the establishment — and returning it to "the people." But what does this actually mean in practice? The populists offer little more than vague rhetoric and pie-in-the-sky claims.
It is easy therefore to dismiss populist grievances. But that would be a mistake. For the populists, perhaps inadvertently, have grasped an element of the American political tradition that is often overlooked by denizens of the nation's capital — the republican notion that government rightly belongs to the people, and must be administered strictly for their benefit. This tradition of civic republicanism is different from the liberal traditions — in either their classical or progressive varieties — that prioritize property rights or distribution of social-welfare benefits, respectively. It is also distinct from the nationalism that seeks to build a stronger, more prosperous union. So perhaps it is unsurprising that the populists would have little to say about the proper levels of taxation, Medicare spending, or infrastructure investments. Their agenda (such as it is) is simply different.
But even if it is sometimes not articulated, the republican tradition is just as much a part of the American experiment as the liberal or nationalist traditions. All three are essential to American governance. And a core reason for the frustration of today's populists is that, in pursuing their notions of liberalism and nationalism, policymakers have overlooked how important civic republicanism is and always has been to the American regime.
To see this, we should consider the political battle between Alexander Hamilton and James Madison as it raged from 1790 to 1793. This was an early illustration of how the various doctrines of the American creed can come into conflict. And the particulars of this history suggest some ways that policymakers are still prone to underappreciate how hard it is to maintain the republican form of government in practice.
THREE STRANDS
The American constitutional system embodies the union of three different intellectual traditions. The first and most prominent is the liberal ideal of government as a contract intended to protect basic rights. Here, the founders were heavily influenced by English philosopher John Locke, whose Second Treatise of Government provided a useful framework for justifying the American Revolution. King George III had violated the terms of the contract between citizen and state, and the colonists were taking appropriate action by declaring their independence. Of course, the commitment to Lockean ideas ran deeper than this. While neither the Declaration of Independence nor the Constitution explicitly enumerate a right to property, it was the threat to property, manifested in Shays's Rebellion in particular, that prompted the states finally to agree to do away with the Articles of Confederation and pursue a more durable constitution.
The founders' reliance on Locke has been well documented by scholars for generations. More recently, scholars have excavated a second tradition in the thought of the founding era: civic republicanism. This approach to government has its roots in classical Greek philosophy and can be seen in Roman thought, such as in the writings of the historian Polybius. It was reintroduced to the West by Florentine diplomat Machiavelli, who influenced English philosopher James Harrington, who in turn influenced the polemics of Lord Bolingbroke and John Trenchard and Thomas Gordon's Cato's Letters, which were very popular in the colonies.
These ideas, too, served as a useful reference for framing the revolution, for they cast the British ministry as a corrupt cabal in hock to the moneyed few at the expense of the people, including (and, in this case, especially) the colonists. But, as in Locke, the framers found in the republican tradition a way to conceive their own experiment in government. If the liberal notion of freedom privileged the absence of government restraint, the republican ideal of freedom emphasized the right to participate in crafting the laws that govern everybody equally.
Along with these two strands, the Constitution also embodied the principle of nationalism. A truly national identity developed slowly over the course of the 18th century, spurred on in part by the Great Awakening, a spiritual revival in the middle of the century. The shared struggle of the revolution also helped bring the states closer together. But it was the miserable postwar experience that created the widespread sense that the states had to establish an unambiguous kind of union.
The Articles of Confederation, drafted at the start of the revolution, were tentative on this point — in some instances hailing the "Union," in other instances declaring that the states remained sovereign. The states were simply not up to the duties the Articles assigned to them. They treated political minorities unjustly, passed an endless array of laws, and consistently undermined the national interest through their parochialism. By the time the Constitutional Convention convened in 1787, nationalism was no longer a mere affective disposition. It was, rather, a governing strategy. James Madison, Alexander Hamilton, and other nationalists argued forcefully that the only way to save both the liberal and republican traditions in the new nation was to forge a stronger union.
Madison's proposed preamble to the Bill of Rights can help us appreciate the interrelationship of these ideals. Originally opposed to a bill of rights, Madison acceded thanks to the clamor of the nominating conventions. Thereafter, he whittled the raft of selections down to a manageable few, and proposed this as an introduction to the document as well:
[T]hat all power is originally vested in, and consequently derived from, the people.
That Government is instituted and ought to be exercised for the benefit of the people; which consists in the enjoyment of life and liberty, with the right of acquiring and using property, and generally of pursuing and obtaining happiness and safety.
That the people have an indubitable, unalienable, and indefeasible right to reform or change their Government, whenever it be found adverse or inadequate to the purposes of its institution.
This is a deeply nationalistic statement, for Madison emphasized that the power of the new government comes from the people (and by implication not the states, as had been a core premise of the Articles of Confederation). The preamble is also more Lockean than even the Declaration of Independence, for it explicitly acknowledges the right "of acquiring and using property," which Jefferson had omitted in the Declaration. The civic-republican quality is evident as well, for government is the creation of the people for their own benefit and can be changed at their discretion.
Even without Madison's opening statement, the Constitution, in conjunction with the Bill of Rights, does a good job of blending these three traditions together. Yet the fact remains that it is a blend. Liberalism, republicanism, and nationalism are three different strands of political thought, with diverse origins and, potentially at least, different implications. Indeed, the heated battle over ratification illustrates how the relationship between these ideals can sometimes be fraught. The Federalists had embraced nationalism as a way to salvage the liberal and republican traditions, while the Anti-Federalists thought a firmer national union would ultimately undermine these very same values.
Moreover, the Constitution provides only a framework for governance. It establishes the basic rules of the game and sets boundaries to public policy, but the rest is left up to the political process. Any item of public policy can advance or hinder the ideals the Constitution enshrines, meaning it is up to elected officials to maintain a proper balance between liberalism, republicanism, and nationalism. In practice, this has proven easier said than done, even in the earliest days of the new Constitution. Between 1790 and 1800, disagreements over how to harmonize these principles destroyed the temporary political consensus that developed following the ratification of the Constitution, and led to the first party system in the United States.
HAMILTONIAN MEDIATION
The year 1789 was one of relative calm — a nice respite for a nation that had endured seven hard years of war followed by another six trying years of peace. The new government established under the Constitution proved itself to be remarkably efficient that year; it enacted an impost, organized the cabinet departments, and approved the Bill of Rights. Yet this climate of civility would prove fleeting, and would soon be replaced by backbiting, recrimination, and mutual enmity. The catalyst for this sea change was Alexander Hamilton of New York, the Treasury secretary.
Hamilton had been a delegate to the Constitutional Convention, but his role there was limited. His views on government, extremely favorable to the British system, were too far outside the mainstream, and the rest of the New York delegation was opposed to the nationalist agenda. His real contribution to the constitutional system came in the form of his leading role in writing the Federalist Papers, which are still essential commentaries on the Constitution, and especially in his tenure as Treasury secretary, during which he did more than anybody to give shape and meaning to the new instrument of government. Jefferson, a staunch opponent of Hamilton's, grudgingly admitted that the secretary was a "host within himself," as Hamilton became de facto prime minister of the Washington administration.
Hamilton's greatest contributions were on the economic front, and came in the form of three reports to Congress: the Report on Public Credit, the Report on a National Bank, and the Report on Manufactures. It is incredible to consider that Hamilton submitted these groundbreaking documents in a short span of time, between January 1790 and December 1791. This is all the more impressive considering that Hamilton had just finished writing the bulk of the Federalist Papers, as well as advocating adoption of the Constitution at the New York ratifying convention — all while he was in his mid-30s.
Hamilton's three reports constitute a systematic set of policies to create a national, diversified economic marketplace. His first task was a full repayment of the national debt to the current holders of public securities. This, Hamilton believed, would facilitate a uniform currency, a necessary foundation for any modern economy. Next, he proposed assuming the state debts, which he believed would reorient the interests of the creditor class to the national government over the states. Then, Hamilton proposed a federally chartered national bank, which would hold federal tax revenues, supply low-interest loans to the government, and increase the supply of private credit throughout the nation. Finally, he called for a policy of industrial protection — mostly through bounties or direct subsidies to preferred industries — as a way to diversify a still-predominantly agricultural economy.
Hamilton's system drew on the best ideas from the great public financiers of Europe, especially Robert Walpole of Great Britain and Jacques Necker of France, and adapted them to the American context. A consistent governing strategy characterizes each proposal, which may be termed "Hamiltonian mediation." Under Hamilton's approach, the wealthy few — be they public creditors, owners of bank stock, or manufacturers — would receive direct benefits from the government. But in providing these economic elites with such subsidies, the government would yoke their private interests to public purposes.
The Hamiltonian system was the culmination of years of study and preparation. As early as 1780, Hamilton had the idea of mediation in mind. In a letter to James Duane arguing for a national bank, he wrote:
Paper credit never was long supported in any country, on a national scale, where it was not founded on the joint basis of public and private credit....Our new money is depreciating almost as fast as the old, though it has in some states as real funds as paper money ever had. The reason is, that the monied men have not an immediate interest to uphold its credit. They may even in many ways find it their interest to undermine it. The only certain manner to obtain a permanent paper credit is to engage the monied interest immediately in it by making them contribute the whole or part of the stock and giving them the whole or part of the profits.
In his day, and for generations thereafter, Hamilton's strategy has been denounced as crass, corrupt, even monarchical. But the secretary had nobler ambitions in mind, and while he was certainly on the elitist spectrum of American political thought, he was still within the traditions of liberalism, republicanism, and nationalism. Hamilton's payouts to the moneyed few were not about rewarding his friends and political allies, but about strengthening the nation, diversifying the economy, and ultimately making everybody better off. For instance, in the Report on Manufactures, Hamilton justified industrial bounties in a largely agricultural nation:
[I]t is the Interest of the society in each case, to submit to a temporary expence, which is more than compensated, by an increase of industry and Wealth, by an augmentation of resources and independence; & by the circumstance of eventual cheapness, which has been noticed in another place.
Unlike many founders, particularly those associated with the southern-plantation gentry, Hamilton understood the transformative power of a diverse economy. It is in this context that he made the case for the equity of mediation. Yes, certain groups would benefit in the short term, but it would help everybody in the long haul.
From this perspective, it is easy to dismiss the objections against Hamilton from Jefferson and Madison as the rantings of physiocrats whose prejudice in favor of agriculture blinded them to the genius of the system. Madison in particular has come under fire from scholars such as Forrest McDonald, Stanley Elkins, and Eric McKitrick, who think it was such small-minded concerns that induced him to turn against Hamilton, his old ally from the Confederation period.
But these dismissals overlook some very cogent critiques made by Jefferson and especially Madison, and in turn elide how Hamilton's system, impressive as it was, made real, controversial tradeoffs between the values of republicanism and nationalism.
MADISONIAN REPUBLICANISM
Jefferson is usually identified as the key opponent to Hamilton, and this is no doubt fair up to a point. After all, Jefferson (serving as secretary of state) was the natural antipode to Hamilton in Washington's cabinet. Nevertheless, Jefferson came relatively late to these debates, not taking his seat in the cabinet until the summer of 1790. By that point, the debate was already on, and Madison had been Hamilton's main antagonist. Madison continued to lead the fight against Hamilton in the House through 1796. He also contributed multiple essays to the National Gazette, the paper established to oppose Hamilton's economic system. It is the writings and speeches of Madison, not Jefferson, that furnish the most cogent rejoinder to Hamilton's economic system.
Madison proffered multiple critiques of Hamilton's system, some compelling, others not as much. He was on his weakest ground on economic matters. His views on political economy, which anticipated the writings of Thomas Malthus, led him to privilege the life of the "manly," independent yeoman farmer, and discount the potential for innovation to transform society. Similarly, Madison had an instinctive distrust of the "stockjobbers" that Hamilton's policies favored, which in turn led him to underestimate the real value of a modern financial system. Additionally, and perhaps most consequentially, Madison fundamentally misunderstood Hamilton's purpose. He wrongly thought that the secretary was looking to establish a monarchical order in the United States, a view that — in historical retrospect — undercuts his more cogent criticisms.
Madison was on his strongest intellectual ground when he attacked Hamilton using his own distinct ideas of republicanism, which were arguably the most sophisticated and innovative among the founders. While his views on republican government are deployed through multiple letters, essays, and speeches, perhaps the single best recapitulation of his system was offered in a letter to George Washington in April 1787. "The great desideratum which has not yet been found for Republican Governments," Madison told the general, "seems to be some disinterested & dispassionate umpire in disputes between different passions and interests in the State."
On these grounds, Madison judged Hamilton's system a failure. It was not disinterested and dispassionate; instead, it was relentlessly partial toward one relatively narrow faction in society, at the expense of the multitudes. Madison levelled two critiques of particular note.
First, Hamilton's system distributed benefits again and again to the financiers and creditors — mostly located in the larger cities on the Atlantic seaboard — leaving little for the broader public. Hamilton's plan to fund the debt favored the current holders of the national debt (largely speculators) over the original holders (largely veterans who were never fully compensated for their service). His assumption plan benefited the indebted states (especially Connecticut, Massachusetts, and South Carolina) over those that had paid back their obligations (especially Virginia). His protective system dispensed benefits to a handful of manufacturers, at the expense of the agricultural majority. Even the Bank of the United States, Madison argued, was unfair in its design. The window between the enactment of the law and the opening of subscriptions was so brief, in his view, that it favored those closer to the seat of government, who would learn the details first and be in the best position to purchase stock.
Madison's objection about the unfairness of Hamilton's plan still resonates. After all, Hamilton was willing to give actual benefits to a select few, under the theoretical belief that in time this would aid the whole country. But those more general benefits were still to come, and Madison doubted they were coming at all. Why could Hamilton not broaden the scope of mediation, so that a more representative array of factions was brought into the ambit of federal munificence? A quarter-century later, Madison and the second generation of Republicans would develop exactly this kind of policy program. The "American System," as popularized by Henry Clay and inspired by the latter half of Madison's second term as president, was much more equitable in its distribution of benefits.
Second, Hamilton's system unbalanced the power relations necessary to maintain republican government. As Madison explained to Washington, republican government requires some kind of neutral umpire. However, he continued in his letter, "The majority who alone have the right of decision, have frequently an interest real or supposed in abusing it. In Monarchies the sovereign is more neutral to the interests and views of different parties; but unfortunately he too often forms interests of his own repugnant to those of the whole." In Madison's view, no social or economic faction was the sole repository of wisdom or justice. Rule by the few, or by the many, was inevitably prone to corrupt the republican character of a state. Instead, Madison believed that well-organized political conflict was the only sure bulwark of republicanism. Thus, his "Virginia Plan," introduced at the Constitutional Convention, rejected mixed estates — which previous republican philosophers had advocated — but distributed power broadly among a diverse polity, thereby minimizing what he called in Federalist No. 10 "the violence of faction."
In Madison's view, Hamilton's economic policies distorted this structure because public subsidies and public power are fungible. Consider the Bank of the United States, which operated by virtue of a public charter. In a speech to the House of Representatives, Madison issued a warning, according to House records:
The power of granting Charters, he observed, is a great and important power, and ought not to be exercised, without we find ourselves expressly authorized to grant them: Here he dilated on the great and extensive influence that incorporated societies had on public affairs in Europe: They are a powerful machine, which have always been found competent to effect objects on principles, in a great measure independent of the people.
If the government comes to depend upon the services the Bank renders, then the Bank would be able to exercise leverage upon the state. This would effectively create the kind of mixed estate that Madison had long opposed, for the managers and stockholders of the Bank would exercise authority out of proportion with their numbers in society.
Madison also worried that Hamilton's system would seed conflicts of interests among politicians. The venality of politicians had long been of theoretical and practical interest to Madison: theoretical, for he knew that it was a potential weak spot in any system of representative government; practical, for during his years in the Confederation Congress he had dealt with politicians who were lining their own pockets. Taken to the extreme, such conflicts of interests could nullify the republican quality of the government, as politicians sacrificed the good of the people for the sake of the factions with which they were aligned. Writing anonymously for the National Gazette in February 1792, he warned of
A government operating by corrupt influence; substituting the motive of private interest in place of public duty; converting its pecuniary dispensations into bounties to favorites, or bribes to opponents; accommodating its measures to the avidity of a part of the nation instead of the benefit of the whole: in a word, enlisting an army of interested partisans, whose tongues, whose pens, whose intrigues, and whose active combinations, by supplying the terror of the sword, may support a real domination of the few, under an apparent liberty of the many.
This essay is one in an extended series that connected Hamiltonian finance to corruption of republican government. Madison believed that, because so many legislators were so heavily invested in public securities as well as the Bank, they had sacrificed the interests of their constituents for their own greed. "Such a government," Madison admonished, "is an imposter" to the republican mantle.
Recent historians have been prone to heap praise upon Hamilton's system and disdain Madison's critiques, but the latter's points were valid. Hamilton's economic program had a negative influence on the republicanism of the young nation. Consider the Panic of 1792, which — insofar as it is remembered at all — is usually cited as an example of Hamilton's financial acumen. No doubt, it is right and proper to praise Hamilton, whose quick, decisive, and forward-thinking action prevented a sudden drop in the price of public securities from infecting other areas of the economy. But it is worth reviewing the events that placed Hamilton in such a situation, for they justify Madison's anxieties.
THE PRAETORIAN BAND
By the summer of 1791, all the main elements of Hamilton's financial system were in place. The national debt was funded, basically at face value. State debts were transferrable into federal debts. And subscriptions to the Bank of the United States were opened. All told, this amounted to a massive, government-backed injection of capital into the economic system, which sent prices for securities skyward. This was especially so with the Bank of the United States, which, given its public charter and its privilege of holding federal tax revenues, was the first private institution that was "too big to fail." As Madison wrote to Jefferson, "It seems admitted on all hands now that the plan of the institution gives a moral certainty of gain to the Subscribers with scarce a physical possibility of loss. The subscriptions are consequently a mere scramble for so much public plunder which will be engrossed by those already loaded with the spoils of individuals."
Henry Lee described the scene on his way to Alexandria, Virginia, to Madison in stark language. "My whole route presented to me one continued scene of stock gambling; agriculture commerce & even the fair sex relinquished, to make way for unremitted exertion in this favorite pursuit — thousands even at this late hour entering into a line of life which they abhor, in order to participate in legal spoil and preserve in some degree their relative station and rank with their neighbors."
This irrational exuberance greatly alarmed Hamilton. Having employed the creditor class as tools of his economic policy, he was suddenly jolted by the realization that this was, in fact, a two-way relationship. He now had to act to temper their enthusiasm and keep market prices at a stable rate. As he told New York senator Rufus King, "[A] bubble connected with my operations is of all the enemies I have to fear, in my judgment, the most formidable."
In response, Hamilton began spreading information to his allies about what he thought the appropriate price for Bank stock was — an action that was decidedly out of character. In 1789, he had flatly rebuffed Lee's entreaties for an insider tip about his intentions with the Report on Public Credit. And Hamilton did more than this. He ordered William Seton, cashier of the Bank of New York, to use money from the sinking fund, established to pay down the principal of the debt, to buy public securities. In private, Hamilton told Seton to purchase from the bulls, not the bears, so as to stabilize the market.
The plan worked, but only temporarily. For in establishing a "put" in the public-securities market, Hamilton also created a moral hazard, as investors — at least those privy to the secretary's thinking — knew that the government would intervene to stabilize the market if push came to shove. This prompted William Duer, former assistant secretary of the Treasury and a close friend of Hamilton's, to join with Alexander McComb, one of New York's most plugged-in speculators, in creating the "Six Percent Club." Their goal was to corner the market on the "six percent's," a type of government debt, in advance of the next payment due for Bank stock. Their speculative venture created another bubble, which popped when Duer and McComb exhausted their credit supplies. This prompted Hamilton to intervene once again in the public-securities market, via another round of purchases from the sinking fund. This time, Hamilton's efforts worked, perhaps because the panic wiped out Duer, and nobody else was so daring as to try such a venture.
Madison and Jefferson were appalled by these events. In a telling note to Jefferson, Madison framed the panic as an existential threat to republican government. "The stockjobbers will become the praetorian band of the government — at once its tool and its tyrant; bribed by its largesses, and overawing it, by clamours and combinations." Well versed in the history of the Roman Empire, Jefferson must have been struck by this analogy — for the praetorian guard of Rome guarded the life of the emperor, but their lofty position also enabled them to rule over him.
Stripped of its hyperbole, the debate between Madison and Hamilton highlights a tradeoff between competing constitutional principles. Hamilton's financial policy, utilizing the principle of mediation, created what he called a "joint basis of public and private credit," which — as the march of time demonstrated — helped forge a national economic marketplace, a necessary precondition for economic prosperity. But uniting the moneyed class and the government in a common endeavor empowered the former to use the authority granted by the latter for their own purposes, which undermined the republican quality of the government.
ENDURING LESSONS
The debate between Madison and Hamilton, though it happened more than 225 years ago, still has relevance today. After all, the country remains committed to the principles of liberalism, republicanism, and nationalism. Moreover, it is still as true now as it was then that it is up to policymakers to advance these ideals through the ordinary course of politics, and that these ideals can sometimes come into conflict.
This is especially important to appreciate, considering that Hamiltonian mediation is still a prevalent policy strategy. Indeed, it might be the main policy tool the government uses to accomplish its many goals. From transportation to medical care, national defense, economic growth, home ownership, food, and other forms of public welfare, the federal government does not directly provide for some public purpose, but rather creates incentives for private factions to do so. There are important exceptions, of course. Medical care for veterans is provided directly by the government, as are Social Security benefits. Still, Hamiltonian mediation is the go-to strategy for policymakers.
Indeed, the scope of mediation only expanded in the course of the 20th century, when liberalism was transformed from an absence of government restraint to the provision of the necessities of life — a task for which mediation was easily adaptable. Moreover, the adoption of mediation has been bipartisan and cross-ideological. Liberals, conservatives, Democrats, and Republicans disagree on which goals to advance and how to advance them, at least at the level of specifics, but all sides are fairly comfortable employing mediation as a strategy for governance. Obamacare uses health insurers to provide medical care; school choice seeks to support and empower private experimentation in education. The particulars change, but the government is still using private factions to accomplish public purposes.
This provides a helpful context for appreciating the populist uprisings on both the left and the right in recent years. Populism, at its core, is usually about the unfair distribution of political power, with the typical critique being that it is not allocated in a republican manner. This is precisely the complaint that Madison made against the Hamiltonian system in 1791-92. Then and now, mediation was a common strategy for governance. Then and now, it is problematic.
Left- and right-wing populists complain about money in politics, the power of special interests, and the influence of the "establishment." All of these critiques, varied as they may be, point to a central idea, which is that the government is in hock to forces whose political power has to do with something other than their numbers in society. This is, as Madison pointed out so many years ago, the downside to Hamiltonian mediation.
Of course, populism has always functioned better as a critique of the status quo than an alternative. On that point, it is worth noting that Madison, the great opponent of the Bank of the United States, was himself the president who chartered the Second Bank of the United States in 1816, an institution that exhibited many of the corrupt tendencies he had warned about in 1791. Hamiltonian mediation, then, seems to be as essential to the American project as it is dangerous to it.
Perhaps the lesson to be gleaned from this history is above all prudential: Policymakers will inevitably confront situations when mediation will help advance whatever nationalistic or liberal goal they have in mind. But they must still be mindful that, over time, it can have negative consequences for the republican qualities of our system. They should thus be cautious in how they employ it, remembering that there is a dynamic, complex relationship between public subsidies and political power.
Moreover, in developing their governing agendas, both political parties should put more effort into formulating policies that preserve and promote the republican principle that government is of the people, by the people, and for the people. If mediation cannot be done away with, if it is indeed essential to American governance, then we should at least be aware of how it can advantage special interests, and work to counteract that effect. This suggests a greater emphasis on campaign finance, the role of lobbyists in government, the revolving door, and so on.
In general, policymakers should appreciate Madison's warning that a republican constitution is not enough to ensure a republican government. Instead, form must combine with substance. Otherwise, anti-republican public policies can, over time, lead to a "real domination of the few, under an apparent liberty of the many."