Hamilton vs. Madison (on the Central Bank): A Banal Dichotomy

My latest post in the New Deal 2.0 “Founding Finance” series [UPDATE: Not the latest any more — new pieces there on what really went on at the Constitutional Convention, and on John Adams’s calling Paine’s “Common Sense” “a crapulous mass” — but issues here are germane to that too] addresses, in part, the distortions that occur when well-regarded historians keep rehearsing the same old conflicts between great men, like that of Hamilton and Madison over the constitutionality (or not) of the central bank. It’s not just that the banal dichotomies are boring: they misconstrue — serve the purpose, I think, of misconstruing! — what was really going on.

Madison and Hamilton were arguing at cross purposes, speaking different languages — but that becomes clear only when the history that many historians leave out gets forced back into the picture. Hamilton’s main targets in proposing a central bank were the democratic populists I discuss in the post, the popular-finance movement that had long been obstructing elite, nationalist high finance. Madison, in fighting Hamilton on the bank, was not arguing on behalf of democratic finance or even acknowledging its existence — anything but. He had another agenda, which left even Hamilton himself more or less bewildered by Madison’s constitutional objections to forming the bank. And they really don’t make much sense.

Hamilton and Madison had ceased to understand what the other was doing, and what the real subject of their disagreement entailed, so their argument is lopsided, goofy, and weak — in a certain realpolitik sense, absurd. Yet it gets taught and is now fully constructed as the titanic, founding clash between fully articulated constitutional philosophies. Then we have to read book after furrowed-brow book carefully “explaining” it all to us, yet again, to no purpose at all.

Here’s the thing: a tendency in the country in the 1780’s toward populist democracy, dangerous to the constituencies of both Madison and Hamilton, got quelled at last by the Constitution they collaborated in pushing through. The Constitution in that sense represents a huge and probably deliberate mutual misunderstanding between opposing agendas that had shared a temporary need to stop a third agenda. Those same two constituencies have now spent the past 200+ years being shocked and horrified by the other’s position. In the meantime, the third constituency, which the unhappy Madison-Hamilton alliance had been formed to crush — working-class democracy, with its own finance theories — gets left out of the story, making us at once historically impoverished, by not knowing about financially savvy alternatives to elite finance in the founding era, and historically bewildered by how the Hamilton-Madison fight really got started in the first place.

In the absence of the real politics and economics, the fight seems purely intellectual. Yet we give it immense weight. We prefer the intellectual, even when it paralyzes us in partisan gridlock, over the founding reality, since the reality is unedifying for being so aggressively undemocratic. But maybe if we accepted the reality, we could get over it.

And just in terms of the endlessly banal binary of liberal vs. conservative philosophies, the distortion of leaving out the third politics, which Hamilton was directly attacking and Madison was busily ignoring, enables us to distort both men’s positions. Do the lefty liberals who have recently rediscovered Madison, and want to grapple him to their souls with hoops of steel, really not get that liberal interpretations of the Constitution, from which come all social-policy victories that lefty-liberals like, are based on Hamilton’s rebuttal of Madison’s conservative reading of the document during the central-bank dispute? You may not like Hamilton’s regressive economic policies — deliberately regressive, I always like to insist — but there’s no help for that in Madison. His critique of Hamilton came, in economic and social-policy terms, entirely from the right.

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