Eurobonds, Alexander Hamilton and Thomas Jefferson

One of the long-standing tropes in American history is that in the early years of the Republic, Alexander Hamilton represented a sophisticated, forward-looking, pro-manufacturing, enlightened nationalist outlook that contrasted with the states-rights, agrarian-romantic, ruralist vision for the nation's future supposedly held by Thomas Jefferson.

This view also sees federal regulations on business and the growth of the federal government's role as embodied in the New Deal as the victory of the "Hamiltonian" vision.

My understanding is that Progressive historians around 1900 and the following decades had a big influence on this interpretation. And, of course, historical understanding is continually evolving with new perspectives and new emphasis on individuals and groups that had previously been marginalized or ignored.

But the old Hamilton-Jefferson clichees still keep popping up. For instance, Andreas Kluth in Coronabonds Could Save Europe, or Sink It Bloomberg Opinion 04/02/2020 argues that eurobonds, public debt backed by the EU as a whole, are an enlightened "Hamiltonian" idea:

So tempers are boiling once again. As indeed they were in 1790, when intellectual titans including Alexander Hamilton and Thomas Jefferson had a similar debate, the one Volcker had in mind. Hamilton, America’s first treasury secretary, wanted to assume the debts of the 13 states that had recently joined together to fight off the Brits. Jefferson and his followers were against the idea, fearing that the federal government would become a behemoth threatening the liberties of the states.

Both were right. The U.S. did assume the states’ debts, thus seeding today’s huge Treasury-bond market. And the federal government did balloon, as it took on ever more functions over time, especially after the New Deal of the 1930s. But the result was the United States of America as we know it. [my emphasis]

I'm on Kluth's side in supporting eurobonds. It's one of the critical failures of the eurozone construction that there are no eurobonds as part of the system. A currency zone needs common debt instruments. Currently, individual EU countries have to borrow on their own faith and credit, not that of the eurozone as a whole. That not only means higher interest rates for less wealthy countries who have higher needs for infrastructure investments.

It also means that individual countries are not borrowing in their own country's currencies, but their debts are euro-demoninated. So when one countries productivity rates are growing more slowly than others, or when they are faced with massive speculative capital movements across national borders in the eurozone, it can provide debt crises like those earlier in this decade. (2020 is the last year of the 2011-2020 decade, BTW.)

But that two-paragraph accounts of Hamilton, Jefferson, and the revolutionary war debts omits important context. In his Jefferson and the Rights of Man (1951), the third volume of Dumas Malone's classic biography of Jefferson, Malone describes the dispute this way:

Hamilton's proposal that the federal government assume the debts of the states was based on the arguments that these had been contracted in a common cause, the war for independence; that a more orderly and efficient provision for them could be made on the basis of a single plan, rather than many plans; and that this action would serve to increase national unity. The federal government was under no contractual obligation to provide for these debts, however, as it was in the case of its ·own obligations, and did not need to do so in order to establish its own credit; hence the discussion centered to a greater degree on questions of expediency and local interest than it had in the case of the national debt.

The alignment considerably depended on the financial situation of the various states. Massachusetts and South Carolina in particular stood to gain by the measure, because a relatively large part of their Revolutionary debt was still unpaid, while Virginia, which had paid a larger proportion of hers, saw actual disadvantage in it. Except for South Carolina, the Southern states were generally opposed to the measure - a further practical consideration being that much of the paper had fallen into eager Northern hands. [my emphasis]

We can safely assume that those "Northern hands" were not primarily poor farmers or small shopkeepers, but rather the late-18th-centruy- version of vulture investors. Congressman James Madison led the Congressional fight against Hamilton's proposal.

At the same time, there was a controversy over whether it was right or legal for wealthy speculators to buy up were buying up the rights of former Virginia and North Carolina soldiers in the Revolutionary War to the back pay they were owed for their military service, accustomed by the usual deceitful practices associated with such schemes. Jefferson opposed recognizing the rights of the speculators to the back pay, Hamilton supported it.

Hamilton, favoring a more oligarchic and quasi-monarchist model for Amrican society and government, thought supporting the speculators in both cases was a grand idea. Jefferson opposed them as crassly unjust. Jefferson and Madison did come to a compromise on the assumption issue, which involved some political deal-making over the permanent location of the national capital.