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In the best of all possible worlds, Hamilton preferred free trade, open markets, and Adam Smith’s “invisible hand.” He wrote late in life, “In matters of industry, human enterprise ought doubtless to be left free in the main, not fettered by too much regulation, but practical politicians know that it may be beneficially stimulated by prudent aids and encouragements on the part of the government.”51 Hamilton knew that he had to present a cogent brief for any government direction of investment. There was an obvious objection: wouldn’t smart entrepreneurs spot profitable opportunities and invest capital without bureaucratic prompting? Yes, Hamilton agreed, entrepreneurs react to market shifts, but for psychological reasons they sometimes respond at a sluggish pace. “These,” he wrote, “have relation to the strong influence of habit and the spirit of imitation; the fear of want of success in untried enterprises; the intrinsic difficulties incident to first essays toward a competition with those who have already attained to perfection in the business to be attempted.”52 Young nations had to contend with the handicap that other countries had already staked out entrenched positions. Infant industries needed “the extraordinary aid and protection of government.”53 Since foreign governments plied their companies with subsidies, America had no choice but to meet the competition. After doing the intellectual spadework for government promotion of manufactures, Hamilton listed all the products he wanted to promote, ranging from copper to coal, wood to grain, silk to glass. He also enumerated policies, including premiums, bounties, and import duties, to protect these infant industries. Wherever possible, Hamilton preferred financial incentives to government directives. For instance, knowing that tariffs taxed consumers and handed monopoly profits to producers, Hamilton wanted them to be moderate in scale, temporary in nature, and repealed as soon as possible. He preferred bounties because they didn’t raise prices. In some cases, he even wanted lower tariffs—on raw materials, for instance—to encourage manufacturing. And to speed innovation, he wanted to extend patent protection to inventors and adopt the sort of self-protective laws that Britain had used to try to hinder the export of innovative machinery. For Hamilton, the federal government had a right to stimulate business and also, when necessary, to restrain it. As Arthur Schlesinger, Jr., has observed, “Hamilton’s enthusiasm over the dynamics of individual acquisition was always tempered by a belief in government regulation and control.”54 As always, Hamilton cited constitutional grounds for his program, invoking the clause that gave Congress authority to “provide for the common defence and general welfare.”59 Owing in part to Hamilton’s generous construction of this clause, it was to acquire enormous significance, allowing the government to enact programs to advance social welfare. Madison was deeply alarmed by these arguments. Thus far, he said, those expounding a liberal interpretation of the Constitution had argued only for leeway in the means to attain ends spelled out in the Constitution. Chernow, Ron. Alexander Hamilton (pp. 380-381). Penguin Publishing Group. Kindle Edition. Chernow, Ron. Alexander Hamilton (pp. 379-380). Penguin Publishing Group. Kindle Edition. Chernow, Ron. Alexander Hamilton (p. 379). Penguin Publishing Group. Kindle Edition. Chernow, Ron. Alexander Hamilton (p. 379). Penguin Publishing Group. Kindle Edition. Chernow, Ron. Alexander Hamilton (p. 379). Penguin Publishing Group. Kindle Edition. Chernow, Ron. Alexander Hamilton (p. 379). Penguin Publishing Group. Kindle Edition.

— Hamilton and free markets  

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