restricted access 5. “A Most Valuable Auxiliary”: Securing Foreign Capital with the Law of the Land
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150 Alexander Hamilton often emphasized trade, banking, and manufacturing interests when he spoke of his commercial vision for the young republic, but he, like Washington and Jefferson, was also interested in maximizing the productive uses of American land and natural resources. For example, Secretary Hamilton and Tench Coxe, the assistant secretary of the treasury, established the Society for Establishing Useful Manufactures, a private, government-sponsored corporation in order to leverage the mechanical power of the Passaic River’s Great Falls for mill operations. Hamilton also identified the “Interests of Agriculture” along with those of “Commerce & Manufactures” as highly promising areas of growth for American economic development. Although commerce often took place overseas or across stock exchanges and money markets, agricultural production, manufacturing ventures, and commercial intercourse in everyday goods and services relied on the plentiful resources gleaned from the nation’s vast terrain. Hamilton viewed land as an important resource that could be leveraged to create his thriving commercial republic; yet in order to realize the untapped agricultural , manufacturing, and commercial potential of both settled and sparsely populated lands, the United States required a large infusion of capital. To find this investment capital, Hamilton looked across the Atlantic Ocean.1 In his 1791 “Report on Manufactures,” Secretary Hamilton made the “A Most Valuable Auxiliary”: Securing Foreign Capital with the Law of the Land five x “A Most Valuable Auxiliary” 151 case for attracting foreign capital to Congress by describing its “instrumentality .” Foreign investment enhanced “not only our funds”—those critical European loans that first floated American independence and then funded and refinanced its lingering war debts—but also strengthened American commerce. Already, Hamilton affirmed, “our Agriculture and other internal improvements have been animated by it.” Rather than fearing foreign investment as an external menace to rival American interests, the treasury secretary encouraged Congress to consider foreign funds as “a most valuable auxiliary” because “in a Country situated like the United States, with an infinite fund of resources yet to be unfolded, every farthing of foreign capital . . . is a precious acquisition.” In time, Hamilton imagined, foreign investments would strengthen and improve American manufacturing as well as “the Public Communications, by cutting canals, opening the obstructions in Rivers and erecting bridges.”2 During his lifetime, Hamilton would, in fact, witness European capitalists investing in American public works projects such as canal building in New York, Virginia, and Pennsylvania. But he personally participated in and encouraged a different sort of foreign capital transaction: the buying, selling, and securing of title to American land. Speculative land frenzies perpetuated by both foreign and domestic investors helped to define, inflate, and depress economic development in the early republic (in addition to other speculative ventures, like the scrip mania surrounding Bank of the United States stock).3 This agitation to buy land, then quickly resell it at a profit, attracted the more preeminent statesmen and financiers of the era, and it caused no small number of ruined livelihoods and an even greater amount of stints in debtors’ prison. Even Hamilton briefly joined the ranks of the statesmen as speculators like Washington, Jefferson, and Robert Morris when he purchased a small parcel of land in western New York (part of a large tract owned first by American speculator extraordinaire Alexander Macomb).4 Land speculation produced surveyed and parceled-out plots, as well as some commercial profits (particularly for the politicians and lawyers like Hamilton who negotiated, advised, and transacted the complicated land sales). However, the frenzy for buying and then quickly reselling unimproved land was not an ideal use for foreign capital. Instead, Hamilton hoped that foreign funds would underwrite long-term settlement or would encourage agricultural, commercial, or manufacturing ventures that would in turn lead to American economic prosperity. A crucial component to establishing Hamilton’s vision of economic development was securing long-term foreign investment in the young republic. By the time Hamilton left the Treasury in 1795, Dutch, French, English, 152 chapter five and even some Spanish investors had already poured millions of dollars into a diversified portfolio of American investments, including American independence (with principal and interest, a total of $11,710,378 financed by foreign loans), US treasury notes (the product of Hamilton’s funding and assumption scheme), Bank of the United States stock (another Hamiltonian venture), private canal and navigation companies, and New England, Maine, and Ohio Valley land ventures.5 Land speculators often focused solely on making quick profits, but...