One Nation under Debt: Hamilton, Jefferson, and the History of What We Owe (review)

"Like any tool," the author writes, "a national debt can be used for good, ill, or anything in between." Wright's goal is to examine the history of the national debt in the United States and "to give both sides of the story, the good and bad, the beautiful and the ugly, an equal hearing." He adds, "Ambivalence here is more than a virtue; it is a necessity" (vii–viii).

Wright, however, is not at all ambivalent about the role of the national debt during the early national period, which is the main focus of his book. The management of the debt under the leadership of Secretary of the Treasury Alexander Hamilton played a central role, Wright argues, in launching the new nation on a path of vigorous economic growth. In his introductory chapter, he posits a "historical model of economic growth," dubbed a "development diamond" model (7). Within it, to reach first base, a country must have both a government that protects life, liberty, and property (home plate) and a modern financial sector (first base). (Second base is entrepreneurship and third base is modern management.) Wright argues that the way in which Hamilton managed (and even created, in a way) public debt helped get the new United States to first base.

Wright's is not a novel assessment of either Hamilton's financial program, broadly defined, or his approach to the national debt, but Wright provides fresh details. He argues persuasively that Hamilton used his new sinking fund to blunt the effects of the Panic of 1792 and, in 1797, the Baltimore branch of the Bank of the United States, inspired by Hamilton's proactive approach, mitigated the effects of another liquidity crisis. In addition, Wright mobilizes a new sample of federal bondholders to reinforce the view that Hamilton's program resulted in a widely held federal debt that lubricated economic life in the early republic. On this issue, Wright also breaks new ground by offering a biographical survey of federal bondholders who registered their bonds in Virginia. He illustrates how investors of widely diverse sizes and occupations used the bonds to advance a broad range of financial interests. By the 1820s, Wright proposes, "the public debt served as the bridge between the nation's non-predatory government and its emerging financial system" and "in turn, spurred the crystallization of the rest of American's development diamond, its entrepreneurs, managers, and the business firms they ran" (238).

Wright's ambivalence emerges in his concluding chapter, in which he evaluates the history that unfolded following the completion of President Andrew Jackson's program to extinguish the debt of the early republic. At this juncture, Wright invokes Thomas Jefferson. He was "prescient," Wright says, in considering the national debt as "a monstrous fraud on posterity." Wright suggests that, in the twentieth century (and perhaps even earlier), pandering politicians and self-interested bureaucrats borrowed money excessively to pay for projects less worthy than what the first national debt bought—"the nation's independence and people's liberty" (282). However, Wright's history of the debt since Andrew Jackson's presidency is too cursory to explain either how the nation fell from Hamiltonian grace, or how it might return there in the future. Nonetheless, Wright's innovative history of financing the early republic provides one of the best foundations available for exploring the sources and dynamics of what some scholars now refer to as the "debt state" of the late twentieth and early twenty-first centuries.