The Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy by Thomas K. McCraw (review)
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Albert Gallatin, Alexander Hamilton, U.S. Treasury, Public finance, Immigrants

The Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy. By Thomas K. McCraw. (Cambridge, MA: Harvard University Press, 2012. Pp. 485. Cloth, $35.00.)

The late Thomas McCraw, who died in November 2012, was for many years the Isidor Straus Professor of Business History at Harvard Business School. Best known to historians for his studies of regulation in late nineteenth- and early twentieth-century America, and among economists for his prize-winning 2007 biography of Joseph Schumpeter, in his final work McCraw turned to a dual biography of two early American secretaries of the Treasury, Alexander Hamilton and Albert Gallatin. The result will strike many historians of the period as a fairly curious work. While The Founders and Finance offers a competent and highly readable retelling of a familiar story, it adds little to our knowledge of the period and its subjects' lives. Instead, we are given an interpretation of Hamilton's and Gallatin's success that stresses their ability as immigrants and [End Page 554] outsiders to understand and use public finance in ways that insiders (the native-born) were unable to grasp.

McCraw lays out his story in three parts. The first two are biographical accounts of his protagonists; the third, entitled "The Legacies," will be the part of the book of most interest to those already familiar with the basic details of the lives and times. In this concluding section of the work, McCraw explores the larger issues he thinks the two financiers' stories raise—"Immigrant Exceptionalism," "Comparisons and Contingencies," "Capitalism and Credit," and "The Political Economy of Hamilton and Gallatin." All of this, by the way, in the space of a little less than forty pages.

Is the notion that, as outsiders and immigrants, Hamilton and Gallatin understood the modern world (and in particular modern finance) better than their provincial American contemporaries a convincing argument? One has to wonder. It has long been thought that Hamilton's immigrant status made him less inclined to state loyalties (not even when it came to the Empire State of New York) and more inclined to take a continental, national perspective. But to suggest that this had much to do with Hamilton's proficiency in matters of finance seems a bit of a stretch. Being a teenage clerk for Beekman and Cruger in St. Croix may have familiarized Hamilton with forms of currency and accounting and bills of exchange, but did it really prepare him to write the Report on Public Credit? Though the logic of McCraw's case leads in that direction, the author doesn't say so directly, and in fact what he does tell us about the origins of Hamilton's knowledge of finance is that it lay in his voracious reading while in the Continental Army. Perhaps only a foreigner would have seen the need to inform himself on these matters and then seized the opportunity to do so, but the case McCraw builds for his thesis is tenuous, to say the least.

Gallatin left Geneva in 1780, at the age of nineteen, without any business background. Geneva was, to be sure, an important banking center in the eighteenth century; but there is no evidence that the pre-immigrant Gallatin had any exposure to the inner workings of the city's financial houses. And in any case, as readers of Herbert Lüthy's La banque protestante en France (2 vols., 1959-61) will recall, the speculations of late ancien régime Swiss bankers in the French public debt were anything but a model that the cautious Gallatin would follow in his own practice as secretary of the Treasury. Lessons, if there were any, would have been largely negative. McCraw also tells us—briefly—about Gallatin's career [End Page 555] after leaving the Treasury. Of course a page or less on his seven years as American minister to France, 1816-1823, is not much, and even more disappointingly we learn virtually nothing about his career as a banker in New York in the 1820s and 1830s.

Gallatin is the lesser known of the two...