Alexander Hamilton’s Second Draft
of the Report on the Subject of
The Secretary of the Treasury in obedience to the order of the House of Representatives of the fifteenth day of January 1790 has applied his attention, at as early a period as his other duties would permit to the subject of Manufactures and particularly to the means of promoting such as will render the United States, independent on foreign nations, for military and other essential supplies.
The expediency of encouraging manufactures in the United States,
though not long since deemed very questionable, appears at this time to be pretty generally admitted. The embarrassments, which have obstructed the progress of our foreign Trade, have led to serious reflections on the necessity of enlarging the sphere of our domestic commerce, and the success which has attended, in certain valu manufacturing enterprise, in certain some valuable branches, has evinced that greater and more various success ought not to be despaired of obstacles to the extension of this species of industry are not so formidable as they have been apprehended to be.
There are nevertheless still patrons of opinions unfavourable to the encouragement of manufactures. The arguments which support these opinions are of the following nature.
In every country, Agriculture is the most beneficial and productive object of human Industry. In the United States this position derives
great additional force from the immense tracts of waste lands still uninhabited and unimproved. Nothing can afford so advantageous an employment for capital and labour as the conversion of this wilderness into cultivated farms. Nothing can contribute so much as this, to the rapid increase of the population and real riches of the Country.
and foster the growth of manufactures by the particular particular patronage and favour of the government is to endeavour by a misjudged and artificial policy to turn aside the course of in change the natural current of Industry from a more to a less beneficial channel. It can scarcely ever be wise in government to attempt to give a direction to the industry of its citizens. This, if left to itself, will under the guidance of individual interest, naturally make its way wherever it can find the most profitable employment; and by such employment alone will be the public prosperity be most effectually advanced. The safest and soundest policy therefore is to leave it to itself.
This policy is not only recommended to the United States by considerations applicable to all
countries, but in a manner dictated artificer to it by an the invincible force of peculiar situation. The smallness of their population compared with their territory; the continual allurements to emigration from the settled to the unsettled parts of the country, the facility with which the less independent situation of an º artisan can be exchanged for the more independent situation of a farmer—these circumspence circumstances conspire to produce and for a great length of time must necessarily continue to produce a scarcity of hands for manufacturing occupations; and a correspondent dearness of labour. These impediments, combined with a deficiency of capital, forbid a successful competition with the manufacturers of Europe. Extensive manufactures can only be the offspring of a redundant, at least of a full population. ’Till that shall characterise the situation of this country, tis vain to hope for the former.
If contrary to the natural and salutary course of things, a premature and artificial spring should be given to certain
manufactures, by force heavy duties, prohibitions, bounties or by any other forced and violent expedients, this will only be to sacrifice the interests of the community to those of particular classes. Besides the misdirection of labour, a virtual monopoly will be given to those employed on such fabrics; and an enhancement of price, the inevitable consequence of every monopoly, must be defrayed at the expence of all others. It is far better that those persons should be employed in the cultivation of the Earth, and that we should procure with the surplus products of our soil at the cheapest the commodities with which foreigners are able to supply us at a cheaper rate and of superior quality.
This theory has so much of truth in it, that its principles ought never to be
ought of the view of the Legislators of this Country. And while its extremes ought to be qualified in practice by the exceptions to which every general theory theory is subject, its maxims ought to serve as cautions against all its extremes of a different kind. If they do not persuade, us that all legislative aid ought to be witheld from particular branches of industry which appear to stand in need of it —they ought at least to inculcate, that it should be afforded with moderation and º measures—that the real aptitudes in the state of things for particular improvements should be carefully consulted— and that these should be developped by gradual systematic and progressive efforts º rather than forced into maturity by violent and disproportioned exertions.
In order to a right judgment of the policy, which ought to be pursued in relation to the encouragement of manufactures in the United States, it will º be useful to pass in review the considerations which serve to limit the generality of the maxims that stand opposed to it.
In the first place, though it is
will readily be admitted that if a Nation Agriculture, as the great and primary basis of national prosperity, as the immediate source of subsistence and nourishment to man, as the origin of those materials, which principally give employment and support to other kinds of labour, as involving, perhaps, a state most favourable to the freedom and independence of the human mind is intitled to the first a preeminence in the system of political œconomy; yet it is not equally evident that this species of industry as alleged, is more productive in any substantial meaning of the term, more productive than every other. It is not verified by any detail of facts and calculations; & The argument, commonly made use of to prove it, is rather quaint than satisfactory. It is said that in the productions of the soil nature cooperates with man and that the effect of their joint labour must be greater than that of man alone. But this appears by no means a necessary inferen inference. It is very conceivable that the labour of man alone bestowed upon an object requiring great skill and art to bring it to perfection, may in the estimate of value, be more productive, than the labour of nature and man combined, when directed towards more simple operations and objects. And accordingly when it is considered to what an extent the mechanical powers of mechanism are rendered auxiliary to the prosecution of manufactures, little more than the quaintness of the hypothesis remains. Accordingly it It is certain, that higher wages are given to workmen in most manufactures, than to labourers employed in Tillage, and that in a great er number of cases the undertaker enjoys greater profit upon his Capital than the landho proprietor of land upon his;
|both which are indications of superior productiveness. And it is not less certain that nations which have
In the second place it may be observed that nothing can be a greater error than to consider
manu Agriculture and manufactures as standing in opposition to each other and to suppose that the growth of the one will impede the progress of the other.
If a country were to be
supposed, having a given extent of territory, requiring a given number of persons to cultivate it, and intirely shut out from foreign Trade there could be little room for question that it would be more its interest to have the requisite such a proportion of its inhabitants employed in furnishing manufactures for the whole society as were requisite for that purpose, than to have them all employed as cultivators. and there would be as little room that its agriculture that the mass
This would not arise, either, from
the absolute impracticability of the cultivators of land to procur ing those manufactures for themselves; for it is very conceivable by their own labour, the manufactures of which they might stand in need: For it is conceivable that the same persons in each family might till the ground and make the fabrics which were requisite to the supply of indispensable wants: Or if there are exceptions to the possibility of doing this, they are not numerous.
it w if such a state of things existed any where, it would quickly be discovered that it was the interest expedient to change it—The lands in a country so situated would be wretchedly cultivated and the whole community badly supplied. The want of a subdivision of labour would prevent improvement and skill in every thing—Husbandry would be in a rude state and the arts in a still ruder. The inducements to make the land productive would be circumscribed to the necessary subsistence of each family. in the simplest The Neither the gratification of those appetites & inclinations which are incident to a state of greater improvement nor the desire of accumulating wealth, by the exchange of thos a surplus produced from the soil, would prompt exertions to obtain such a surplus. While The interruptions and delays arising from the necessity of passing from one kind of labour to another and the want of skill in execution which can only be acquired by a continual application to the same object business renders diminish es the effect of it in every operation to which it is applied: All the important inventions, by which machinery is made to abridge and perfect labour, would be excluded; from the want of adequate motives to excite the a spirit of discovery and contrivance.
It is readily perceived, that in
a country so situated not only the total mass of labour would be much less than if its inhabitants were subdivided in due proportions into cultivators mechanics and manufacturers—but the mass of agricultural industry would also be incomparably less—The superior cultivation of so much of the soil l as was cultivated in one case would greatly overballance in productive l the intire quantity occupied in the other, case under circumstances of very inferior cultivation. And from hence the following inferences may be drawn—that it may the interest even of a state not fully peopled , to have a part of its inhabitants abstracted from the cultivation of land to be employed in mechanic and manufacturing occupu occupations and that the abstraction of the a part of the inhabitants of a state, not fully peopled and consequently having waste and unoccupied lands, from agricultural pursuits is not necessarily injurious to agriculture but may be essential to its prosperity. And it may be safely presumed that in a country situated as has been supposed the natural interests of the community would of themselves subdivide it into the different classes of cultivators mechanics and manufactures.
shewn history and experience shew that in very early stages of national progress long before the land mechanic and manufacturing arts grow up. Villages are formed from distance to distance in which those who devote themselves to such arts, collect, for the supply of the neighbouring country, which repays their industry with the progress of the soil. And it is This takes place from two causes the palpable advantages of a subdivision separation and distribution of industrious pursuits and the diversity of dispositions and talents of mankind of the human mind. The importance of giving scope to this diversity, by varying the objects by diversifying the objects of national industry will deserve particular notice in another place.
It is a remark of
all time that the country in the vicinity of a manufacturing towns are much better cultivated and more thriving than those remote from them; which is to be accounted by the facility of obtaining those supplies for which the husbandman has occasion
by the advantage of a near market for the sale of whatever surplus he may have to dispose of. This fact
no affords no inconsiderable illustration of the beneficial influence which the industry of the towns has upon that of the country or in other words which the progress establishment of manufactures has upon the progress of agriculture.
were a is manifestly an error to consider the prosperity of Agriculture as in proportion to the quantity of land occupied or even to the number of persons who occupy it or to both. It is rather to be considered as in a compound ratio n to the quantity of land s occupied and to the degree of improvement.
But a reflection naturally arises here, that
although however true it may be that a state secluded from foreign Commerce would find its interest and the interest of Agriculture in devoting a part of its population, which might b e find employment in tillage, to manufactur ing pursuits—yet wil it will not follow that the same thing can be advantageous to a community in which having such tracts of vacant territory, can also have the benefit of time by means of foreign commerce procure from foreign nations on good terms all the fabrics necessary for which it may have occasion.
This point requires therefore a further and more particular examination.
If the free system were the prevailing system of nations, if industry and commerce were generally left to their natural course, the arguments which dissuade a Country situated like the United States from the pursuit of manufactures would be more difficult to combat than they now are. It is not certain that they might not safely be permitted to serve as a rule of conduct. Each Country would then have the full benefit of its peculiar advantages to compensate for its disadvantages. That which was invited by its particular situation to direct its attention exclusively to agriculture would be able to furnish the products of the earth on so much better terms than the country which was engaged in an extensive scene of manufactures as to be able to maintain a beneficial exchange of subsistence and raw materials for manufactured articles.
But this natural ballance is disturbed and in great measure destroyed by the general policy of nations. The spirit of monopoly which
governs most countries is the governing one interrupts that free exchange which would distribute to each party its proportion of benefits; and seconded in some instances by a great superiority bet both of industrious skill and of capital would subject any nation which should implicity follow the dictates of the opposite system to disadvantageous very incompatible with its properity. It has, with regard to a Country situated like the United States, in a great degree, the same effect, as an exclusion from foreign commerce.
England, for instance, from which we derive our principal supplies of manufactured articles forbids the importation of our grain into her home market except when its price there is beyond
what is considered what is considered as its average or ordinary rate;76 and thus while we continually take from her her manufactures, she only occasionally takes from us our grain.
Again she excludes us either from bringing from her West Inia possessions those products which we stand in need of from thence or from carrying thither those of our products of which they stand in need.
thus not only ex It is true that she brings to us in our own ships all the different articles produced in her Islands and takes from us in her own ships all the articles of the our productions requisite to their supply; but by preventing us from being our own carriers,77 she reduces us in this branch of trade to a commerce merely passive, deprives us of all her share in the profits of the carrying trade whatever they may be and substantially of a participation in the profits of the advanced price both of the commodities of her Islands in our markets and of our commodities in the markets of her Islands. While in the trade between her European dominions and the United States she shares fully with us in every species of advantage.
With regard to the fisheries which from situation may be considered as the staple of a part of the United States,
such the British regulations amount to a prohibition of all but the finer oils of w which find admission into Great Britain in spite of the enormous duty of 78
If from England our eyes are turned towards France we shall not see a more favourable Picture. It
is the standing has been long the standing policy of France to exclude the introduction of flour into every part of her dominions. Relaxations in this policy from particular exigencies occasionally take place but it is the prevailing one.79 And th is exportation of this great staple of our country meets with with a still more formidable bar from the regulations of France than of Britain.
France permits us to bring from her Islands in our own ships Rum melasses and to carry thither in our own ships but
flour or wheat & flour cannot be admitted there either in our our own or in French bottoms—no r more than Sugar Coffee or Cocoa can be brought to us in the one or in the other.80
The fisheries by a late edict of the National Assembly are placed on a footing still more disadvantageous than that upon which it stands in respect to Great Britain.81
yet being charged with a duty of per quintal, which amounts to
p a prohibition since this apparent distinction in our favour is merely nominal. The state of things in France is not likely to afford us the same advantage with regard to our fine oils as results from the state of things in Great Britain.
Another Regulation of the National Assembly of France has placed our Tobacco Trade upon a very disadvantageous footing.82 The Tobacco of the United States may be carried to France in French or American bottoms but if carried in the former, it is liable to a duty of only if carried in the latter it is liable to a duty of a difference which prohibits its exportation in vessels of the United States; and by narrowing the field of commercial enterprise and substituting a less eligible mode of transportation is calculated to incumber and injure the trade in that article.
Upon the whole it may be affirmed that ineligible as is the footing upon which our Trade with Britain is carried on it stands upon a still less eligible footing in regard to France.
Spain too and Portugal have regulations injurious to our Trade in Grain. Flour
With regard to the Northern Powers of Europe they are in general our competitors in furnishing the articles which constitute our Agricultural staples.
And as to the most Southern
Powers parts of Europe, the avenues to them have been almost intirely closed by the hostile dispositions of the Barbary Powers.
This view of our external situation is not designed by way of complaint of the policy by which our trade
it is embarrassed. It is the right of every independent nation, where not restrained by Treaty, to pursue its own interest, in its own way; so that it does not violate any positive right of another. Tis for itself to judge how far its meer practice may counteract its own object, and, by aiming at too much, may occasion the loss of advantages actually possessed and which by a more natural policy might have been long preserved as in the one case, and with certainty acquired for the other.
Its sole intention is to shew that the policy of other countries interferes with
ou our deriving the full benefit of our Agricultural Industry, placing places us under serious disadvantages in exchanging the surplus of our soil for those foreign productions and manufactures of which we stand in need, and renders more precarious than might be wished the obtaining of a regular ready and regular vent for that immense increasing surplus which the inevitable progress must result from the inevitable progress of population and settlement in the United States.
while no overweening anxiety for the future is indulged— while the experience we have had of an increasing demand even for those very staples with w for some of our principal productions ought to guard us against a degree of solicitude, which might mislead—though we ought fully to appreciate those which counteract, in our favour, those the regulations tending to abrige the advantages of our situation and which are likely to continue to render us the granary of Europe in those emergencies which its the interests and passions of its various subdivisions will not fail to reiterate—Yet it cre becomes to consider seriously of the means of rendering our prosperity less dependent on the projects and vicissitudes of foroegn Politics.
It is a consolation that, already the measures which have borne hard upon our Trade have accelerated internal improvements which upon the whole have bettered our situation. To diversify, develope and extend those improvements is the surest and safest method of indemnifying ourselves for any inconveniences which those or similar measures have a tendency to occasion, and will be found the most effectual retaliation for any unkindness of disposition (if any there has been) which may have produced them. If Europe will not take the products of our soil, upon such terms as we ought to expect, let us endeavour as fast as possible to cease to have occasion for her manufactures. These considerations shew that in pursuing the free system we should not have the full benefit of its principles from the want of reciprocity—and the policy of foreign countries has in a great measure the effect of an exclusion from foreign Trade.
The best of all expedients for the encouragement of Agriculture is to secure
an extensive home market for that surplus which produced by the labour of the farmer which remains after supplying the wants of himself and family.
The foreign market is necessarily a precarious dependence for the surplus. It is the effort of every nation to be able to supply itself with articles of prime necessity, particularly those which
constitute its subsistence. Hence most nations supply themselves in ordinary times supply themselves with aut the principal products of the earth. Seasons of particular scarcity and times of war only oblige them to resort to foreign supply assistance. And hence also the demand for the surplus of a country merely Agriculture must be liable to injurious stagnations. Plentiful harvests and a state of pretty general peace are always likely to interrupt it. And while the wants of such a country for manufactured supplies are pretty constant and uniform, the demand for the commodities which it has to give in exchange is liable to frequent fluctuations. And this will account for the fact which has been already remarked namely that countries merely Agricultural have seldom much active wealth being continually drained by those manufacturing countries with which they trade.
This being the case it is consequently of the highest importance to secure an extensive domestic market for that surplus. The superior steadiness and certainty of such a market by rendering the reward of the farmer more certain is the strongest incement to his industry.
Towards the creation of this domestic market the establishment and extension of manufactures
is are indispensable. The manufacturer is a certain customer to the farmer for what he can spare and in return furnishes him with what he wants. This is not the least of the circumstances by which manufactures promote the interest of Agriculture.
Another respect in which they do it is this—They not
not only render the demand for the surplus productions of the soil in general more certain but they create a demand in cases in which83
75. ADf, Hamilton Papers, Library of Congress.
Words which were underlined for emphasis in the MS are printed with underlines in this draft of the Report.
76. The most recent British regulation regarding the importation of grain was contained in 31 Geo. III, C. 30 (1791).
77. 28 Geo. III, C. 6 (1788) confirmed earlier Orders in Council regarding trade with the West Indies.
78. This and subsequent spaces left blank in MS by H.
Jefferson had described these regulations in the report on the fisheries which he had communicated to Congress on February 4, 1791 (ASP description begins American State Papers, Documents, Legislative and Executive, of the Congress of the United States (Washington, 1832–1861). description ends , Commerce and Navigation, I, 8–22). According to the 1787 consolidated table of rates (27 Geo. III, C. 13 ), foreign train oil, blubber, or fish oil paid £18 3s. per tun of 252 gallons, whereas the same quantity from the British fisheries paid £1 15s. 3d. British spermaceti was entered duty free, while that of foreign fisheries paid 17s. 8d. per hundredweight if “coarse and oily,” and 8d. per pound if fine.
79. The policy of temporary suspension of impost restrictions in favor of necessary provisions was stated in Article 17 of the decree concerning the French colonies that was passed by the National Assembly on March 28, 1790, and published by royal proclamation on April 9, 1790. Article 17 states: “Examinant les formes suivant lesquelles le pouvoir législatif doit être exercé relativement aux colonies, elles reconnoîtront que les lois destinées à les régir, méditées & préparées dans leur sein, ne sauraient avoir une existence entière & définitive, avant d’avoir été décrétées par l’Assemblée nationale & sanctionnées par le Roi; que si les lois purement intérieures peuvent être provisoirement exécutées avec la sanction d’un gouverneur, & en réservant l’approbation définitive du Roi & de la Législature française, les lois proposées qui toucheraient aux rapports extérieurs, & qui pourraient en aucune manière changer ou modifier les relations entre les colonies ou la métropole, ne sauraient recevoir aucune exécution, même provisoire, avant d’avoir été consacrées par la volonté nationale; n’entendant point comprendre sous la dénomination des lois les exceptions momentanées relatives à l’introduction des substances qui peuvent avoir lieu à raison d’un besoin pressant, et avec sanction du gouverneur” (Duvergier, Lois description begins J. B. Duvergier, Collection Complète des Lois, Décrets, Ordonnances, Réglemens, et Avis du Conseil-d’Etat, Publiée sur les Editions Officielles du Louvre; de L’Imprimierie Nationale, Par Baudouin, et Du Bulletin des Lois (Paris, 1824). description ends , I, 164–65).
80. After the American Revolution, regulations concerning the commerce of the United States with the French West Indies were established by the “Arrêt du conseil concernant le commerce étranger dans les îles françaises de l’Amérique” of August 30, 1784. Section 1 of the arrêt opened new entrepôts to foreign ships. Sections 2 and 3 stipulated the products which might be imported into these entrepôts. These sections read in part as follows:
“2. Permet S. M.… aux navires étrangers, du port de soixante tonneaux au moins, uniquement chargés de bois de toute espèce, même de bois de teinture, de charbon de terre, d’animaux et bestiaux vivants de toute nature, de salaisons de bœufs et non de porcs, de morue et poisson salés, de riz, maïs, légumes, de cuirs verts en poil ou tannés, de pelleteries, de résines et goudron, d’aller dans les seuls ports d’entrepôt désignés par l’article précédent, et d’y décharger et commercer lesdites marchandises.
“3. Il sera permis aux navires étrangers qui iront dans les ports d’entrepôt, soit pour y porter les marchandises permises par l’art. 2, soit à vide, d’y charger pour l’etranger, uniquement des sirops et taffias, et des marchandises venues de France.” (Isambert, Recueil Général des Anciennes Lois Françaises description begins Recueil Général des Anciennes Lois Françaises, Depuis L’An 420 Jusqu’à La Révolution de 1789, par MM. Jourdan, Docteur en droit, Avocat à la Cour royale de Paris; Isambert, Avocat aux Conseils du Roi et à la Cour de Cassation; Decrusy, ancien Avocat à la Cour royale de Paris (Paris, 1821–1833). description ends , XXVII, 460.)
81. On January 24, 1791, during discussion of the general tariff act, the National Assembly adopted the rate of five livres per quintal for fish oils from America whether in French or American ships. Later the same day this was amended and a rate of twelve livres per quintal was substituted. On March 2, 1791, the question was raised again, and a tariff of six livres per quintal assessed (Archives Parlementaires description begins Archives Parlementaires de 1787 à 1860 (Paris, 1868– ). description ends , XXII, 470–71, 475; XXIII, 602, 611).
82. Discussions concerning a new decree adjusting the duties on tobacco began in the National Assembly in February, 1791. The decree, passed March 1, 1791, is printed in Archives Parlementaires description begins Archives Parlementaires de 1787 à 1860 (Paris, 1868– ). description ends , XXIII, 595. According to this decree the duty on tobacco imported into France in foreign ships was twenty-five livres per quintal, while the duty on tobacco imported in French ships was eighteen livres, fifteen sous. This duty was incorporated into the “Tarif des Droits d’Entrée” passed by the National Assembly on March 2, 1791 (Archives Parlementaires description begins Archives Parlementaires de 1787 à 1860 (Paris, 1868– ). description ends , XXIII, 618–19).
83. No further material for this draft has been found. There are, however, four pages of an outline in H’s handwriting in the Hamilton Papers, Library of Congress, which H apparently intended as a recapitulation of his second draft and as an outline for his third draft of this Report. This outline reads as follows:
Society more revenue
with manufactures than
|To be answered
This is to be deferred
|To be answered|
|To be answered|
|Answered (Monopolising system of Europe)|
|To be answered|
|To be answered|
|Scarcity of Hands—
Some districts populous
women and children
occasional employment to classes otherwise occupied
|To be answered|
|To be answered|
Advantange to Trade from more various market
Independence from possessing all necessary means internally
Distance from Europe
Bulk of Commodities &c.
Kinds of manufactures which
U States ought to aim at
Usual means employed for encouragt
Specific means proper
to be taken
Manufactures tend to increase the mass of productive labour
|1||by promoting the division of it|
|2||by giving an occasion to the extension of the artificial powers of machinery|
|3||by enlarging the sphere of income out of which savings can be made to increase the national capital and the number of persons by whom they are to be made.”|