Note on the Funding System
[Philadelphia, August, 1794]1
The funding system (says a correspondent) as much abused, as if it were criminal in a Government to provide for the payment of the Debts of a Nation or as if it had created the debt for which it but provides, has not only produced all the advantageous effects which were promised from it (that is) contributed, by an increase of active or negotiable capital, to extend commerce and industry in every branch and to raise the value of lands, but it is at this moment promoting a very important advantage of another sort which was not predicted, namely the transfer to this Country of foreigners of property with their property. Every body knows that the difficulty of transferring property from one country to another without loss or risk of loss is not among the least of the impediments to emigration. But the funds of the U States, which have been carried to Europe, obviate this difficulty, and offer at once a mode of investment and transfer altogether convenient and even profitable; a circumstance which it is known has had its influence and is likely to have still greater. Thus the U States receive a double compensation for their funds by the first price which was given for them, and by their return with the additional advantage of an acquisition of citizens who come to this country from a mode of thinking congenial with our political establishments. Those who think accessions of Capital to a young Country, which has more to improve, than capital for improvement, beneficial, will not undervalue the advantage which has been mentioned. At any rate, they will see in it a diminution of what has been supposed by some as evil, the transfer of our funds to foreigners.
ADf, Hamilton Papers, Library of Congress.
1. It is impossible to date this document with any degree of accuracy. At the top of the first page of the MS someone (not H) has written: “[1791?].” This date, which has been accepted by Broadus Mitchell (Mitchell, Alexander Hamilton [New York, 1957–1962], II, 590, note 11), appears to be too early, for on the back of this document H wrote the following notes for his own use: “Enquire of Mr. Frances if he is in the way of procuring the needful supplies. Note Contractors for Cloathing. Proscribed Privateers.” Tench Francis was the agent for military purchases in Philadelphia. Although H’s remarks concerning supplies and clothing could apply to either 1793 or 1794, it seems more likely that he was referring to the problem of supplying the militia army used against the opponents of the excise tax in 1794 in western Pennsylvania. In addition, and perhaps more important, while the proscribed privateers were an issue in both 1793 and 1794, on August 18, 1794, H wrote to George Washington: “The Secretary of the Treasury submits to the President the draft of a letter on the subject of the proscribed privateers.”