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This is a short extract from my forthcoming book: The Invention of 
Capitalism: 
Classical Political Economy and the Secret History of Primitive 
Accumulation 
(Duke University Press, Spring 2000). 
 
 
                    Alexander Hamilton and Adam Smith 
 
Of all the founding fathers, Hamilton was most inclined toward the mind 
set of political economy.  Scholars have noted certain parallelisms 
between the work of Hamilton and the Wealth of Nations (Gourne 1894; 
Mitchell 1962; 2: pp. 144, 146, and 149; and the editorial notes in 
Hamilton 1961; 10: pp. 1-240).  William Grampp even suggests that a 
reading of Wealth of Nations was sufficient to wean Hamilton of his 
earlier mercantilist leanings (Grampp 1965, pp. 134-36). 
 
In fact, Hamilton's ideas were remarkably close to those of Steuart. Both 
thought that institutions other than the market were required to integrate 
the economy.  Hamilton approved of Steuart's popular monetary theories 
because they would "cement more closely the union of states" (Hamilton 
1961-; 7: p. 70).  Indeed, the same metaphor can be found in Steuart where 
statesmen are called upon to "cement" their society (Steuart 1767; 2: p. 
191).  Elsewhere, Hamilton praised debt and the army as cement for the 
union (Hamilton 1961-; 2: pp. 635, 402; see also 3: 4, p. 29). 
 
Steuart's influence was readily apparent in Hamilton's Report on the 
Establishment of a Mint, which drew heavily on the work of his master 
(Hamilton 1961-; 10: p. 462).  Although Hamilton did not explicitly 
acknowledge Steuart, an early draft did allude to him as "an English 
writer of reputation who appears to have investigated the point with great 
accuracy and care and who accompanies his calculations with their data 
which are confirmed by other authority" (ibid., p. 482). 
 
In his most systematic study of the limits of the market, Hamilton lashed 
out at those "who maintain that trade will regulate itself" (Hamilton 
1961-; 3: p. 76; see also ibid., 15: p. 467).  He continued: "Such persons 
assume that there is no need of a common directing power. This is one of 
those wildly speculative paradoxes, which have grown into credit among us, 
contrary to the practice and sense of the most enlightened nations" 
(ibid.). 
 
Hamilton's most noteworthy contribution to economic theory proper was his 
Report on the Subject of Manufacturers (Hamilton 1961-; 10: pp. 1-340).  
In spite of the frequent appropriations of observations from Smith, the 
intent of the document was decidedly unsmithian (ibid., p. 7; see also 
Cooke 1967, p. 81).  Hamilton wrote of the division of labor, but his 
division of labor was Steuart's, not Smith's.  He began with the 
assertion: 
 
It has just been observed, that there is scarcely anything of greater 
moment in the economy of a nation, than the proper division of labour. The 
separation of occupations causes each to be carried to a much greater 
perfection, than it could possibly acquire, if they were blended. 
[Hamilton 1791, p. 249] 
 
To create an appropriate social division of labor, Hamilton called for the 
"separation of the occupation of the cultivator, from that of the 
Artificer" (Hamilton 1961; 10: p. 251) by "diverting a part of its 
population from Tillage to Manufactures ... leaving the farmer free to 
pursue exclusively the cultivation of his land and enabling him to procure 
with its products the manufactured supplies requisite either to his wants 
or to his enjoyments" (Hamilton 1961; 10: pp. 216 and 261-62). 
 
Hamilton recommended that the state enact a continual tax which would act 
as "a Motive to greater exertion in any occupation" (ibid., p. 280).  Like 
Steuart, he saw industry as engaging those "willing to devote the leisure 
resulting from the intermissions of their ordinary pursuits to collateral 
labours" (ibid., p. 253).  In short, Hamilton rejected "the proposition, 
that Industry, if left to itself will naturally find its way to the most 
useful and profitable employment: whence it is inferred that manufacturers 
without the aid of government will grow up as soon and as fast, as the 
natural state of things and the interest of the community may require" 
(ibid., p. 266).  Steuart could not have said it better. 
 
Smith's unimportant role in the development of Hamilton's thought is 
suggested by one source, who noted that Hamilton had actually prepared a 
critique of Wealth of Nations during his term in the Continental Congress 
(ibid., p. i; and Hamilton 1879, 2: p. 514). 
 
Michael Perelman 
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