I am embarrassed to admit how little I knew about Alexander Hamilton before taking US History with my teacher, Mr. Crowley-Delman. However, now that I've researched Hamilton, I believe America's financial and economic institutions owe much credit to him. Out of all his work, one of his most famous and respected policies include establishing the First Bank of the United States. He is famous for many other policies as well; however today I would like to explain the significance of the bank.
At the time of Hamilton's proposition, America had just broken off from England and formed the United States (McDonald, 1979). Prior to this point, America had been thirteen different colonies with their own systems of banking and their own ideas on how to handle finance (McDonald, 1979). Why was this dangerous? The most important reason must have that different currencies would cause disunity both internally and internationally. Just imagine if New Jersey, Texas, and Massachusetts all had different currencies. Each state would be looking out for their own interests, resulting in internal division. In addition, each state would have a different value to their currency. Other countries would have to distinguish between the different types, and America would quickly fall apart. In Hamilton's belief, establishing the first bank of the United States would solve this problem which would result in tremendous economic growth (in addition to paying of the debt America had incurred through the American Revolution) (McDonald, 1979). Establishing this bank would set up a standardized system that would serve as a model for future banks, and set a precedent for fixed currency. Hamilton had the incredible foresight to predict that unless the country could systematize economic trade, disorder would spread across the United States.
As great as the system seems to many today, there was much opposition to Hamilton in his day. Figures such as Jefferson argued that because 80% of the bank was public, other countries who would invest in it could control America's institutions and corrupt our system (Friedman, 1963) However, this was not the case. The buyers of the public shares had no link to the overseers of the national bank (Markham, 2001).
Without a visionary such as Hamilton, where would America's economy been today? He gave the United States some of the greatest tools for setting up a great financial system. World economists should look back at Hamilton's accomplishments (First Bank of the United States, the system of tarriffs, founding of the US mint, Revenue Cutter Service) and think about how we can recreate his successes to strengthen their perspective economies.
McDonald, Forrest (1979). Alexander Hamilton: A Biography. W.W. North & Co.. pp. 194.
Milton Friedman and Anna Jacobson Schwartz (1963). A Monetary History of the United States, 1867-1960
Markham, Jerry (2001). A Financial History of the United States. Armonk: M.E. Sharpe. ISBN 0765607301.