It's no distortion at all. Hamilton made his strong inclination toward economic interventionism perfectly clear. Here's an excerpt Alexander Hamilton's famous Report on Manufactures of 1791, the DEFINING DOCUMENT of Hamiltonian economics. It is laden with calls for protectionism, federal expenditures, and widespread government economic intervention. That is not capitalism, fake-it. That is interventionism and Hamilton was by definition an interventionist. Live with it:
In order to a better judgment of the means proper to be resorted to by the United States, it will be of use to advert to those which have been employed with success in other countries. The principal of these are--
I. Protecting duties
Protecting duties--or duties on those foreign articles which are the rivals of the domestic ones, intended to be encouraged.
Duties of this nature evidently amount to a virtual bounty on the domestic fabrics since by enhancing the charges on foreign articles, they enable the national manufacturers to undersell all their foreign competitors. The propriety of this species of encouragement need not be dwelt upon; as it is not only a clear result from the numerous topics which have been suggested, but is sanctioned by the laws of the United States in a variety of instances; it has the additional recommendation of being a resource of reevenue. Indeed all the duties imposed on imported articles, though with an exclusive view to revenue, have the effect in contemplation, and except where they fall on raw materials wear a beneficent aspect towards the manufactures of the country.
II. Prohibitions of rival articles or duties equivalent to prohibitions
This is another and an efficacious mean of encouraging national manufactures, but in general it is only fit to be employed when a manufacture, has made such a progress and is in so many hands as to insure a due competition, and an adequate supply on reasonable terms. Of duties equivalent to prohibitions, there are examples in the Laws of the United Staets, and there are other cases to which the principle may be advantageously extended, but they are not numerous.
Considering a monopoly of the domestic market to its own manufacturers as the reigning policy of manufacturing nations, a similar policy on the part of the United States in every proper instance, is dictated, it might almost be said, by the principles of distributive justice; certainly by the duty of endeavoring to secure to their own citizens a reciprocity of advantages.
III. Prohibitions of the exportation of the materials of manufactures
The desire of securing a cheap and plentiful supply for the national workmen, and, where the article is either peculiar to the country, or of peculiar quality there, the jealousy of enabling foreign workmen to rival those of the nation, with its own materials, are the leading motives to this species of regulation. It ought not to be affirmed, that it is in no instance proper, but it is certainly one which ought to be adopted with great circumspection and only in very plain cases. It is seen at once, that its immediate operation, is to abridge the demand and keep down the price of the produce of some other branch of industry, generally speaking, of agriculture, to the prejudice of those, who carry it on; and though if it be really essential to the prosperity of any very important national manufacture, it may happen that those who are injured in the first instance, may be eventually indemnified, by the superior steadiness of an extensive domestic market, depending on that prosperity: yet in a matter, in which there is so much room for nice and difficult combinations, in which such opposite considerations combat each other, prudence seems to dictate, that the expedient in question, ought to be indulged with a sparing hand.
IV. Pecuniary bounties
This has been found one of the most efficacious means of encouraging manufactures, and it is in some views, the best. Though it has not yet been practiced upon by the government of the United States (unless the allowances on the exportation of dried and pickled fish and salted meat could be considered as a bounty) and though it is less favored by public opinion than some other modes.
Its advantages, are these--
It is a species of encouragement more positive and direct than any other, and for that very reason, has a more immediate tendency to stimulate and uphold new enterprises, increasing the chances of profit, and diminishing the risks of loss, in the first attempts.
It avoids the inconvenience of a temporary augmentation of price, which is incident to some other modes, or it produces it to a less degree; either by making no addition to the charges on the rival foreign article, as in the case of protecting duties, or by making a smaller addition. The first happens when the fund for the bounty is derived from a different object (which may or may not increase the price of some other article, according to the nature of that object) the second, when the fund is derived from the same or a similar object of foreign manufacture. One percent duty on the foreign article converted into a bounty on the domestic, will have an equal effect with a duty of two percent, exclusive of such bounty; and the price of the foreign commodity is liable to be raised, in the one case, in the proportion of one percent; in the other, in that of two percent. Indeed the bounty when drawn from another source is calculated to promote a reduction of price, because without laying any new charge on the foreign article, it serves to introduce a competition with it, and to increase the total quantity of the article in the market.
Bounties have not like high protecting duties, a tendency to produce scarcity. An increase of price is not always the immediate, though, where the progress of a domestic manufacture does not counteract a rise, it is commonly the ultimate effect of an additional duty. In the interval, between the laying of the duty and a proportional increase of price, it may discourage importation, by intefering with the profits to be expected from the sale of the article.
Bounties are sometimes not only the best, but the only proper expedient, for uniting the encouragement of a new object of agriculture, with that of a new object of manufacture. It is the interest of the farmer to have the production of the raw material promoted, by counteracting the interference of the foreign material of the same kind. It is the interest of the manfuacturer to have the material abundant and cheap. If prior to the domestic production of the material, in sufficient quantity, to supply the manufacturer on good terms; a duty to be laid upon the importation of it from abroad, with a view to promote the raising of it at home, the interests both of the farmer and manufacturer will be disserved. By either destroying the requisite supply, or raising the price of the article, beyond what can be afforded to be given for it, by the conductor of an infant manufacture, it is abandoned or fails; and there being no domestic manufactories to create a demand for the raw material, which is raised by the farmer, it is in vain, that the competition of the like foreign article may have been destroyed.
It cannot escape notice, that a duty upon the importation of an article can no otherwise aid the domestic production of it, than giving the latter greater advantages in the home market. It can have no influence upon the advantageous sale of the article produced, in foreign markets; no tendency, therefore to promote its exportation.
The true way to conciliate these two interests, is to lay a duty on foreign manufactures of the material, the growth of which is desired to be encouraged, and to apply the produce of that duty by way of bounty, either upon the production of the material itself or upon its manufacture at home or upon both. In this disposition of the thing, the manufacturer commences his enterprise under every advantage, which is attainable, as to quantity or price, of the raw material: And the farmer if the bounty be immediate to him, is enabled by it to enter into a successful competition with the foreign material; if the bounty be to the manufacturer on so much of the domestic material as he consumes, the operation is nearly the same; he has a motive of interest to prefer the domestic commodity, if of equal quality, even at a higher price than the foreign, so long as the difference of price is any thing short of the bounty which is allowed upon the article.
Except the stable and ordinary kinds of household manufactures, or those for which there are very commanding local advantages, pecuniary bounties are in most cases indispensable to the introduction of a new branch. A stimulus and a support not less powerful and direct is generally speaking essential to the overcoming of the obstacles which arise from the competitions of superior skill and maturity elsewhere. Bounties are especially essential, in regard to articles, upon which those foreigners, who have been accustomed to supply a country, are in the practice of granting them.
The continuance of bounties on manufactures long established must almost always be of questionable policy: because a presumption would arise in every such case, that there were natural and inherent impediments to success. But in new undertakings, they are as justifiable, as they are oftentimes necessary.
There is a degree of prejudice against bounties from an appearance of giving away the public money, without an immediate consideration, and from a supposition, that they serve to enrich particular classes, at the expense of the community.
But neither of these sources of dislike will bear a serious examination. There is no purpose, to which public money can be more beneficially applied, than to the acquisition of a new and useful branch of industry; no consideration more valuable than a permanent addition to the general stock of productive labor.
As to the second source of objection, it equally lies against other modes of encouragement, which are admitted to be eligible. As often as a duty upon a foreign article makes an addition to its price, it causes an extra expense to the community, for the benefit of the domestic manufacturer. A bounty does no more: But it is in the interest of the society in each case, to submit to a temporary expense, which is more than compensated, by an increase in industry and wealth, by an augmentation of resources and independence; and by the circumstance of eventual cheapness, which has been noticed in another place.
It would deserve attention, however, in the employment of this species of encouragement in the United States, as a reason for moderating the degree of it in the instances, in which it might be deemed eligible, that the great distance of this country from Europe imposes very heavy charges on all the fabrics which are brought from thence, amounting from 15 to 30 percent on their value, according to their bulk.
A question has been made concerning the constitutional right of the government of the United States to apply this species of encouragement, but there is certainly no good foundation for such a question. The national legislature has express authority ``To lay and Collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare'' with no other qualifications than that ``all duties, imposts and excises, shall be uniform throughout the United States, that no capitation or other direct tax shall be laid unless in proportion to numbers ascertained by a census or enumeration taken on the principles prescribed in the Constitution,'' and that ``no tax or duty shall be laid on articles exported from any state.'' These three qualifications excepted, the power to raise money is plenary, and indefinite; and the objects to which it may be appropriated are no less comprehensive, than the payment of the public debts and the providing for the common defense and ``general welfare.'' The terms ``general welfare'' were doubtless intended to signify more than was expressed or imported in those which preceded; otherwise numerous exigencies incident to the affairs of a nation would have been left without a provision. The phrase is as comprehensive as any that could have been used; because it was not fit that the constitutional authority of the Union, to appropriate its revenues should have been restricted within narrower limits than the ``general welfare'' and because this necessarily embraces a vast variety of particulars, which are susceptible neither of specification nor of definition.
It is therefore of necessity left to the discretion of the national legislature, to pronounce, upon the objects, which concern the general welfare, and for which under that description, an appropriation of money is requisite and proper. And there seems to be no room for a doubt that whatever concerns the general interests of learning of agriculture, of manufactures, and of commerce are within the sphere of the national councils as far as regards an application of money.
The only qualification of the generality of the phrase in question, which seems to be admissible, is this--That the object to which an appropriation of money is to be made be general and not local; its operation extending in fact, or by possibility, throughout the Union, and not being confined to a particular spot.
No objection ought to arise to this construction from a supposition that it would imply a power to do whatever else should appear to Congress conducive to the general welfare. A power to appropriate money with this latitude which is granted too in express terms would not carry a power to do any other thing, not authorized in the Constitution, either expressly or by fair implication.
V. Premiums
These are of a nature allied to bounties, though distinguishable from them, in some important features.
Bounties are applicable to the whole quantity of an article produced, or manufactured, or exported, and involve a correspondent expense. Premiums serve to reward some particular excellence or superiority, some extraordinary exertion or skill, and are dispensed only in a small number of cases. But their effect is to stimulate general effort. Contrived so as to be both honorary and lucrative, they address themselves to different passions; touching the chords as well of emulation as of interest. They are accordingly a very economical mean of exciting the enterprise of a whole community.
There are various societies in different countries, whose object is the dispensation of premium for the encouragement of agriculture, arts, manufactures and commerce; and though they are for the most part voluntary associations, with comparatively slender funds, their utility has been immense. Much has been done by this mean in Great Britain; Scotland in particular owes materially to it a prodigious amelioration of condition. From a similar establishment in the United States, supplied and supported by the government of the Union, vast benefits might reasonably be expected. Some further ideas on this head, shall accordingly be submitted, in the conclusion of this report.
VI. The exemption of the materials of manufactures from duty
The policy of that exemption as a general rule, particularly in reference to new establishments, is obvious. It can hardly ever be advisable to add the obstructions of fiscal burdens to the difficulties which naturally embarrass a new manufacture; and where it is matured and in condition to become an object of revenue, it is generally speaking better that the fabric, than the material should be the subject of taxation. Ideas of proportion between the quantum of the tax and the value of the article, can be more easily adjusted, in the former, than in the latter case. An argument for exemptions of this kind in the United States, is to be derived from the practice, as far as their necessities have permitted, of those nations whom we are to meet as competitors in our own and in foreign markets.
There are however exceptions to it; of which some examples will be given under the next head.
The laws of the Union afford instances of the observance of the policy here recommended, but it will probably be found advisable to extend it to some other cases. Of a nature, bearing some affinity to that policy is the regulation which exempts from duty the tools and implements, as well as the books, cloths and household furniture of foreign artists, who come to reside in the United States; an advantage already secured to them by the laws of the Union, and which, it is in every view, proper to continue....
VIII. The encouragement of new inventions and discoveries
The encouragement of new inventions and discoveries at home, and of the introduction into the United States of such as may have been made in other countries; particularly those, which relate to machinery.
This is among the most useful and unexceptionable of the aids, which can be given to manufactures. The usual means of that encouragement are pecuniary rewards, and, for a time, exclusive privileges. The first must be employed, according to the occasion, and the utility of the invention, or discovery: For the last, so far as respects ``authors and inventors'' provision has been made by law. But it is desirable in regard to improvements and secrets of extraordinary value, to be able to extend the same benefit to introducers, as well as authors and inventors; a policy which has been practiced wtih advantage in other countries. Here, however, as in some other cases, there is cause to regret, that the competency of the authority of the national government to the good, which might be done, is not without a question. Many aids might be given to industry; many internal improvements of primary magnitude might be promoted, by an authority operating throughout the Union, which cannot be effected, as well, if at all, by an authority confined within the limits of a single state.
But if the legislature of the Union cannot do all the good, that might be wished, it is at least desirable, that all may be done, which is practicable. Means for promoting the introduction of foreign improvements, though less efficaciously than might be accomplished with more adequate authority, will form a part of the plan intended to be submitted in the close of this report.
It is customary with manufacturing nations to prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved. There are already objects for a similar regulation in the United States; and others may be expected to occur from time to time. The adoption of it seems to be dictated by the principle of reciprocity. Greater liberality, in such respects, might better comport with the general spirit of the country; but a selfish and exclusive policy in other quarters will not always permit the free indulgence of a spirit, which would place us upon an unequal footing. As far as prohibitions tend to prevent foreign competitors from deriving the benefit of the improvements made at home, they tend to increase the advantages of those by whom they may have been introduced; and operate as an encouragement to exertion.
IX. Judicious regulations for the inspection of manufactured commodities
This is not among the least important of the means, by which the prosperity of manufactures may be promoted. It is indeed in many cases one of the most essential. Contributing to prevent frauds upon consumers at home and exporters to foreign countries--to improvement quality and preserve the character of the national manufactures, it cannot fail to aid the expeditious and advantageous sale of them, and to serve as a guard against successful competition from other quarters. The reputation of the flour and lumber of some states, and of the potash of others has been established by an attention to this point. And the like good name might be procured for those articles, wheresoever produced, by a judicious and uniform system of inspection; throughout the ports of the United States. A like system might also be extended with advantage to other commodities.
X. The facilitating of pecuniary remittances from place to place
The facilitating of pecuniary remittances from place to place is a point of considerable moment to trade in general, and to manufactures in particular; by rendering more easy the purchase of raw materials and provisions and the payment for manufactured suplies. A general circulation of bank paper, which is to be expected from the institution lately established will be a most valuable mean to this end. But much good would also accrue from some additional provisions respecting inland bills of exchange. If those drawn in one state payable in another were made negotiable, everywhere, and interest and damages allowed in case of protest, it would greatly promote negotiations between the citizens of different states, by rendering them more secure; and, with it the convenience and advantage of the merchants and manufacturers of each.
XI. The facilitating of the transportation of commodities
Improvements favoring this object intimately concern all the domestic interests of a community; but they may without impropriety be mentioned as having an important relation to manufactures. There is perhaps scarcely any thing, which has been better calculated to assist the manufactures of Great Britain, than the ameliorations of the public roads of that kingdom, and the great progress which has been of late made in opening canals. Of the former, the United States stand much in need; and for the latter they present uncommon facilities.
The symptoms of attention to the improvement of inland navigation, which have lately appeared in some quarters, must fill with pleasure every breast armed with a true zeal for the prosperity of the country. These examples, it is to be hoped, will stimulate the exertions of the government and the citizens of every state. There can certainly be no object, more worthy of the cares of the local administrations; and it were to be wished, that there was no doubt of the power of the national government to lend its direct aid, on a comprehensive plan. This is one of those improvements, which could be prosecuted with more efficacy by the whole, than by any part or parts of the Union. There are cases in which the general interest will be in danger to be sacrificed to the collision of some supposed local interests. Jealousies, in matters of this kind, are as apt to exist, as they are apt to be erroneous.
The following remarks are sufficiently judicious and pertinent to deserve a literal quotation. ``Good roads, canals, and navigable rivers, by dimishing the expense of carriage, put the remote parts of a country more nearly upon a level with those in the neighborhood of the town. They are upon that account the greatest of all improvements. They encourage the cultivation of the remote, which must always be the most extensive circle of the country. They are advantageous to the town by breaking down the monopoly of the country in its neighborhood. they are advantageous even to that part of the country. Though they introduce some rival commodities into the old market, they open many new markets to its produce. Monopoly besides is a great enemy to good management, which can never be universally established, but in consequence of that free and universal competition, which forces everybody to have recourse to it for the sake of self-defense. It is not more than fifty years ago that some of the countries in the neighborhood of London petitioned the Parliament, against the extension of the turnpike roads, into the remoter counties. Those remoter counties, they pretended, from the cheapness of labor, would be able to sell their grass and corn cheaper in the London market, than themselves, and they would thereby reduce their rents and ruin their cultivation. Their rents however have risen and their cultivation has been improved, since that time.''
Specimens of a spirit, similar to that which governed the counties here spoken of present themselves too frequently to the eye of an impartial observer, and render it a wish of patriotism, that the body in this country, in whose councils a local or partial spirit is least likely to predominate, were at liberty to pursue and promote the general interest, in those instances, in which there might be danger of the interference of such a spirit.
The foregoing are the principal of the means, by which the growth of manufactures in ordinarily promoted. It is, however, not merely necessary, that the measures of government, which have a direct view to manufactures, should be calculated to assist and protect them, but that those which only collaterally affect them, in the general course of the administration, should be guarded from any peculiar tendency to injure them...
...The remaining objections to a particular encouragement of manufactures in the United States now require to be examined.
One of these turns on 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 manufactures 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. {217}
Against the solidity of this hypothesis, in the full latitude of the terms, very cogent reasons may be offered. These have relation to the strong influence of habit and the spirit of imitation -- the fear of want of success in untried enterprises -- the intrinsic difficulties incident to first essays towards a competition with those who have previously attained to perfection in the business to be attempted -- the bounties premiums and other artificial encouragements, with which foreign nations second the exertions of their own Citizens in the branches, in which they are to be rivalled. [298]
Experience teaches, that men are often so much governed by what they are accustomed to see and practice, that the simplest and most obvious improvements, in the [most] ordinary occupations, are adopted with hesitation, reluctance and by slow gradations. The spontaneous transition to new pursuits, in a community long habituated to different ones, may be expected to be attended with proportionably greater difficulty. When former occupations ceased to yield a profit adequate to the subsistence of their followers, or when there was an absolute deficiency of employment in them, owing to the superabundance of hands, changes would ensue; but these changes would be likely (989) to be more tardy than might consist with the interest either of individuals or of the Society. In many cases they would not happen, while a bare support could be ensured by an adherence to ancient courses; though a resort to a more profitable employment might be practicable. To produce the desireable changes, as early as may be expedient, may therefore require the incitement and patronage of government." - Alexander Hamilton, Report on Manufactures, Dec. 5, 1791