Alexander Hamilton Establishes the US Economy

The Gilder Lehrman Institute of American History

Alexander Hamilton was the designer of the American financial system. He established a national bank, promoted manufacturing, and paid off US debts from the American Revolution. When Hamilton retired in 1795, he left the United States with the tools to support a thriving economy. 

Dey Mansion, Washington’s Headquarters, Wayne, NJ
During the Revolutionary War, Hamilton served as George Washington’s aide-de-camp. As a member of Washington’s inner circle, he performed essential tasks, conveying the general’s orders and communicating with officers, congressmen, and diplomats. At Washington’s Headquarters at Dey Mansion, Hamilton saw firsthand how the lack of funds threatened the success of the war.

Hamilton in the Trenches

While serving under General Washington, Hamilton recognized that money was a key to the success of the new nation. Under the Articles of Confederation, the government did not have the power to tax citizens to support the army. This led to shortages of food and other supplies.

Alexander Hamilton to François, the Marquis de Barbé-Marbois

A year before the surrender of Cornwallis in 1781, Hamilton feared that the United States would not win the war. He blamed Congress’s inability to raise funds for the army for the dire circumstances: “The want of money makes us want everything else.”

Philadelphia, PA

Carpenter’s Hall

As Secretary of the Treasury, Hamilton’s goal was to put the nation’s finances in order. As part of his plan, Hamilton created a national bank to improve the nation’s credit, issue national currency, and stabilize financial transactions. The Bank of the United States began its operations at Carpenter's Hall in Philadelphia.

Alexander Hamilton’s Report on Public Credit

Hamilton’s Report on Public Credit laid the groundwork for the nation’s economic future. The report analyzed the financial standing of the country and made recommendations to improve its credit rating internationally. To accomplish this, he devised a plan for the federal government to assume the Revolutionary War debts owed by the states.

Philadelphia, PA

First Bank of the United States

The national bank moved from Carpenter’s Hall to a building of its own in 1795. The Bank of the United States took part in the collection of taxes and supported Congress in its power to make laws needed to run the government.

The Bank of the United States in 1800

Pictured here is the facade of the Bank of the United States in Philadelphia in 1800. Like other important government buildings, the building was modeled on the architecture of ancient Rome. The style reinforced the the link between the Roman republic and the new American republic.

Currency Issued Rhode Island

Until 1789 states and banks could issue their own money. It was chaotic and unreliable. Money issued in one state might not be accepted in another, and a pound in one state might not equal a pound elsewhere. The Bank of the United States solved this problem by printing money that would be accepted equally in all the states.

Alexander Hamilton on the Constitutionality of the Bank, 1791

Republicans such as Thomas Jefferson objected to the Bank of the US. They claimed its creation was outside of the powers granted by the Constitution. Hamilton skillfully argued for the bank by saying it was part of the implied powers that were necessary to run the government.

New York, NY

Fraunces Tavern

Fraunces Tavern in New York City was a popular place where men gathered to drink, exchange news, and make deals. When the capital was in New York City, there were no dedicated buildings for the government agencies. The Treasury, State, and War departments met at Fraunces Tavern in 1789 and 1790.

Nathaniel Gorham to Henry Knox, January 20, 1790

Bostonian Nathaniel Gorham wrote to Secretary of War Henry Knox to warn him that many feared that the assumption of debt would result in heavy property taxes. Gorham believed that these rumors would lead to the defeat of the plan. He suggested that Hamilton change his wording to alleviate these fears.

Philadelphia, PA

The Mint of the United States

Hamilton recognized the need for a national currency to replace the assortment of state money. Most Americans approved of this aspect of Hamilton’s plan. To create a unified currency , the United States would need to establish a mint to print money.

Alexander Hamilton on the Creation of the Mint

In January 1791, Treasury Secretary Hamilton published a detailed plan for the national mint. He argued that standard coins and paper money printed by the mint would benefit all citizens.

1793 Pennies

In 1793, the first US pennies were produced by the mint in Philadelphia. The public disliked this first design, so a second design was issued the same year.

The Falls of the Passaic, Paterson, NJ
In 1790, the United States was primarily an agricultural nation. The land was dotted with farms, towns, and only a few cities. Many Americans, like Thomas Jefferson, wanted an economy based on farming. But Hamilton was ahead of his time. He believed that the future growth of the US depended on producing and selling goods at home and to other countries. To put his theory into practice, he devised a plan to use the falls of the Passaic River as a source of industrial power.

Passaic Falls, New Jersey

In 1791, Hamilton helped found the Society for Establishing Useful Manufactures. The Society planned to use the falls to develop Paterson, New Jersey, as an industrial city with workshops that would produce everything from hats to iron wire.

Alexander Hamilton’s Report on the Subject of Manufactures

In a 1791 report to the House of Representatives, Hamilton proposed high tariffs designed to protect American industry from foreign competition. He also advocated internal improvements and a better transportation system, hoping to break Britain’s manufacturing hold on the United States.

Albany, NY

Location of Old City Hall

Hamilton was a founding member of the New York Manumission Society, which addressed the issue of slavery in the state of New York. On this site in 1799, the New York legislature passed An Act for the Gradual Abolition of Slavery. It was a victory for Hamilton and the Manumission Society.

Portrait of Alexander Hamilton by Jonathan Trumbull

Hamilton foresaw a nation of free people and free labor. He introduced a plan of gradual emancipation of slaves owned by the members of the Manumission Society and lobbied to end the slave trade in New York.

Act for the Gradual Abolition of Slavery, 1799

When John Jay, one of the founders of the New York Manumission Society, was governor, New York state finally passed legislation regarding the emancipation of slaves. The 1799 Act for the Gradual Abolition of Slavery stated that children born into slavery after July 4, 1800, would be emancipated in their mid-twenties.

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