Title: Introductory Note: Report on Manufactures
From:
To:

[Philadelphia, December 5, 1791]

Like Hamilton’s other major state papers, the “Report on Manufactures” is distinguished not so much by originality of thought as by the cogency and persuasiveness of its arguments, its far-reaching implications, and its ennobling vision of the destiny of the United States. Indeed, it contains few, if any, specific proposals that even the most enthusiastic supporters of Hamilton could maintain were original. In this sense, the Report is as much a product of its times as the creation of its author, for many of the ideas which it contains had been debated for decades on both sides of the Atlantic. During the second half of the eighteenth century western Europe and America provided in varying degrees an economic climate which was conducive to discussions of questions concerning national economic growth and the role of manufacturing in the economy.
For many years preceding the preparation of Hamilton’s Report, leading French and English politicians and students of national economic policy had devoted considerable attention to such matters as the relative economic advantages of agriculture and manufacturing, machinery and manual industry, bounties and restrictions on imports, and colonial and domestic trade. In England before the outbreak of the American Revolution statesmen and writers who were concerned with imperial problems had considered the American potential for economic growth and the possibility of America’s achieving self-sufficiency in manufacturing. There is ample evidence, moreover, that for several years before he joined the new government Hamilton had studied the writings of such leading political and economic theorists as Jacques Necker, David Hume, Malachy Postlethwayt, Adam Smith, and Sir James Steuart. Despite the fact that these men ranged over a number of diverse topics, each was concerned in different ways with some of the subjects contained in the “Report on Manufactures.”
Hamilton could draw on American as well as European experiences and ideas in the preparation of his Report. Although he refers only incidentally in the Report to attempts to promote industry during the American Revolution, some of the arguments for domestic manufacturing advanced during the war are similar to those later used by Hamilton. After the Revolution, Americans of necessity increasingly turned their attention to questions concerning the need for manufacturing, economic independence, tariff policy, and the role of invention and technology in the economy. The interest in these and related matters during the seventeen-eighties is indicated in part by the increasing number of pamphlets and articles in periodicals that discussed such subjects, by the founding of associations and societies for the encouragement of American manufactures, and by petitions to Congress and debates in that body on the desirability of Federal support of manufacturing. Hamilton, however, was not satisfied with the existing body of available material on manufacturing, for while preparing this Report he solicited information from various Americans on both manufacturing and agriculture. In addition, through his connection with the Society for Establishing Useful Manufactures he had acquired firsthand knowledge of the problems involved in the formation of a large-scale manufacturing company. Finally, and perhaps most important, the subject of this Report was not new to Hamilton in 1791, for his earlier writings reveal a continuing interest in the part that manufacturing should play in the nation’s economy.
The encouragement of manufactures, as the “next great work to be accomplished,” was an integral part of Hamiltonian finance. In the Report Hamilton defends the financial policies already in effect that had been subjected to strong criticism. The Bank of the United States and the funding system had been the targets of mounting opposition in the wake of increased speculation in public funds and bank scrip, and the market break of August, 1791, had given additional support to those who contended that all “paper” produced “bubbles.” In the “Report on Manufactures” Hamilton reiterates his view of the public debt as an acquisition of artificial capital available for the promotion of manufactures, and, as in his “Report on Public Credit,” he attempts to dissociate his views from the opinions of those who regarded every increase in the public debt as an unmitigated public blessing.
The “Report on Manufactures” cannot be divorced from Hamilton’s view of public credit and banking, but an equally close relation exists between this Report and his attitude toward foreign policy. It is possible that Hamilton’s views might have aroused less opposition in Congress if he had suggested that the encouragement of American manufactures could be used as a lever to bring a change in European trade policy—especially that of Great Britain. In a conversation with George Beckwith, unofficial British representative in the United States, he had said that American manufacturing efforts would be proportioned to British conduct. But although there is evidence that Hamilton attempted to gain support both from free traders and from those who desired greater accommodation for France, he did not attempt to appeal to anti-British groups in the United States by emphasizing that the growth of manufactures might serve as a device for twisting the lion’s tail.
In an evident attempt to avoid unnecessary opposition from those more favorably disposed to the French Revolution and free trade, he deleted outspoken criticism of the French assignat policy and equally outspoken praise for mercantilism. In a marginal query in his fourth draft he asked whether even the support for self-sufficiency in necessaries might not contradict what had previously been stated in favor of free trade. Necker’s “either-or” contrast between agrarian law and commercial restrictions was omitted, as was the view of Hume and Steuart that subsistence farmers were of no use to a state either for revenue or for defense.
On points of policy, however, Hamilton gave no ground. For example, the Report does not share the ambiguity of many contemporary American essays concerning the improvement of either agriculture or manufactures. Hamilton left no doubt of his support for commercial farming and factory production. He gave little space to household industry or manufactures associated with agriculture, and in the discussion of bounties he distinguished clearly between factory production and handicrafts related to self-sufficiency. He emphasized the increased profits to the landholder from intensive farming, but omitted the corollary which Steuart drew that, while manufactures aid commercial agriculture, they hurt subsistence farming.
By 1791 European trade policies had helped to create an attitude among Americans which Hamilton had every reason to believe would prove favorable to the encouragement of manufactures in the United States. A commercial treaty with Britain after the Revolution had failed to materialize, and Orders in Council closing the West Indies trade had been a source of irritation for the better part of a decade. A greater cause for surprise and irritation came from French commercial policies, some of which Hamilton noted in his second and third drafts of this Report. Some Frenchmen in the period between 1783 and 1791 had emphasized the possibilities of Franco-American trade, but the policies of the French government caused almost as much ill feeling in 1791 as the highhanded attitudes of the British government and press. Even Jefferson, inveterate foe of American manufactures and stanch friend of France, commented in June, 1791:
“Very considerable discouragements are recently established by France Spain & England with respect to our commerce: the first as to whale oil, tobacco, & ships, the second as to corn, & the third as to corn & ships. Should these regulations not be permanent, still they add to the proofs that too little reliance is to be had on a steady & certain course of commerce with the countries of Europe to permit us to depend more on that than we cannot avoid. Out best interest would be to employ our principal labour in agriculture, because to the profits of labour, which is dear this adds the profits of our lands which are cheap. But the risk of hanging our prosperity on the fluctuating counsels & caprices of others renders it wise in us to turn seriously to manufactures; and if Europe will not let us carry our provisions to their manufactures we must endeavor to bring their manufacturers to our provisions.”
In his final version of the “Report on Manufactures” Hamilton deleted specific references to the regulations of England and France respecting American commerce, but the risk of foreign commercial restrictions was a stronger argument for the encouragement of manufactures in the minds of many Americans than Hamilton’s critique of laissez-faire theory.
Pamphlets as well as government regulations reflected British and French concern over the effect of political independence on the course of American trade with Europe. At the close of the American Revolution Lord Sheffield wrote a pamphlet which contained the economic policies he thought Great Britain should pursue toward the United States and which clearly indicated his contempt for the economic power of the new nation. Lord Sheffield’s pamphlet elicited extensive criticism in American periodicals; especially exasperating to his American contemporaries were his views that a commercial treaty was not necessary, since American products could be obtained from other countries, and that the superiority of British manufactures would ensure their predominance in the American market. Although official British policy coincided with the views of Lord Sheffield, his ideas were criticized in England as well as in the United States. The final volume of the three-volume book of travels of Jean Pierre Brissot de Warville, written in collaboration with Etienne Clavière, made clear to Americans the possibilities of French trade and cautioned them against the waste and social evils which would surely attend the development of manufacturing. Clavière wrote:
“Europe has the spirit of manufactures; independent America ought to have that of cultivating lands.… I do, and ought to insist upon these observations, because the reading of American papers proves to me, that notwithstanding general insights, enough is not yet known in the United States, neither of the principles which must form connexions with Europe, nor of the terrible inconveniencies attached to manufactures.… The same arguments which prove the necessity of making stockings, family linen, &c. at home, are applied without distinction to cloths, silks, and the most complicated and pernicious manufactures.”
Other views from Europe were more favorable to American economic prospects. Théophile Cazenove, who was serving as an agent in America for a group of Dutch bankers, wrote to Hamilton that in his opinion manufactures would have a favorable effect on the American balance of trade, the value of the debt, and the ease with which loans could be obtained abroad. Necker discussed American economic prospects and predicted the downfall of the French monopoly of her own colonial trade as well as the probable elimination of the favorable balance of trade enjoyed by France:
“The commerce carried on with its manufactures, and with its American commodities, make three-fourths of the exports of the kingdom [of France]. The knowledge of this fact cannot but occasion some uneasiness, for both these branches of commerce are liable to revolutions.… works of industry and ingenuity are not like the privileged gifts of soil and climate, men in every part of the globe are capable of ingenious labour;… in a word, that species of industry which springs up and strengthens itself in the bosom of civil liberty, and of a fruitful territory, will in time make a considerable progress in the extensive republic just formed upon the continent of America; and this new power will one day, participate in some measure, in supplying the West India islands, and the Spanish West India settlements. Let it not be objected, that they will find it more to their advantage to till their lands; the more they are cultivated the greater will be the quantity of subsistence, and this abundance will, sooner or later, invite arts and industry, whenever the government takes care to second the efforts of private interest.”
The “Report on Manufactures” contains considerable evidence of Hamilton’s reliance on those European writers from whom he had drawn material in some of his earlier papers and reports. Several scholars have noted the close similarity between sections of the Report and parts of Adam Smith’s The Wealth of Nations, and the footnotes to the Report in this edition of Hamilton’s papers make it clear that there can be little doubt concerning the source to which the Secretary of the Treasury turned for the free-trade views which he refuted in the Report. More in sympathy with the general tenor of the Report were the conclusions of Necker and Steuart, for both shared Hamilton’s views concerning the relation between manufactures and the power and prestige of a state. Although Malachy Postlethwayt’s Universal Dictionary, which Hamilton had repeatedly used in his earlier writing, was perhaps of less assistance in this Report, Postlethwayt’s views on manufactures and modern society nevertheless correspond in many respects to those of Hamilton. Among other European writers who may have influenced Hamilton’s thinking some mention should be made of Vattel, who conceded that moderate commercial restrictions did not constitute violations of natural law; Montesquieu, who maintained that freedom of commerce did not preclude commercial restrictions; and Hume, who along with several other eighteenth-century writers argued that the growth of manufacturing was desirable in that it would increase the market for agricultural products.
Of the many sources used by Hamilton, The Wealth of Nations in many respects provides the most interesting case study. According to one biographer, Hamilton had prepared a critique of The Wealth of Nations during his service in the Continental Congress. No trace of this document, however, has been found, and the student must turn to the “Report on Manufactures” to discover those points on which Hamilton and Smith either agreed or disagreed. Hamilton’s respect for some of Smith’s views is revealed by his reliance on The Wealth of Nations for his discussion of the division of labor and for the direct quotation taken from the same book to describe the advantages of transportation facilities. He also paraphrased Smith’s statement and criticism of the Physiocratic classification of manufactures as unproductive labor. On the other hand, he could not accept Smith’s notion of the superior productivity of agriculture, and he criticized Smith’s view that private interest was led by an invisible hand to support the type of activity most beneficial to society. Hamilton may also have entertained much the same doubts concerning the labor theory of value as those expressed by Thomas Pownall. In his third draft of this Report Hamilton speaks of the “practical estimate of value” in determining the relative productivity of agriculture and manufactures.
A study of the “Report on Manufactures” clearly reveals the influence of Jacques Necker on Hamilton’s thinking. A statement which Hamilton inserted (and then deleted) in his third draft of this Report indicates that he, like Necker, was opposed to the assignat policy. There is also a similarity between some of the arguments used in the Report and those in Necker’s discussion of the grain trade and in his eulogy of Colbert. Hamilton’s views correspond to those of the French Minister in his discussion of the penalties which would be incurred by one nation attempting to institute free trade in a world of mercantilist economic policies. Finally, both men agreed that a diversified, self-sufficient economy would gain a more favorable balance of trade than one which depended upon agricultural exports alone. Although scholars have emphasized the similarity of expression between statements in the Report and The Wealth of Nations, it is difficult to overlook the fact that the general conclusions of the Report are closer to those of Necker than to those of Smith.
But if Hamilton shared Necker’s opposition to unqualified statements of free-trade views, his respect for the “liberal doctrine” was similar to that of William Pitt and his associates. One commentator has suggested:
“Pitt was not merely being polite when he acknowledged Adam Smith as his master.… Perhaps owing partly to his example, the influence [of The Wealth of Nations] had its fashion in Government circles.… There is no need to underestimate the general stimulus thus provided. It could also be usefully invoked when required for persuasion or support.… The word ‘liberal’ was liberally used, when it was convenient.… There was nothing insincere in the use of the word to denote an acknowledgment of industrial facts by men who rightly regarded themselves as being abreast of the times. To Governments as to men of business, freedom of trade meant freedom to trade. But perhaps it did not mean much more than that.”
In America as well as in Europe manufacturing and its relation to the government were subjects that were frequently discussed from a variety of viewpoints in official and unofficial circles for several years before Hamilton’s Report was presented to Congress in 1791. During the Revolution difficulties encountered in obtaining supplies had called the attention of the Continental Congress to the desirability of domestic manufactures, and as early as 1775 Benjamin Rush gave a speech on the possibilities open to American manufactures. Members of the First Congress of the new government considered the advisability of protecting domestic manufactures in the course of their debates over the revenue and tonnage acts, and the question of extensive government intervention in the economy was raised in debates over the act establishing the Bank of the United States.
One of the most frequently cited sources for the “Report on Manufactures” consists of the information that Hamilton received from various individuals in reply to his requests for facts concerning the current state of American agriculture and manufacturing. Although Hamilton made use of some of the material which was sent to him from various correspondents, the information which he appeared most anxious to obtain was not readily available. The reports of his correspondents on prices and profits of farms, wages and profits in Britain, European regulations, and even the costs and profits of American factories fell far short of his requests. Manufacturers were either unable or reluctant to disclose their full financial operations, and the records kept by farmers were so inadequate that it was impossible to make a valid comparison between the profits of agriculture and those of manufacturing. But the information that Hamilton did receive at least gave an indication of the extent of manufactures, the problems in establishing them, and the attitude toward government encouragement of manufacturing.
Tench Coxe was perhaps the best-known American advocate of manufactures in the years immediately preceding 1791, a fact that may in part account for his appointment by Hamilton as Assistant to the Secretary of the Treasury. Coxe’s influence on the “Report on Manufactures” has been suggested by both contemporary observers and recent scholars, and there is little question that he was of great assistance to Hamilton in obtaining and compiling information concerning manufactures received from various individuals. Although Hamilton devoted little space in the Report to household manufactures or to “manufactures associated with agricultural pursuits,” Coxe placed greater emphasis on both types of manufacturing. In an enlarged version of his A Brief Examination of Lord Sheffield’s Observations on the Commerce of the United States, Coxe appended a “Supplementary Note” concerning household manufactures compiled from the results of inquiries made in preparation for the “Report on Manufactures.”
In recent years scholars have speculated on the importance of Coxe’s part in the preparation of this Report, but the fact that Coxe’s papers were not available to them precluded any definitive statement concerning his role. Through the courtesy of Mr. Daniel M. Coxe a draft of the Report in Coxe’s handwriting has been made available to the editors of The Papers of Alexander Hamilton and is printed in this volume as “Tench Coxe’s Draft of the Report on the Subject of Manufactures.” That Coxe’s contribution was not limited to his own draft is suggested by a note which Coxe wrote to the clerk who copied part of Hamilton’s first draft, for the material to which the note refers does not appear in the Coxe draft. In addition, there is always the possibility that further material relevant to the “Report on Manufactures” may come to light when scholars have unlimited access to the Coxe Papers.
Hamilton’s first draft of this Report is considerably longer than Coxe’s, but it is equally significant that Hamilton incorporated a major part of Coxe’s draft in his own first draft. A study of Coxe’s draft helps not only to clarify Coxe’s contribution to this Report but also to illustrate some of the differences between Hamilton’s views on manufacturing and those of Coxe. In his first draft Hamilton deleted Coxe’s proposals for a land premium, for the introduction of new and useful machinery, and for the abolition of tonnage duty on coasting vessels. Hamilton’s additions indicate a greater interest in questions of economic theory, a lively awareness of the position of the United States among the competing trading nations of Europe, and a more outspoken advocacy of late eighteenth-century European mercantilist views. Coxe’s contribution to the “Report on Manufactures” should not, however, be underestimated. In addition, any student seeking to compare the views of Coxe and Hamilton should keep in mind that Coxe’s draft was prepared over a short period of time, while Hamilton’s final version was the product of almost a year’s intermittent work. At the same time Hamilton’s final version of this Report differs markedly in both emphasis and substance from Coxe’s draft and from Coxe’s other writings on manufactures.
William Barton and Mathew Carey, like Coxe, were known to favor the encouragement of manufactures. Barton’s “Remarks on the state of American manufactures and commerce” was printed in The American Museum, and a copy is in the Hamilton Papers at the Library of Congress. Carey had expressed his opinions through the selection and publication of material in The American Museum and by occasional annotation of material in that magazine.
Although George Washington’s influence on this Report cannot be precisely ascertained, there can be no doubt concerning his interest in manufacturing. In 1789 he indicated his willingness to support the establishment of a woolen factory in Virginia, and in the same year in a letter to Jefferson he mentioned the “Measures taken by the different States for carrying the new government into execution” and continued: “Exclusive of these things, the greatest and most important objects of internal concern, which at present occupy the attention of the public mind, are manufactures and inland navigation. Many successful efforts in fabrics of different kinds are every day made.… A desire of encouraging whatever is useful and œconomical seems now generally to prevail. Several capitol artists, in different branches, have lately arrived in this Country.” What may have been a draft of Washington’s first inaugural address provides evidence of the first President’s belief that manufacturing was essential to the nation’s well-being. It may also be significant that in October, 1791, he wrote to Hamilton suggesting bounties on hemp and cotton. Finally, it should be remembered that the occasion for the House order requesting this Report was an address from the President opening the second session of the First Congress. In a section devoted to provision for the common defense, Washington said: “A free people ought not only to be armed but disciplined; to which end a uniform and well digested plan is requisite: And their safety and interest require, that they should promote such manufactories, as tend to render them independent on others for essential, particularly for military supplies.”
Parallels between Hamilton’s statements in the Report and those made by other Americans and Europeans should not obscure the fact that Hamilton himself had displayed a sustained interest in manufacturing for several years. To a certain degree he was one of his own best sources. In A Full Vindication he had emphasized the high prices which would be paid to farmers who supplied the raw materials used in the manufacture of clothing. This argument was repeated in his pamphlet The Farmer Refuted, where he maintained that an agricultural country was of necessity politically dependent on manufacturing nations, that a variety of products would stimulate a mutually beneficial commerce, and that internal commerce promoted national stability. In a letter to Robert Morris in 1781 he had emphasized the importance of a habit of industry, and four months later he had stated that the first essential power which should be given to Congress should be “The Power of Regulating Trade, comprehending a right of granting bounties and premiums by way of encouragement, of imposing duties of every kind, as well for revenue as regulation, of appointing all officers of the customs, and of laying embargoes, in extraordinary emergencies.”
The intellectual origins of the “Report on Manufactures” have attracted the attention of countless scholars. Ugo Rabbeno, Edward G. Bourne, and Louis M. Hacker have written on the relation between ideas in The Wealth of Nations and those in the Report. Arthur H. Cole has indicated specific instances in which points made in the Report are similar to those raised by Hamilton’s correspondents. Joseph Dorfman and Joseph Stancliffe Davis, among others, have discussed some of the ideas in the Report which were shared by Hamilton’s contemporaries and which had their origins in European experience and theory. These examples by no means exhaust the list of those who have studied the genesis of the “Report on Manufactures,” and it seems likely that the subject will continue to fascinate historians and economists.
In annotating the “Report on Manufactures,” the editors of The Papers of Alexander Hamilton can make no claim to being either exhaustive or definitive. On the other hand, some precedents for material in the Report from sources with which Hamilton is known to have been familiar are indicated in the footnotes to his final version, and wherever possible other substantive footnotes have been provided for this version. In addition, in Coxe’s draft and Hamilton’s four drafts there are some substantive footnotes for material which Hamilton did not include in his final version. Statute references are given in all drafts and in Hamilton’s final version of the Report. Notes 46, 59, 107, and 123 explain the editorial devices used to indicate the different handwritings that appear in Coxe’s draft and in Hamilton’s first and fourth draft and in his final version. No attempt has been made, however, to identify the individuals who made marginal comments or interlineations in Hamilton’s drafts of the Report, for the number of people Hamilton may have consulted and the brevity of the material that was added in any one instance have convinced the editors that they lacked both the temerity and the ability to identify the handwriting of each of these anonymous contributors.


Title: Tench Coxe’s Draft of the Report on the Subject of Manufactures, [Fall] 1790
From: Coxe, Tench
To:

Treasury Departmentthe  1790

The Secretary of the Treasury, in obedience to the order of the house of Representatives of the fifteenth day of January last, has applied his attention, at as early a period as his other duties would permit, to the subject of manufactures, and particularly to the means of promoting such as will tend to render the United States independent on foreign Nations for military and other essential supplies.
The expediency of encouraging manufactures in the United States, tho recently deemed very questionable, appears at this time to be generally admitted. The advantages of the Landholder in furnishing raw materials, subsistence, fuel and other supplies to the workmen—the support which the fisheries derive from them by their consumption of articles drawn from the ocean—the assistance given to external commerce by promoting the importation of raw articles and furnishing manufactured commodities for exportation—their favorable effects on population by inducing the emigration of foreign artists and laborers—the introduction of money by offering a new & promising field to capitalists of other nations—the promotion of individual industry & œconomy which naturally result from manufactures and particularly when engrafted upon an extensive agriculture—their encreasing and rendering more certain the means of defence and other articles of prime necessity and lastly the Reduction of the prices of convenient & essential supplies for public & private use, which has already taken place on the appearance of competition from the American manufacturer are among the considerations, which have produced more favorable opinions concerning this object.
Among the means devised by the European nations to encourage manufactures protecting duties have been very generally adopted. It cannot be unobserved by those, who are engaged in these pursuits nor will it escape the notice of those capitalists, and workmen who may intend to transfer their property and business to the United States, that the duties already imposed by the legislature, tho principally for the purposes of Revenue, afford very considerable and certain advantages to the American manufacturer. Tho it may be very doubtful whether general addition to these duties be necessary further to encourage the Manufactures of the United States, yet it is humbly conceived a few articles may be very properly aided by a moderate encrease. Among those in View is Sail Cloth which is important to defence, to domestic & foreign commerce, the fisheries &, as it relates to the raw materials, to agriculture likewise.
Prohibitions of rival articles, or duties equivalent, frequently present themselves in the laws of foreign nations. Tho this measure, in most instances, may be of doubtful propriety in the United States, it appears to merit consideration in regard to particular Articles. From the present flourishing condition of some manufactories of military supplies, such as Gunpowder, leaden & iron ball, iron cannon & cartridge paper it may not be deemed hazardous, in a season of profound peace, to encrease the duty so as to prevent the Importation of them. Besides warlike stores there are certain Articles manufactured from materials with which the United States abound, that do not appear unfit Subjects of excluding duties. Among the objects here contemplated are Malt liquors, spirits made from grain of every sort & from fruit, (exepting that made of the grape) the oils of sea and land animals & of flaxseed, the spirits of turpentine, snuff, chewing & smoking tobacco, starch and other things manufactured from such productions of the Earth & of the fisheries as are constantly exported in large quantities which are encreasing on our hands, and for which a sufficient vent is consequently difficult to procure. The wisdom of the house however will render them duly aware of the injuries, that may be occasioned by an indiscriminate & too extended an application of duties equivalent to prohibitions should they be induced to impose them in favor of certain manufactures necessary for defence, or highly and universally beneficial to the landed interest.
Pecuniary bounties upon home made articles have been tried in several European countries with great success. The linen branch in Ireland is a well known instance. [But under the present] circumstances of this country the Secretary cannot discover sufficient inducements to these expensive encouragements to justify a [strenuous] recommendation of them to the consideration of the legislature. This aid to manufactures however is less necessary at [the present moment] in the United States than in any European country, because their fabrics, being generally wanted for hom⟨e consumption, are free from the heavy expences of importation, which rival foreign⟩ goods sustain to the amount of [fifteen, ⟨twenty⟩ and twenty five] ⅌ Cent on their Value according to their bulk. But if it should on consideration be deemed inexpedient to grant bounties in money to encourage manufactures it may nevertheless appear adviseable to reward certain great and useful promoters of them by other means. The United States having a very large quantity of unappropriated lands the Secretary humbly submits to the house the propriety of setting apart the quantity of five hundred thousand acres, of good quality and advantageously situated, for the purpose of rewarding the first introducers or establishers of new and useful manufactories, arts, machines, & secrets not before possessed, known or carried on in the United States. The objects here contemplated, and the mode of applying this landed fund will be more clearly explained by the plan contained in the paper (A) which accompanies this report. A measure of this nature would evince to the manufacturers of Europe the disposition of the legislature to encourage and reward them, and would afford to persons, who may transfer their capitals and establishments ⟨to the United States, a certain⟩ tho ⟨not⟩ an immediate compensation ⟨even in unsuccessful⟩ instances.
In addition to these rewards for the Importation of manufacturing Machinery, and secrets of great value, acts may be passed, if sufficiently warranted by the extraordinary utility of the object and the difficulty of attaining it, granting to the introducers such exclusive privileges for a term of years as would have been secured by patent, had they been the inventors. Public Advantage, if derived from each in an equal degree, will justify this favor to the one as well as to the other, and the successful practice of the principal manufacturing nations of Europe establishes the prudence of the measure.
As a substitute for pecuniary bounties on particular articles, sufficiently beneficial to the landed interest to merit that expensive and inconvenient encouragement, the revenue may be calculated to assist them by diminishing the use of rival, tho in some instances different, commodities. Thus the Duties on ardent spirits may be rendered a virtual bounty on beer, ale & porter & the impost on foreign spirituous liquors and encouragement to those made at home. By careful attention to regulations of this nature, it is believed very effectual aid may be given to our manufactures without any hazard of public inconvenience or injurious frauds. An examination of the Articles imported for consumption in the United States, and of the capacity of our manufacturers to make succedanea for them out of our own produce, and imported raw Materials will suggest many objects, to which, it is supposed, this Idea may be advantageously applied.
A drawback of the amount of the duty on the raw Material on the ex⟨portation of manufactured Articles⟩ is a measure recommended by ⟨policy,⟩ and ⟨rendered in some degree necessary⟩ by the practice of nations, who will hold a competition with us in foreign Markets. The duty on Molasses, if the idea here suggested should meet the approbation of the legislature, might be allowed on the exportation of American rum—that on Muscovado sugars on the exportation of refined—that on Cocoa on the exportation of Chocolate and in such other instances as shall admit of due security against deception & fraud the danger of which is the only objection that occurs to this mode of encouragement.
⟨The promotion of friendly intercourse and fair trade with the indian Tribes will have a favorable effect upon some valuable branches of Manufacture, the raw materials for which are derived from the western Country. Towards these ends the wisdom⟩ of the Legislature and of ⟨the Chief Magistrate⟩ have been already successfully directed; but some objects of great consequence to the Indian trade & consequently to the Manufactures dependent on it remain to be obtained. The pursuit of them however rests upon considerations of so much more Importance than any which arise on the present topic, that it is sufficient merely to present them to the attention of the house, as connected with the subject of this report.
Facility of communication, and cheapness of transportation are matters of primary importance in the business of every country; but under the existing circumstances of the United States they call for the earliest & most efficient exertions of government. The good condition of the post roads, especially where they happen to connect places of landing on the rivers & bays, and those which run into the western country, will conduce exceedingly to the cheapness of transporting and the facility of obtaining raw materials, fuel & provisions. But the most useful assistance perhaps, which it is in the power of the legislature to give to manufactures and which at the same time will equally benefit the landed & commercial interests, is the improvement of inland navigation.
Three of the easiest and most important operations of this kind are the improvement of the communication between New York, Connecticut, Rhode Island & Boston by cutting a passage thro the penninsula of cape Cod, the Union of Delaware and Chesapeak bays by a canal from the waters of the former to those of the latter, and the junction the Chessapeak bay & Albermarle sound by uniting the Elizabeth and the . The accomplishment of these and other objects of the same nature seem likely to afford greater & more various aids to our growing manufactures than any other measure, that has occured to the Secretary in the investigation, which he has been directed to make.
A further ⟨measure⟩ to promote the cheap transportation of raw materials & provisions presents itself in the abolition of the duty of Tonnage imposed on coasting vessels. This appears to be a burden on the produce of lands, as substantial as if it were imposed on working waggons, and seems hardly consistent with sound policy.
The principal productions of the fisheries may not improperly be considered as articles of the nature of manufactures, & the remainder are of great Utility as raw materials or cheap & wholesome food but as the means of encouraging that important branch of trade have been refered by the house to the Secretary of State, it is unnecessary and improper to enlarge upon it here.
The regulation of inland bills of exchange, so as to ensure due caution in drawing them and strict punctuality in paying them, must have a favorable effect on the purchases of raw materials & sales of manufactured Articles in a country so extensive as the United States.
The ability to place funds with celerity and ease in every part of the Country for the purchase of raw materials and provisions is a matter of great importance to the manufacturer. To afford the accommodation of a general paper circulation of the nature of Bank Notes, payable with absolute certainty in specie on demand, is therefore very desirable. This benefit will immediately result from a national bank, & from ⟨such arrangements⟩ of Government with that ⟨Institution as soon⟩ as it shall be erected, as may give an universal circulation to their cash notes.
The want of sufficient capital being deemed one of the principal difficulties, in a national view, with which the manufactures of the United States have at this time to contend a steady pursuit of such measures as will give full and unfluctuating value to the public funds appears of the utmost importance to the increase and prosperity of American Manufactures. Having enlarged upon the beneficial circulation that ever grows out of a well founded national debt in the report upon public credit, which he had the honor to make in January last, the Secretary conceives it sufficient at this time to repeat his thorough convictions of what is therein stated on that point.
The ⟨Importation of⟩ raw materials and ingredients, and of colors, drugs & other articles necessary to complete manufactures, free of duty, is an encouragement of obvious propriety, generally considered; but when it is remembered, that the principal nations of Europe afford this aid to their manufactories, and that we are to meet them, as competitors, in our own and in foreign markets, it appears to be almost indispensible. Proceeding, it is presumed, on these principles the legislature have been pleased to exempt from impost a number of articles of the nature above described, thereby giving their sanction to the principle here contemplated. An extension of this exemption further than has yet taken place particularly to include, cotton & hemp, the Secretary humbly conceives to be necessary to success in the business of manufactures.
The particular value to the U.S. of improved implements and machinery for manufacturing, and the inducements to export those we have already obtained or may hereafter procure, which the interest of our competitors obviously creates, ⟨seem to⟩ render a penalty for such exportations an eligible m⟨easure.⟩ It is manifestly proper to guard carefully against extending this ⟨fur⟩ther than is absolutely necessary to prevent a deprivation of any particular implement or machine, lest in the formation of the law, the export trade of well known articles, applicable in manufactures, may be unfavorably affected.
Besides the measures for the encouragement of manufactures, which it appears eligible that the legislature should pursue there are some of considerable importance which fall more immediately within the sphere of the other branches of government and on which for obvious reasons arising out of the nature of those measures, the Secretary refrains from enlarging.


Title: Alexander Hamilton’s Second Draft of the Report on the Subject of Manufactures, 1791
From: Hamilton, Alexander
To:

The Secretary of the Treasury in obedience to the order of the House of Representatives of the fifteenth day of January 1790 has applied his attention, at as early a period as his other duties would permit to the subject of Manufactures and particularly to the means of promoting such as will tend to render the United States, independent on foreign nations, for military and other essential supplies.
The expediency of encouraging manufactures in the United States, though not long since deemed very questionable, appears at this time to be pretty generally admitted. The embarrassments, which have obstructed the progress of our foreign Trade, have led to serious reflections on the necessity of enlarging the sphere of our domestic commerce, and the success which has attended, in certain valu manufacturing enterprise, in certain some valuable branches, has evinced that greater and more various success ought not to be despaired of the obstacles to the extension of this species of industry are not so formidable as they have been apprehended to be.
There are nevertheless still patrons of opinions unfavourable to the encouragement of manufactures. The arguments which support these opinions are of the following nature.
In every country, Agriculture is the most beneficial and productive object of human Industry. In the United States this position derives great additional force from the immense tracts of waste lands still uninhabited and unimproved. Nothing can afford so advantageous an employment for capital and labour as the conversion of this wilderness into cultivated farms. Nothing can contribute so much as this, to the rapid increase of the population and real riches of the Country.
To endeavour to promote and foster the growth of manufactures by the extraordinary particular particular patronage and favour of the government is to endeavour by a misjudgedmisapplied and artificial impulse to policy to turn aside the nat course of in change the natural current of Industry from a more to a less beneficial channel. It can scarcely ever be wise in a government to attempt to give a direction to the industry of its citizens. This, if left to itself, will under the guidance of individualprivate interest, naturally make its way wherever it can find find out its way to the most profitable employment; and by such employment alone will be the public prosperity be most effectually advanced. The safest and soundest policy therefore is to leave it to itself.
This policy is not only recommended to the United States by considerations applicable to all countriesnations, but in a manner dictated artificer to it by an the invincible force of a very peculiar situation. The smallness of their population compared with their territory; the continual allurements to emigration from the settled to the unsettled parts of the country, the facility with which the less independent situation of an

   artificer

 artisan can be exchanged for the more independent situation of a farmer—these circumspenceand other similar circumstances conspire to produce and for a great length of time must necessarily continue to produceoccasion a scarcity of hands for manufacturing occupations; and a correspondent dearness of labour. These impediments, combined with a deficiency of capital, forbid a successful competition with the manufacturers of Europe. Extensive manufactures can only be the offspring of a redundant, at least of a full population. ’Till the latter that shall characterise the situation of this country, tis vain to hope for the former.
If contrary to the natural and salutary course of things, a premature and artificial spring should be given to certain manufacturesfabrics, by force heavy duties, prohibitions, bounties or by any other forced and violent expedients, this will only be to sacrifice the interests of the community to those of particular classes. Besides the misdirection of labour, a virtual monopoly will be given to those the persons employed on such fabrics; and an enhancement of price, the inevitable consequence of every monopoly, must be defrayed at the expence of all others. It is far better that those persons should be employed in the cultivation of the Earth, and that we should procure with the surplus products of our soil at the cheapest the commodities with which foreigners are able to supply us on better terms at a cheaper rate and of superior quality.
This theory has so much of truth in it, that its principles ought never to be out ought of the view of the Legislators of this Country. And while its extremes ought to be qualified in practice by the exceptions to which every general theory theory is subject, its maxims ought to serve as cautions against all its extremes of any other a different kind. If they do not persuade, us that all legislative countenance aid ought to be witheld from particular branches of industry which appear to stand in need of it —they ought at least to inculcate, that it should be afforded with moderation and

   pursuits

 measures—that the real aptitudes in the state of things for particular improvements and ameliorations should be carefully consulted— and that these should be nurtured developped by gradual systematic and progressive efforts

   gigantic sanguine excessive

 rather than forced into maturity by violentvehement and disproportioned exertions.
In order to a right judgment of the policy, which ought to be pursuedgovern in relation to the encouragement of manufactures in the United States, it will

   take as concise a view as may consist with perspiccuity

 be useful to pass in reviewtake a concise view of the considerations which serve to limit the generality of the maxims that stand opposed to it.
In the first place, though it is will readily must without hesitation be readily to be admitted that if a Nation Agriculture, as the great and primary basis of national supply prosperity, as the immediate source of subsistence and nourishment to man, as the originfountain of those materials, which principally give employment and support to other kinds of labour, as involving, perhaps, a state most favourable to the freedom and independence of the human mind is intitled to the first a preeminence in the systemscience of political œconomy; yet it is not equally evident that this species of industry is, as alleged, as alleged, is more productive in any substantial meaning of the term, more productive than every other. ItThe reality of this is not verified by any accurate detail of facts and calculations; & An a general argumentThe argument, commonly made use of to prove it, is rather quaint than satisfactory. It is said that in the productions of the soil nature cooperates with man and that the effect of their joint labour must be greater than that of the labour of man alone. But this appears by no means a necessary inferen inference. It is very conceivable that the labour of man alone bestowed upon a work an object requiring great skill and art to bring it to perfection, may in the estimate of value, be more productive, than the labour of nature and man combined, when directed towards more simple operations and objects. And accordingly when it is considered to what an extent the mechanicalmechanical powers of mechanism are rendered auxiliarysubservient to the prosecution of manufactures, little more than the quaintness of the hypothesis remains. Accordingly it It is certain, that higher wages are given to workmen in most manufactures, than to labourers employed in Tillage, and that in a greater number of cases the undertaker enjoys a larger greater profit upon his Capital than the landho proprietor of land upon his;
{both which are indications of superior productiveness. And it is not less certain that nations which have made a considerable progress arrived to eminence in manufactures abound more in wealth and resources than those which have made little progress in them.
In the second place it may be observed that nothing can be a greater error than to consider manu Agriculture and manufactures as standing in opposition to each other or and to suppose inferring and to suppose that the growth of the one will impede the progress of the other.
If a country were to be supposedimagined, having a given extent of territory, requiring a given number of persons to cultivate it,possessing exactly that number of inhabitants, and intirely shut out from foreign Trade there could be little room for question that it would be more its interest and more for the advantage of agriculture to have the necessary the requisite such a proportion of its inhabitants employed exclusively in furnishing manufactures for the whole society as were requisite for that purpose, than to have them all employed as cultivators. and there would be as little room for doubt that its agriculture that the mass
This would not arise, either, from thean absolute impracticability ofto the cultivators of land to procuringe those manufactures for themselves; for it is very conceivable by their own labour, the manufactures of which they might stand in need: For it is supposeable conceivable that the same persons in each family might till the ground and make the fabrics which were requisite to the supply of indispensable wants: Or if there are exceptions to the possibility of doing this, they are not numerous.
But it w if such a state of things existed any where, it would quickly be discovered that itin any country, it is evident that its was the interest expedient to change it—The lands in a country so situated would be wretchedly cultivated and the whole community miserably badly supplied. The want of a proper division subdivision of labour would prevent improvement and skill in every thing—Husbandry would be in a rude state and the arts in a still ruder. The inducements to make the land productive would be circumscribed to the necessary subsistence of each family. in the simplest The Neither the gratification of those appetites & inclinations which are incident to a state of greater improvement nor the desire of accumulating wealth, by the exchange of thos a surplus producedwon by hard labour from the soil, would prompt exertions to obtain such a surplus. While The interruptions and delays arising from the necessity of passing frequently continually from one kind of labour to another and the want of that skill in execution which can only be acquired by a continual application to the same object business renders would diminishes the effect of it in every operation to which it iswas applied: All And the important inventions, by which machinery is made to abridge and perfect labour, would be excluded; from through the want of adequate motives to excite the a spirit of discovery and contrivance.
It is readily perceived, that in a country so situatedsuch a state of things not only the total mass of labour would be much less than if its inhabitants were subdivided in due proportions into cultivators mechanicsand Artizans and manufacturers—but the mass of agricultural industry would also be incomparably less—The superior cultivation of so much of the soill as was cultivatedoccupied in one case would greatly overballance in productivelness the intire quantity occupied in the other, case under circumstances of very inferior cultivation.
And from hence Whence the following inferences mayare to be drawn—that it may be the interest even of a state not fully peopled and consequently having waste and occupied lands, to have a part of its inhabitants abstractedwithhold withdrawn from the cultivation of landthe soil to be employed in mechanic and manufacturing occupu occupations and that the abstraction of thewithdrawing a part of the inhabitants of a state, not fullyof such a state peopled and consequently having waste and unoccupied lands, from agricultural pursuits to those occupations is not only not necessarily injurious to agriculture but may be essential to its prosperity. And it may also be be safely presumedaffirmed that in a country situated as has been supposed the natural interests of the community would of themselves subdivide it into the different classes of cultivators mechanics and manufactures.
Accordingly shewn history and experience shew that in very early stages of national progress long before the land mechanic and manufacturing arts grow up. Villages are formed from distance to distance by the collection of in which in which those who devote themselves to such arts, collectcollect, for the supply of the neighbouring country, which repays their industry with the progressproduce of the soil. And it is This takes place from two causes the palpable advantages of a subdivision separation and distribution of industrious pursuits and the diversity in the of dispositions and talents of mankindfaculties of the human mind. The importance of giving scope to this diversity, by varying the objects by diversifying the objects of national industry will deserve particular notice in another place.

   manufactures occasion calls fo new objects of Agriculture

It is a remark of long standing all time that the parts of a country country in the vicinity of a manufacturing towns are much better cultivated and more thriving than those remote from them; which is to be accounted for by the great facility of obtaining on better terms those supplies for which the husbandman has occasion

   Elsewhere

and by the advantage of a near market for the sale of whatever surplus he may have to dispose of. This fact no affords no inconsiderable illustration of the beneficial influence which the industry of the towns has upon that of the country or in other words which the progress establishment of manufactures has upon the progress of agriculture.   It were a is manifestly an error to consider the prosperity of Agriculture as in proportion to the quantity of land occupied or even to the number of persons who occupy it or to both. It is rather to be considered as in a compound ration to the quantity of lands occupied and to the degree of improvement.
But a reflection naturally arises here, that although however true it may be that a state which possessing large tracts of uncultivatedvacant & fertile territory wasis at the same time secluded from foreign Commerce would find its interest and the interest of Agriculture in devotingdiverting a part of its population, which might be find employment infrom tillage, to manufacturinges pursuits—yet wil it will not follow that the same thing can be advantageous to a community in which having such tracts of vacant territory, can also have the benefit ofat the same at the same time by means of foreignexternal commerce procure from foreign nations on good terms all the fabrics necessary for of which it may have has occasion.
This point requires therefore a further and more particular examination.
If the free system were the prevailing system of nations, if industry and commerce were generally left to their natural course, the arguments which dissuade a Country situated like the United States from the eager pursuit of manufactures would be more difficult to combat than they now are. It is not certain that they might not safely be permitted to serve as a rule of conduct. Each Country would then have the full benefit of its peculiar advantages to compensate for its disadvantages. That which was invited by its particular situation to direct its attention exclusively to agriculture would be able to furnish the products of the earth on so much better terms than the country which was engaged in an extensive scene of manufactures as to be able to maintain a beneficial exchange of subsistence and raw materials for manufactured articles.
But this natural ballance is disturbed and in great measure destroyed by the general policy of nations. The spirit of monopoly which governs most countries is the governing one interrupts that free exchange which would distribute to each party its proportion of benefits; and seconded in some instances by a great superiority bet both of industrious skill and of pecuniary capital would subject any nation which should implicity follow the dictates of the opposite system to disadvantageous very incompatible with its properity. It has, with regard to a Country situated like the United States, in a great degree, the same effect, as an exclusion from foreign commerce.
England, for instance, from which we derive our principal supplies of manufactured articles forbids the importation of our grain into her home market except when its price there is beyond what is considered what is considered as its average or ordinary rate; and thus while we continuallyconstantly take from her her manufactures, she only occasionally takes from us our grain.
Again she excludes us either from bringing from her West Inia possessions those products which we stand in need of from thence or from carrying thither those of our products of which they stand in need. thus not only ex It is true that she brings to us in ourher own ships all the different articles produced in her Islands and takes from us in her own ships likewise all the articles of the our productions requisite to their supply; but by preventing us from being our own carriers, she reduces us in this branch of trade to a commerce merely passive, deprives us of all her share in the profits of the carrying trade whatever they may be and substantially of a participation in the profits of the advanced price both of the commodities of her Islands in our markets and of our commodities in the markets of her Islands. While in the trade between her European dominions and the United States she shares fully with us in every species of advantage.
With regard to the fisheries which from situation may be considered as the staple of a part of the United States, such the British regulations amount to a prohibition of all but the finer oils of w which find admission into Great Britain in spite of the enormousnotwithstanding the heavy duty of
If from England our eyes are turned towards France we shall not see a more favourable Picture. It is the standing has been long the standing policy of France to exclude the introduction of wheat & flour into every part of her dominions. Relaxations in this policy from particular exigencies occasionally take place but it is the prevailing one. And thise exportation of this great staple of our country meets with with a still more formidable bar from the regulations of France than of Britain.
France permits us to bring from her Islands in our own ships Rum melasses  and to carry thither in our own ships  but flour orour wheat & flour cannot be admitted there either in our our own or in French bottoms—nor more than Sugar Coffee or Cocoa can be brought to us in the one or in the other.
Our The fisheries by a late edict of the National Assembly are placed on a footing still more disadvantageous than that upon which it stands in respect to Great Britain.
And though
yet being charged with a duty of  per quintal, which amounts to p a prohibition since this apparent distinction in our favour is merely nominal. The state of things in France is not likely to afford us the same advantage with regard to our fine oils as results from the state of things in Great Britain.
Another Regulation of the National Assembly of France has placed our Tobacco Trade upon a very disadvantageous footing. The Tobacco of the United States may be carried to France in French or American bottoms but if carried in the former, it is liable to a duty of only  if carried in the latter it is liable to a duty of  a difference which prohibits its exportation in vessels of the United States; and by narrowing the field of commercial enterprise and substituting a less eligible mode of transportation is calculated to incumber and injure the trade in that article.
Upon the whole it may be affirmed that ineligible as is the footing upon which our Trade with Britain is carried on it stands at this time upon a still less eligible footing in regard to France.
Spain too and Portugal have regulations injurious to our Trade in Grain. Flour
With regard to the Northern Powers of Europe they are in general our competitors in furnishing the articles which constitute our Agricultural staples.
And as to the most Southern Powers parts of Europe, the avenues to them have been almost intirely closed by the hostile dispositions of the Barbary Powers.
This view of our external situation is not designed by way of complaint of the policy by which our trade it is embarrassed. It is the right of every independent nation, where not restrained by Treaty, to pursue its own interest, in its own way; so that it does not violate any positive right of another. Tis for itself to judge how far its meer practice may counteract its own object, and, by aiming at too much, may occasion the loss of advantages actually possessed or easily attainable and which by a more natural policy might have been long preserved as in the one case, and with certainty acquired forin the other.
Its sole intention is to shew that the policy of other countries interferes withou our deriving the full benefit of our Agricultural Industry, placing places us under serious disadvantages in exchanging the surplus of our soil for those foreign productions and manufactures of which we now stand in need, and renders more precarious than might be wished the obtaining in foreign markets a of a regular ready and regular vent for that immense increasing surplus which the inevitable progress must result from the inevitable progress of population and settlement in the United States.
And whilethough no overweening anxiety for the future isought to be indulged—whilethough the experience we have had of an even increasing demand even for those very staples with w for some of our principal productions ought to guard us against a degree of solicitude, which might mislead—though we ought fully to appreciate those powerful causes which counteract, in our favour, those the regulations tending to abrige the advantages of our situation and which are likely to continue to render usthe U States the granary of Europe in those emergencies which its the interests and passions of its various subdivisions will not fail to reiterate—Yet it cre becomes us to consider seriously of the means of rendering our prosperity less dependent on the projects and vicissitudes of foroegn Politics.
It is a consolation that, already the measures which have borne hard upon our Trade have accelerated internal improvements which upon the whole have bettered our situationcondition. To diversify, develope and extend those improvements is the surest and safest method of indemnifying ourselves for any inconveniences which those or similar measures have a tendency to occasion, and will be found the most effectual retaliation for any unkindness of disposition (if any there has been) which may have produceddictated them. If Europe will not take the products of our soil, upon such terms as we ought to expect, let us endeavour as fast as possible to cease to have occasion for her manufactures. These considerations shew that in pursuing the free system we should not have the full benefit of its principles from the want of reciprocity—and the policy of foreign countries has in a great measure the effect of an exclusion from foreign Trade.
The best of all expedients for the encouragement of Agriculture is to secure an extensive homea certain & sufficient market for that surplus which produced by the labour of the farmer which remains after supplying the wants of himself and family.

The foreign market is necessarily a precarious dependence for the vent of this surplus. It is the effort of every nation to be able to supply itself with articles of prime necessity, particularly those which relate to constitute its subsistence. Hence most nations supply themselves in ordinary times supplyfurnish themselves with aut the principal products of the earth. Seasons of particularextraordinary scarcity and times of war only oblige them to resort to foreign supply assistance. And hence also the demand for the surplus of a country merely Agriculture must be liable to injurious stagnations. Plentiful harvests and a state of pretty general peace in the countries with which its Trade is carried on are always likely to interrupt it. And while the wants of such a country for manufactured supplies are pretty constant and uniform, the demand for the commodities which it has to give in exchange is liable to frequent fluctuations. And this will account for the fact which has been already remarked namely that countries merely Agricultural have seldom much active wealth being continually drained of what they acquire by those manufacturing countries with which they trade.
This being the case it is consequently of the highest importance to secure an extensive domestic market for that surplus. The superior steadiness and certainty of such a market by rendering the reward of the farmer more certain is the strongest incement to his industry.
Towards the creation of this domestic market the establishment and extension of manufactures is are indispensable. The manufacturer is a certain customer to the farmer for what he can spare and in return furnishes him with what he wants. This is not the least of the circumstances by which manufactures promote the interest of Agriculture.
Another respect in which they do it is this—They not not only render the demand for the surplus productions of the soil in general more certain but they create or extend a demand in cases in which