Report on Manufactures inacted in full

[Aranfan]

Alexander Hamilton's Economic Program was never fully implemented. His report on manufactures advocated a modest tarriff wall for national revenue and subsidies from that revenue to nurture infant industries, both directly to the industries and for infrastructural development.

Instead, what was implemented was selectively high tariffs for protectionism, and no subsidies at all.

What if Hamilton had gotten his way and his ideas were implemented as intended?

 

[GreatScottMarty]

Read my TL

I am doing a Federalist-wank based on the idea that Col. John Laurens (One of Washington's Aides-De-Camp, a close friend of Hamilton and a noted SOUTHERN abolitionist).

Back to your hypothesis, he had IIRC that he advocated higher tarriffs that would benefit domestic manufactures and domestic agriculture. While he was giving testimony he advocated diversification in agriculture as well as in manufacturing. I think this would have lead to earlier industrialization and in the south to a break with King Cotton before it really began. One thing to note is that Patterson, NJ was founded as a model factory town. The city was designed by the same Frenchman who designed DC and was really only derailed by mismanagement of investor funds not because the model was bad.

 

[Aranfan]

So no Civil War?

Edit: Probably no Texas or California either in that case.

 

[Workable Goblin]

Well, the difficulty is that the politically powerful (then as now) Southerners will not like it AT ALL. Very hard to see how Hamilton could get this through, tbh.

 

[Jaded_Railman]

One of two scenarios:

1. A more 'British' America, that is, an America with much larger class divides, much earlier. Whereas, in the areas without a plantation economy, the early decades of the republic were markedly flat, just because of the influence of an open frontier. As indentured servitude and white slavery petered out, free labor enjoyed something of a renaissance in America, as high wages in the face of scarcer labor and low land prices promised an open future (one of the original iterations of the American Dream). But that won't happen with the cost of living increases that tariffs entail. Instead, somewhat different pressures apply.

I mean, to some extent it's inevitable that the frontier will push outwards (you don't put 3 million people and two baby booms on one coast of an under-populated continent and not expect something to happen) and there will be strange effects on the operation of American industry because of that, but the better you assist industry in avoiding this pressure the more the particulars of the resultant economic situation change. Similarly, I expect that subsidies won't do nearly as much as the tariffs for American industry, and will primarily act as a transfer of wealth from the poorer rural areas that depend on cheap manufactured goods and open foreign staple markets to the wealthier urban areas that can take advantage of the distorted labor market effects.

It's a crude metaphor, but think of how the Second Serfdom was at least partially an attempt by the Russian Empire to keep peasants from leaving their lands and seeking out a life in the quickly opening Siberian frontier. Tariffs, and to some lesser extent subsidies, will work in a mildly similar way. They're designed to 'solve' the same 'problem'.

Other policies from the report, like the agricultural protectionism, are particular stinkers from a technical, rather than equitable, viewpoint. The free trade in grain is the number one reason America developed to be as wealthy as it did. Right through the 1910's, even with all the tariff barriers and state aid to manufacturing, the US' number one export was wheat.

Another stinker is the national bank. All it does is monetize the debt, driving boom-bust cycles, as well as acting as a wealth transfer mechanism, only this time transferring wealth around through debt and inflation rather than direct taxation and subsidization. The economy becomes more unstable, wealth more easily accumulates into a small number of hands, and we almost certainly end up with a perpetual money monopoly, rather than getting the brief periods of competition that we actually did. And, with a long-lasting national bank, the state system of legislatively chartered banks will survive in the long run, more likely than not. That means banking remains a highly politicized business and the state governments turn into corrupt tools of special interests even quicker than IOTL.

Over all, depending on exactly how events play out, you've headed off the second industrial revolution and guaranteed a nasty series of wars sometime after the 1850's. The world (and the US) are poorer in the long run, and liberal democracy as we know it probably doesn't exist.

2. This whole thing provokes such a backlash amongst pretty much everyone that the Federalists are tossed out in 1796 instead of 1800. I don't what the chances of these are, because it took the Alien and Sedition Acts to do it IOTL. While the Report on Manufactures as a policy guide is going to be terrible for...everyone in the very long run, nobody is going to know this at the time, certainly not well enough to oppose as much as people opposed the two OTL Acts.

 

[Aranfan]

I'm not seeing how tarrifs and subsidies are going to stop people from moving west, and the driving up of labor costs/wages that follows.

 

[GreatScottMarty]

I'm not seeing how tarrifs and subsidies are going to stop people from moving west, and the driving up of labor costs/wages that follows.

They don't. All I have to say is that the J.R. is wrong. Its a rather Libertarian view of Economics that I disagree with.

What the Report would have done is created industrial incubators using subsidies that would have broken the British hold on Manufacturing. The Tariffs would have protected the industries until they were strong enough to stand on their own. As for Free Trade, that didn't exist in the Pre-WW2 world unless you count Mercantilism (the use of Colonies as markets to fund manufacturing at home, roughly, the home state ships finished goods to the Colonies and the Colony ships raw materials back) but in terms of State to State trade; it didn't.

As a matter of fact Tariffs existed in the US all through out the 1st Party system and were one of primary points of debate in the 1828 and 1832 elections. Hamilton's point was that a targeted use of Tariffs would allow Manufacturing to grow and Agriculture to benefit from the growth in manufacturing, either through innovation or through invention.

I don't think a Report on Manufactures would do what J.R. is saying in terms of westward expansion either. I think as time went by people would leave cities naturally and set out on their own. The want of land and of a home of your own is what drives America to this day. The country would still be a mostly rural nation and would be for a long time. Even with the continuation of slavery and the resulting depression of wages, more immigrants are leaving the old country looking for better farm land and more opportunities both them offered in 1790s-1810s Ohio, Indiana, Illinois.

 

[Mabus Azathoth]

They don't. All I have to say is that the J.R. is wrong. Its a rather Libertarian view of Economics that I disagree with.

What the Report would have done is created industrial incubators using subsidies that would have broken the British hold on Manufacturing. The Tariffs would have protected the industries until they were strong enough to stand on their own. As for Free Trade, that didn't exist in the Pre-WW2 world unless you count Mercantilism (the use of Colonies as markets to fund manufacturing at home, roughly, the home state ships finished goods to the Colonies and the Colony ships raw materials back) but in terms of State to State trade; it didn't.

As a matter of fact Tariffs existed in the US all through out the 1st Party system and were one of primary points of debate in the 1828 and 1832 elections. Hamilton's point was that a targeted use of Tariffs would allow Manufacturing to grow and Agriculture to benefit from the growth in manufacturing, either through innovation or through invention.

I don't think a Report on Manufactures would do what J.R. is saying in terms of westward expansion either. I think as time went by people would leave cities naturally and set out on their own. The want of land and of a home of your own is what drives America to this day. The country would still be a mostly rural nation and would be for a long time. Even with the continuation of slavery and the resulting depression of wages, more immigrants are leaving the old country looking for better farm land and more opportunities both them offered in 1790s-1810s Ohio, Indiana, Illinois.

Well if you disagree then it is you who is in the wrong, sir. How hard is it to understand that protectionism helps nobody in the long run, or that greater tariffs will significantly increase the cost of living for everybody in the country? No amount of "innovation" is going to make up for the resources that are misallocated and destroyed through manipulation of the incentive structures of production as well as the inevitable reciprocal tariffs that will no doubt close off foreign markets that would have been open (or at least more open than otherwise) to domestic producers.

And you seem to have a weird idea as to what Mercantilism was; it was not the system of colonial trade that Britain constructed in the 19th century but the economic theory that posited that nations must be entirely self-sufficient and export as much as possible in order to enrich themselves at the expense of the rest of the world, the theory that underpinned all of the economic ideas of your beloved Alexander Hamilton and was thoroughly refuted by Adam Smith in The Wealth of Nations; I suggest that you read it sometime.

 

[King Gorilla]

Well if you disagree then it is you who is in the wrong, sir. How hard is it to understand that protectionism helps nobody in the long run, or that greater tariffs will significantly increase the cost of living for everybody in the country? No amount of "innovation" is going to make up for the resources that are misallocated and destroyed through manipulation of the incentive structures of production as well as the inevitable reciprocal tariffs that will no doubt close off foreign markets that would have been open (or at least more open than otherwise) to domestic producers.

In the long one everybody is dead.

Protectionism, is in the short and medium term very useful, especially when a country is beginning to industrialize. After all their initial industries will not be as productive and efficient as the existing players. But they can, and do learn fast especially when they possess good means of transportation, native sources of capital, and a large and/or educated workforce. One of the critical developments for America emerging as a great economic and industrial power was the creation of a domestic market to consuming its natively produced industrial and consumer goods. If america believed in "free trade" at this junction of history, this development will almost certainly be delayed. Especially given "free trade" was embraced more as a theory than as a national practice.

In terms of waste, this was an entire era based upon waste. Boom and bust cycles are a given with speculation, and speculation is something which cannot be cut out of capitalistic enterprise. If anything a national bank would have eased this turmoil involved in this. After all, for most of American history the boom bust cycle didn't end in a recession, it ended in a panic and there was one every decade or so.

 

[Mabus Azathoth]

In the long one everybody is dead.

A flippant excuse coined by an economist who was too self-absorbed to admit that his theories were fatally flawed.

Protectionism, is in the short and medium term very useful, especially when a country is beginning to industrialize. After all their initial industries will not be as productive and efficient as the existing players. But they can, and do learn fast especially when they possess good means of transportation, native sources of capital, and a large and/or educated workforce. One of the critical developments for America emerging as a great economic and industrial power was the creation of a domestic market to consuming its natively produced industrial and consumer goods. If america believed in "free trade" at this junction of history, this development will almost certainly be delayed. Especially given "free trade" was embraced more as a theory than as a national practice.

In terms of waste, this was an entire era based upon waste. Boom and bust cycles are a given with speculation, and speculation is something which cannot be cut out of capitalistic enterprise. If anything a national bank would have eased this turmoil involved in this. After all, for most of American history the boom bust cycle didn't end in a recession, it ended in a panic and there was one every decade or so.

But the problem with this line of reasoning is that it never leads to a conclusion; so "infant" industries need protection to ensure that they survive, do they? well which industries are they and when will they be sufficiently "mature" to allow them to compete with foreign producers? the industrialists themselves will never give you a straight answer, all of them will claim that they are too underdeveloped to survive international competition and none of them will ever say otherwise, the politicians who support the policy will be too ingratiated to the industrialists to ever contradict their line and the public servants hired to administer the policy will know what's in their best interests too so don't expect any sort of straight answer from them either. The result is that eventually all industries will be well ensconced in an ever-growing trade barrier and soon all domestic consumers will suffer from ever-rising prices and ever-shrinking purchasing power; where will your strong domestic market be then?

 

[King Gorilla]

A flippant excuse coined by an economist who was too self-absorbed to admit that his theories were fatally flawed.

But the problem with this line of reasoning is that it never leads to a conclusion; so "infant" industries need protection to ensure that they survive, do they? well which industries are they and when will they be sufficiently "mature" to allow them to compete with foreign producers? the industrialists themselves will never give you a straight answer, all of them will claim that they are too underdeveloped to survive international competition and none of them will ever say otherwise, the politicians who support the policy will be too ingratiated to the industrialists to ever contradict their line and the public servants hired to administer the policy will know what's in their best interests too so don't expect any sort of straight answer from them either. The result is that eventually all industries will be well ensconced in an ever-growing trade barrier and soon all domestic consumers will suffer from ever-rising prices and ever-shrinking purchasing power; where will your strong domestic market be then?

What a wonder the democratic process is, as through the act of voting and governance tariffs and subsidies can and do fall. When the time is right, said industries will be the biggest advocates for such liberalization. After all, protective tariffs were hardly unusual in the 19th century. Yet trade and industry didn't grind into a halt. When the US is ready to trade with Britain, and other tarifed countries it will most likely negotiate a reciprocal lowering of tariffs.

As for your take on consumer spending, I feel you are somewhat misguided. Economics is not a zero sum game, and gains productivity, innovation, and diversity are felt. Having tariffs isn't going to create the amalgamated Lowell textile combine. Having tariffs isn't going to enserf the population, deprive them of basic education, and snuff out innovation. Having tariffs isn't going to scare away immigrants, particularly those looking for free/cheap land. Having tariffs isn't going to disappear millions of acres of the world's best farmlands, and billions of metric tons of natural resources. Having tariffs isn't going to turn America into a pariah state during the era in which tariffs were the norm. So I think its pretty likely that strong domestic market will be here to stay.

 

[Jaded_Railman]

I'm not seeing how tarrifs and subsidies are going to stop people from moving west, and the driving up of labor costs/wages that follows.

As I said, to some extent, it can't be stopped. Even the Second Serfdom wasn't completely successful, and that was a hugely more drastic measure.

But the changed parameters will have some effect. You change the mix of manufacturing and agriculture in the early American economy and you change how that economy is going to evolve. Since American manufacturers couldn't compete on the international market, now, they won't be able to replace the national export income from the foregone grain exports. Since you lose that income, you impinge on gross national savings, which effects the market for loanable funds and thus the interest rate. The whole project is defeated in the long run as the higher interest rate prevents increased investment.

However, in the short run, the main effect will be a transfer of wealth from the consuming rural poor to the subsidized urban wealthy.

It's impossible to tell how large an effect this parametric change will have, but I'm willing to bet that the Federalists are able to use this program to increase their hold on national and state governments: By decreasing the number of rural land-holders, you also decrease the number of qualified voters in the states with property requirements on suffrage. This slants the electorate even heavier towards the monied urban interests that represented the base of the High Federalist wing of the Federalist party. Policy continues to favor them above most others, which exacerbates the effects I'm talking about.

The North ends up looking like the South, with a smaller class of very wealthy whites ruling over a larger class of very poor whites.

EDIT: Basically, this whole idea comes from a fucked up understanding of what 'industrialization' is. Industrialization is, primarily, a demographic change, something that happens when your population begins producing more workers than can be absorbed in existing industries (whether they be agricultural or manufacturing). As alternatives dry up, the price of labor drops and factory systems become profitable. Before that demographic change, industrialization CANNOT be forced to happen without extreme and drastic measures. Tariffs and subsidies won't cause industrialization, they certainly didn't IOTL, they'll just act as transfers of wealth from agricultural and other primary sectors (which depend on a large export market) towards manufacturing and other secondary sectors (who now have a captive internal market).

Notice that, even with the high tariffs of parts of the early 19th century, the US didn't actually industrialize, only waiting until the late 19th century and first half of the 20th when it actually went through the demographic transition I'm talking about? In fact, the 'base' that American industry was built on was built in the 1840's and 1850's, in a low tariff regime.

Seriously, Mabus knows what he's talking about here. This isn't 'libertarianism', this is liberalism of the old Scottish school. Adam Smith succeeded in blowing up mercantilism on theoretical grounds decades before Hamilton ever saw public office. Free trade is good for everyone in the long run. Subsidies are terrible for everyone but the subsidized. National banks are a bad for everyone but participants in the bond market and money hungry politicians.

 

[The Sandman]

King Gorilla has the right of it.

The fact is that some degree of protectionist measures are necessary if you want to enter an industry where there are already mature players on the international market. Simply because of economies of scale, they can compete you into the ground during your start-up period, where by definition you won't have similar efficiency (as you literally haven't finished developing that much capacity yet).

And once your industry is capable of competing, they are going to press for the reduction of tariffs, for a simple reason: they want to expand into foreign markets, and the only way to do that is a general lowering of tariffs on that industry.

Furthermore, another natural economic incentive to lower tariffs will appear once the protected industry has matured: the tariffs aren't making enough money to be worth it. As domestic production rises, assuming that you have a functional transportation infrastructure, imports are going to fall. The fewer items being imported, the less money there is to be earned from the tariffs. There are two points in particular at which tariffs should cease, assuming that your government recognizes them; the first is when the monies earned by tariffs drop below the monies to be earned by taxes on the companies whose imports would increase without tariffs, the second is when the monies earned by tariffs drop below the monies required to pay for their enforcement.

Anti-trust laws, of course, are a key adjunct to all of this, as for it to work you need to discourage the rise of abusive domestic monopolies and cartels. Internal improvements (to the transportation and communication infrastructure in particular, although education and health are also key areas for government investment as money and technological developments allow them) are also critical; for the agricultural side of things to work as intended, you need to make sure that domestic produce is cheaper and easier for your factories to purchase than foreign imports. This means that it needs to able to reach domestic markets quickly and in large amounts.

As for a national bank, a properly managed one would be able to tame the liquidity crises that cause the boom-and-bust cycle that is the bane of totally unregulated capitalism. In the event of a speculative bubble, raising the interest rates and the reserve requirements would serve to remove money from the market, starving the bubble of fuel; when the reverse occurs, and there is insufficient credit available in the market, decreasing interest rates and reducing the reserve requirement would inject sufficient additional capital to restart the economy.

The South, unfortunately, is going to be problematic under any circumstances, because of the distorting effects of slavery. Once cotton and other crops that can only be grown effectively in large plantations with massive amounts of manual labor take over, small farmers and urban industry are both doomed. The rise in the price of slaves, meanwhile, will serve to enforce the racial divide just as it did historically; when most Southern whites will no longer be able to afford even a single slave, and will only encounter blacks occasionally when they have dealings with the rich, it becomes much easier to cast all blacks as some mysterious and inferior other. And the only way to stop this from happening, a restriction on the number of slaves an individual entity (personal or corporate) can own, is unlikely to get past the Southern gentry whose interests would be directly affected by this.

I didn't mention emancipation because, while that would obviously solve the problem much more quickly, there's absolutely no chance of it happening outside of war or the utter collapse of plantation agriculture.

 

[Aranfan]

Since American manufacturers couldn't compete on the international market, now, they won't be able to replace the national export income from the foregone grain exports.

American Manufacturers weren't able to compete internationally anyway. Britain flooded the American markets with their own goods every time the tariffs were lowered enough.

Keep in mind that the tariffs aren't going to be high protectionist walls. It's going to be modest tariffs to get income for subsides to both Manufacture and Agriculture. The manufacturers nurtured by the subsides would have the internal domestic market, and the agriculturists would still be able to sell their crops internationally because they would be getting subsidies as well. That's assuming the other nations put up a tariff wall on grain though, instead of trying to use America as their farm.


Hamilton wasn't stupid.

 

[Jaded_Railman]

American Manufacturers weren't able to compete internationally anyway. Britain flooded the American markets with their own goods every time the tariffs were lowered enough.

Of course they couldn't: They had to pay a relatively high price for labor vis-a-vie manufacturers in Europe.

And are you saying it's a BAD thing that Britain sent cheap merchandise to the US when tariffs were lowered?

Tell me, ought we be raising tariffs against China? They're doing the exact same thing these days.

Keep in mind that the tariffs aren't going to be high protectionist walls. It's going to be modest tariffs to get income for subsides to both Manufacture and Agriculture. The manufacturers nurtured by the subsides would have the internal domestic market, and the agriculturists would still be able to sell their crops internationally because they would be getting subsidies as well. That's assuming the other nations put up a tariff wall on grain though, instead of trying to use America as their farm.

So, you tax people in order to subsidize them? How's that supposed to work, anyway? Sounds more like creating dependency, to me. In fact, that's part of exactly why Hamilton was doing what he was doing: He wanted to force people into having a stake in the new Federal government.

Hamilton wasn't stupid.

No, he was under-informed and self-interested.

Let's get one thing straight, guys, America won't 'industrialize' AT ALL before the 1870's in the east, the 1890's/1900's in the mid-West, the 1930's or 1940's in the South, or a similar time bracket in the West. It's all about options and, as long as the open frontier is available, the demographic effects I talked about before aren't going to go into effect. All taxing imports and subsidizing manufacturing is going to do is create a privileged class of wealthy urban capitalists who support a state run for and by them under the High Federalists.

Hamilton's programs won't 'industrialize' the US before its time, that can't be done, they'll act as a significant favor for his constituents. Again, this isn't 'libertarian economics', it's common sense combined with an economic education. People weren't ignorant back then, guys, Jefferson and the Republicans knew what Hamilton's programs would do, that's why they were against it. Jackson and the Democrats knew what the Second Bank could and was doing, that's why they were against it. These people did, to some extent, have a personal interest against these people (Biddle & Co. represented a second 'elite' growing to challenge the power of the existing planter elite), but they definitely weren't wrong in the effects the policies were having on the 'little man' in America.

 

[stevep]

Well if you disagree then it is you who is in the wrong, sir. How hard is it to understand that protectionism helps nobody in the long run, or that greater tariffs will significantly increase the cost of living for everybody in the country? No amount of "innovation" is going to make up for the resources that are misallocated and destroyed through manipulation of the incentive structures of production as well as the inevitable reciprocal tariffs that will no doubt close off foreign markets that would have been open (or at least more open than otherwise) to domestic producers.

Actually no nation has become a major economic power without substantial government protection and support, often in the form of tariffs. The US would have industrialised slower without its tariff walls. This did have considerable costs in the shorter term for US consumers and the longer term for manufacturers in other countries.

However what you say seems a weird statement when what Hamilton is arguing for is lower protectionism than his opponents supported and what actually happened.

And you seem to have a weird idea as to what Mercantilism was; it was not the system of colonial trade that Britain constructed in the 19th century but the economic theory that posited that nations must be entirely self-sufficient and export as much as possible in order to enrich themselves at the expense of the rest of the world, the theory that underpinned all of the economic ideas of your beloved Alexander Hamilton and was thoroughly refuted by Adam Smith in The Wealth of Nations; I suggest that you read it sometime.

Definitely agree here. Mercantilism was the common economic ideology in the European world in the 18th century. There is some relationship with the protectionist theories in the 19th C but their effectively the direct opposite of the free trade ideas that Britain came up with in the 19th C.

Steve

 

[Aranfan]

Of course they couldn't: They had to pay a relatively high price for labor vis-a-vie manufacturers in Europe.

And are you saying it's a BAD thing that Britain sent cheap merchandise to the US when tariffs were lowered?

It is generally a bad idea for Butterlandia to buy all it's arms from Guntopia using money it gets from Guntopians buying their crops. Guntopia would love such a thing though.

Same with any industry that allows a nation to exert independence on the international field.

Tell me, ought we be raising tariffs against China? They're doing the exact same thing these days.

If China were to drop it's protectionism and allow actual free trade with the USA, China's still fledgling industry would be steam rolled as Wallmart and such come in with their immense economies of scale.

So, you tax people in order to subsidize them? How's that supposed to work, anyway? Sounds more like creating dependency, to me. In fact, that's part of exactly why Hamilton was doing what he was doing: He wanted to force people into having a stake in the new Federal government.

What taxes are you talking about? America would be charging foreign merchants and using that money to promote domestic merchants. If you're saying that the consumers are taxed because the supply curve for foreign firms is closer to that of domestic firms, I don't follow.

No, he was under-informed and self-interested.

Let's get one thing straight, guys, America won't 'industrialize' AT ALL before the 1870's in the east, the 1890's/1900's in the mid-West, the 1930's or 1940's in the South, or a similar time bracket in the West. It's all about options and, as long as the open frontier is available, the demographic effects I talked about before aren't going to go into effect. All taxing imports and subsidizing manufacturing is going to do is create a privileged class of wealthy urban capitalists who support a state run for and by them under the High Federalists.

Hamilton's programs won't 'industrialize' the US before its time, that can't be done, they'll act as a significant favor for his constituents. Again, this isn't 'libertarian economics', it's common sense combined with an economic education. People weren't ignorant back then, guys, Jefferson and the Republicans knew what Hamilton's programs would do, that's why they were against it. Jackson and the Democrats knew what the Second Bank could and was doing, that's why they were against it. These people did, to some extent, have a personal interest against these people (Biddle & Co. represented a second 'elite' growing to challenge the power of the existing planter elite), but they definitely weren't wrong in the effects the policies were having on the 'little man' in America.

If you consider "industrialization" to be a demographic shift to cities instead of a change in industrial production and growth, then you are right.

On the other hand, I find it hard to believe that the Federalists would manage to have such a death grip on Congress. Politicians who expand the electorate gain immense and loyal power bases, Jackson bringing the rabble into the White House was inevitable, especially since the frontier states would have less stringent voting requirements and the example would exert pressure elsewhere.

 

[The Sandman]

Of course they couldn't: They had to pay a relatively high price for labor vis-a-vie manufacturers in Europe.

No, the reason they couldn't compete was that economies of scale allowed Europeans (well, mainly the British) to produce enough goods that an unprotected American company couldn't possibly survive the period between its creation and achieving sufficient size to have similar economies of scale.

And surprisingly enough, demand for labor is usually more of a factor than supply when the labor in question is either unskilled or minimally skilled, because usually you aren't going to have a sudden massive shortage of unskilled labor.

And are you saying it's a BAD thing that Britain sent cheap merchandise to the US when tariffs were lowered?

For them, no. For us, or at least for those of us who were now looking at the impossible task of building an industry from scratch under constant pressure from a mature industry? Very much so. And the British knew it.

Tell me, ought we be raising tariffs against China? They're doing the exact same thing these days.

It might not hurt, given that I doubt we sell that much to China for them to retaliate against. Far more effective, though, would be requirements on the other end; a certain percentage of any product that can be produced in the US must be produced here, with allowed imports tied to that (for example, if 10% of Good A must be produced in the US, then the maximum allowed imports are nine times the amount of Good A currently being produced in the US).

So, you tax people in order to subsidize them? How's that supposed to work, anyway? Sounds more like creating dependency, to me. In fact, that's part of exactly why Hamilton was doing what he was doing: He wanted to force people into having a stake in the new Federal government.

...no, you put a tariff on foreign manufactures and then use the money from that tariff to provide venture capital to anyone who wants to start producing the item you have the tariff on. As the amount of domestic production increases, the amount you earn from the tariff decreases; as the amount of tariff money decreases, the amount of venture capital you have to spend decreases. Taxes are set as a percentile, not a specific amount, so any increase in productivity provides you with more money without you having to take a larger portion of the income of any given citizen or corporation.

No, he was under-informed and self-interested.

You mean unlike Thomas Jefferson, whose economic and political philosophies would enrich and support the Southern landed gentry he was a member of, and who did not in fact have the slightest conception of the economic and political disaster that the slave-worked plantations would cause for the country in general and the South in particular?

Let's get one thing straight, guys, America won't 'industrialize' AT ALL before the 1870's in the east, the 1890's/1900's in the mid-West, the 1930's or 1940's in the South, or a similar time bracket in the West. It's all about options and, as long as the open frontier is available, the demographic effects I talked about before aren't going to go into effect. All taxing imports and subsidizing manufacturing is going to do is create a privileged class of wealthy urban capitalists who support a state run for and by them under the High Federalists.

You mean entirely unlike the way that the historical pattern of industrialization created a privileged class of wealthy urban capitalists who supported a state run for and by them under the Democrats and Republicans?

I submit to you that the real problem was that the earnings and working environment of the average urban laborer in an unregulated, unsupervised, dog-eat-dog capitalist environment were so abysmal that agricultural work (where you could at least be reasonably sure that you could feed yourself) remained preferable to the factories until technological improvements started to eliminate agricultural jobs faster than they could be created. Find a way to make the workers want to come to the cities, and you can industrialize before changes in the farming industry force workers to take the miserable terms offered by the urban capitalists in lieu of unemployment and starvation.

Hamilton's programs won't 'industrialize' the US before its time, that can't be done, they'll act as a significant favor for his constituents. Again, this isn't 'libertarian economics', it's common sense combined with an economic education. People weren't ignorant back then, guys, Jefferson and the Republicans knew what Hamilton's programs would do, that's why they were against it. Jackson and the Democrats knew what the Second Bank could and was doing, that's why they were against it. These people did, to some extent, have a personal interest against these people (Biddle & Co. represented a second 'elite' growing to challenge the power of the existing planter elite), but they definitely weren't wrong in the effects the policies were having on the 'little man' in America.

I submit that your economic education must then be the reason why you seem to have so little grasp of how economics work in the real world, as opposed to in your favored theories; theories, might I add, that require that you have perfect information (which is impossible), perfect rationality amongst all actors in the economy (also impossible), no externalities under any circumstances (impossible), and that the most rational decision for a given individual is always the same as the most rational decision for a society (which is false).

And if you were to actually read Smith, or Ricardo, or any of the other great early economists, you might start to notice just how badly their legacies have been served by people like Milton Friedman and any of the modern economists who try to claim that completely ungoverned and unregulated capitalism is some flawless panacea that will naturally produce the best outcomes for every aspect of human life.

 

[Jaded_Railman]

It is generally a bad idea for Butterlandia to buy all it's arms from Guntopia using money it gets from Guntopians buying their crops. Guntopia would love such a thing though.

Same with any industry that allows a nation to exert independence on the international field.

While using humorously named metaphorical countries can be useful in some instances, I believe being honest is worth it here.

If 'Guntopia' is a democratic country with (as time goes on) an increasingly large electorate, it doesn't quite matter, because 'Guntopia' is going to suffer just as badly from cutting off trade with 'Butterlandia' as grain supplies dwindle and 'Guntopia's hundreds of thousands of industrial workers face rising food costs.

Wait, I said something about honesty...right, so by 'Guntopia' I mean 'Great Britain', and by 'Butterlandia' I mean 'United States'. Because that's what's being talked about: The early US raising trade barriers against Great Britain because it is, for some reason, believed that we need to develop an industrial manufacturing base when an entire continent was there to be settled to the West. You have to understand what this does to an economy. An extremely low price of land relative to elsewhere invites massive immigration in that direction. In the early US, this immigration was mostly internal, because what followed the successful revolution was several of the largest baby booms in American history. The population went from 4 to 10 million in three decades.

Agricultural worker numbers boomed in certain areas especially, pretty much the areas that would turn into centers of American manufacturing on the East coast: lower New England, down-state New York, and cis-Appalachian Pennsylvania. Certain types of manufacturing are supported in these conditions; in New England, for instance, you got shoe and textile industries with or without tariffs. What tariffs and subsidies are going to do is they're going to effect the distribution of workers who stay on at these factories and those who go do something else (like emigrate inland). By protecting these industries enough to allow them to pay even higher wages, less people will follow an agricultural labor route west towards land ownership on the frontier.

To continue with the New England example, the demographic boom of Yankees created a 'Greater New England' throughout the Great Lakes region. If more people stay in Boston and Connecticut instead of heading west, you effect the future demographics of those regions. You retard development in one area in order to promote it elsewhere. That's the essence of scarcity. The whole scheme is an attempt to correct something that didn't need to be corrected.

If China were to drop it's protectionism and allow actual free trade with the USA, China's still fledgling industry would be steam rolled as Wallmart and such come in with their immense economies of scale.

It's ironic that you use Wal-Mart, because, well, I guess the best way of putting it is to say that Wal-Mart's greatest economy of scale is the Dwight D. Eisenhower System of Interstate Highways.

If China dropped its protectionism towards us and we towards it, we'd all be richer.

What taxes are you talking about? America would be charging foreign merchants and using that money to promote domestic merchants. If you're saying that the consumers are taxed because the supply curve for foreign firms is closer to that of domestic firms, I don't follow.

It's either an explicit tax on imported goods, or an implicit one on consumer prices as people pay higher prices for the same things (since the production possibilities frontier of foreign firms is further out than the PPF of domestic firms). Foreign merchants wouldn't be paying much of a tax because foreign trade would collapse in the face of higher marginal tax rates. It'd be the higher prices on everything that people pay because, as you keep saying, American industry is 'in-efficient' (that is, they face a different cost schedule than foreign companies, so they can't use the same revenue generating methods profitably), and can't match the economies of scale present in British industry.

The 'problem' (it's really only a problem to wealthy merchant-cum-state capitalists in the Eastern coastal cities) is that American labor is very expensive. The policy 'corrections' are meant to compensate for this. All they really do, however, is transfer wealth from labor to capital. In the long run they retard development on a national scale.

If you consider "industrialization" to be a demographic shift to cities instead of a change in industrial production and growth, then you are right.

OK, now this really deserves expanding on.

'Industrialization' is a composite phenomenon. It's made up of more than one 'thing' happening. What you're describing is one aspect of it: Urbanization. What I was describing is what I think is the phenomenon underlying industrialization: The demographic transition and the subsequent shift in the price of labor. What industrialization is is a penumbra of different outcomes of this shift.

However, phenomena like the demographic transition are heavily dependent on a few contextual parameters. One parameter that was somewhat unique to the US (at the time, anyway) was the Western Frontier. The specific evolution of demographics that caused industrialization in Britain in this time and elsewhere in the late 19th century can't happen in the US in the same way on account of this different parameter. Instead you get waves of settlement across the frontier as a high fertility rate causes a population boom.

The entire thing for Hamilton's plan was to eliminate this parameter and try to make American demographics follow the British model. To the extent that it could done, this will have massive changes down the line. Not completely world-shaking because, as I said, it would take a lot more than just the policies outlined in the Report to really counter-act the presence of the frontier, but it's going to have SOME effect.

On the other hand, I find it hard to believe that the Federalists would manage to have such a death grip on Congress. Politicians who expand the electorate gain immense and loyal power bases, Jackson bringing the rabble into the White House was inevitable, especially since the frontier states would have less stringent voting requirements and the example would exert pressure elsewhere.

I don't think it'll be a seriously long term thing, but think about it in terms of pushing back against universal suffrage. Instead of almost all states having universal white manhood suffrage by the 1850's, maybe it'll take until the 1870's. That's going to have a similar effect on how long it takes the people who aren't white men to get the vote.

The reasons I dismissed my second scenario of a backlash similar to the revolution of 1800 was merely on account of the fact that the really terrible outcomes of the policies in the Report would take a few decades to really show, early on they won't be viewed nearly as badly as the Federalist mistakes of the Adams Administration that provoked backlash IOTL.

 

[The Sandman]

If 'Guntopia' is a democratic country with (as time goes on) an increasingly large electorate, it doesn't quite matter, because 'Guntopia' is going to suffer just as badly from cutting off trade with 'Butterlandia' as grain supplies dwindle and 'Guntopia's hundreds of thousands of industrial workers face rising food costs.

I have a certain suspicion that 'Guntopia' is going to have an easier time finding someone else to sell it grain (which can be produced anywhere with the right soil and climate conditions) than 'Butterlandia' is going to have finding someone else to sell it guns (which require both industrial plant and at least semi-skilled labor to make). Assuming, of course, that Butterlandia doesn't start making the guns itself, rendering Guntopia irrelevant. At that point, the relative power of the arrangement shifts.

Wait, I said something about honesty...right, so by 'Guntopia' I mean 'Great Britain', and by 'Butterlandia' I mean 'United States'. Because that's what's being talked about: The early US raising trade barriers against Great Britain because it is, for some reason, believed that we need to develop an industrial manufacturing base when an entire continent was there to be settled to the West. You have to understand what this does to an economy. An extremely low price of land relative to elsewhere invites massive immigration in that direction. In the early US, this immigration was mostly internal, because what followed the successful revolution was several of the largest baby booms in American history. The population went from 4 to 10 million in three decades.

Agricultural worker numbers boomed in certain areas especially, pretty much the areas that would turn into centers of American manufacturing on the East coast: lower New England, down-state New York, and cis-Appalachian Pennsylvania. Certain types of manufacturing are supported in these conditions; in New England, for instance, you got shoe and textile industries with or without tariffs. What tariffs and subsidies are going to do is they're going to effect the distribution of workers who stay on at these factories and those who go do something else (like emigrate inland). By protecting these industries enough to allow them to pay even higher wages, less people will follow an agricultural labor route west towards land ownership on the frontier.

No, not really. The factory workers are going to need food, the factories are going to need raw material inputs, and the people who come to the city to meet those needs will have needs of their own. People will be encouraged to head West because there's going to be a lot of money to be made in supplying the agricultural needs of the burgeoning cities. And aside from the baby boom, you'll have the immigrant flood from Europe, enticed to come to the US by an even greater demand for labor than historically.

And the protection isn't so much to allow vastly higher wages (although hopefully wages will go up somewhat, giving birth to a middle class) as it is to allow companies to charge prices high enough to cover their costs in the period before they become large enough for economies of scale to kick in. Without any protectionist measures, they don't get this period to build up, and are competed out of existence by foreign industries that already have economies of scale in their favor and can therefore afford to charge less for their products.

To continue with the New England example, the demographic boom of Yankees created a 'Greater New England' throughout the Great Lakes region. If more people stay in Boston and Connecticut instead of heading west, you effect the future demographics of those regions. You retard development in one area in order to promote it elsewhere. That's the essence of scarcity. The whole scheme is an attempt to correct something that didn't need to be corrected.

No, it was an attempt to correct the deliberate retardation by the British of the development of industry in the Americas. Their policy had been carefully designed to keep our entire economy based on resource extraction, with any materials that couldn't be made by a handful of men in a small workshop being imported at a substantial markup. Post-independence, unless we wanted to remain an economic adjunct of Great Britain forever, our only choice was to promote domestic manufacture of goods.

It's ironic that you use Wal-Mart, because, well, I guess the best way of putting it is to say that Wal-Mart's greatest economy of scale is the Dwight D. Eisenhower System of Interstate Highways.

If China dropped its protectionism towards us and we towards it, we'd all be richer.

No, we wouldn't. The only advantage that China has at present is a massive supply of impoverished workers who are willing to work in abominable conditions for minimal pay. If they drop their protectionist measures, that will remain their only advantage forever, as they won't have the chance to build any other advantages before mature Western industry strangles theirs in the cradle. Our own country, meanwhile, would see a handful of people at the top do very well from being able to slash their labor costs even further, but the majority of people would simply become much poorer from the downward pressure on wages radiating outward from those workers directly affected by cheap Chinese labor to the ones who those workers buy things from. This process has been disguised by the availability of massive quantities of easy credit throughout most of the 1990s and 2000s, but I think the last two years have brought a permanent end to that.

It's either an explicit tax on imported goods, or an implicit one on consumer prices as people pay higher prices for the same things (since the production possibilities frontier of foreign firms is further out than the PPF of domestic firms). Foreign merchants wouldn't be paying much of a tax because foreign trade would collapse in the face of higher marginal tax rates. It'd be the higher prices on everything that people pay because, as you keep saying, American industry is 'in-efficient' (that is, they face a different cost schedule than foreign companies, so they can't use the same revenue generating methods profitably), and can't match the economies of scale present in British industry.

Which is why you accompany it with subsidies for American production of those necessities. Tariffs on things that we can't ever produce ourselves (coffee, for example, or chocolate) are quite obviously silly, because there's no domestic industry to protect and no way for one to appear. Tariffs on things like nails or paint or cheese or other such products, though, will only work so long as those things aren't made here. Once they start to be made here in quantity, the money from the tariffs dries up and the tariff itself is removed.

The 'problem' (it's really only a problem to wealthy merchant-cum-state capitalists in the Eastern coastal cities) is that American labor is very expensive. The policy 'corrections' are meant to compensate for this. All they really do, however, is transfer wealth from labor to capital. In the long run they retard development on a national scale.

No, the problem is that it's much cheaper to import something from a pre-existing foreign industry than it is to buy something from a domestic industry that didn't exist until a year or two ago and is still ironing out its methods. You can't charge a low enough price to compete with those British factories while employing American labor and purchasing material inputs for your factories, not unless you like going out of business very quickly.

And the cost of American labor (or rather, the cost that American labor demands) will decrease as economies of scale for domestic production start to kick in, allowing them to accept lower wages and still be earning enough money to survive.

In point of fact, at least some of the decision-making power is likely to be shifted from capital to labor as a natural result of a shortage of the latter compared with a surplus of the former. Given the way that OTL American history has tended to be firmly on the side of capital, I don't see this as a bad thing.

'Industrialization' is a composite phenomenon. It's made up of more than one 'thing' happening. What you're describing is one aspect of it: Urbanization. What I was describing is what I think is the phenomenon underlying industrialization: The demographic transition and the subsequent shift in the price of labor. What industrialization is is a penumbra of different outcomes of this shift.

However, phenomena like the demographic transition are heavily dependent on a few contextual parameters. One parameter that was somewhat unique to the US (at the time, anyway) was the Western Frontier. The specific evolution of demographics that caused industrialization in Britain in this time and elsewhere in the late 19th century can't happen in the US in the same way on account of this different parameter. Instead you get waves of settlement across the frontier as a high fertility rate causes a population boom.

The entire thing for Hamilton's plan was to eliminate this parameter and try to make American demographics follow the British model. To the extent that it could done, this will have massive changes down the line. Not completely world-shaking because, as I said, it would take a lot more than just the policies outlined in the Report to really counter-act the presence of the frontier, but it's going to have SOME effect.

I'll agree that there will be some effect. It won't, however, be as enormous as you seem to think, because an earlier increase in domestic industry means an earlier increase in domestic demand for raw materials, and therefore an incentive to moving out onto the frontier will still exist.

I don't think it'll be a seriously long term thing, but think about it in terms of pushing back against universal suffrage. Instead of almost all states having universal white manhood suffrage by the 1850's, maybe it'll take until the 1870's. That's going to have a similar effect on how long it takes the people who aren't white men to get the vote.

I'm not quite sure why increasing the overall amount of wealth produced in America, with a concomitant increase in the amount of skilled and semi-skilled labor needed, is going to lead to a delay in universal suffrage.

The reasons I dismissed my second scenario of a backlash similar to the revolution of 1800 was merely on account of the fact that the really terrible outcomes of the policies in the Report would take a few decades to really show, early on they won't be viewed nearly as badly as the Federalist mistakes of the Adams Administration that provoked backlash IOTL.

As best as I can tell, the only 'terrible outcomes' are that a particular brand of economic/political ideology that revolved around extreme laissez-faire governing philosophy, protection of the prerogatives of slave-owners, and keeping both labor and society in a position of eternal weakness towards capital will have far less influence on American development. To me, this is exactly the opposite of a terrible outcome, although you of course might have a different opinion.