Liberty Pole, September 8, 1780.
Dear Sir:
Agreeably to your request, and my promise, I sit down to give you my
ideas of the defects of our present system, and the changes necessary
to save us from ruin. They may, perhaps, be the reveries of a
projector, rather than the sober views of a politician. You will judge
of them, and make what use you please of them.
The fundamental defect is a want of power in Congress. It is hardly
worth while to show in what this consists, as it seems to be
universally acknowledged; or to point out how it has happened, as the
only question is how to remedy it. It may, however, be said, that it
has originated from three causes; an excess of the spirit of liberty,
which has made the particular States show a jealousy of all power not
in their own hands; and this jealousy has led them to exercise a right
of judging in the last resort of the measures recommended by Congress,
and of acting according to their own opinions of their propriety,
or necessity; a diffidence, in Congress, of their own powers, by
which they have been timid and indecisive in their resolutions:
constantly making concessions to the States, till they have scarcely
left themselves the shadow of power; a want of sufficient means at
their disposal to answer the public exigencies, and of vigor to draw
forth those means; which have occasioned them to depend on the
States individually, to fulfil their engagements with the army; the
consequence of which, has been to ruin their influence and credit with
the army, to establish its dependence on each State separately, rather
than _on them_, that is, rather than on the whole collectively.
It may be pleaded, that Congress had never any definite powers granted
them, and, of course, could exercise none, could do nothing more
than recommend. The manner in which Congress was appointed, would
warrant, and the public good required, that they should have considered
themselves as vested with full power _to preserve the republic from
harm_. They have done many of the highest acts of sovereignty, which
were always cheerfully submitted to: The declaration of independence;
the declaration of war: the levying of an army; creating a navy;
emitting money; making alliances with foreign powers; appointing a
dictator, etc., etc. All these implications of a complete sovereignty
were never disputed, and ought to have been a standard for the whole
conduct of administration. Undefined powers are discretionary powers,
limited only by the object for which they were given; in the present
case, the independence and freedom of America. The Confederation
made no difference; for as it has not been generally adopted, it had
no operation. But from what I recollect of it, Congress have even
descended from the authority which the spirit of that act gives them;
while the particular States have no further attended to it, than as it
suited their pretensions and convenience. It would take too much time
to enter into particular instances, each of which separately might
appear inconsiderable; but united, are of serious import. I only mean
to remark, not to censure.
But the Confederation itself is defective, and requires to be altered.
It is neither fit for war nor peace. The idea of an uncontrollable
sovereignty, in each State, over its internal police, will defeat
the other powers given to Congress, and make our union feeble and
precarious. There are instances without number, where Acts, necessary
for the general good, and which rise out of the powers given to
Congress, must interfere with the internal police of the States;
and there are as many instances in which the particular States, by
arrangements of internal police, can effectually, though indirectly,
counteract the arrangements of Congress. You have already had examples
of this, for which I refer you to your own memory.
The Confederation gives the States, individually, too much influence in
the affairs of the army. They should have nothing to do with it. The
entire formation and disposal of our military forces, ought to belong
to Congress. It is an essential cement of the union: and it ought to
be the policy of Congress, to destroy all ideas of State attachments
in the army, and make it look up wholly to them. For this purpose, all
appointments, promotions, and provisions, whatsoever, ought to be made
by them. It may be apprehended that this may be dangerous to liberty.
But nothing appears more evident to me, than that we run much greater
risk of having a weak and disunited federal government, than one which
will be able to usurp upon the rights of the people.
Already some of the lines of the army would obey their States in
opposition to Congress, notwithstanding the pains we have taken to
preserve the unity of the army. If any thing would hinder this, it
would be the personal influence of the General; a melancholy and
mortifying consideration.
The forms of our State constitutions, must always give them great
weight in our affairs, and will make it too difficult to bend them to
the pursuit of a common interest; too easy to oppose whatever they do
not like: and to form partial combinations subversive of the general
one. There is a wide difference between our situation, and that of an
empire under one simple form of government, distributed into counties,
provinces, or districts, which have no legislatures, but merely
magistratical bodies, to execute the laws of a common sovereign. Here
the danger is, that the sovereign will have too much power, and oppress
the parts of which it is composed. In our case, that of an empire
composed of confederated States; each with a government completely
organized within itself, having all the means to draw its subjects to
a close dependence on itself; the danger is directly the reverse. It
is, that the common sovereign will not have power sufficient to unite
the different members together, and direct the common forces to the
interest and happiness of the whole.
The leagues among the old Grecian republics are a proof of this. They
were continually at war with each other; and, for want of union, fell
a prey to their neighbors. They frequently held general councils; but
their resolutions were no further observed, than as they suited the
interests and inclinations of all the parties; and, at length, they
sunk entirely into contempt.
The Swiss Cantons are another proof of the doctrine. They have had
wars with each other, which would have been fatal to them, had not
the different powers, in their neighborhood, been too jealous of one
another, and too equally matched, to suffer either to take advantage of
their quarrels. That they have remained so long united at all, is to be
attributed to their weakness, to their poverty, and to the causes just
mentioned. These ties will not exist in America; a little time hence,
some of the States will be powerful empires; and we are so remote from
other nations, that we shall have all the leisure and opportunity we
can wish, to cut each other’s throats.
The Germanic corps might also be cited as an example in favor of the
position.
The United Provinces may be thought to be one against it. But the
family of the Stadtholders, whose authority is interwoven with the
whole Government, has been a strong link of union between them.
Their physical necessities, and the habits founded upon them, have
contributed to it.
Each province is too inconsiderable, by itself, to undertake any thing.
An analysis of their present constitutions, would show that they have
many ties which would not exist in ours; and that they are by no means
a proper model for us.
Our own experience should satisfy us. We have felt the difficulty of
drawing out the resources of the country, and inducing the States to
combine in equal exertions for the common cause.
The ill success of our last attempt is striking. Some have done a
great deal; others little, or scarcely any thing. The disputes about
boundaries, etc., testify how flattering a prospect we have of future
tranquillity, if we do not frame, in time, a confederacy capable
of deciding the differences, and compelling the obedience of the
respective members.
The Confederation, too, gives the power of the purse too entirely
to the State Legislatures. It should provide perpetual funds, in
the disposal of Congress, by a land tax, poll tax, or the like. All
imposts upon commerce ought to be laid by Congress, and appropriated
to their use. For, without certain revenues, a Government can have no
power. That power which holds the purse-strings absolutely, must rule.
This seems to be a medium which, without making Congress altogether
independent, will tend to give reality to its authority.
Another defect in our system, is want of method and energy in the
administration. This has partly resulted from the other defect; but
in a great degree from prejudice, and the want of a proper executive.
Congress have kept the power too much in their own hands, and have
meddled too much with details of every sort. Congress is, properly, a
deliberative corps; and it forgets itself when it attempts to play the
executive. It is impossible such a body, numerous as it is, constantly
fluctuating, can ever act with sufficient decision, or with system.
Two-thirds of the members, one half the time, cannot know what has
gone before them, or what connection the subject in hand has to what
has been transacted on former occasions. The members who have been
more permanent, will only give information that promotes the side they
espouse in the present case; and will as often mislead as enlighten.
The variety of business must distract; and the proneness of every
assembly to debate, must at all times delay.
Lately, Congress, convinced of these inconveniences, have gone into the
measure of appointing Boards. But this is, in my opinion, a bad plan.
A single man, in each department of the administration, would be
greatly preferable. It would give us a chance of more knowledge, more
activity, more responsibility, and, of course, more zeal and attention.
Boards partake of a part of the inconveniences of larger assemblies.
Their decisions are slower, their energy less, their responsibility
more diffused. They will not have the same abilities and knowledge as
an administration by single men. Men of the first pretensions will not
so readily engage in them; because they will be less conspicuous, of
less importance, have less opportunity of distinguishing themselves.
The members of Boards will take less pains to inform themselves and
arrive to eminence, because they have fewer motives to do it. All
these reasons conspire to give a preference to the plan of vesting the
great executive departments of the State in the hands of individuals.
As these men will be, of course, at all times under the direction of
Congress, we shall blend the advantages of a Monarchy and Republic in
our constitution.
A question has been made, whether single men could be found to
undertake these offices. I think they could; because there would be
then every thing to excite the ambition of candidates. But, in order
to this, Congress, by their manner of appointing them, and the line of
duty marked out, must show that they are in earnest in making these
officers, officers of real trust and importance.
I fear a little vanity has stood in the way of these arrangements, as
though they would lessen the importance of Congress, and leave them
nothing to do. But they would have precisely the same rights and powers
as heretofore, happily disencumbered of the detail. They would have to
inspect the conduct of their ministers, deliberate upon their plans,
originate others for the public good; only observing this rule: that
they ought to consult their ministers, and get all the information and
advice they could from them, before they entered into any new measures,
or made changes in the old.
A third defect is, the fluctuating constitution of our army. This
has been a pregnant source of evil: all our military misfortunes,
three-fourths of our civil embarrassments, are to be ascribed to it.
The General has so fully enumerated the mischiefs of it, in a letter of
the , to Congress, that I could only repeat what he has said, and
will therefore refer you to that letter.
The imperfect and unequal provision made for the army, is a fourth
defect, which you will find delineated in the same letter. Without a
speedy change, the army must dissolve. It is now a mob, rather than an
army; without clothing, without pay, without provision, without morals,
without discipline. We begin to hate the country for its neglect of
us. The country begin to hate us for our oppressions of them. Congress
have long been jealous of us. We have now lost all confidence in them,
and give the worst construction to all they do. Held together by the
slenderest ties, we are ripening for a dissolution.
The present mode of supplying the army, by State purchases, is not one
of the least considerable defects of our system. It is too precarious
a dependence; because the States will never be sufficiently impressed
with our necessities. Each will make its own ease a primary object; the
supply of the army a secondary one. The variety of channels through
which the business is transacted, will multiply the number of persons
employed, and the opportunities of embezzling public money. From the
popular spirit on which most of the Governments turn, the State agents
will be men of less character and ability: nor will there be so rigid
a responsibility among them, as there might easily be among those in
the employ of the Continent; of course, not so much diligence, care, or
economy. Very little of the money raised in the several States, will go
into the Continental treasury, on pretence, that it is all exhausted in
providing the quotas of supplies; and the public will be without funds
for the other demands of Government. The expense will be ultimately
much greater, and the advantages much smaller. We actually feel the
insufficiency of this plan; and have reason to dread, under it, a
ruinous extremity of want.
These are the principal defects, in the present system, that now occur
to me. There are many inferior ones, in the organization of particular
departments, and many errors of administration, which might be pointed
out; but the task would be troublesome and tedious: and if we had once
remedied those I have mentioned, the others would not be attended with
much difficulty.
I shall now propose the remedies, which appear to me applicable to
our circumstances, and necessary to extricate our affairs from their
present deplorable situation. The first step must be, to give Congress
powers competent to the public exigencies. This may happen in two ways:
one, by resuming and exercising the discretionary powers I suppose to
have been originally vested in them, for the safety of the States;
and resting their conduct on the candor of their countrymen, and
the necessity of the conjuncture: the other, by calling immediately
a Convention of all the States, with full authority to conclude
finally upon a General Confederation; stating to them, beforehand,
explicitly, the evils arising from a want of power in Congress, and
the impossibility of supporting the contest on its present footing;
that the delegates may come, possessed of proper sentiments, as well
as proper authority, to give efficacy to the meeting. Their commission
should include a right of vesting Congress with the whole, or a
proportion, of the unoccupied lands, to be employed for the purpose of
raising a revenue: reserving the jurisdiction to the States by whom
they are granted.
The first plan, I expect, will be thought too bold an expedient, by the
generality of Congress; and, indeed, their practice hitherto, has so
riveted the opinion of their want of power, that the success of this
experiment may very well be doubted.
I see no objection to the other mode, that has any weight, in
competition with the reasons for it. The Convention should assemble the
first of November next. The sooner the better. Our disorders are too
violent to admit of a common or lingering remedy. The reasons for which
I require them to be vested with plenipotentiary authority, are, that
the business may suffer no delay in the execution; and may, in reality,
come to effect. A Convention may agree upon a Confederation: the
States, individually, hardly ever will. We must have one at all events,
and a vigorous one, if we mean to succeed in the contest, and be happy
hereafter. As I said before, to engage the States to comply with this
mode, Congress ought to confess to them, plainly and unanimously, the
impracticability of supporting our affairs on the present footing, and
without a solid coercive union. I ask, that the Convention should have
a power of vesting the whole, or a part, of the unoccupied lands in
Congress; because it is necessary that body should have some property,
as a fund for the arrangements of finance; and I know of no other kind
that can be given them.
The Confederation, in my opinion, should give Congress complete
sovereignty; except as to that part of internal police, which relates
to the rights of property and life among individuals, and to raising
money by internal taxes. It is necessary that every thing belonging
to this, should be regulated by the State legislatures. Congress
should have complete sovereignty in all that relates to war, peace,
trade, finance; and to the management of foreign affairs; the right of
declaring war; of raising armies, officering, paying them, directing
their motions in every respect; of equipping fleets, and doing the same
with them; of building fortifications, arsenals, magazines, etc., etc.;
of making peace on such conditions as they think proper; of regulating
trade, determining with what countries it shall be carried on; granting
indulgencies; laying prohibitions on all the articles of export, or
import; imposing duties; granting bounties and premiums for raising,
exporting, or importing, and applying to their own use, the product of
these duties; only giving credit to the States on whom they are raised,
in the general account of revenues and expenses; instituting Admiralty
Courts, etc.; of coining money; establishing Banks on such terms, and
with such privileges, as they think proper; appropriating funds, and
doing whatever else relates to the operations of finance; transacting
every thing with foreign nations; making alliances, offensive and
defensive; treaties of commerce, etc., etc.
The Confederation should provide certain perpetual revenues,
productive, and easy of collection; a land tax, poll tax, or the like;
which, together with the duties on trade, and the unlocated lands,
would give Congress a substantial existence, and a stable foundation
for their schemes of finance. What more supplies were necessary, should
be occasionally demanded of the States, in the present mode of quotas.
The second step I would recommend, is, that Congress should instantly
appoint the following great officers of State. A Secretary for Foreign
Affairs, a President of War, a President of Marine, a Financier, a
President of Trade. Instead of this last, a Board of Trade may be
preferable, as the regulations of trade are slow and gradual; and
require prudence and experience more than other qualities; for which
Boards are very well adapted.
Congress should choose for these offices, men of the first abilities,
property, and character, in the Continent; and such as have had the
best opportunities of being acquainted with the several branches.
General Schuyler, whom you mentioned, would make an excellent President
of War; General M’Dougall a very good President of Marine. Mr. Robert
Morris would have many things in his favor for the department of
finance. He could, by his own personal influence, give great weight to
the measures he should adopt. I dare say men, equally capable, may be
found for the other departments.
I know not if it would not be a good plan to let the Financier be
President of the Board of Trade; but he should only have a casting
voice in determining questions there. There is a connection between
trade and finance, which ought to make the director of one acquainted
with the other; but the Financier should not direct the affairs of
trade, because, for the sake of acquiring reputation by increasing the
revenues, he might adopt measures that would depress trade. In what
relates to finance, he should be alone.
These officers should have nearly the same powers and functions as
those in France analogous to them: and each should be Chief in his
department; with subordinate Boards, composed of assistants, clerks,
etc., to execute his orders.
In my opinion, a plan of this kind would be of inconceivable utility to
our affairs: its benefits would be very speedily felt. It would give
new life and energy to the operations of Government. Business would be
conducted with dispatch, method, and system. A million of abuses, now
existing, would be corrected; and judicious plans would be formed and
executed for the public good.
Another step of immediate necessity, is, to recruit the army for the
war, or at least for three years. This must be done by a mode similar
to that which is practised in Sweden. There the inhabitants are thrown
into classes of sixteen; and when the sovereign wants men, each of
these classes must furnish one. They raise a fixed sum of money; and
if one of the class is willing to become a soldier, he receives the
money and offers himself a volunteer. If none is found to do this, a
draught is made; and he on whom the lot falls, receives the money, and
is obliged to serve.
The minds of the people are prepared for a thing of this kind. The
heavy bounties they have been obliged to pay for men to serve a few
months, must have disgusted them with this mode, and made them desirous
of another, that will, once for all, answer the public purposes, and
obviate a repetition of the demand. It ought, by all means, to be
attempted; and Congress should frame a general plan, and press the
execution upon the States.
When the Confederation comes to be framed, it ought to provide for this
by a fundamental law; and hereafter there would be no doubt of the
success.
But we cannot now wait for this. We want to replace the men whose times
of service will expire the first of January: for then, without this, we
shall have no army remaining; and the enemy may do what they please.
The General, in his letter already quoted, has assigned the most
substantial reasons for paying immediate attention to this point.
Congress should endeavor, both upon their credit in Europe, and
by every possible exertion in this country, to provide clothing
for their officers; and should abolish the whole system of State
supplies. The making good the depreciation of the currency, and all
other compensations to the army, should be immediately taken up by
Congress, and not left to the States. If they would have the accounts
of depreciation liquidated, and governmental certificates given for
what is due, in specie, or an equivalent to specie, it would give
satisfaction; appointing periodical settlements for future depreciation.
The placing the officers upon half-pay during life, would be a great
stroke of policy; and would give Congress a stronger tie upon them
than any thing else they can do. No man, that reflects a moment,
but will prefer a permanent provision of this kind to any temporary
compensation. Nor is it opposed to economy: the difference between
this, and between what has already been done, will be insignificant.
The benefit of it to the widows should be confined to those whose
husbands die during the war. As to the survivors, not more than one
half, on the usual calculation of men’s lives, will exceed the seven
years for which the half-pay is already established. Beside this,
whatever may be the visionary speculations of some men at this time,
we shall find it indispensable, after the war, to keep on foot a
considerable body of troops: and all the officers, retained for this
purpose, must be deducted out of the half-pay list. If any one will
take the pains to calculate the expense of these principles, I am
persuaded he will find the addition of expense, from the establishment
proposed, by no means a national object.
The advantages of securing the attachment of the army to Congress, and
binding them to the service by substantial ties, are immense. We should
then have discipline; an army in reality, as well as in name. Congress
would then have a solid basis of authority and consequence: for, to me,
it is an axiom, that in our constitution, an army is essential to the
American Union.
The providing of supplies, is the pivot of every thing else (though a
well-constituted army would, not in a small degree, conduce to this, by
giving consistency and weight to Government). There are four ways, all
of which must be united: A foreign loan; heavy pecuniary taxes; a tax
in kind; a Bank founded on public and private credit.
As to a foreign loan, I dare say Congress are doing every thing in
their power to obtain it. The most effectual way will be to tell
France, that, without it, we must make terms with Great Britain.
This must be done with plainness and firmness; but with respect, and
without petulance; not as a menace, but as a candid declaration of our
circumstances.
We need not fear to be deserted by France. Her interest and honor
are too deeply involved in our fate; and she can make no possible
compromise. She can assist us, if she is convinced it is absolutely
necessary; either by lending us, herself, or by becoming our surety,
or by influencing Spain. It has been to me astonishing, how any man
could have doubted, at any period of our affairs, of the necessity of
a foreign loan. It was self-evident, that we had not a fund of wealth
in this country capable of affording revenues equal to the expenses. We
must then create artificial revenues, or borrow. The first was done;
but it ought to have been foreseen that the expedient could not last,
and we should have provided in time for its failure.
Here was an error of Congress. I have good reason to believe, that
measures were not taken, in earnest, early enough to procure a loan
abroad. I give you my honor, that from our first outset, I thought as
I do now, and wished for a foreign loan; not only because I foresaw
it would be essential, but because I considered it as a tie upon the
nation from which it was derived, and as a mean to prop our cause in
Europe.
Concerning the necessity of heavy pecuniary taxes, I need say nothing;
as it is a point in which every body is agreed. Nor is there any
danger, that the product of any taxes, raised in this way, will
overburthen the people, or exceed the wants of the public. Indeed, if
all the paper in circulation were drawn annually into the treasury, it
would neither do one nor the other.
As to a tax in kind, the necessity of it results from this principle:
that the money in circulation is not a sufficient representative of
the productions of the country; and, consequently, no revenues, raised
from it as a medium, can be a competent representative of that part
of the products of the country which it is bound to contribute to
the support of the public. The public, therefore, to obtain its due,
or satisfy its just demands, and its wants, must call for a part of
those products themselves. This is done in all those countries which
are not commercial: in Russia, Prussia, Denmark, Sweden, etc., and is
peculiarly necessary in our case.
Congress, in calling for specific supplies, seem to have had this
in view; but their intention has not been answered. The States, in
general, have undertaken to furnish supplies by purchase; a mode, as I
have observed, attended with every inconvenience, and subverting the
principle on which the supplies were demanded; the insufficiency of our
circulating medium as a representative for the labor and commodities
of the country. It is therefore necessary that Congress should be more
explicit; should form the outlines of a plan for a tax in kind, and
recommend it to the States as a measure of absolute necessity.
The general idea I have of a plan, is, that a respectable man should
be appointed by the State, in each county, to collect the taxes
and form magazines; that Congress should have, in each State, an
officer to superintend the whole; and that the State collectors
should be subordinate and responsible to them. This Continental
Superintendent might be subject to the general direction of the
Quarter-Master-General, or not, as might be deemed best; but if not
subject to him, he should be obliged to make monthly returns to
the President at War, who should instruct him what proportion to
deliver to the Quarter-Master-General. It may be necessary, that the
Superintendents should sometimes have power to dispose of the articles
in their possession, on public account; for it would happen, that the
contributions, in places remote from the army, could not be transported
to the theatre of operations without too great expense; in which case
it would be eligible to dispose of them, and purchase, with the money
so raised, in the countries near the immediate scene of war.
I know the objections which may be raised to this plan; its tendency
to discourage industry, and the like. But necessity calls for it. We
cannot proceed without it: and less evils must give place to greater.
It is, besides, practised with success in other countries, and why not
in this? It may be said, the examples cited are from nations under
despotic governments; and that the same would not be practicable with
us. But I contend, where the public good is evidently the object, more
may be effected in governments like ours, than in any other. It has
been a constant remark, that free countries have ever paid the heaviest
taxes. The obedience of a free people to general laws, however hard
they bear, is ever more perfect than that of slaves to the arbitrary
will of a prince. To this may be added, that Sweden was always a free
government; and is so now, in a great degree, notwithstanding the late
revolution. How far it may be practicable to erect a Bank on the
joint credit of the public and of individuals, can only be certainly
determined by the experiment. But it is of so much importance, that the
experiment ought to be fully tried. When I saw the subscriptions going
on to the Bank established for supplying the army, I was in hopes it
was only the embryo of a more permanent and extensive establishment.
But I have reason to believe I shall be disappointed. It does not seem
to be at all conducted on the true principles of a Bank.
The Directors of it are purchasing with their Stock, instead of Bank
notes, as I expected: in consequence of which, it must turn out to be a
mere subscription of a particular sum of money for a particular purpose.
Paper credit never was long supported in any country, on a national
scale, where it was not founded on a joint basis of public and private
credit. An attempt to establish it on public credit alone, in France,
under the auspices of Mr. Law, had nearly ruined the kingdom. We have
seen the effects of it in America; and every successive experiment,
proves the futility of the attempt. Our new money is depreciating
almost as fast as the old; though it has, in some States, as real funds
as paper money ever had. The reason is, that the moneyed men have not
an immediate interest to uphold its credit. They may even, in many
ways, find it their interest to undermine it. The only certain manner
to obtain a permanent paper credit, is to engage the moneyed interest
immediately in it, by making them contribute the whole, or part of the
Stock, and giving them the whole, or part of the profits.
The invention of Banks, on the modern principle, originated in Venice.
There the public, and a Company of moneyed men, are mutually concerned.
The Bank of England unites public authority and faith with private
credit: and hence we see, what a vast fabric of paper credit is raised
on a visionary basis. Had it not been for this, England would never
have found sufficient funds to carry on her wars: but, with the help
of this, she has done, and is doing, wonders. The Bank of Amsterdam is
on a similar foundation. And why can we not have an American Bank?
Are our moneyed men less enlightened to their own interest, or less
enterprising in the pursuit? I believe the fault is in Government,
which does not exert itself to engage them in such a scheme. It is
true, the individuals in America are not very rich; but this would not
prevent their instituting a Bank; it would only prevent its being done
with such ample funds as in other countries. Have they not sufficient
confidence in the Government, and in the issue of the cause? Let
the Government endeavor to inspire that confidence, by adopting the
measures I have recommended, or others equivalent to them. Let it
exert itself to procure a solid Confederation; to establish a good
plan of executive administration; to form a permanent military force;
to obtain, at all events, a foreign loan. If these things were in a
train of vigorous execution, it would give a new spring to our affairs;
Government would recover its respectability, and individuals would
renounce their diffidence.
The object I should propose to myself, in the first instance, from
a Bank, would be an auxiliary mode of supplies; for which purpose,
contracts should be made, between Government and the Bank, on terms
liberal and advantageous to the latter. Every thing should be done,
in the first instance, to encourage the Bank. After it gets well
established, it will take care of itself; and Government may make the
best terms it can, for itself.
The first step to establishing the Bank, will be to engage a number of
moneyed men of influence to relish the project, and make it a business.
The subscribers to that lately established, are the fittest persons
that can be found; and their plan may be interwoven.
The outlines of my plan would be, to open subscriptions in all the
States; for the Stock, which we will suppose to be one million of
pounds. Real property of every kind, as well as specie, should be
deemed good Stock; but at least a fourth part of the subscription
should be in specie, or plate. There should be one great Company, in
three divisions: in Virginia, Philadelphia, and at Boston; or two at
Philadelphia and Boston. The Bank should have a right to issue Bank
notes, bearing two per cent. interest, for the whole of their stock;
but not to exceed it. These notes may be payable every three months, or
oftener: and the faith of government must be pledged for the support of
the Bank. It must therefore have a right, from time to time, to inspect
its operations, and must appoint inspectors for the purpose.
The advantages of the Bank may consist in this: in the profits of
the contracts made with Government, which should bear interest to
be annually paid in specie; in the loan of money at interest, say
six per cent.; in purchasing lives by annuities, as practised in
England, etc. The benefit resulting to the Company, is evident from
the consideration, that they may employ, in circulation, a great
deal more money than they have specie in Stock, on the credit of the
real property which they will have in other use. This money will be
employed, either in fulfilling their contracts with the public, by
which also they will gain a profit; or in loans at an advantageous
interest, or in annuities.
The Bank may be allowed to purchase plate and bullion, and coin money;
allowing Government a part of the profit. I make the Bank notes bear
interest, to obtain a readier currency, and to induce the holders to
prefer them to specie, to prevent too great a run upon the Bank, at any
time, beyond its ability to pay.
If Government can obtain a foreign loan, it should lend to the Bank,
on easy terms, to extend its influence, and facilitate a compliance
with its engagements. If Government could engage the States to raise
a sum of money in specie, to be deposited in Bank in the same manner,
it would be of the greatest consequence. If Government could prevail
on the enthusiasm of the people, to make a contribution in plate for
the same purpose, it would be a master-stroke. Things of this kind
sometimes succeed in popular contests; and, if undertaken with address,
I should not despair of its success: but I should not be sanguine.
The Bank may be instituted for a term of years by way of trial; and the
particular privilege of coining money, be for a term still shorter.
A temporary transfer of it to a particular Company, can have no
inconvenience, as the Government are in no condition to improve this
resource; nor could it, in our circumstances, be an object to them;
though, with the industry of a knot of individuals, it might be a
valuable one to them. A Bank of this kind, even in its commencement,
would answer the most valuable purposes to Government and to the
proprietors: in its progress, the advantages will exceed calculation.
It will promote commerce, by furnishing a more extensive medium, which
we greatly want, in our circumstances. I mean a more extensive valuable
medium. We have an enormous nominal one at this time, but it is only a
name.
In the present unsettled state of things in this country, we can hardly
draw inferences from what has happened in others; otherwise I should be
certain of the success of this scheme: but I think it has enough in its
favor to be worthy of trial.
I have only skimmed the surface of the different subjects I have
introduced. Should the plans recommended come into contemplation, in
earnest, and you desire my further thoughts, I will endeavor to give
them more form and particularity. I am persuaded a solid Confederation,
a permanent army, a reasonable prospect of subsisting it, would give us
treble consideration in Europe, and produce a peace this winter.
If a Convention is called, the minds of all the States, and the people,
ought to be prepared to receive its determinations by sensible and
popular writings, which should conform to the views of Congress. There
are epochs in human affairs when _novelty_ even is useful. If a general
opinion prevails that the old way is bad, whether true or false, and
this obstructs or relaxes the operations of the public service, a
change is necessary, if it be but for the sake of change. This is
exactly the case now. ’Tis a universal sentiment, that our present
system is a bad one, and that things do not go right on this account.
The measure of a Convention would revive the hopes of the people,
and give a new direction to their passions, which may be improved in
carrying points of substantial utility. The eastern States have already
pointed out this mode to Congress: they ought to take the hint and
anticipate the others.
And, in future, my dear sir, two things let me recommend, as
fundamental rules for the conduct of Congress: to attach the army to
them by every motive; to maintain an air of authority (not domineering)
in all their measures with the States. The manner in which a thing is
done, has more influence than is commonly imagined. Men are governed
by opinion: this opinion is as much influenced by appearances as by
realities. If a Government appears to be confident of its own powers,
it is the surest way to inspire the same confidence in others. If it is
diffident, it may be certain there will be a still greater diffidence
in others; and that its authority will not only be distrusted,
controverted, but contemned.
I wish, too, Congress would always consider, that a kindness
consists as much in the manner as in the thing. The best things done
hesitatingly, and with an ill grace, lose their effect, and produce
disgust rather than satisfaction or gratitude. In what Congress have at
any time done for the army, they have commonly been too late. They have
seemed to yield to importunity, rather than to sentiments of justice or
to a regard to the accommodation of their troops. An attention to this
idea, is of more importance than it may be thought. I, who have seen
all the workings and progress of the present discontents, am convinced,
that a want of this has not been among the most inconsiderable causes.
You will perceive, my dear sir, this letter is hastily written, and
with a confidential freedom: not as to a member of Congress, whose
feelings may be sore at the prevailing clamors; but as to a friend, who
is in a situation to remedy public disorders; who wishes for nothing so
much as truth; and who is desirous of information, even from those less
capable of judging than himself. I have not even time to correct and
copy; and only enough to add, that I am, very truly and affectionately,
dear sir,
Your most obedient servant,
A. Hamilton.