PSCI 110 – Summary Paper #6
Glenn Booker 12/4/2012
Federalist Paper #11 (Hamilton, A., Madison, J., & Jay, J. (1961) The Federalist Papers. New York; Signet Classics.) was written by Alexander Hamilton to discuss domestic and foreign commercial interactions of the Union, and the Navy. The topics are closely connected because America has shown eagerness to carry out commercial transactions over the oceans, making the maritime countries of Europe nervous. Those with colonies in America are also nervous because the union of States could threaten their marine power, therefore they wish to encourage divisions among the States to weaken them. In our defense, we could create prohibitory regulations to force foreign powers to bid against each other for the US market, or else we would block them from our ports and the market generated by our three million people. In response, a blocked country such as Great Britain could use an intermediary such as the Dutch to access the US market, but in doing so would lose a substantial amount of profit and raise the price of British goods in this country. A better solution for all parties would be for Great Britain to allow us access to the West India market and similar markets.
Creating a federal navy would help our standing with European nations, and give us a stronger presence in dealing with the West Indies. Having a military presence in the West Indies will give us stronger bargaining rights for commercial privileges by allowing our neutrality in that region to be up for sale. In contrast if we are seen as weak militarily, then other countries will have no respect for us and could attack us as whim suits. We need to be strong in order to be allowed the luxury of being neutral in the region. That strength will also allow us to confound attempts by European countries to restrain our growth. If we were weak then other nations could dictate the terms of our existence and restrict us to passive commerce, wherein we could only get minimal prices for our products and the other profits from our work would be given to our enemies. This would stifle the American spirit of enterprise, leading to poverty and disgrace.
The rights to American fisheries, the Mississippi river, and navigable lakes are of great importance to the country. Weakness in the United States would lead to loss of these rights to Spain, Great Britain, and France, who would all be happy to lose us as a competitor since we currently can undersell them in their own markets.
To support this competition, we need a strong national navy. The southern states contribute tar, pitch, turpentine, and wood for good ships; southern and middle states have iron, and good seamen come from the North. A key job for the navy is to protect maritime commerce interests. Furthermore, trade among the States will support both domestic and foreign markets. Access to a wide range of products will increase their value since markets fluctuate in demand, and crops fail sometimes, so variety in products helps both of these dimensions. The states could still trade without being united, but barriers between states would hinder it; “unity of commercial … interests can only result from a unity of government.” (p. 85)
The world is politically divided into Europe, Asia, Africa, and America. Of these, Europe is clearly the strongest of all. Hamilton prophetically makes the case that unifying the states will finally give a contender to European dominance over the world.
Federalist Paper #12, also by Alexander Hamilton, discusses how creating the Union will increase revenue. National wealth is fed by commerce, so the latter is a key political concern. Greed motivates industry and men. Agriculture and commerce have interests that are intermixed. Land values are connected to commerce. Tax revenue depends on the amount of money in circulation and how fluidly it circulates. Commerce helps both of these tax revenue factors increase. Germany boasts great land and precious metal resources, but in the absence of strong commerce has little revenue.
Direct taxation has been poor at generating revenue. Even Britain gets little from direct taxes and relies a lot on import taxes. America will have to rely on excise taxes for a narrow range of products. Since commerce will benefit from the creation of the Union, it will also bear the brunt of providing revenue for it (her?) through duties. The states have many routes through which interstate duties could be avoided. In contrast, France has 20,000 patrols who guard against dealers in contraband; an example we do not wish to emulate in a free country. We want to unify the states and monitor a common border (the Atlantic Ocean) against vessels to tax imports, a fairly easy objective compared to France. This would make the states cooperate with each other and not raise tariffs against each other. Our geography (being distant from all trading partners, unlike the countries of Europe) gives us great security against contraband from foreign countries. Hence a national government could impose import taxes much more easily than individual states could. State import taxes are about three percent, and could triple without seriously affecting consumer demand.
A nation without revenue becomes a province. Excise taxes are ineffective in an agricultural country. Personal estate taxes are taxable only through consumption. Those who own land are easy targets for revenue.
Federalist Paper #13 is where Alexander Hamilton discusses how the union leads to more efficient government. He argues that economies of scale make a single national government more efficient than several groups of confederacies, or worse, all thirteen states becoming separate sovereign powers. Some proposed three confederacies with four northern states, four middle states, and five southern states. Each confederacy would need as much government structure as the united states, hence each would be less efficient. Civil power can be spread out in a large country through careful arrangement of subordinate institutions.
Hamilton discusses how the states could form three confederacies, e.g. the four eastern states would join, New York and New Jersey might join the northern states, and Pennsylvania would be torn between north and south but probably lean to the north because of business interests. The southern states would discourage marine navigation, giving each state the right to control transportation and purchase of commodities.
In brief, the unified nation would be cheaper to run than any possible combination of smaller groups of states, because of the lower cost of the government infrastructure, guarding against interstate trade, and military establishments.
In conclusion, Federalist Paper #11 makes the case that the unified states, in conjunction with a strong federal navy, would provide much more income from marine commerce, support the American spirit of enterprise, and earn us the right to be neutral in foreign affairs if we choose. The variety of products from across the country would give us a competitive advantage worldwide, and make it easier to make ships for the navy.
Federalist Paper #12 explains how a unified government would increase revenue through strong commerce, based on healthy and diverse agriculture and growing land values. We want to avoid interstate duties, especially since they’re easy to avoid, so import tariffs will provide much of the income needed for the federal government.
Finally, Federalist Paper #13 explains how a single national government is more efficient than breaking the colonies into any larger number of confederacies, due to economies of scale of the government, reduced cost from avoiding interstate trade tariffs, and reduced defense costs.
This trio of papers by Alexander Hamilton therefore give a business rationale for approving the proposed Constitution based on increased commerce, improved standing among nations through a strong navy (force projection), revenue through easily controlled import tariffs, and improved efficiency in government compared to creating many confederacies.