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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 3: M Joe Wisenthal and I'm Tracy Alloway.

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Speaker 2: Tracy, Uh, did you ever see the musical Hamilton?

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Speaker 4: No?

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Speaker 3: I didn't. Can I just say listeners? Joe has already

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Speaker 3: asked me this question in preparation for the podcast, and

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Speaker 3: he actually did a really amazing summary of all of Hamilton.

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Speaker 3: You didn't sing it or wrap it, which I think

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Speaker 3: you should have done, but it was pretty good.

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Speaker 2: Yeah, I mean, look, I think can I just say,

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Speaker 2: like I actually did like it at the time that

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Speaker 2: I saw it, and I still like, if I'm in

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Speaker 2: the car with my kids, like it's not bad to

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Speaker 2: put on. I feel like liking Hamilton. It's a little

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Speaker 2: cringe now. It's very like, you know.

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Speaker 3: Very stream for you.

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Speaker 2: Yeah, you know, it's like you're a little twenty tens.

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Speaker 2: It's a little bit like we sort of moved on,

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Speaker 2: but like, it is an entertaining show. It's not the

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Speaker 2: worst as far as musicals go, many of which are

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Speaker 2: very bad in my opinion, it's not the worst one.

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Speaker 3: It definitely kind of vaulted Hamilton. It feels weird to

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Speaker 3: say this now, but I guess it vaulted him into

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Speaker 3: the public consciousness. But it's interesting because as far as

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Speaker 3: I understand, and here I have to confess that I

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Speaker 3: never really did US history when I was in high school.

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Speaker 3: I was in Austria and then Japan. So this is

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Speaker 3: a big blind spot for me. But when I think

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Speaker 3: of Hamilton now, I think of like the federalist papers,

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Speaker 3: maybe the financial system. But it turns out there's this

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Speaker 3: huge body of Hamiltonian thought that is all about the

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Speaker 3: real economy and I guess manufacturing, industrial policy development.

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Speaker 2: Yeah, and this is not at all in I haven't

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Speaker 2: read the Wrong Churnall biography, but it's certainly not in

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Speaker 2: the US. And basically the play or the musical like

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Speaker 2: sort of you know, he has these rat battles with

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Speaker 2: Thomas Jefferson.

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Speaker 3: And Joe summarize the rap battles.

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Speaker 2: And you know, obviously Thomas Jefferson is a defender of

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Speaker 2: the system of slavery. And what's important is like doing

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Speaker 2: the planting and all you guys do up north is

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Speaker 2: like finance, but we're supposed to be on the side

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Speaker 2: of finance. Is the audience in this and set it,

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Speaker 2: you know, first Secretary of the Treasury. But as you

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Speaker 2: point out, there is much more to Hamilton than just

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Speaker 2: this sort of like dichotomy of the slave owning plantation

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Speaker 2: owners in the South and then those of us up

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Speaker 2: in New York City who just do numbers and finance.

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Speaker 3: Yeah. And I guess the other thing to point out is,

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Speaker 3: obviously industrial policy is having a moment since the pandemic,

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Speaker 3: and we've seen various steps and projects from the Biden administration,

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Speaker 3: including the IRA and things like that. So it's kind

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Speaker 3: of interesting to go back in time and consider the

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Speaker 3: American historical HAMILTONI in roots of progressive industrial policy.

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Speaker 2: Well, and this comes out every time we do an

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Speaker 2: episode like on the Chips Act or the Inflational Reduction Act,

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Speaker 2: et cetera. Someone says, well, you know, industrial policy is

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Speaker 2: not this new thing in America, and as if we

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Speaker 2: did this in the past, and they start to leave

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Speaker 2: it there. But I think it's a good idea to

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Speaker 2: like actually start exploring some of those historical roots of

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Speaker 2: the role that the federal government can and has played

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Speaker 2: in the past in channeling industries, channeling capital, channeling real

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Speaker 2: physical resources, promoting domestic manufacturing. Because everyone says Oh, we

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Speaker 2: always did this in the past, but we sort of

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Speaker 2: have to talk more about what that past looked like.

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Speaker 3: Yes, so this is the episode for anyone who has

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Speaker 3: ever said that statement. The US has a long history

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Speaker 3: of this industrial policy.

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Speaker 2: We're going to go back to the very beginning. Well,

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Speaker 2: I'm really excited about our guests. Like I said, I

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Speaker 2: never read the wrong Turnout Biography, but I did read

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Speaker 2: radical Hamilton Economic Lessons from a misunderstood founder. The author,

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Speaker 2: Christian Parenti, is joining us. He is a professor in

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Speaker 2: the John Jay Economics program that housed within the Quney

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Speaker 2: System of New York City. So, Christian Prenti, thank you

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Speaker 2: so much for coming on odd Lots.

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Speaker 5: Thank you very much for inviting me.

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Speaker 2: I loved your book, But did you want have you?

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Speaker 2: Did you watch the musical?

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Speaker 5: I did not watch the musical. I don't really like musicals,

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Speaker 5: so I.

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Speaker 2: Have a complicated view towards musicals myself, so I totally

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Speaker 2: get that. Why did you think another Hamilton book was necessary?

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Speaker 5: Well, I did read the Churnout Biography, and while reading it,

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Speaker 5: there's a mention of the report on the subject of manufacturers,

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Speaker 5: which is Hamilton's magnum opus in many ways, and it

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Speaker 5: is an argument for in a blueprint for planning to

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Speaker 5: drive a transition from an agrarian based economy to a

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Speaker 5: manufacturing based economy. And that was very interesting to me,

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Speaker 5: and I tried to find more on it, and there

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Speaker 5: really wasn't that much in the literature. So this book

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Speaker 5: actually began by mistake. Almost The idea was to republish

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Speaker 5: the report on the subjects of Manufacturers, and I would

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Speaker 5: do an introduction, and then the introduction turned into a

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Speaker 5: book long away. It was like, oh, we'll have it

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Speaker 5: as at appendix, but that just you know, it became

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Speaker 5: an effort to fill in the gap around Hamilton's thinking

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Speaker 5: about the real economy and about what we would call

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Speaker 5: industrialization or industrial policy, but what they called manufacturers.

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Speaker 3: Why do you think that Hamilton's legacy is so much

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Speaker 3: more focused, I suppose on the federalist papers on maybe

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Speaker 3: building the financial system versus the paper that you just mentioned,

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Speaker 3: Because again I will confess that before I read the book,

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Speaker 3: I had never heard of that particular piece of Hamilton writing.

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Speaker 5: Part of it has to do with the fact that

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Speaker 5: the report on manufacturers was controversial from the beginning, and

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Speaker 5: there was pushback from the beginning, and there has been

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Speaker 5: pushback against the kinds of policies that it advocated all

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Speaker 5: the way through, so it just sort of dropped away.

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Speaker 5: And there is a mythology about American capitalism which tries

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Speaker 5: to minimize the role of government in that story. And

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Speaker 5: so that's why we have previously hadn't thought sufficiently about

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Speaker 5: the Report on the Subject of Manufacturers, because it clashes

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Speaker 5: with prevailing notions about how capitalism works, which is that

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Speaker 5: it's all about free enterprise and entrepreneurs and free trade.

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Speaker 5: And in fact, what the story of Hamilton's Report on

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Speaker 5: the Subject of Manufacturers shows, and I think you can

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Speaker 5: see it throughout world history, is that successful capitalist industrialization

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Speaker 5: pretty much always involves an activist state that intervenes, gets

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Speaker 5: prices wrong, and helps drive an economy towards manufacturing. In fact,

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Speaker 5: in the beginning of the Report on the Subject of Manufacturers,

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Speaker 5: Hamilton launches a critique of Adam Smith. Hamilton supposedly wrote

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Speaker 5: a whole treatment of Smith's Wealth of Nations, but that's

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Speaker 5: been lost to us. But that's why. And I studied

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Speaker 5: with Alice Amsden, who's passed away, who is an economist

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Speaker 5: at the New School many many years ago, and she

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Speaker 5: wrote the definitive book, or sort of the first big

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Speaker 5: book on Korean industrialization. It was all about this, and

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Speaker 5: so that really interested me and the similarity, you know,

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Speaker 5: the fact that the US at the beginning of the

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Speaker 5: story of American capitalism is the story of a developmentalist state,

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Speaker 5: and I've been interested in those questions as they appear

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Speaker 5: in the global South.

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Speaker 3: It's funny you mentioned Korea's development because we did an

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Speaker 3: episode Joe. I don't know if you remember many many

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Speaker 3: years ago about the development of the k pop and

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Speaker 3: entertainment industry in South Korea and how much of it

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Speaker 3: was actually driven by a conscious government effort. Where a

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Speaker 3: lot of people think even this kind of creative industry

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Speaker 3: develops naturally, but in the case of South Korea, there

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Speaker 3: was a lot of support.

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Speaker 2: I actually have Elis Anderson's book Escaped from Empire to

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Speaker 2: Developing World's Journey through Heaven and Hell on my bookshelf.

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Speaker 5: I need to read that book there.

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Speaker 2: What were the economic conditions in the US at the

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Speaker 2: time or I guess was it the US in the

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Speaker 2: colonies at the time that Hamilton was looking at that.

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Speaker 2: He's a okay, we need to talk about a government

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Speaker 2: role in manufacturing.

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Speaker 5: Yeah, to some extent, this gets into why the revolution occurred,

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Speaker 5: and British mercantilism was putting very explicit and onerous restrictions

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Speaker 5: on economic development in the United States. For example, hat

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Speaker 5: makers in the US couldn't have more than two apprentices. Right.

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Speaker 5: There was a robust fur trade and beaver pelts were

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Speaker 5: much in demand in Europe for making hats, and the

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Speaker 5: US had a nascent hat industry and British economic policies

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Speaker 5: made it illegal for it to develop as much as

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Speaker 5: it could. Similarly, around iron smelting, iron could only be

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Speaker 5: processed to a certain level. So there were very real

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Speaker 5: restrictions on the development of manufacturers because Britain held these

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Speaker 5: thirteen colonies as colonies, and so they wanted these colonies

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Speaker 5: as a market. So that's one of the reasons actually

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Speaker 5: that northern kind of nascent manufacturing interests gravitate towards revolutionary

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Speaker 5: cause there's other there's all sorts of interests, right, I mean,

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Speaker 5: it's like the rhetoric of freedom is appealing to the

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Speaker 5: working classes in the slaves South. There was fear that

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Speaker 5: the British Empire was going to restrict slavery, because there

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Speaker 5: is the Summerset case in seventeen seventy three. I think

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Speaker 5: it is in which a planter, a British planter in Jamaica,

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Speaker 5: comes back to England with an enslaved person and that

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Speaker 5: person gets in touch with abolitionists who say, you know,

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Speaker 5: slavery is illegal in England, even though though it's legal

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Speaker 5: in the colonies. This goes all the way through the

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Speaker 5: English court system and it is ruled that yes, you

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Speaker 5: may be enslaved in Jamaica, but as soon as you

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Speaker 5: set foot in England you are free. This sent shockwaves

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Speaker 5: of fear throughout the elites of the South. One of

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Speaker 5: the richest people in the British Empire was a South

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Speaker 5: Carolina slave owner, Henry Lawrence, who later is actually President

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Speaker 5: of the Continental Congress, and he felt threatened like, well,

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Speaker 5: now I can't travel to England with my chattel, slavery,

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Speaker 5: my servants. What's next. Maybe they're going to come after

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Speaker 5: slavery entirely. Because there was a movement also in the

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Speaker 5: northern colonies against slavery. So there's a whole variety of

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Speaker 5: causes that coalesce and drive many of the colonists. Though

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Speaker 5: not all to embrace revolution and independence. The economic conditions,

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Speaker 5: getting back to your question, were pretty underdeveloped. Agriculture was

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Speaker 5: predominant in the south. The economy was dominated by large planters.

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Speaker 5: Most white Southerners didn't own slaves, but almost half did

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Speaker 5: own slaves, but most slaves were owned by a small

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Speaker 5: group of men who owned many, many slaves and much land.

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Speaker 5: So that was the southern economy. And in the north

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Speaker 5: you had small family farms, and there'd almost been a

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Speaker 5: kind of repeasantization in that many of these farms were

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Speaker 5: quite self sufficient and had only a tenuous connection to

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Speaker 5: the cache economy of war. The revolutionary war will actually

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Speaker 5: drive many of those northern tier farmers into the cash

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Speaker 5: economy because they have to pay taxes and they have

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Speaker 5: to come up with cash. So and in those northern

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Speaker 5: family farms there were small craft productions. There was home

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Speaker 5: based productions generally, you know, like building. Along with your

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Speaker 5: self sufficient farm, you maybe produce a little extra dairy

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Speaker 5: for the market, but then also in the winter you

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Speaker 5: create barrel staves or shoes or something like that. So

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Speaker 5: there was this workshop based manufacturing. There are no American banks,

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Speaker 5: and the thirteen colonies are all independent there's no transportation network,

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Speaker 5: so after the war it's an absolute mess. And Hamilton's

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Speaker 5: concern is first and foremost national security, because we're going

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Speaker 5: to be reconquered and recolonized if we don't have a

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Speaker 5: strong army and navy and state. And the only way

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Speaker 5: we can afford that is if we transition as quickly

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Speaker 5: as possible to a manufacturing based economy, and that's not

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Speaker 5: going to happen by following Adam Smith and letting the

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Speaker 5: market do his think. We need to actually have a

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Speaker 5: plan that can help push this transition. At first, Hamilton

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Speaker 5: is not particularly concerned with economics. He's writing about democracy

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Speaker 5: and all that. When fighting begins, he organizes an artillery

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Speaker 5: company and he serves for about a year on the

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Speaker 5: front lines. And because he's so brilliant and good at

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Speaker 5: what he does, he's receiving these offers from generals to

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Speaker 5: join their staffs, and he holds out until Washington offers

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Speaker 5: him a place on his quote unquote family with just

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Speaker 5: to say, his staff. So then Hamilton transitions to the

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Speaker 5: role of a kind of military planner, and he has

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Speaker 5: an overall view of the war, and what he sees

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Speaker 5: is one total dysfunction at the level of politics because

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Speaker 5: the colonies are not properly united under the Articles of Confederation,

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Speaker 5: which is just a loose security pact, and each colony

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Speaker 5: is essentially a sovereign state, and so there's a continental

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Speaker 5: Army which answers to Congress, but there are also these

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Speaker 5: malicious state militias, and so states would send aid to

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Speaker 5: the Continental Army and put provisions on say like this

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Speaker 5: clothing is for the Pennsylvania line, you know, please don't

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Speaker 5: distribute this weaponry to whatever the New England line, this

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Speaker 5: kind of stuff. Congress had no means of taxing, so

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Speaker 5: Hamilton is viewing all of this from this kind of

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Speaker 5: archimedean bird'seye view on Washington's staff.

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Speaker 3: So one of the things that comes through in your book,

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Speaker 3: and again like, I don't know much about this, but

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Speaker 3: I didn't realize how much of a basket case the

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Speaker 3: Revolutionary War kind of was, and how disorganized in some

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Speaker 3: respects and just terrible physical conditions. So you write about how,

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Speaker 3: you know, there were soldiers who rebelled because they weren't

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Speaker 3: getting paid because there were no taxes, so the federal government,

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Speaker 3: which didn't really exist, could not pay them, and also

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Speaker 3: how soldiers had to be let loose in the forests

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Speaker 3: to like slaughter wild pigs because they didn't have enough

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Speaker 3: food supply and things like that. It very much seems

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Speaker 3: to highlight the idea or the importance of the role

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Speaker 3: of the supply chain and physical real goods in military conflict.

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Speaker 3: And I guess by extension in government.

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Speaker 5: Absolutely and I think many of US labor under a

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Speaker 5: misapprehension that the Revolutionary War was a guerrilla war and

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Speaker 5: that the patriots were living off the land and you know,

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Speaker 5: taking potshots of the.

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Speaker 2: British from I was an elementary school ar.

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Speaker 5: Yeah, that's how I learned it. But actually it was

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Speaker 5: a conventional war, which is say, very expensive, and most

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Speaker 5: of the conflicts were forceaw on force with these long

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Speaker 5: supply chains. You know, everything had to be provided to

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Speaker 5: these armies. Salt, for example, somethings as mundane AsSalt. This

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Speaker 5: was extremely important. As one old article put it said,

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Speaker 5: salt was as important to the Revolutionary War armies as

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Speaker 5: gasoline was to the armies of nineteen forty five. If

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Speaker 5: you didn't have salt for the animals, they would very

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Speaker 5: quickly get weak and couldn't function. You had to cure

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Speaker 5: food with salt, so salt was essential. There really wasn't

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Speaker 5: a salt industry in the colonies because one of the

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Speaker 5: few things that the British Navigation Acts, one of the

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Speaker 5: weird little kind of wrinkles in them, was that they

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Speaker 5: allowed ships coming from Europe to fill their hulls for

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Speaker 5: ballast with French salt. So there was this flow of

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Speaker 5: relatively cheap, high quality salt into the colonies. So the

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Speaker 5: colonies didn't actually have much of a industry. So during

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Speaker 5: the war that's cut off, so they have to start

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Speaker 5: developing AsSalt industry. They've got these, like you know, anemic

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Speaker 5: little foundries, one down in Virginia, some up in Pennsylvania.

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Speaker 5: They have to start building all this up as the

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Speaker 5: war is going on. And even though there were these

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Speaker 5: long supply lines, things were so harsh that there was

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Speaker 5: also what they called the Grand Forage that soldiers would

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Speaker 5: go out to requisition and nominally purchase supplies. But they're

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Speaker 5: doing this with a series of increasingly worthless scripts. At

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Speaker 5: first you have the Continental dollar, which the British are

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Speaker 5: also counterfeiting, and then they just overproduce Continental dollars so

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Speaker 5: that they're worthless. Then they create this IOU system called

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Speaker 5: Piris's notes, which turned into another kind of paper currency.

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Speaker 5: But these requisition squads would go out into the countryside

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Speaker 5: and say to farmers like, well, you know, if you

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Speaker 5: support the cause, we're here to buy with this worthless money,

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Speaker 5: you know whatever, ten percent of your produce, your half

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Speaker 5: your chickens, whatever. If you refused, and they said, well,

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Speaker 5: you're a loyalist, you're against our call, so we're just

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Speaker 5: going to confiscate everything. So they're pushing all of this

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Speaker 5: paper currency, which during the war leads to inflation, and

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Speaker 5: then there's a big crash after the war. So it's

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Speaker 5: totally chaotic, and the scale of some of these operations

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Speaker 5: is nuts. There was a campaign in seventeen seventy nine

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Speaker 5: against the Iroquois, who had mostly sided with the British,

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Speaker 5: and it involved damming a river, building a road to

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Speaker 5: the river, building a fleet of boats to go down

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Speaker 5: the river, and then blowing this dam and riding this

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Speaker 5: wave of water down river to then launch on this

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Speaker 5: expedition against the Iroquois. So capital intensive, labor intensive, big

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Speaker 5: economic endeavor.

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Speaker 2: So one of the things that's interesting these days is,

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Speaker 2: you know, people have talked for years in the US,

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Speaker 2: like we need to revive domestic manufacturing. It's is one

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Speaker 2: of those things that gets said what seems to help

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Speaker 2: get the voats over the line to actually do endeavors,

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Speaker 2: even when it comes to something like climate is the

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Speaker 2: idea of existential national security threat. We have to compete

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Speaker 2: against China, right, Like, that's how it's framed. And when

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Speaker 2: there's the rivalry with China as the framing, then that

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Speaker 2: opens the door for vote. And it sounds like, and

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Speaker 2: you talk about this in your book that ultimately it

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Speaker 2: was the same that that at the end, it's like,

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Speaker 2: there is no sovereign US without manufacturing. Yes, that we

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Speaker 2: can't maintain our independence even if we win it without manufacturing.

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Speaker 5: That was Hamilton's insight that this independence would be totally

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Speaker 5: illusory if it was not backed up with material force,

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Speaker 5: and that material force was going to be expensive, and

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Speaker 5: that required an economic transformation, an industrialization program. But they

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Speaker 5: didn't use that word. They talked about manufacturers. So that's

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Speaker 5: what he sets out to do. And amidst the war,

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Speaker 5: he has a kind of what seems to be a

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Speaker 5: mental breakdown. He goes in't this nervous fever during the

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Speaker 5: winter when they're all at Valley Forge and there's a

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Speaker 5: number of generals going rogue and he's sent up to like,

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Speaker 5: you know, reimpose order, and then he has this crazy breakdown,

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Speaker 5: and after that his writing is really different. He begins

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Speaker 5: a series of letters to elites outlining the need for

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Speaker 5: constitutional convention and an economic plan. And so the rest

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Speaker 5: of his life is that. And it should be said

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Speaker 5: that the war ends in seventeen eighty three. There are

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Speaker 5: rebellions like increasing in the ranks, mutinies, culminating with a

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Speaker 5: mutiny by officers in Newburgh, New York, which is often

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Speaker 5: misrepresented as if these guys are all greedy and trying

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Speaker 5: to you know, you know, have some crupdetas, but they

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Speaker 5: are suffering like their men. I mean, they have boots

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Speaker 5: that some of their men are shoeless, but it's like

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Speaker 5: they had really suffered and they were demanding from Congress

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Speaker 5: some resources. After the war beginning in you know, the

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Speaker 5: fighting kind of winds down around seventeen eighty, but the

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Speaker 5: Treaty of Paris isn't until seventeen eighty three, and there

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Speaker 5: then begins was called the Critical Peer, which is a

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Speaker 5: period in which the United States is still governed by

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Speaker 5: the Articles of Confederation, and all sorts of serious economic

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Speaker 5: and political and even military problems begin to happen. There's

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Speaker 5: a trade war between New Jersey and New York, and

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Speaker 5: New York and Connecticut. Maryland and Virginia are having similar

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Speaker 5: trade wars. On the Chesapeak, there's conflict with Maroon communities

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Speaker 5: self emancipated formally enslaved people, some of whom had served

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Speaker 5: with the British Army, who have these autonomous communities. On

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Speaker 5: the board of South Carolina and Georgia, there's increasing conflict

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Speaker 5: with Native Americans. In what's now Kentucky. There's conflict between

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Speaker 5: groups of white settlers and their speculative land backers, like

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Speaker 5: these two competing factions in the Wyoming Valley of Pennsylvania,

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Speaker 5: which turns into a shooting war in which people are

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Speaker 5: being killed and homes are burned. And then all of

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Speaker 5: this culminates with Shay's rebellion in seventeen eighty six in

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Speaker 5: western Massachusetts. And all of these states had gone heavily

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Speaker 5: into debt during the war, and many of those IOUs

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Speaker 5: that I mentioned earlier were bought up at pennies on

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Speaker 5: the dollar used to be their face value by speculators.

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Speaker 5: And in Massachusetts, thirty five people owned almost half of

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Speaker 5: all of the state's debt, and Congress is making these

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Speaker 5: requests and seventeen eighty four there's this massive requisition request,

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Speaker 5: which by seventeen eighty six is really hurting people on

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Speaker 5: the ground. And so this request for a tax take

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Speaker 5: from Congress is part of what's pushing Massachusetts to shake

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Speaker 5: down its farmers. There's also, interestingly, a series of volcanic eruptions,

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Speaker 5: one in Iceland and one in Japan.

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Speaker 3: Which affected the growing season.

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Speaker 5: Right. Yeah, there's a really really cold summers and floods

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Speaker 5: knocking out crops and barns. So all this is happening. Yeah,

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Speaker 5: And so amidst this, through this massive wave of foreclosures

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Speaker 5: in Massachusetts and also in New Hampshire and other parts

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Speaker 5: of New England. But in Massachusetts this coalesces into an

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Speaker 5: actual armed rebellion led by veterans of the Revolutionary War,

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Speaker 5: in particular Daniel Shayes. The Schaiesites didn't call themselves Shaysites.

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Speaker 5: They call themselves regulators. And what they did was they

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Speaker 5: just closed down the courts and the militia was called

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Speaker 5: up to put an end to this, and the militia

387
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Speaker 5: would switch sides or refuse to fight, or just melt away.

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Speaker 5: So the coastal elites, who owned all the debt that

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Speaker 5: they were trying to collect on by foreclosing on these farms,

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Speaker 5: create a private army. They take up a subscription of

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Speaker 5: a private army, and there's actually a series of force

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Speaker 5: on force battles with cannons, and the Shazites are defeated

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Speaker 5: in the early spring winter of seventeen eighty seven. And

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Speaker 5: it's in response to that crisis that the Constitutional Convention

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Speaker 5: happens in Philadelphia.

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Speaker 3: There's literally like this, this is Hamilton. This is what

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Speaker 3: Joe said, Hamilton, the musical one, right, right, Okay, So

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Speaker 3: can I just ask you You can kind of see

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Speaker 3: why Hamilton would make the argument that the US, such

400
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Speaker 3: as it was at that time, needs to develop industrially,

401
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Speaker 3: build out manufacturing capacity, create a strong system of government,

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Speaker 3: and things like that. But one thing I don't quite

403
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Speaker 3: understand from that period is why was agrarianism seemingly so

404
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Speaker 3: well regarded. Because it's hard for me to even envision

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Speaker 3: a time when there was this agrarian ideal because we're

406
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Speaker 3: so used to talking about development, linear development of economies,

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Speaker 3: you know, you move from farming to manufacturing to a

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Speaker 3: service based economy. It's weird to think that at that

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Speaker 3: time there was actually a number of people who said

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Speaker 3: that agrarianism was the best economic system.

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Speaker 5: Yes, at most famous among them Thomas Jefferson. Agrarianism was

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Speaker 5: popular because that's what most people did. And Jefferson famously

413
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Speaker 5: or infamously says in one correspondence that it would be

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Speaker 5: better to leave manufacturing workshops in Europe because manufacturing brings

415
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Speaker 5: with it a degradation of character, and that the farming

416
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Speaker 5: classes are the most noble, and so it was a

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Speaker 5: very romantic argument about national character. Underneath that, though, was

418
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Speaker 5: also a very material concern with what it would mean

419
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Speaker 5: for the slave South were the North where there was

420
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Speaker 5: at this point at the end of the Revolution, that

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Speaker 5: slavery has been outlawed in Massachusetts, it's been outlawed in Vermont,

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Speaker 5: which is not yet actually a state. It's on the

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Speaker 5: way to being outlawed in Pennsylvania and New York. That'll

424
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Speaker 5: take a couple more decades. But this so other elite

425
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Speaker 5: can see the writing on the wall that their system

426
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Speaker 5: is unpopular, and if the North becomes more populous and wealthier,

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Speaker 5: then it would dominate the federal government. This was their

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Speaker 5: fear and then perhaps come after their property. And that

429
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Speaker 5: is indeed what happened. And part of what drove that

430
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Speaker 5: northern hostility to slavery was humanitarian. It was like a

431
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Speaker 5: religious kind of humanitarian sensibility, but there was also an

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Speaker 5: element of self interest. Northern farmers were really worried that

433
00:25:31,680 --> 00:25:35,280
Speaker 5: this system would crowd them out of western lands and

434
00:25:35,359 --> 00:25:38,159
Speaker 5: that it might extend to the north. They did not think, oh,

435
00:25:38,840 --> 00:25:43,840
Speaker 5: slavery is naturally limited to grarian work on continent tobacco

436
00:25:43,960 --> 00:25:46,280
Speaker 5: in the south. They were worried that the workers of

437
00:25:46,359 --> 00:25:48,720
Speaker 5: the North could also be enslaved. That's sort of just

438
00:25:48,840 --> 00:25:50,879
Speaker 5: emerging at the time of the revolution, so anyway, so

439
00:25:51,040 --> 00:25:56,840
Speaker 5: that's part of what is motivating Jefferson's hostility initially to manufacturing,

440
00:25:56,920 --> 00:26:00,399
Speaker 5: and this is romanticization of the agrarian character. Also that

441
00:26:00,720 --> 00:26:04,400
Speaker 5: they don't want the northern states to get too powerful,

442
00:26:05,080 --> 00:26:08,680
Speaker 5: and so the Constitution actually involves all sorts of compromises

443
00:26:09,080 --> 00:26:12,280
Speaker 5: to compensate for the fact that that's very likely to happen.

444
00:26:13,119 --> 00:26:16,880
Speaker 5: The Senate being one of those important compromises where every

445
00:26:17,040 --> 00:26:21,080
Speaker 5: state gets to senators, and the Southern elites dominated the

446
00:26:21,119 --> 00:26:23,399
Speaker 5: Senate for a very long time, and it should be

447
00:26:23,440 --> 00:26:25,639
Speaker 5: set up until the Civil War, the richest people in

448
00:26:25,720 --> 00:26:29,160
Speaker 5: the country were always Southern elites, even though the South

449
00:26:29,480 --> 00:26:32,840
Speaker 5: was generally impoverished, and even to this day, the southeast

450
00:26:32,880 --> 00:26:36,639
Speaker 5: of the US bears the marks of underdevelopment in terms

451
00:26:36,720 --> 00:26:40,760
Speaker 5: of numerous indicators of well being, rates of interpersonal violence,

452
00:26:40,800 --> 00:26:42,040
Speaker 5: early death, all this kind of stuff.

453
00:26:42,520 --> 00:26:45,639
Speaker 2: What did industrial policy which again I know they didn't

454
00:26:45,840 --> 00:26:48,320
Speaker 2: call it that at the time, but like to Hamilton,

455
00:26:49,000 --> 00:26:51,480
Speaker 2: what did it look like? Specifically, what should the federal

456
00:26:51,560 --> 00:26:55,320
Speaker 2: government be empowered to do? How should it make those decisions? Like, okay,

457
00:26:55,359 --> 00:26:59,560
Speaker 2: it's all philosophically, he criticized Edwin Smith. He saw reasons

458
00:26:59,640 --> 00:27:01,840
Speaker 2: on the around why there needed to be a strong

459
00:27:01,920 --> 00:27:04,840
Speaker 2: state develop that. What does that look like in practice

460
00:27:04,960 --> 00:27:07,600
Speaker 2: in terms of actual policy choices made by the government

461
00:27:07,840 --> 00:27:09,040
Speaker 2: to foster these industries.

462
00:27:09,359 --> 00:27:11,800
Speaker 5: Well, all that is laid out in the Report on

463
00:27:11,840 --> 00:27:15,159
Speaker 5: the subjects of Manufacturers, and he calls the things that

464
00:27:15,200 --> 00:27:18,280
Speaker 5: the federal government should do the means proper. It should

465
00:27:18,280 --> 00:27:20,520
Speaker 5: also be said that the Report on Manufacturers is the

466
00:27:20,600 --> 00:27:24,520
Speaker 5: first time the word capitalists is used in the English language.

467
00:27:24,640 --> 00:27:26,800
Speaker 3: I was amazed to read that, So you said, the

468
00:27:26,880 --> 00:27:30,400
Speaker 3: first published mention of the word capitalists.

469
00:27:29,840 --> 00:27:32,399
Speaker 5: As far as I can tell, Yeah, it had been

470
00:27:32,480 --> 00:27:34,360
Speaker 5: used in French earlier, but that was the first time

471
00:27:34,520 --> 00:27:39,560
Speaker 5: it's in English. So the means proper for Hamilton involve tariffs,

472
00:27:40,720 --> 00:27:45,920
Speaker 5: prohibitive taxes on imports so as to defend infant industries

473
00:27:46,040 --> 00:27:49,440
Speaker 5: as they would later be called. Hamilton calls them infant manufacturers,

474
00:27:50,320 --> 00:27:55,840
Speaker 5: but also drawbacks from those tariffs subsidies for specific firms

475
00:27:56,400 --> 00:28:01,800
Speaker 5: that need help, Bans on exports of strategic raw materials,

476
00:28:02,520 --> 00:28:08,560
Speaker 5: investment in physical infrastructure, investment in planning and in R

477
00:28:08,640 --> 00:28:12,960
Speaker 5: and D, research and development, and general education. And ultimately

478
00:28:13,320 --> 00:28:15,879
Speaker 5: he wanted to have a planning board, something like the

479
00:28:16,040 --> 00:28:21,439
Speaker 5: Japanese Ministry of Industry and Technology. That never came to truition,

480
00:28:21,640 --> 00:28:25,280
Speaker 5: but he lays out in tremendous detail basically the means

481
00:28:25,320 --> 00:28:30,280
Speaker 5: proper this toolbox for economic planning, and the standard story

482
00:28:30,400 --> 00:28:32,399
Speaker 5: is that it was shot down. He even opens the

483
00:28:32,440 --> 00:28:36,000
Speaker 5: doors the idea of public ownership. He also more well known,

484
00:28:36,040 --> 00:28:40,600
Speaker 5: of course, and before pitching the manufacturing plan, he creates

485
00:28:40,720 --> 00:28:43,880
Speaker 5: the credit system. Right, He creates the first Bank of

486
00:28:43,920 --> 00:28:47,320
Speaker 5: the United States, and the standard story is that, well

487
00:28:47,800 --> 00:28:50,880
Speaker 5: it came to nothing, but actually a bunch of it

488
00:28:51,000 --> 00:28:53,240
Speaker 5: was passed, and over time, more and more of what

489
00:28:53,520 --> 00:28:56,959
Speaker 5: Hamilton outlined in the Reporter Manufacturers is implemented, and it's

490
00:28:57,040 --> 00:29:02,040
Speaker 5: often implemented in moments of crises, because frequently what happens

491
00:29:02,120 --> 00:29:06,160
Speaker 5: is the free marketeers win the argument there isn't sufficient taxation,

492
00:29:06,280 --> 00:29:10,800
Speaker 5: there isn't sufficient regulation, and then there's an economic crash

493
00:29:10,920 --> 00:29:13,920
Speaker 5: and a crisis in which planning is sort of spontaneously

494
00:29:14,280 --> 00:29:17,280
Speaker 5: summoned in to clean up the mess. So in the

495
00:29:17,360 --> 00:29:20,200
Speaker 5: long run, the report on the subject of manufacturers really

496
00:29:20,360 --> 00:29:25,360
Speaker 5: does triumph and does guide American industrialization and was also

497
00:29:25,800 --> 00:29:29,240
Speaker 5: very influential on other industrialization processes.

498
00:29:44,680 --> 00:29:49,600
Speaker 3: Can you talk about the relationship between Hamilton's vision of

499
00:29:50,120 --> 00:29:53,880
Speaker 3: industrial policy and again he doesn't use that term, but

500
00:29:54,240 --> 00:29:59,040
Speaker 3: the means proper and I guess how it's financed because

501
00:29:59,200 --> 00:30:02,120
Speaker 3: he seems to make And obviously this is where I

502
00:30:02,240 --> 00:30:04,080
Speaker 3: think a lot of what we're seeing from the Biden

503
00:30:04,120 --> 00:30:06,840
Speaker 3: administration now tends to get a little bit controversial because

504
00:30:06,880 --> 00:30:09,400
Speaker 3: people say like, oh, well, we're building all this stuff.

505
00:30:09,440 --> 00:30:13,040
Speaker 3: But also the public debt has absolutely exploded. What did

506
00:30:13,120 --> 00:30:16,080
Speaker 3: Hamilton say about that aspect of it? And one thing

507
00:30:16,160 --> 00:30:18,880
Speaker 3: that I was kind of thinking is he talks, or

508
00:30:18,920 --> 00:30:22,360
Speaker 3: he seems to talk a lot about external financing, so

509
00:30:22,560 --> 00:30:28,360
Speaker 3: building up state credibility in order to convince creditors to

510
00:30:28,480 --> 00:30:31,000
Speaker 3: give you money so that you can fund all these projects.

511
00:30:31,680 --> 00:30:35,120
Speaker 3: And when I think about that, in addition to some

512
00:30:35,280 --> 00:30:39,000
Speaker 3: of the tariffs and bounties and subsidies that he was

513
00:30:39,080 --> 00:30:42,600
Speaker 3: talking about, I don't want to say beggar thy neighbor policies,

514
00:30:42,760 --> 00:30:45,480
Speaker 3: but like you start to think about, well, why would

515
00:30:45,520 --> 00:30:50,800
Speaker 3: these other countries fund American development? And also can everyone

516
00:30:51,000 --> 00:30:55,080
Speaker 3: pursue these type of policies all at once? Can everyone

517
00:30:55,280 --> 00:30:58,640
Speaker 3: draw on external debt in order to develop their own economies?

518
00:30:59,680 --> 00:31:02,240
Speaker 5: Well, taking the first part first, so what Hamilton does

519
00:31:02,480 --> 00:31:05,680
Speaker 5: is all the states have debt, and so when he

520
00:31:06,080 --> 00:31:10,120
Speaker 5: is Treasury secretary, he's the first Treasury secretaryunder Washington, he

521
00:31:11,200 --> 00:31:14,000
Speaker 5: pursues assumption of the state debts, as it's called, so

522
00:31:14,120 --> 00:31:16,920
Speaker 5: that the federal government will buy up at face value

523
00:31:17,040 --> 00:31:19,800
Speaker 5: all these state debts, which will help reinflate with the

524
00:31:19,840 --> 00:31:22,360
Speaker 5: state economies and liberate the state governments from this debt.

525
00:31:22,440 --> 00:31:25,800
Speaker 5: But in exchange, the states have to hand over their

526
00:31:25,880 --> 00:31:30,240
Speaker 5: western land claims, and many states didn't have a western boundary.

527
00:31:30,240 --> 00:31:32,480
Speaker 5: It was just like, and you know the western boundary.

528
00:31:32,160 --> 00:31:34,240
Speaker 3: Of Virginia is it's somewhere in that direction.

529
00:31:34,480 --> 00:31:36,080
Speaker 5: Yeah, we haven't been to the Pacific yet, but it's

530
00:31:36,160 --> 00:31:37,760
Speaker 5: like out there as far as we go. I didn't

531
00:31:37,760 --> 00:31:40,920
Speaker 5: realize that. Yeah, And so getting all of that land

532
00:31:41,200 --> 00:31:44,360
Speaker 5: and federalizing it is also very important part of the

533
00:31:44,400 --> 00:31:49,560
Speaker 5: toolbox for American industrialization. So the way Hamilton pays for

534
00:31:49,640 --> 00:31:52,920
Speaker 5: the debt is by taking a loan in Europe and

535
00:31:53,040 --> 00:31:57,560
Speaker 5: he offers four percent interests when most European debt is

536
00:31:57,800 --> 00:32:01,640
Speaker 5: offering three percent interest And there's a debate at the

537
00:32:01,680 --> 00:32:03,280
Speaker 5: time about whether or not the debt should just be

538
00:32:03,760 --> 00:32:05,320
Speaker 5: paid off, and Hamilton says, no, no, we.

539
00:32:05,400 --> 00:32:07,560
Speaker 4: Need to You know, this is a roll it over.

540
00:32:07,840 --> 00:32:09,200
Speaker 3: Essentially, you want to keep borrowing.

541
00:32:09,400 --> 00:32:12,840
Speaker 5: Yeah, what he calls a funded debt. So this is

542
00:32:13,160 --> 00:32:16,080
Speaker 5: what happens. And part of this is also about keeping

543
00:32:16,200 --> 00:32:20,000
Speaker 5: your enemies close. He doesn't want the speculator class to

544
00:32:20,240 --> 00:32:22,640
Speaker 5: turn on the state and attack it and undermine it.

545
00:32:22,880 --> 00:32:26,160
Speaker 5: He wants to deal them in. And critics say, oh, well,

546
00:32:26,200 --> 00:32:28,680
Speaker 5: see he was just a servant of these elites, and

547
00:32:28,760 --> 00:32:31,800
Speaker 5: it's like, well, yeah, he was, you know, helping their interests.

548
00:32:31,800 --> 00:32:35,160
Speaker 5: But he also was concerned very pragmatically about having this

549
00:32:35,280 --> 00:32:37,760
Speaker 5: class of speculators turn against the state, and so he

550
00:32:37,880 --> 00:32:42,520
Speaker 5: wanted them to be committed to state stability, because I

551
00:32:42,560 --> 00:32:45,480
Speaker 5: should say he's very explicit about the risk of the

552
00:32:45,560 --> 00:32:50,120
Speaker 5: country fragmenting and falling part and disintegrating into civil war,

553
00:32:50,200 --> 00:32:52,920
Speaker 5: which you know it does to some extent due to

554
00:32:53,080 --> 00:32:55,680
Speaker 5: the power of states. So Hamilton was very opposed to

555
00:32:55,760 --> 00:32:59,360
Speaker 5: state power anyway, so that's part of how he funds it.

556
00:32:59,440 --> 00:33:03,400
Speaker 5: And then also so prior to the Washington administration, states

557
00:33:03,440 --> 00:33:07,000
Speaker 5: had their own rules and generally the tariff was around

558
00:33:07,080 --> 00:33:10,720
Speaker 5: eight percent. After Hamilton's plans go through, it's about thirteen percent.

559
00:33:11,040 --> 00:33:14,760
Speaker 5: The interesting thing is that the overall tax burden actually

560
00:33:14,880 --> 00:33:15,520
Speaker 5: goes down.

561
00:33:15,880 --> 00:33:16,120
Speaker 4: Yeah.

562
00:33:16,480 --> 00:33:18,640
Speaker 3: I actually I made a note of this because I

563
00:33:18,640 --> 00:33:20,680
Speaker 3: thought it was really interesting. And again, I think when

564
00:33:20,720 --> 00:33:25,560
Speaker 3: people think about like public infrastructure building and industrial policy nowadays,

565
00:33:25,600 --> 00:33:27,760
Speaker 3: they think like, oh, my taxes will go up. But

566
00:33:28,400 --> 00:33:31,840
Speaker 3: in this particular instance, I think they fell seventy seven

567
00:33:31,960 --> 00:33:34,880
Speaker 3: percent from seventeen eighty five to seventeen eighty eight.

568
00:33:35,400 --> 00:33:37,720
Speaker 5: Yeah, And I mean that's partly because there wasn't this

569
00:33:37,880 --> 00:33:39,960
Speaker 5: insane effort to just pay off all the debts, and

570
00:33:40,000 --> 00:33:43,960
Speaker 5: also because there are productive investments being made. Another crucial

571
00:33:44,080 --> 00:33:47,000
Speaker 5: piece of this toolbox is actually the post office.

572
00:33:47,280 --> 00:33:49,920
Speaker 4: Yeah, that was really interesting to me about this.

573
00:33:50,160 --> 00:33:53,520
Speaker 5: So in the postal clause, my favorite clause in the constitution,

574
00:33:53,760 --> 00:33:57,360
Speaker 5: Article one, section eight of the Constitution is very often overlooked,

575
00:33:57,360 --> 00:34:01,600
Speaker 5: and that explains what the government can do. Most constitutional

576
00:34:01,680 --> 00:34:05,719
Speaker 5: scholarship focuses on how the government works, the divided government

577
00:34:05,800 --> 00:34:08,880
Speaker 5: different branches, but what does this government allow itself to

578
00:34:08,960 --> 00:34:12,279
Speaker 5: do is rarely explored. And so Article one, section eight

579
00:34:12,400 --> 00:34:14,880
Speaker 5: is where that is laid out. That's what Congress can do.

580
00:34:15,560 --> 00:34:19,600
Speaker 5: And there's a debate around the postal clause. Benjamin Franklin

581
00:34:19,960 --> 00:34:23,120
Speaker 5: and Hamilton and other Federalists as they were called, they

582
00:34:23,160 --> 00:34:26,560
Speaker 5: wanted to empower the federal government to build canals because

583
00:34:27,160 --> 00:34:32,600
Speaker 5: they needed transportation infrastructure, and that is opposed by primarily Southerners.

584
00:34:33,200 --> 00:34:36,520
Speaker 5: As is later said some decades afterwards, when the question

585
00:34:36,600 --> 00:34:40,480
Speaker 5: of canals, federally funded canals again comes up, Daniel Macon,

586
00:34:40,640 --> 00:34:44,319
Speaker 5: a congressman from Georgia, answers a young local politician who

587
00:34:44,360 --> 00:34:46,279
Speaker 5: asked him. He says, how come we're opposed to the

588
00:34:46,360 --> 00:34:50,120
Speaker 5: federal funding of canals? And Macon says, if we allow

589
00:34:50,480 --> 00:34:54,920
Speaker 5: Congress to fund canals, they will no sooner and with

590
00:34:55,080 --> 00:34:58,720
Speaker 5: more propriety, soon be after our slaves. He doesn't say slaves,

591
00:34:58,960 --> 00:35:02,440
Speaker 5: you know, some euphemism. So there was again this concern.

592
00:35:02,760 --> 00:35:04,640
Speaker 5: You know, the more you empower the federal government, the

593
00:35:04,719 --> 00:35:08,200
Speaker 5: greater the risk to slavery. So there is no mention

594
00:35:08,280 --> 00:35:10,839
Speaker 5: of canals. However, the postal clause says that the Post

595
00:35:10,920 --> 00:35:13,800
Speaker 5: Office has the right to build post roads, and that

596
00:35:14,000 --> 00:35:17,520
Speaker 5: little thing roads, well, you know, by the eighteen twenties

597
00:35:18,000 --> 00:35:22,000
Speaker 5: most rivers were declared post roads, and the post Office

598
00:35:22,000 --> 00:35:26,520
Speaker 5: becomes a massive public works agency. We think of rivers

599
00:35:26,600 --> 00:35:31,160
Speaker 5: as passive natural features, but they required enormous amounts of

600
00:35:31,200 --> 00:35:35,560
Speaker 5: transformation to be economically useful, and it was the Post

601
00:35:35,640 --> 00:35:39,800
Speaker 5: Office that did that, hiring contractors, for example, on the

602
00:35:39,880 --> 00:35:42,000
Speaker 5: Red River which runs up through Arkansas. This is, you know,

603
00:35:42,120 --> 00:35:45,120
Speaker 5: after Hamilton's time, but these are the effects of Hamilton's

604
00:35:45,160 --> 00:35:48,520
Speaker 5: work playing out. There was a one hundred mile long

605
00:35:49,040 --> 00:35:53,520
Speaker 5: snake infested log jam called the Raft, and it blocked

606
00:35:53,560 --> 00:35:57,520
Speaker 5: settlement of Arkansas and Missouri, and it was the federal government,

607
00:35:57,600 --> 00:35:59,640
Speaker 5: i the Post Office that went in and cleared that.

608
00:36:00,280 --> 00:36:03,080
Speaker 5: And so the Post Office built the vast majority of

609
00:36:03,239 --> 00:36:07,960
Speaker 5: roads and that lower transportation costs that knit together a

610
00:36:08,080 --> 00:36:12,280
Speaker 5: national economy. It also subsidized business communications and the press

611
00:36:12,320 --> 00:36:15,960
Speaker 5: and an enormous amount to create a national market.

612
00:36:16,320 --> 00:36:19,480
Speaker 2: That's incredibly interesting. And up until you talked about the book,

613
00:36:19,520 --> 00:36:22,520
Speaker 2: I had not realized the sort of the developmental role

614
00:36:22,560 --> 00:36:24,560
Speaker 2: for the Post Office. But I'm glad you said that

615
00:36:24,719 --> 00:36:27,160
Speaker 2: thing about the young congressman. Why do we oppose the

616
00:36:27,360 --> 00:36:29,200
Speaker 2: allowing the federal government to have this role in the

617
00:36:29,239 --> 00:36:32,600
Speaker 2: building of canals? And you know, there was concerns that

618
00:36:32,719 --> 00:36:34,759
Speaker 2: the abolition movement was going to rise in their way

619
00:36:34,760 --> 00:36:36,960
Speaker 2: of life and their economic system was going to get

620
00:36:36,960 --> 00:36:39,160
Speaker 2: destroyed by the advent of slavery.

621
00:36:39,480 --> 00:36:41,120
Speaker 4: There still is a lot.

622
00:36:41,040 --> 00:36:44,560
Speaker 2: Of opposition to the idea that the federal government can

623
00:36:44,680 --> 00:36:48,440
Speaker 2: have a productive role to play in building out infrastructure

624
00:36:48,560 --> 00:36:51,160
Speaker 2: or doing whatever the equivalent is of building out a

625
00:36:51,200 --> 00:36:54,600
Speaker 2: canal today. So are there deeper, strange or other sort

626
00:36:54,640 --> 00:36:57,680
Speaker 2: of related ideas that you can draw between you know,

627
00:36:57,800 --> 00:37:02,400
Speaker 2: the late seventeen hundreds and today, excluding slavery. Why people

628
00:37:02,640 --> 00:37:05,920
Speaker 2: there's still like economic interests of like deep anxiety about

629
00:37:06,040 --> 00:37:08,000
Speaker 2: the role of the federal government these things.

630
00:37:08,640 --> 00:37:11,600
Speaker 5: Yeah, I think persistent throughout American history is the fear

631
00:37:11,680 --> 00:37:16,160
Speaker 5: of the slippery slope by the incumbent economic elites. And

632
00:37:16,640 --> 00:37:20,640
Speaker 5: if the federal government is proposing transformations of any sort,

633
00:37:21,120 --> 00:37:22,840
Speaker 5: there are always gonna be some interests that are threatened

634
00:37:22,880 --> 00:37:25,360
Speaker 5: by that. And the other thing is it's expensive, and

635
00:37:25,520 --> 00:37:28,360
Speaker 5: so no one really wants to pay taxes, and so

636
00:37:28,880 --> 00:37:34,279
Speaker 5: industries and lobbies are constantly pushing to lower taxes. And

637
00:37:34,400 --> 00:37:37,359
Speaker 5: so part of the argument for that is, don't spend

638
00:37:37,400 --> 00:37:39,640
Speaker 5: the money, don't do these big projects. Just give us

639
00:37:39,680 --> 00:37:42,480
Speaker 5: the money. Let us keep the money. These big projects

640
00:37:42,520 --> 00:37:45,960
Speaker 5: are pointless, and we handle the money better.

641
00:37:47,080 --> 00:37:50,680
Speaker 3: In the few minutes remaining, can you please defend industrial

642
00:37:50,800 --> 00:37:54,080
Speaker 3: policy from every single criticism that has ever been made

643
00:37:54,120 --> 00:37:57,000
Speaker 3: against it? No, But I am thinking back to Adam Smith,

644
00:37:57,640 --> 00:38:02,279
Speaker 3: And you know, Adam Smith's argument was part one of security,

645
00:38:02,360 --> 00:38:06,440
Speaker 3: the idea that trade would build relationships between countries, whereas

646
00:38:06,600 --> 00:38:10,640
Speaker 3: Hamilton's argument, it seems, is centered on the development of

647
00:38:10,719 --> 00:38:13,560
Speaker 3: the US the building of a strong state, and how

648
00:38:13,640 --> 00:38:16,200
Speaker 3: those two are related to each other. So I guess

649
00:38:16,320 --> 00:38:21,520
Speaker 3: number one, what does Hamiltonian style industrial policy actually mean

650
00:38:21,719 --> 00:38:25,359
Speaker 3: for trade relationships between countries and the prospects for peace.

651
00:38:25,760 --> 00:38:27,839
Speaker 3: But then also can you talk a little bit about

652
00:38:27,920 --> 00:38:32,319
Speaker 3: arguments about well, government spending creates unproductive capacity, or it's

653
00:38:32,400 --> 00:38:35,879
Speaker 3: unfair for governments to pick winners or losers. Again, I'm

654
00:38:35,920 --> 00:38:38,719
Speaker 3: asking you to basically address all the critiques of industrial

655
00:38:38,800 --> 00:38:41,200
Speaker 3: policy in the few minutes we have allotted to us.

656
00:38:41,520 --> 00:38:42,920
Speaker 5: Well, the first thing I would say is it's not

657
00:38:43,080 --> 00:38:46,160
Speaker 5: like industrial policy always works out. There are problems with it.

658
00:38:46,200 --> 00:38:48,600
Speaker 5: It's not easy to do. However, if you look at

659
00:38:49,280 --> 00:38:52,600
Speaker 5: the history of industrialization in one country after another, it

660
00:38:52,760 --> 00:38:56,799
Speaker 5: does raise the standard of living and it generally works,

661
00:38:57,280 --> 00:39:01,920
Speaker 5: but it always involves a development list activist state. So

662
00:39:02,040 --> 00:39:04,759
Speaker 5: I don't think there's any escaping that now that can

663
00:39:04,840 --> 00:39:08,359
Speaker 5: be done in better or worse ways. And the US

664
00:39:08,480 --> 00:39:11,800
Speaker 5: plays an important role in that. These ideas from Hamilton

665
00:39:11,880 --> 00:39:14,239
Speaker 5: goes to Frederick List, who goes to Germany, who then

666
00:39:14,680 --> 00:39:19,480
Speaker 5: very influential on the Meiji restoration in Japan and Japan's

667
00:39:19,480 --> 00:39:22,560
Speaker 5: industrialization and on and on to today. So in terms

668
00:39:22,600 --> 00:39:24,399
Speaker 5: of I mean, I think that's the most important argument

669
00:39:24,480 --> 00:39:27,960
Speaker 5: is that the actual story of industrialization always involves an

670
00:39:28,000 --> 00:39:31,040
Speaker 5: activist state in terms of trade. I mean Hamilton was

671
00:39:31,080 --> 00:39:33,719
Speaker 5: not opposed to trade. He just didn't want to be

672
00:39:34,360 --> 00:39:37,840
Speaker 5: subordinated to this dominant power for British I mean, his

673
00:39:38,040 --> 00:39:43,759
Speaker 5: concern with national sovereignty and industrial development didn't come at

674
00:39:43,800 --> 00:39:48,520
Speaker 5: the expense of international trade. So almost always exports also

675
00:39:48,600 --> 00:39:53,000
Speaker 5: play a very important part of industrialization. Take for example,

676
00:39:53,040 --> 00:39:55,960
Speaker 5: a place like Rwanda. You know, Rwanda is very explicit,

677
00:39:56,160 --> 00:39:58,160
Speaker 5: very kind of Hamiltonian. They say, look, if we don't

678
00:39:58,239 --> 00:40:01,240
Speaker 5: have economic growth and development, we're going to have another genocide.

679
00:40:01,239 --> 00:40:03,160
Speaker 5: We've had you know, four or five whatever it is, right,

680
00:40:03,640 --> 00:40:06,759
Speaker 5: And they they're heavily dependent on exporting T. They don't

681
00:40:06,760 --> 00:40:09,600
Speaker 5: want to not export T. But they've had conflicts with

682
00:40:09,719 --> 00:40:11,920
Speaker 5: the IMF because they want to run a three percent

683
00:40:12,200 --> 00:40:15,920
Speaker 5: budget deficit so that they can fund public education all

684
00:40:15,960 --> 00:40:18,160
Speaker 5: the way you know, through K through twelve. And they say, look,

685
00:40:18,160 --> 00:40:20,520
Speaker 5: if we don't have if our farmers are all illiterate,

686
00:40:20,880 --> 00:40:24,879
Speaker 5: we can't increase productivity and we can't develop. So I'm

687
00:40:24,880 --> 00:40:28,480
Speaker 5: speaking to the industrialization rather than industrial policy. Like what

688
00:40:28,560 --> 00:40:30,440
Speaker 5: we're dealing with here in the US is something new,

689
00:40:30,480 --> 00:40:33,640
Speaker 5: which is kind of like the question of reindustrialization. And

690
00:40:34,080 --> 00:40:36,400
Speaker 5: you know that's actually a very different problem in project.

691
00:40:37,160 --> 00:40:39,400
Speaker 4: The book is written to the left.

692
00:40:39,640 --> 00:40:43,120
Speaker 2: What did you feel the need for like this particular

693
00:40:43,280 --> 00:40:45,360
Speaker 2: audience to read this particular history.

694
00:40:46,080 --> 00:40:49,640
Speaker 5: Well, there's a hostility, I think to the US projects

695
00:40:49,920 --> 00:40:53,200
Speaker 5: on the left that is not helpful. And there's also

696
00:40:53,280 --> 00:40:56,160
Speaker 5: a misunderstanding of the Constitution. I mean, people right off

697
00:40:56,239 --> 00:41:00,200
Speaker 5: the Constitution as a document written by slaveholders. And I

698
00:41:00,440 --> 00:41:02,799
Speaker 5: was struck in getting into this, getting under the hood

699
00:41:03,080 --> 00:41:05,920
Speaker 5: about how many progressive elements there are in the American

700
00:41:06,640 --> 00:41:10,520
Speaker 5: constitutional tradition. And I came away from this project with

701
00:41:10,800 --> 00:41:13,480
Speaker 5: a much deeper appreciation and respect for that. And I

702
00:41:13,560 --> 00:41:17,400
Speaker 5: wanted to disabuse leftists who fall into these sort of

703
00:41:17,560 --> 00:41:21,520
Speaker 5: fascil notions about the Constitution being bad. I disagree with that,

704
00:41:21,560 --> 00:41:24,719
Speaker 5: and I think there's actually a lot of room for

705
00:41:25,239 --> 00:41:29,840
Speaker 5: quote unquote progressive goals to be met through the Constitution.

706
00:41:30,000 --> 00:41:33,359
Speaker 5: The general Welfare clause, which Thomas Jefferson freaked out about

707
00:41:33,400 --> 00:41:35,160
Speaker 5: and he didn't like. He said, this could mean almost anything.

708
00:41:35,239 --> 00:41:39,480
Speaker 5: It's like, yes, it opens the door to all types

709
00:41:39,640 --> 00:41:42,960
Speaker 5: of egalitarian projects potentially.

710
00:41:44,040 --> 00:41:46,560
Speaker 3: I have one more thing, which is again when I

711
00:41:46,600 --> 00:41:50,840
Speaker 3: think about Hamilton's experience versus what's happening today. One of

712
00:41:50,880 --> 00:41:53,000
Speaker 3: the things I think about is that, as you said,

713
00:41:53,400 --> 00:41:56,880
Speaker 3: a lot of what he recommended didn't immediately come to fruition.

714
00:41:57,080 --> 00:42:00,840
Speaker 3: People like Jefferson stood in the way. Nowadays, there seems

715
00:42:00,880 --> 00:42:03,000
Speaker 3: to be you know, a sort of similar back and

716
00:42:03,120 --> 00:42:05,799
Speaker 3: forth with in DC. But how do you build political

717
00:42:06,440 --> 00:42:10,360
Speaker 3: consensus for this type of policy, because that really seems

718
00:42:10,400 --> 00:42:13,239
Speaker 3: to have been the challenge for Hamilton. It happened over

719
00:42:13,719 --> 00:42:16,520
Speaker 3: time to some degree, but it certainly didn't happen immediately.

720
00:42:16,760 --> 00:42:21,320
Speaker 5: Yeah. Yeah, you know, I don't know how you build

721
00:42:21,440 --> 00:42:25,040
Speaker 5: political consensus around it. You don't do it by not

722
00:42:25,160 --> 00:42:30,960
Speaker 5: admitting any fault and not having conversations. So I cannot

723
00:42:31,000 --> 00:42:33,560
Speaker 5: tell you how political consent can be built.

724
00:42:34,400 --> 00:42:35,880
Speaker 3: You have to write a whole other book about that.

725
00:42:36,040 --> 00:42:38,160
Speaker 5: Yeah, I mean, and there are you know, well, you guys,

726
00:42:38,239 --> 00:42:39,680
Speaker 5: I just listened to a podcast you do with some

727
00:42:39,760 --> 00:42:42,600
Speaker 5: Irish guy about you know, the EU policies. I mean,

728
00:42:42,640 --> 00:42:45,239
Speaker 5: it's like, it's not like there aren't problems with these

729
00:42:45,280 --> 00:42:49,320
Speaker 5: agendas and those have to be acknowledged and those blockages removed.

730
00:42:49,719 --> 00:42:52,080
Speaker 2: This was gonna say, Tracy, when you said that, like Oh,

731
00:42:52,280 --> 00:42:55,520
Speaker 2: it seems so quaint that people were like skeptical of

732
00:42:55,920 --> 00:42:58,760
Speaker 2: the era of economic no trajectory.

733
00:42:59,040 --> 00:42:59,960
Speaker 4: We just did this episode.

734
00:43:00,120 --> 00:43:03,160
Speaker 3: No, I know, I know, I know, but like if

735
00:43:03,239 --> 00:43:08,520
Speaker 3: you read the book, like the idealization of agrarianism is

736
00:43:08,760 --> 00:43:11,640
Speaker 3: just like very surprising to me, especially because you think

737
00:43:11,719 --> 00:43:14,120
Speaker 3: back to the late seventeen hundreds and you don't think

738
00:43:14,200 --> 00:43:19,120
Speaker 3: that like subsistence farming was a particularly glamorous activity. But

739
00:43:19,239 --> 00:43:22,480
Speaker 3: then again, as Christian was pointing out, there's all this

740
00:43:22,680 --> 00:43:26,200
Speaker 3: like idealism and values attached to the hard work of

741
00:43:26,320 --> 00:43:26,960
Speaker 3: being a farmer.

742
00:43:28,680 --> 00:43:31,600
Speaker 5: Yeah, and that too, yeah, and it did provide autonomy

743
00:43:31,840 --> 00:43:35,480
Speaker 5: for yeoman farmers, and so there were legitimate concerns about

744
00:43:35,640 --> 00:43:36,920
Speaker 5: the loss of that autonomy.

745
00:43:37,360 --> 00:43:37,520
Speaker 3: You know.

746
00:43:37,640 --> 00:43:42,360
Speaker 5: One final argument for industrial planning for gument intervention is

747
00:43:42,400 --> 00:43:46,319
Speaker 5: that it is as Carl Polani says, laissez fair free

748
00:43:46,440 --> 00:43:51,320
Speaker 5: trade was planned, and planning is spontaneous because the pattern,

749
00:43:51,360 --> 00:43:54,680
Speaker 5: again and again is that the forces that want free

750
00:43:54,760 --> 00:43:58,479
Speaker 5: market advocate for that, they get deregulation, they get tax cuts,

751
00:43:58,719 --> 00:44:03,320
Speaker 5: and that inevitably to a crash in which the government

752
00:44:03,360 --> 00:44:05,759
Speaker 5: has to step in and regulate and nationalize. And we

753
00:44:06,160 --> 00:44:08,759
Speaker 5: just lived through that with two thousand and eight, right,

754
00:44:08,800 --> 00:44:11,920
Speaker 5: I mean you had an entire generation of bankers and

755
00:44:12,080 --> 00:44:17,480
Speaker 5: policy experts who had argued against government intervention, and when

756
00:44:17,600 --> 00:44:19,480
Speaker 5: two thousand and eight came, what did they do. They

757
00:44:19,560 --> 00:44:23,200
Speaker 5: basically nationalized the US banking system for a number of

758
00:44:23,280 --> 00:44:25,800
Speaker 5: years and bailed the whole thing out. So another argument

759
00:44:26,000 --> 00:44:29,760
Speaker 5: for industrial policy is that government intervention in the capitalist

760
00:44:29,800 --> 00:44:33,439
Speaker 5: economy is inevitable. It's going to either happen ad hoc

761
00:44:33,560 --> 00:44:38,759
Speaker 5: during an emergency, or it can happen consciously through democratic deliberation.

762
00:44:39,480 --> 00:44:42,880
Speaker 2: Christian PRENTI, thank you so much for coming on. Everyone

763
00:44:43,200 --> 00:44:45,680
Speaker 2: go read the book. And also, there are a number

764
00:44:45,680 --> 00:44:50,279
Speaker 2: of just extraordinary interesting people at your department at John Jay.

765
00:44:50,920 --> 00:44:53,759
Speaker 2: I'm in a band with one of the professors. I

766
00:44:53,840 --> 00:44:57,239
Speaker 2: play music with your colleague, Thomas Herndon. Yeah, a number

767
00:44:57,280 --> 00:44:59,680
Speaker 2: of smart people there, and it's a really interesting program.

768
00:44:59,480 --> 00:45:01,360
Speaker 5: Here in New York. Great masters program.

769
00:45:01,520 --> 00:45:15,800
Speaker 4: Yeah, thank you very much, Thank you, Tracy.

770
00:45:15,920 --> 00:45:20,719
Speaker 2: I really enjoyed that conversation, even sitting aside sort of

771
00:45:20,840 --> 00:45:23,719
Speaker 2: some of the economic lessons, just sort of like revisiting

772
00:45:23,800 --> 00:45:26,120
Speaker 2: some of the assumptions we make about the history of

773
00:45:26,200 --> 00:45:28,040
Speaker 2: that time and what it was actually like. I find

774
00:45:28,120 --> 00:45:28,880
Speaker 2: to be very useful.

775
00:45:29,160 --> 00:45:31,400
Speaker 3: Yeah, you know, we didn't even really get into this,

776
00:45:31,520 --> 00:45:33,919
Speaker 3: but there was also I think an instance of price

777
00:45:34,000 --> 00:45:37,080
Speaker 3: controls immediately after the Revolutionary War. We're going to have

778
00:45:37,160 --> 00:45:40,200
Speaker 3: to do like a whole other hour on this with Christian.

779
00:45:40,640 --> 00:45:41,200
Speaker 4: Yeah, we should.

780
00:45:41,239 --> 00:45:42,960
Speaker 2: You know, there's another interesting thing, and I meant to

781
00:45:42,960 --> 00:45:46,000
Speaker 2: ask a question about it, but I'm aware that there

782
00:45:46,080 --> 00:45:47,799
Speaker 2: is a thing in America in history called the War

783
00:45:47,840 --> 00:45:50,480
Speaker 2: of eighteen twelve, and I almost know nothing about it.

784
00:45:50,600 --> 00:45:51,440
Speaker 4: I certainly was not.

785
00:45:51,719 --> 00:45:53,160
Speaker 2: I think they set the White House on fire, for

786
00:45:53,360 --> 00:45:54,960
Speaker 2: that's all I know. But in the book, there's a

787
00:45:55,040 --> 00:45:59,920
Speaker 2: lot in there about the basically insufficiency of the USNSH

788
00:46:00,280 --> 00:46:03,959
Speaker 2: defense at that point, born in part due to poor

789
00:46:04,600 --> 00:46:07,600
Speaker 2: domestic investment that allowed us to be in a situation

790
00:46:07,680 --> 00:46:10,160
Speaker 2: where the British could you destroy Washington, DC.

791
00:46:10,400 --> 00:46:12,719
Speaker 3: You know, it's funny. I didn't study or hear that

792
00:46:12,840 --> 00:46:15,360
Speaker 3: much about the Revolutionary War, but when I went to

793
00:46:15,520 --> 00:46:18,640
Speaker 3: university in London, there sure was a lot of talk

794
00:46:18,880 --> 00:46:21,280
Speaker 3: in my international history class about the War of eighteen

795
00:46:21,360 --> 00:46:21,680
Speaker 3: or twelve.

796
00:46:22,200 --> 00:46:22,359
Speaker 4: Yeah.

797
00:46:22,760 --> 00:46:25,120
Speaker 2: I literally realized I know very little about it, and

798
00:46:25,160 --> 00:46:26,719
Speaker 2: I don't think it gets talked about very much.

799
00:46:27,080 --> 00:46:29,440
Speaker 3: I was waiting for you to drop the idea of

800
00:46:29,560 --> 00:46:32,719
Speaker 3: Hamilton being a secret MMT.

801
00:46:32,600 --> 00:46:35,320
Speaker 2: Or clearly I mean, come on, no, but it is

802
00:46:35,560 --> 00:46:38,040
Speaker 2: really interesting and I you know, this idea of like

803
00:46:38,600 --> 00:46:40,880
Speaker 2: that there were ways in the US Constitution, And I

804
00:46:40,920 --> 00:46:43,920
Speaker 2: thought that was a really interesting point that like embedded

805
00:46:44,080 --> 00:46:48,279
Speaker 2: in the Constitution are these various clauses and comments or

806
00:46:48,360 --> 00:46:50,360
Speaker 2: lines that really do open up a lot of like

807
00:46:50,920 --> 00:46:53,320
Speaker 2: space for active economic power from the government.

808
00:46:53,520 --> 00:46:53,719
Speaker 4: Yeah.

809
00:46:53,880 --> 00:46:57,560
Speaker 3: I also thought the point about well not just dismissing

810
00:46:58,239 --> 00:47:01,320
Speaker 3: the some of the negativities that can go with industrial

811
00:47:01,400 --> 00:47:04,719
Speaker 3: policy is really important because if you're gonna you know,

812
00:47:05,120 --> 00:47:06,919
Speaker 3: you can do it, you can also do it wrong

813
00:47:07,200 --> 00:47:10,560
Speaker 3: to Christian's point, and there are plenty of examples throughout

814
00:47:10,640 --> 00:47:14,080
Speaker 3: world history of things kind of going off the rails

815
00:47:14,200 --> 00:47:17,000
Speaker 3: and stuff like that. But you need to have a

816
00:47:17,080 --> 00:47:20,400
Speaker 3: reasonable and honest discussion about the pros and cons and

817
00:47:20,800 --> 00:47:23,279
Speaker 3: the goals of the policy as well, what exactly you're

818
00:47:23,320 --> 00:47:25,920
Speaker 3: trying to do here and what the results are that

819
00:47:26,000 --> 00:47:27,960
Speaker 3: you want to see. It can't just be like throw

820
00:47:28,080 --> 00:47:30,400
Speaker 3: money at every single problem. You have to have some

821
00:47:30,840 --> 00:47:33,400
Speaker 3: specificity about what you're trying to achieve.

822
00:47:33,760 --> 00:47:36,680
Speaker 2: Absolutely, and that's so fascinating because I knew that about

823
00:47:36,800 --> 00:47:40,000
Speaker 2: like Friedrich List and the industrialization of Germany and the

824
00:47:40,080 --> 00:47:42,280
Speaker 2: influence that his work in Germany then had on Japan.

825
00:47:42,480 --> 00:47:45,480
Speaker 2: But the fact that his work actually justin Hamilton, the

826
00:47:45,560 --> 00:47:47,560
Speaker 2: fact that Hamilton was the first to write the word

827
00:47:47,640 --> 00:47:50,600
Speaker 2: capitalist in the English language, pretty fascinating history.

828
00:47:50,760 --> 00:47:52,400
Speaker 3: Yeah. Absolutely, shall we leave it there.

829
00:47:52,480 --> 00:47:53,120
Speaker 5: Let's leave it there.

830
00:47:53,360 --> 00:47:56,120
Speaker 3: This has been another episode of the Odd Thoughts podcast.

831
00:47:56,239 --> 00:47:59,480
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.

832
00:47:59,200 --> 00:48:01,040
Speaker 2: And I'm joe Y and Thal you can follow me

833
00:48:01,160 --> 00:48:04,480
Speaker 2: at the Stalwart. Follow our producers Carmen Rodriguez at Carman

834
00:48:04,600 --> 00:48:08,160
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835
00:48:08,239 --> 00:48:11,440
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836
00:48:11,480 --> 00:48:14,120
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837
00:48:14,160 --> 00:48:16,600
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838
00:48:16,880 --> 00:48:19,680
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839
00:48:19,800 --> 00:48:21,920
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840
00:48:22,160 --> 00:48:24,759
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841
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842
00:48:27,960 --> 00:48:31,880
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843
00:48:32,080 --> 00:48:34,680
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