The Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy by Thomas K. McCraw (review)

Abstract

Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy. By Thomas K. McCraw. (Cam-bridge, MA: Harvard University Press, 2012. Pp. 485. Cloth, $35. 00.)The late Thomas McCraw, who died in November 2012, was for many years the Isidor Straus Professor of Business History at Harvard Busi-ness School. Best known to historians for his studies of regulation in late nineteenth-and early twentieth-century America, and among economists for his prize-winning 2007 biography of Joseph Schumpeter, in his final work McCraw turned to a dual biography of two early American secre-taries of the Treasury, Alexander Hamilton and Albert result will strike many historians of the period as a fairly curious work. While Founders and Finance offers a competent and highly readable retelling of a familiar story, it adds little to our knowledge of the period and its subjects' lives. Instead, we are given an interpretation of Hamil-ton's and Gallatin's success that stresses their ability as immigrants and outsiders to understand and use public finance in ways that insiders (the native-born) were unable to grasp.McCraw lays out his story in three parts. first two are biographi-cal accounts of his protagonists; the third, entitled The Legacies, will be the part of the book of most interest to those already familiar with the basic details of the lives and times. In this concluding section of the work, McCraw explores the larger issues he thinks the two financiers' stories raise-Immigrant Exceptionalism, Comparisons and Contin-gencies, Capitalism and Credit, and The Political Economy of Hamilton and Gallatin. All of this, by the way, in the space of a little less than forty pages.Is the notion that, as outsiders and immigrants, Hamilton and Gallatin understood the modern world (and in particular modern finance) better than their provincial American contemporaries a convincing argument? One has to wonder. It has long been thought that Hamilton's immigrant status made him less inclined to state loyalties (not even when it came to the Empire State of New York) and more inclined to take a continental, national perspective. But to suggest that this had much to do with Hamil-ton's proficiency in matters of finance seems a bit of a stretch. Being a teenage clerk for Beekman and Cruger in St. Croix may have familiarized Hamilton with forms of currency and accounting and bills of exchange, but did it really prepare him to write the Report on Public Credit? Though the logic of McCraw's case leads in that direction, the author doesn't say so directly, and in fact what he does tell us about the origins of Hamilton's knowledge of finance is that it lay in his voracious reading while in the Continental Army. Perhaps only a foreigner would have seen the need to inform himself on these matters and then seized the opportu-nity to do so, but the case McCraw builds for his thesis is tenuous, to say the least.Gallatin left Geneva in 1780, at the age of nineteen, without any busi-ness background. Geneva was, to be sure, an important banking center in the eighteenth century; but there is no evidence that the pre-immigrant Gallatin had any exposure to the inner workings of the city's financial houses. And in any case, as readers of Herbert Liithy's La banque protes-tante en France (2 vols., 1959-61) will recall, the speculations of late ancien re gime Swiss bankers in the French public debt were anything but a model that the cautious Gallatin would follow in his own practice as secretary of the Treasury. …