Hamilton Tackles Economics, 1781 (Hamilton 31)

On February 16, 1781, after a confrontation with Washington on the stairs at army headquarters, Hamilton resigned from the commander-in-chief’s staff. He refused both Washington’s apology and his father-in-law’s plea to reconcile. (See last week’s post.) But because Washington’s staff was very much reduced – only Hamilton and Tench Tilghman were at headquarters – Hamilton remained at New Windsor until early April, writing his last letter as Washington’s aide-de-camp on April 9th.

What was Alexander doing between April 9 and July 31, 1781, when he was finally given a field command? Canoodling with Eliza? Taking a break upstate?


Hamilton and Eliza had been together at the army’s 1780-1781 winter quarters in New Windsor (just south of the I-84 bridge over the Hudson River). After Hamilton left Washington’s staff, they moved to De Peyster’s Point, just across the river. In mid-May, Alexander took Eliza to the Schuyler home in Albany – probably because the summer campaign was due to start, and Eliza was pregnant. So OK, there was some canoodling. (Philip was born January 22, 1782.)

What provoked Hamilton to resign from Washington’s staff?

After I researched last week’s post, it seemed plausible that Hamilton resigned as aide-de-camp because he had “outgrown” the position – rather than because he and Washington had a massive, irreconcilable argument. This week, while searching for something  completely different, I found three solid reasons that Hamilton might have felt he’d outgrown his staff position.

A sample of Continental currency, 1776. "Mind your business" is such a lovely motto for currency!
A sample of Continental currency, 1776. “Mind your business” is such a lovely motto for currency!

Background: having no regular source of revenue, the Continental Congress had been issuing paper currency to pay its expenses since 1776. Lots and lots of paper currency. By May 1781, “continentals” were virtually worthless. The United States was/were (collectively and singularly) in dire financial straits. To handle the financial situation, Congress finally decided to put finances in the hands of a single man, rather than a committee.

Major General John Sullivan, a delegate to Congress, wrote to Washington asking about Hamilton’s qualifications as finance minister. On February 4, 1781 – ten days before the rupture between Washington and Hamilton – Washington replied.

The measure adopted by Congress of appointing a Minister of War—Finance—& for Foreign Affairs I think a very wise one. To give efficacy to it, proper characters will, no doubt, be chosen to conduct the business of these departments. How far Colo. Hamilton—of whom you ask my opinion as a financier—has turned his thoughts to that particular study I am unable to ansr because I never entered upon a discussion of this post with him—but this I can venture to advance from a thorough knowledge of him, that there are few men to be found, of his age, who has a more general knowledge than he possesses—and none whose Soul is more firmly engaged in the cause—or who exceeds him in probity & Sterling virtue. …

It is a provident foresight—a proper arrangement of business—system & order in the execution that is to be productive of that œconomy which is to defeat the efforts & hopes of Great Britain—And I am happy—thrice happy on private as well as public acct, to find that these are in train; for it will ease my Shoulders of as immense burthen which the deranged & perplexed Situation of our Affairs and the distresses of every department of the Army which concentred in the Comdr in chief had placed upon them. …  (Whole letter here)

I would dearly love to know whose handwriting that letter from Washington to Sullivan is in. (According to the Founders Archives, the letter is at Library of Congress, so it’s probably digitized by now; but I couldn’t find it.) Did Hamilton see Sullivan’s letter and/or Washington’s reply? It seems likely, since Washington’s staff at the time consisted only of Hamilton and Tilghman. Tilghman had been so sick that he wrote no letters for Washington between January 12 and February 9. (See Newton,  Hamilton, Ch. 35.)

If Hamilton saw Sullivan’s letter or Washington’s, then he knew he was being mentioned for one of the most prominent roles in the U.S. government.

And it wasn’t the first time. In November 1780, the Marquis de Lafayette had recommended Hamilton for the newly vacant position of adjutant-general for the army. Washington passed him over.

In December 1780, Hamilton was nominated by Sullivan, and strongly seconded by Lafayette, to be sent as envoy to France. Negotiating a loan from France was a crucial task, given the financial mess the U.S. was in. Hamilton was passed over in favor of his friend John Laurens. He told Laurens he didn’t mind in a letter of 2/4/1781 – coincidentally, the same day Washington replied to Sullivan’s query about Hamilton’s qualifications for the superintendent of finances position.

So: by mid-February 1781, 24-year-old Alexander Hamilton, an orphan immigrant from the Caribbean with two years of college and four years of experience in military administration, has been mentioned three times in three months for crucial roles of nationwide scope. Even though he didn’t get the adjutant-general, envoy, or financial superintendent position, I could see where he might have felt he’d outgrown his position as Washington’s subordinate. If you’d been in the running for a CEO position (never mind three), would you want to go back to being an executive secretary?

“I am extremely sorry to have embarrassed you by my late application”

And now, back to the weeks following April 9, 1781, when Hamilton wrote his last letter for Washington.

On April 19th, Hamilton wrote to General Nathanael Greene (whom he had met in 1775) asking for a field command.

[Washington’s aide Robert Hanson] Harrison has left the General to be a Chief Justice of Maryland. I am about leaving him to be any thing that fortune may cast up. I mean in the military line. This, my dear General, is not an affair of calculation but of feeling. You may divine the rest, and I am sure you will keep your divinations to yourself. (Whole letter here).

Greene’s reply doesn’t survive.

A week later, on April 27th, Hamilton wrote to Washington pointing out that Congress had recently resolved that those who served as aides-de-camp would have the same seniority in the army as if they had served in the field. He again asked Washington for a command.

It is become necessary to me to apply to your Excellency to know in what manner you foresee you will be able to employ me in the ensuing campaign. I am ready to enter into activity whenever you think proper, though I am not anxious to do it ’till the army takes the field, as before that period I perceive no object. …

Your Excellency knows I have been in actual service since the beginning of 76. I began in the line and had I continued there, I ought in justice to have been more advanced in rank than I now am. I believe my conduct in the different capacities in which I have acted has appeared to the officers of the army in general such as to merit their confidence and esteem; and I cannot suppose them to be so ungenerous as not to see me with pleasure put into a situation still to exercise the disposition I have always had of being useful to the United States. I mention these things only to show that I do not apprehend, the same difficulties can exist in my case (which is peculiar) that have opposed the appointment to commands of some other officers not belonging to what is called the line. … (Whole letter here)

Washington replied from across the Hudson on the same day, April 27th, citing the unrest caused recently when officers had been appointed from outside military units, rather than promoted from within.

Your letter of this date has not a little embarrassed me. You must remember the ferment in the Pensylvania line the last Campaign occasioned by the appointment of Major McPhearson; and you know the uneasiness which at this moment exists among the Eastern Officers on Acct. of the commands conferred upon Colo. Gemat and Major Galvan although it was the result of absolute necessity.

Should circumstances admit of the formation of another advanced Corps … it can be but small and must be composed almost entirely of Eastern Troops, and to add to the discontents of the Officers of those lines by the further appointment of an Officer of your Rank to the command of it, or in it, would, I am certain, involve me in a difficulty of a very disagreeable & delicate nature; and might perhaps lead to consequences more serious than it is easy to imagine. … I am convinced that no officer can with justice dispute your merit and abilities. …  (Whole letter here)

Hamilton’s reply has a bitter tone (5/2/1781):

I am extremely sorry to have embarrassed you by my late application, and that you should think there are insuperable obstacles to a compliance with it. Having renounced my expectations, I have no other inducement for troubling Your Excellency with a second letter, than to obviate the appearance of having desired a thing inconsistent with the good of the service, while I was acquainted with the circumstances that made it so.

But getting a command matters to Hamilton. He’s not about to let this go. He analyzes the cases that Washington cited and again argues that they are different from his own:

I cannot forbear repeating, that my case is peculiar and dissimilar to all the former; it is distinguished by the circumstances I have before intimated—my early entrance into the service; my having made the campaign of 76, the most disagreeable of the war at the head of a company of artillery, and having been intitled in that corps to a rank, equal in degree, more ancient in date than I now possess; my having made all the subsequent campaigns in the family of the Commander in Chief, in a constant course of important and laborious service; these are my pretensions, at this advanced period of the war, to being employed in the only way, which my situation admits … I am incapable of wishing to obtain any object by importunity. (Whole letter here)

Two months later, on July 10, Alexander wrote to Eliza from Dobbs Ferry, reporting that he had resigned his commission because Washington had still not given him a field command. And then, he’s sorry to admit, he allowed himself to be persuaded to withdraw his resignation. See last week’s post. (If I’d known where this week’s post was going, I would have waited to include that letter. But I never know where I’m going, until I’ve dug into primary sources and found a question that whets my curiosity.)

Meanwhile …

Hamilton turns to economics

On April 20, 11 days after he wrote his last letter for Washington, Hamilton asked Timothy Pickering (then the army’s adjutant general) to lend him several books on economics, including Hume’s Political Discourses, Wyndham Beawes’s Lex Mercatoria Rediviva: or the Merchant’s Directory, and Malachy Postlethwayt, The Universal Dictionary of Trade and Commerce (letter here).

Ten days later, on April 30, 1781, Hamilton dropped into the mailbag a 12,000-word letter on finances. That’s about 30 pages in print. It’s the first detailed, lengthy work that Hamilton wrote this subject. (His 1780 letter to James Duane is more on politics, although finances figures into it.) Hamilton’s choice of recipient for this treatise – Robert Morris – was spot on.

Portrait of Robert Morris by Robert Edge Pine, ca. 1785
Portrait of Robert Morris by Robert Edge Pine, ca. 1785

Morris, a 47-year-old British-born financier, signed the Declaration of Independence and the Articles of Confederation (and later, the Constitution). Beginning in May 1781, he was America’s superintendent of Finance – the position General Sullivan had thought Hamilton might be suited for. Next to Washington, Robert Morris was probably the most important man in the U.S. in May 1781. Eight years later, in 1789, it was Morris whom Washington first invited to be secretary of the Treasury. Morris refused, and suggested Alexander Hamilton. This letter is the beginning of the Morris-Hamilton relationship.

The outlines of Hamilton’s ideas on government and government finances were set early in his life, so let’s look at some of the important points in his 4/30/1781 letter to Morris.

At the beginning of the letter, Hamilton argues that we need a different form of government from the ever-squabbling Congressional committees – i.e., government by men experienced in their particular fields, such as Morris.

I was among the first who were convinced, that an administration by single men was essential to the proper management of the affairs of this country. I am persuaded now it is the only resource we have to extricate ourselves from the distresses, which threaten the subversion of our cause. It is palpable that the people have lost all confidence in our public councils, and it is a fact of which I dare say you are as well apprised as my self, that our friends in Europe are in the same disposition. I have been in a situation that has enabled me to obtain a better idea of this than most others; and I venture to assert, that the Court of France will never give half the succours to this Country while Congress holds the reins of administration in their own hands, which they would grant, if these were intrusted to individuals of established reputation and con⟨spicuous⟩ for probity, abilities and fortune.

Next point: We will win the war via finances, not battles. Notice how very similar Hamilton’s attitude is to Washington’s, as expressed in Washington’s 2/4/1781 letter to General Sullivan (above). It’s no wonder President Washington and Secretary of the Treasury Hamilton later worked together so well.

Tis by introducing order into our finances—by restoreing public credit—not by gaining battles, that we are finally to gain our object. Tis by putting ourselves in a condition to continue the war not by temporary, violent and unnatural efforts to bring it to a decisive issue, that we shall in reality bring it to a speedy and successful one. In the frankness of truth I believe, Sir, you are the Man best capable of performing this great work. …

I take the liberty to submit to you some ideas, relative to the object of your department. I pretend not to be an able financier; it is a part of administration, which has been least in my way and of course has least occupied my inquires and reflections. Neither have I had leisure or materials to make accurate calculations. I have been obliged to depend on memory for important facts for want of the authorities from which they are drawn. With all these disadvantages, my plan must necessarely be crude and defective; but if it may be a basis for something more perfect, or if it contains any hints that may be of use to you, the trouble I have taken myself, or may give you, will not be misapplied. …

Next point: Based on the money in circulation and the tax revenues of France, Great Britain, and the Netherlands, we can guess how much taxes could be collected in the United States: about a quarter of the cash in circulation. However, although America is still very productive (despite the war), little cash is in circulation.

Hamilton calculates the probable expenses of the American civil and military establishments and asks: where will we get the money?

Not from foreign loans or wealthy individuals; the American government isn’t regarded as reliable enough to repay its debts. So here’s what we need. This is the keystone of Hamilton’s proposal, and he waxes rhetorical.

To surmount these obstacles and give individuals ability and inclination to lend, in any proportion to the wants of government, a plan must be devised, which by incorporating their means together and uniting them with those of the public, will on the foundation of that incorporation and Union, erect a mass of credit that will supply the defect of monied capitals and answer all the purposes of cash, a plan which will offer adventurers immediate advantages analagous to those they receive by employing their money in trade, and eventually greater advantages, a plan which will give them the greatest security the nature of the case will admit for what they lend, and which will not only advance their own interest and secure the independence of their country, but in its progress have the most beneficial influence upon its future commerce and be a source of national strength and wealth.

I mean the institution of a National Bank. This I regard, in some shape or other as an expedient essential to our safety and success … There is no other that can give to government that extensive and systematic credit, which the defect of our revenues makes indispensably necessary to its operations. The longer it is delayed, the more difficult it becomes; our affairs grow every day more relaxed and more involved; public credit hastens to a more irretrievable catastrophe; the means for executing the plan are exhausted in partial and temporary efforts.

Now, if you think the proper functions of government are limited to police, military, and the courts (I do), and if you think the government should keep its grubby tentacles out of the markets and other financial matters (I do), then you’re going to be upset at the idea of a national bank. (I am.)

But here’s the thing. There are no banks in the United States in 1781. None. Zero. Zilch. Hence when Hamilton lists the government’s options for getting a loan for running expenses, he mentions foreign governments or private individuals. What he wants is an institution where money can be safely deposited, and loaned out at interest, to the government or to private individuals.

The tendency of a national bank is to increase public and private credit. The former gives power to the state for the protection of its rights and interests, and the latter facilitates and extends the operations of commerce among individuals. Industry is increased, commodities are multiplied, agriculture and manufactures flourish, and herein consist the true wealth and prosperity of a state.

It’s fascinating – and not surprising given his commercial activities as a youth – that even as early as 1781, Hamilton thinks American prosperity will depend not only on agriculture,  but on manufacturing and trade. He and Jefferson would already have disagreed on this (“We plant seeds in the South”), long before they came to verbal fisticuffs in Washington’s cabinet.

In his 1781 letter to Morris, Hamilton goes on to describe the structure of such a bank, in 20 annotated sections. Near the end of the letter is its most famous paragraph:

A national debt if it is not excessive will be to us a national blessing; it will be powerfull cement of our union. It will also create a necessity for keeping up taxation to a degree which without being oppressive, will be a spur to industry; remote as we are from Europe and shall be from danger, it were otherwise to be feard our popular maxims would incline us to too great parsimony and indulgence. We labour less now than any civilized nation of Europe, and a habit of labour in the people is as essential to the health and vigor of their minds and bodies as it is conducive to the welfare of the State. We ought not to Suffer our self-love to deceive us in a comparrison, upon these points. (Whole letter here.)

Robert Morris responded from Philadelphia about a month later, on May 26, 1781:

I have read it with that attention which it justly deserves and finding many points of it to Coincide with my own Opinions on the Subject, it naturally Strengthened that Confidence which every man ought to possess to a certain degree in his own judgement. You will very Soon See the Plan of a Bank published and Subscriptions opened for its establishment  …

I esteem myself much your Debtor for this piece not merely on account of the personal Respect you have been pleased to express but also on account your good Intentions and for these and the pains you have taken I not only think, but on all proper Occasions Shall Say, the Publick are also Indebted to you.

My office is new and I am Young in the execution of it. Communications from Men of Genius & abilities will always be acceptable and yours will ever Command the attention of,   Sir   Your obed hble Servt.
Robt. Morris (whole letter here)

Morris proposed a national bank on 5/17/1781; it was chartered on 5/26, and opened its doors in Philadelphia as the Bank of North America on 1/7/1782.

Working with Eliza

The version of Hamilton’s letter to Robert Morris that the Library of Congress owns is in three different hands. The first part is in Eliza’s handwriting. The middle is by an unknown hand and Hamilton.The end in Eliza’s hand again. (Wish I could find an image of this manuscript. No luck so far on the Library of Congress site.)

The Founders Online page on the letter notes that the sections written by Eliza have “many spelling errors, and … such errors appear in all her other writing.” Never mind: Eliza had qualities that went beyond secretarial. I do love to think of her having the chance to work with Alexander on one of his non-stop projects!

But American finances weren’t the only problem that Alexander Hamilton was writing about in the summer of 1781.

The Continentalist essays

In July 1781, Hamilton published his first political pamphlets since A Full Vindication of the Measures of the Congress, 1774, and The Farmer Refuted, 1775.  (See this post for what made Hamilton’s early essays so remarkable.)

The title of Hamilton’s new series – The Continentalist – is significant. It shows he’s already pushing for a unified country rather than a loose federation of states. The Articles of Confederation had only been ratified in early 1781, but they had been the operating rule for the government since 1776. Their deficiencies were already glaringly obvious to Hamilton.

Continentalist no. 1 sets out the dangers of a weak central government.

It would be the extreme of vanity in us not to be sensible, that we began this revolution with very vague and confined notions of the practical business of government. To the greater part of us it was a novelty … [T]here is hardly at this time a man of information in America, who will not acknowledge, as a general proposition, that in its present form, it is unequal, either to a vigorous prosecution of the war, or to the preservation of the union in peace.

In a government framed for durable liberty, not less regard must be paid to giving the magistrate a proper degree of authority, to make and execute the laws with rigour, than to guarding against encroachments upon the rights of the community. As too much power leads to despotism, too little leads to anarchy, and both eventually to the ruin of the people.  … (Whole issue here)

The second issue of the Continentalist deals with the objection that  a strong central government may turn to tyranny.

In a single state, where the sovereign power is exercised by delegation, whether it be a limitted monarchy or a republic, the danger most commonly is, that the sovereign will become too powerful for his constituents; in fœderal governments, where different states are represented in a general council, the danger is on the other side—that the members will be an overmatch for the common head, or in other words, that it will not have sufficient influence and authority to secure the obedience of the several parts of the confederacy. (Whole issue here)

The Founders Archives has links to the rest of the Continentalist issues. I’ll resist summarizing and commenting, because this post is pushing the point of being too many damn pages for any man to understand.

“Nature has given you a right to be esteeemed, to be cherished, to be beloved”

 On July 13, 1781 – the day after the first issue of The Continentalist appeared – Alexander writes to Eliza, complaining that he’s bored!
I have received my angel two letters from you since my arrival in Camp with a packet of papers, and I have written to you twice since I saw you. …
With no object of sufficient importance to occupy my attention here I am left to feel all the weight of our separation. I pass a great part of my time in company but my dissipations are a very imperfect suspension of my uneasiness. I was cherishing the melancholy pleasure of thinking of the sweets I had left behind and was so long to be deprived of, when a servant from Head Quarters presented me with your letters. I feasted for some time on the sweet effusions of tenderness they contained, and my heart returned every sensation of yours. Alas my Betsey you have divested it of every other pretender and placed your image there as the sole proprietor. I struggle with an excess which I cannot but deem a weakness and endeavour to bring myself back to reason and duty. I remonstrate with my heart on the impropriety of suffering itself to be engrossed by an individual of the human race when so many millions ought to participate in its affections and in its cares. But it constantly presents you under such amiable forms as seem too well to justify its meditated desertion of the cause of country humanity, and of glory I would say, if there were not something in the sound insipid and ridiculous when compared with the sacrifices by which it is to be attained.
Indeed Betsey, I am intirely changed—changed for the worse I confess—lost to all the public and splendid passions and absorbed in you. Amiable woman! nature has given you a right to be esteemed to be cherished, to be beloved; but she has given you no right to monopolize a man, whom, to you I may say, she has endowed with qualities to be extensively useful to society. Yes my Betsey, I will encourage my reason to dispute your empire and restrain it within proper bounds, to restore me to myself and to the community. Assist me in this; reproach me for an unmanly surrender of that to love and teach me that your esteem will be the price of my acting well my part as a member of society. …
I write your father all the news we have. Give my love to your mother sisters and brothers. Love me and let your happiness always consist in loving
Yr. A Hamilton (Whole letter here)
On July 31, 1781, Hamilton was given finally given a troop to command. By August 7, 1781, he was complaining to Timothy Pickering, the army’s quartermaster, that the supplies he had required for his men had not yet arrived.


  • Hamilton wrote to Laurens on 2/4/1781, congratulating him on being chosen as envoy to France. When he wrote this letter, he had been a soldier for five years, and had never been a politician. “?I have? implicit confidence in your talent?s and? integrity; but in the frankness of fri?endship? allow me to suggest to you one apprehension. It is of the honest warmth of your ?temper.? A politician My Dear friend must ?be at all? times supple—he must often dissemble.” How very … Burrish! (Whole letter here)
  • Robert Morris has been on our radar before, when Angelica asked Eliza (7/30/1794) to send a sketch of the grand new Morris mansion in Philadelphia (see here). The “old” Morris mansion was used as the executive mansion by Washington and Adams from 1790-1800.
  • I’ve started adding comments based on these blog posts to the Genius.com pages on the Hamilton Musical: a fantastic resource. Follow me @DianneDurante.
  • The usual disclaimer: This is the thirtieth in a series of posts on Hamilton: An American Musical My intro to this series is here. Other posts are available via the tag cloud at lower right. Bottom line: these are unofficial musings, and you do not need them to enjoy the musical or the soundtrack.
  • Want wonderful art delivered weekly to your inbox? Members of my free Sunday Recommendations list (email DuranteDianne@gmail.com) receive three art-related suggestions every week: check out my favorites from last year’s recommendations. For more goodies, check out my Patreon page.
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