Of the founding fathers, Alexander Hamilton has always been my favorite—and not because of the arcane fact that my uncle, Robert Ward McEwen (variant spelling), was the 14th President of that well-regarded upstate New York liberal arts college named for you-know-who.
No, I’ve been a fan of Hamilton (1755—1804) ever since I first began studying the economic history of the US, and Hamilton had it all: Illegitimate child, immigrant, soldier, lawyer (member of the New York bar), economist, co-author of the Federalist Papers, founder of the Bank of New York, proponent of the notion that New York, not Washington, be the Capitol of the new nation (a well-intended but misbegotten notion—business and governmental capitals fundamentally don’t get along), Treasury Secretary, and ultimately martyr to his own sense of honor, killed across the river from here in Weehawken in a duel with Aaron Burr. (Although the circumstances of the duel are much disputed, the most authoritative biographer of Hamilton, Ron Chernow, concluded that Hamilton fired first, missing Burr on purpose [his shot hit a branch over Burr’s head] but that Burr took deliberate aim.)
And did I mention that my alma mater Princeton must to this day rue its refusal to accommodate Hamilton’s request in his admission application that he be allowed to study at a quicker pace and graduate in an accelerated period of time? Columbia accepted his request and today Hamilton Lawn separates Hamilton Hall and John Jay Hall on Columbia’s Frederick Law Olmstead-designed campus a mile north of here. A pity.
Now, readers regular or occasional must know that Adam Smith, Esq. is resolutely nonpartisan and nonpolitical, but occasionally an essay that could be viewed as espousing a political view is so worthy of attention that we can’t resist. David Brook’s column a few days ago in the Times, “The Role of Uncle Sam,” is such an occasion.
Brooks contrasts the Hamiltonian tradition of what the government’s role in the national economy should be with the Jefferson-Jacksonian tradition. This has indeed been the great debate in the history of governmental intervention in the economy. Since you already know that I’m firmly in the Hamiltonian camp, you are at liberty to take what follows with a grain of salt, but I always endeavor to be objective and fair:
|Primary government unit of interest||federal||state and local|
|Government role||cautious, constrained and limited||energetic, open-ended, and evolving|
|Priorities||long-term structural development, infrastructure, education, R&D||short-term security|
|99%/1%?||interests of capital and labor are harmonious in the long run||haves and have-nots|
|Time horizon||you eat in the long run||you eat today|
|What works||innovation, experimentation, and entrepreneurship—”we’ll see”||what’s worked in the past, with a gloss of “experts know best”|
|Spending priorities||on the unproven, the promising, and the future||on the incumbents who have the power|
|Economic policy should protect||competition||competitors|
One of the more conspicuous clashes between Hamilton and Jefferson the individuals (as opposed to the philosophies) came when Hamilton was Secretary of the Treasury and Jefferson Secretary of State. Over Jefferson’s strenuous opposition, Hamilton estabished the country’s first national bank.
Now, we may seem to strayed a long way from LawFirm Land, but bear with me.
I discern an analogy—think about it—between the Hamiltonian approach to governance and that of firmly united partnerships bound strongly together for the long run, and the same between the Jeffersonian approach to governance and that of partnerships celebrating individual super-stars in the here and now. If you grant me license to describe what I believe to be relative, not absolute, distinctions, consider:
- the H partnership invests in professional development for all and keeps a lid on the divergence between highest paid and lowest paid;
- the J partnership invests in the proven stars and rewards them accordingly, no matter what high:low compensation ratios that might entail;
- the H partnership is willing to let people pursue new and potentially unproven areas, within reason, understanding that success would redound to the benefit of the entire firm;
- the J partnership prefers to invest in what’s proven to work (and if it’s worked elsewhere that’s even stronger proof);
- the H partnership is oriented towards the long run, understanding that B players are as essential as A players, and that individuals migrate between the two categories over a career, sometimes more than once;
- the J partnership wants results now, and has little patience for anyone who’s not hyper-successful today.
On a national level, one can compare the relative dynamism, vibrancy, and success of the US when we were at our apex of investing in infrastructure (the transcontinental railway, the interstate highway system) and R&D (DARPA, NASA, the NIH and the NSF), with the US today (or more strongly, with continental European nations in general).
If you think that too glib or polarizing a comparison to make, perhaps you’d prefer to look at it through a different lens: What’ are the essential characteristics of a country, or a firm, you can believe in and want to believe in? Is it of something being built for the long run, with intergenerational equity, generous investment in individuals and the environment they need to thrive, and a recognition that not all progress at the same pace but that all deserve equal opportunity?
Or instead is it a hallucinatory redistributionist engine, running Robin Hood in reverse, where the spoils go to those with the greatest power today, and the way forward is not to invest in providing an environment that would nurture others up to that high-performance level, but to corral more and more of the already powerful?
Is it led by individuals who are aware of their limitations and the unpredictability of life, or is it led by those undeterrable in their convictions?
Does management assume it knows everything worth knowing, or do those at the top honestly welcome differences and seek to build strength on the back of diversity?
Use your imagination.