The Intellectual Foundations of Political Economy | Pepperdine University | School of Public Policy

The Intellectual Foundations of Political Economy

Early American Political Economy

Report on Manufactures (excerpts)

Alexander Hamilton

December 5, 1791

The Secretary of the Treasury, in obedience to the order of ye House of Representatives, of the 15th day of January, 1790, has applied his attention, at as early a period as his other duties would permit, to the subject of Manufactures; and particularly to the means of promoting such as will tend to render the United States, independent on foreign nations for military and other essential supplies. And he thereupon respectfully submits the following Report.

The expediency of encouraging manufactures in the United States, which was not long since deemed very questionable, appears at this time to be pretty generally admitted. The embarrassments, which have obstructed the progress of our external trade, have led to serious reflections on the necessity of enlarging the sphere of our domestic commerce: the restrictive regulations, which in foreign markets abridge the vent of the increasing surplus of our Agricultural produce, serve to beget an earnest desire, that a more extensive demand for that surplus may be created at home: And the complete success, which has rewarded manufacturing enterprise, in some valuable branches, conspiring with the promising symptoms, which attend some less mature essays, in others, justify a hope, that the obstacles to the growth of this species of industry are less formidable than they were apprehended to be, and that it is not difficult to find, in its further extension, a full indemnification for any external disadvantages, which are or may be experienced, as well as an accession of resources, favorable to national independence and safety.

It ought readily to be conceded that the cultivation of the earth–as the primary and most certain source of national supply–as the immediate and chief source of subsistence to man– as the principal source of those materials which constitute the nutriment of other kinds of labor–as including a state most favourable to the freedom and independence of the human mind–one, perhaps, most conducive to the multiplication of thc human species–has intrinsically a strong claim to pre-eminence over every other kind of industry.

But, that it has a title to any thing like an exclusive predilection, in any country, ought to be admitted with great caution. That it is even more productive than every other branch of Industry requires more evidence than has yet been given in support of the position. That its real interests, precious and important as without the help of exaggeration, they truly are, will be advanced, rather than injured by the due encouragement of manufactures, may, it is believed, be satisfactorily demonstrated. And it is also believed that the expediency of such encouragement in a general view may be shown to be recommended by the most cogent and persuasive motives of national policy.

But without contending for the superior productiveness of Manufacturing Industry, it may conduce to a better judgment of the policy, which ought to be pursued respecting its encouragement, to contemplate the subject, under some additional aspects, tending not only to confirm the idea, that this kind of industry has been improperly represented as unproductive in itself; but to evince in addition that the establishment and diffusion of manufactures have the effect of rendering the total mass of useful and , productive labor, in a community, greater than it would otherwise be. In prosecuting this discussion, it may be necessary briefly to resume and review some of the topics, which have been already touched.

To affirm, that the labour of the Manufacturer is unproductive, because he consumes as much of the produce of land, as he adds value to the raw materials which he manufactures, is not better founded, than it would be to affirm, that the labour of the farmer, which furnishes materials to the manufacturer is unproductive, because he consumes an equal value of manufactured articles. Each furnishes a certain portion of the produce of his labor to the other, and each destroys a correspondent portion of the produce of the labour of the other. In the mean time the maintenance of two Citizens, instead of one, is going on; thc State has two members instead of one; and they together consume twice the value of what is produced from the land.

If instead of a farmer and artificer, there were a farmer only, he would be under the necessity of devoting a part of his labour to the fabrication of clothing and other articles, which he would procure of the artificer, in the case of there being such a person; and of course he would be able to devote less labor to thc cultivation of his farm; and would draw from it a proportionable less product. The whole quantity of production, in this state of things, in provisions, raw materials and manufactures, would certainly not exceed in value the amount of what would be produced in provisions and raw materials only, if there were an artificer as well as a farmer.

Again–if there were both an artificer and a farmer, the latter would be left at liberty to pursue exclusively the cultivation of his farm. A greater quantity of provisions and raw materials would of course be produced–equal at least–as has been already observed, to the whole amount of the provisions, raw materials and manufactures, which would exist on a contrary supposition. The artificer, at the same time would be going on in the production of manufactured commodities; to an amount sufficient not only to repay the farmer, in those commodities, for the provisions and materials which were procured from him, but to furnish the artificer himself with a supply of similar commodities for his own use. Thus then, there would be two quantities or values in existence, instead of one; and the revenue and consumption would be double in one case, what it would be in the other.

If in place of both of these suppositions, there were supposed to be two farmers, and no artificer, each of whom applied a part of his labour to the culture of land, and another part to the fabrication of Manufactures–in this case, the portion of the labour of both bestowed upon land would produce the same quantity of provisions and raw materials only, as would be produced by the entire sum of the labour of one applied in the same manner–and the portion of the labour of both bestowed upon manufactures, would produce the same quantity of manufactures only, as would be produced by the entire sum of the labour of one, applied in the same manner. Hence the produce of the labour of the two farmers would not be greater than the produce of the labour of the farmer and artificer; and hence, it results, that the labour of the artificer is as positively productive as that of the farmer, and, as positively, augments the revenue of the Society.

The labour of the Artificer replaces to the farmer that portion of his labour, with which he provides the materials of exchange with the Artificer, and which he would otherwise have been compelled to apply to manufactures: and while the Artificer thus enables the farmer to enlarge his stock of Agricultural industry, a portion of which he purchases for his own use, he also supplies himself with the manufactured articles of which he stands in need. He does still more–Besides this equivalent which he gives for the portion of Agricultural labour consumed by him, and this supply of manufactured commodities for his own consumption– he furnishes still a surplus, which compensates for the use of the Capital advanced either by himself or some other person, for carrying on the business. This is the ordinary profit of the Stock employed in the manufactory, and is, in every sense, as effective an addition to the income of the Society, as the rent of the land

Thc produce of the labour of the Artificer consequently, may be regarded as composed of three parts: one by which the provisions for his subsistence and the materials for his work are purchased of the farmer, one by which he supplies himself with manufactured necessities, and a third which constitutes the profit on the Stock employed. The two last portions seem to have been overlooked in the system, which represents manufacturing industry as barren and unproductive.

In the course of the preceding illustrations, the products of equal quantities of the labour of the farmer and artificer have been treated as if equal to each other. But this is not to be understood as intending to assert any such precise equality. It is merely a manner of expression adopted for the sake of simplicity and perspicuity. Whether thc value of the produce of the labour of the farmer be somewhat more or less, than that of the artificer, is not material to the main scope of thc argument, which hitherto has only aimed at showing, that the one, as well as thc other, occasions a positive augmentation of thc total produce and revenue of thc Society.

It is now proper to proceed a step further, and to enumerate the principal circumstances, from which it may be inferred–that manufacturing establishments not only occasion a positive augmentation of the Produce and Revenue of the Society, but that they contribute essentially to rendering them greater than they could possibly be, without such establishments; These circumstances are–

1. The division of labour.

2. An extension of the use of Machinery.

3. Additional employment to classes of the community not ordinarily engaged in the business.

4. The promoting of emigration from foreign Countries.

5. The furnishing greater scope for the diversity of talents and dispositions which discriminate men from each other.

6. The affording a more ample and various field for enterprize.

7. The creating in some instances a new, and securing in all, a more certain and steady demand for the surplus produce of the soil.

Each of these circumstances has a considerable influence upon the total mass of industrious effort in a community: Together, they add to it a degree of energy and effect, which are not easily conceived. Some comments upon each of them, in the order in which they have been stated, may serve to explain their importance.


It has justly been observed, that there is a scarcely any thing of greater moment in the economy of a nation than the proper division of labour. The separation of occupations causes each to be carried to a much greater perfection, than it could possibly acquire, if they were blended. This arises principally from three circumstances–

1st. The greater skill and dexterity naturally resulting from a constant and undivided application to a single object. It is evident, that these properties must increase, in proportion to the separation and simplification of objects and the steadiness of thc attention devoted to each; and must be less in proportion to the complication of objects, and the number among which the attention is distracted.

2nd. The economy of time, by avoiding the loss of it, incident to a frequent transition from one operation to another of a different nature. This depends on various circumstances–the transition itself–the orderly disposition of the implements, machines and materials employed in the operation to be relinquished–the preparatory steps to the commencement of a new one–the interruption of the impulse, which the mind of the workman acquires, from being engaged in a particular operation–the distractions, hesitations and reluctances, which attend the passage from one kind of business to another.

3rd. An extension of the use of Machinery. A man occupied on a single object will have it more in his power, and will be more naturally led to exert his imagination in devising methods to facilitate and abridge labour, than if he were perplexed by a variety of independent and dissimilar operations. Besides this the fabrication of Machines, in numerous instances, becoming itself a distinct trade, the Artist who follows it, has all the advantages which have been enumerated, for improvement in his particular art; and in both ways the invention and application of machinery are extended.

And from these causes united, the mere separation of the occupation of the cultivator, from that of the Artificer, has the effect of augmenting the productive powers of labour, and with them, the total mass of the produce or revenue of a Country. In this single view of the subject, therefore, the utility of Artificers of Manufacturers, towards promoting an increase of productive industry, is apparent.


Thc employment of Machinery forms an item of great importance in the general mass of national industry. 'Tis an artificial force brought in aid of thc natural force of man; and, to all the purposes of labour, is an increase of hands; an accession of strength, unencumbered too by the expence of maintaining the laborer. May it not therefore be fairly inferred, that those occupations, which give greatest scope to the use of this auxiliary, contribute most to the general Stock of industrious effort, and, in consequence, to the general product of industry?

It shall be taken for granted, and the truth of the position referred to observation, that manufacturing pursuits are susceptible in a greater degree of the application of machinery, than those of Agriculture. If so all the difference is lost to a community, which, instead of manufacturing for itself, procures the fabrics requisite to its supply from other Countries. The substitution of foreign for domestic manufactures is a transfer to foreign nations of the advantages accruing from the employment of Machinery, in the modes in which it is capable of being employed, with most utility and to the greatest extent.

The Cotton Mill, invented in England, within the last twenty years, is a signal illustration of the general proposition, which has been just advanced. In consequence of it, all the different processes for spinning Cotton are performed by means of Machines, which are put in motion by water, and attended chiefly by women and Children; and by a smaller number of persons, in the whole, than are requisite in the ordinary mode of spinning. And it is an advantage of great moment, that the operations of this mill continue with convenience during the night as well as through the day. The prodigious effect of such a Machine is easily conceived. To this invention is to be attributed essentially the immense progress, which has been so suddenly made in Great Britain, in the various fabrics of cotton.


This is not among the least valuable of the means, by which manufacturing institutions contribute to augment the general stock of industry and production. In places where those institutions prevail, besides the persons regularly engaged in then, they afford occasional and extra employment to industrious individuals and families, who are willing to devote the leisure resulting from the intermissions of their ordinary pursuits to collateral labours, as a resource for multiplying their acquisitions or their enjoyments. The husbandman himself experiences a new source of profit and support; from the increased industry of his wife and daughters; invited and stimulated by the demands of the neighboring manufactories.

Besides this advantage of occasional employment to classes having different occupations, there is another, of a nature allied to it, and of a similar tendency. This is–the employment of persons who would otherwise be idle (and in many cases a burthen on the community) either from the bias of temper, habit, infirmity of body, or some other cause, indisposing or disqualifying them for the toils of the Country. It is worthy of particular remark, that, in general, women and Children are rendered more useful, and the latter more early useful by manufacturing establishments, than they would otherwise be. Of the number of persons employed in the Cotton Manufactories of Great Britain, it is computed that four sevenths nearly are women and children; of whom the greatest proportion are children, and many of them of a very tender age.

And thus it appears to be one of the attributes of manufactures, and one of no small consequence, to give occasion to the exertion of a greater quantity of Industry, even by the same number of persons, where they happen to prevail, than would exist, if there were no such establishments.


Men reluctantly quit one course of occupation and livelihood for another, unless invited to it by very apparent and proximate advantages. Many who would go from one country to another, if they had a prospect of continuing with more benefit the callings, to which they have been educated, will often not be tempted to change their situation, by the hope of doing better, in some other way. Manufacturers, who, listening to thc powerful invitations of a better price for their fabrics, or their labour, of greater cheapness of provisions and raw materials, of an exemption from the chief part of the taxes, burthens and restraints, which they endure in the old world, of greater personal independence and consequence, under the operation of a more equal government, and of what is far more precious than mere religious toleration–a perfect equality of religious privileges; would probably flock from Europe to the United States to pursue their own trades or professions, if they were once made sensible of the advantages they would enjoy, and were inspired with an assurance of encouragement and employment, will, with difficulty, be induced to transplant themselves, with a view to becoming Cultivators of Land.

If it be true then, that it is the interest of the United States to open every possible avenue to emigration from abroad, it affords a weighty argument for the encouragement of manufactures; which, for the reasons just assigned, will have the strongest tendency to multiply the inducements to it.

Here is perceived an important resource, not only for extending the population, and with it the useful and productive labour of the country, but likewise for the prosecution of manufactures, without deducting from the number of hands, which might otherwise be drawn to Tillage and even for the indemnification of Agriculture for such as might happen to be diverted from it. Many, whom Manufacturing views would induce to emigrate, would afterwards yield to the temptations, which the particular situation of this Country holds out to Agricultural pursuits. And while Agriculture would in other respects derive many signal and unmingled advantages, from the growth of manufactures, it is a problem whether it would gain or lose, as to the article of the number of persons employed in carrying it on.


This is a much more powerful means of augmenting the fund of national Industry than may at first sight appear. It is a just observation, that minds of the strongest and most active powers for their proper objects fall below mediocrity and labour without effect, if confined to uncongenial pursuits. And it is thence to be inferred, that the results of human exertion may be Immensely increased by diversifying Its objects. When all the different kinds of industry obtain in a community, each individual can find his proper element, and can call into activity the whole vigour of his nature. And the community is benefited by the services of its respective members, in the manner, in which each can serve it with most effect.

If there be any thing in a remark often to be met with– namely that there is, in the genius of the people of this country, a peculiar aptitude for mechanic improvements, it would operate as a forcible reason for giving opportunities to the exercise of that species of talent, by the propagation of manufactures.


This also is of greater consequence in the general scale of national exertion, than might perhaps on a superficial view be supposed, and has effects not altogether dissimilar from those of the circumstance last noticed. To cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients, by which the wealth of a nation may be promoted. Even things in themselves not positively advantageous, sometimes become so, by their tendency to provoke exertion. Every new scene which is opened to the busy nature of man to rouse and exert itself, is the addition of a new energy to the general stock of effort.

The spirit of enterprise, useful and prolific as it is, must necessarily be contracted or expanded in proportion to the simplicity or variety of the occupations and productions, which are to be found in a Society. It must be less in a nation of mere cultivators, than in a nation of cultivators and merchants; less in a nation of cultivators and merchants, than in a nation of cultivators, artificers and merchants.


This is among the most important of thc circumstances which have been indicated. It is a principal means, by which the establishment of manufactures contributes to an augmentation of the produce or revenue of a country, and has an immediate and direct relation to the prosperity of Agriculture.

It is evident, that the exertions of thc husbandman will be steady or fluctuating, vigorous or feeble, in proportion to the steadiness or fluctuation, adequateness or inadequateness, of the markets on which he must depend, for the vent of the surplus, which may be produced by his labor; and that such surplus in the ordinary course of things will be greater or less in the same proportion.

For the purpose of this vent, a domestic market is greatly to be preferred to a foreign one; because it is in the nature of things, far more to be relied upon.

It is a primary object of the policy of nations, to be able to supply themselves with subsistence from their own soils; and manufacturing nations, as far as circumstances permit, endeavor to procure from the same source, the raw materials necessary for their own fabrics. This disposition, urged by the spirit of monopoly, is sometimes even carried to an injudicious extreme. It seems not always to be recollected, that nations who have neither mines nor manufactures, can only obtain the manufactured articles, of which they stand in need, by an exchange of the products of their soils; and that, if those who can best furnish them with such articles are unwilling to give a due course to this exchange, they must of necessity, make every-possible effort to manufacture for themselves; the effect of which is that the manufacturing nations abridge the natural advantages of their situation, through an unwillingness to permit the Agricultural countries to enjoy the advantages of theirs, and sacrifice the interests of a mutually beneficial intercourse to the vain project of selling every thing and buying nothing.

But it is also a consequence of the policy, which has been noted, that the foreign demand for the products of Agricultural countries is, in a great degree, rather casual and occasional, than certain or constant. To what extent injurious interruptions of the demand for some of the staple commodities of the United States, may have been experienced from that cause, must be referred to the judgment of those who are engaged in carrying on thc commerce of the country; but it may be safely affirmed, that such interruptions are at times very inconveniently felt, and that cases not unfrequently occur, In which markets are so confined and restricted as to render the demand very unequal to the supply.

Independently likewise of the artificial impediments, which are created by the policy in question, there are natural causes tending to render the external demand for the surplus of Agricultural nations a precarious reliance. The differences of seasons, in the countries, which are the consumers, make immense differences in the produce of their own soils, in different years; and consequently in the degrees of their necessity for foreign supply. Plentiful harvests with them, especially if similar ones occur at the same time in the countries, which are the furnishers, occasion of course a glut in the markets of the latter.

Considering how fast and how much the progress of new settlements in the United States must increase the surplus produce of the soil, and weighing seriously the tendency of the system, which prevails among most of the commercial nations of Europe, whatever dependence may be placed on the force of natural circumstances to counteract the effects of an artificial policy, there appear strong reasons to regard the foreign demand for that surplus as too uncertain a reliance, and to desire a substitute for it, in an extensive domestic market.

To secure such a market, there is no other expedient, than to promote manufacturing establishments. Manufacturers who constitute the most numerous class, after the Cultivators of land, are for that reason the principal consumers of the surplus of their labour.

This idea of an extensive domestic market for the surplus produce of the soil is of the first consequence. It is, of all things, that which most effectually conduces to a flourishing state of Agriculture. If the effect of manufactories should be to detach a portion of the hands, which would otherwise be engaged in Tillage, it might possibly cause a smaller quantity of lands to be under cultivation; but, by their tendency to procure a more certain demand for the surplus produce of the soil, they would, at the same time, cause thc lands which were in cultivation to be better improved and more productive. And while, by their influence, the condition of each individual farmer would be meliorated, the total mass of Agricultural production would probably be increased. For this must evidently depend as much, if not more, upon the degree of improvement than upon the number of acres under culture.

It merits particular observation, that the multiplication of manufactories not only furnishes a Market for those articles which have been accustomed to be produced in abundance in a country, but it likewise creates a demand for such as were either unknown or produced in Inconsiderable quantities. The bowels as well as the surface of the earth are ransacked for articles which were before neglected. Animals, Plants and Minerals acquire a utility and a value which were before unexplored.

The foregoing considerations seem sufficient to establish, as general propositions, that it is the interest of nations to diversify the industrious pursuits of the individuals who compose them– that the establishment of manufactures is calculated not only to Increase the general stock of useful and productive labour; but even to improve the state of Agriculture in particular, certainly to advance the interests of those who are engaged in it.

The objections to the pursuit of manufactures in the United States, which next present themselves to discussion, represent an impracticability of success, arising from three causes--scarcity of hands–dearness of labour-- want of capital.

The two first circumstances, are to a certain extent real, and, within due limits, ought to be admitted as obstacles to the success of manufacturing enterprise In the United States. But there are various considerations, which lessen their force, and tend to afford an assurance that they are not sufficient to prevent the advantageous prosecution of many very useful and extensive manufactories.

With regard to scarcity of hands, the fact itself must be applied with no small qualification to certain parts of the United States. There are large districts, which may be considered as pretty fully peopled; and which notwithstanding a continual drain for distant settlement, are thickly interspersed with flourishing and increasing towns. If these districts have not already reached the point, at which the complaint of scarcity of hands ceases, they are not remote from it, and are approaching fast towards it; and having, perhaps, fewer attractions to agriculture, than some other parts of the Union, they exhibit a proportionably stronger tendency towards other kinds of industry. In these districts, may be discerned no inconsiderable maturity for manufacturing establishments.

But there are circumstances which have been already noticed with another view, that materially diminish, everywhere, the effect of a scarcity of hands. These circumstances are–the great use which can be made of women and children; on which point a very pregnant and instructive fact has been mentioned–the vast extension given by late improvements to the employment of Machines, which substituting the Agency of fire and water, had prodigiously lessened the necessity of manual labour–the employment of persons ordinarily engaged in other occupations, during the seasons, or hours of leisure; which, besides giving occasion to the exertion of a greater quantity of labour by the same number of persons, and thereby increasing the general stock of 1abour, as has been elsewhere remarked, may also be taken into the calculation, as a resource for obviating the scarcity of hands–lastly the attraction of foreign emigrants. Whoever inspects with a careful eye, the composition of our towns will be made sensible to what an extent this resource may be relied upon. This exhibits a large proportion of ingenious and valuable workmen, in different arts and trades, who, by expatriating from Europe, have improved their own condition, and added to the industry and wealth of the United States. It is a natural inference from the experience, we have already had, that as soon as thc United States shall present the countenance of a serious prosecution of Manufactures–as soon as foreign artists shall be made sensible that the state of things here affords a moral certainty of employment and encouragement–competent numbers of European workmen will transplant themselves, effectually to insure the success of the design. How, indeed can it otherwise happen considering the various and powerful inducements which the situation of this country offers; addressing themselves to so many strong passions and feelings, to so many general and particular interests?

It may be affirmed therefore, in respect to hands for carrying on manufacturers, that we shall in a great measure trade upon a foreign Stock, reserving our own, for the cultivation of our lands and the manning of our Ships, as far as character and circumstances shall incline. it is not unworthy of remark, that thc objection to the success of manufacturers, deduced from the scarcity of hands, is alike applicable to Trade and Navigation, and yet these are perceived to flourish, without any sensible impediment from that cause.

As to the dearness of labour (another of the obstacles alleged) this has relation principally to two circumstances, one that which has been just discussed, or the scarcity of hands; the other, the greatness of profits.

As far as it is a consequence of the scarcity of hands, it is mitigated by all the considerations which have been adduced as lessening that deficiency.

It is certain too, that the disparity in this respect, between some of the most manufacturing parts of Europe and a large proportion of the United States, is not nearly so great as is commonly imagined. It is also much less in regard to Artificers and manufacturers than in regard to country labourers; and while a careful comparison shows, that there is, in this particular, much exaggeration, it is also evident that the effect of the degree of disparity, which does truly exist, is diminished in proportion to the use which can be made of machinery.

To illustrate this last idea: Let it be supposed, that thc difference of price, in two Countries, of a given quantity of manual labour requisite to the fabrication of a given article is as 10, and that some mechanic power is introduced into both countries, which performing half the necessary labour, leaves only half to bc done by hand, it is evident that the difference in thc cost of the fabrication of the article in question in the two countries, as far as it is connected with the price of labour, will be reduced from 10 to 5, in consequence of the introduction of that power.

This circumstance is worthy of the most particular attention. It diminishes immensely one of the objections most strenuously urged against the success of manufactures in the United States.

To procure all such machines as are known in any part of Europe, can only require a proper provision and due pains. The knowledge of several of the most important of them is already possessed. The preparation of them here is, in most cases, practicable on nearly equal terms. As far as they depend on Water, some superiority of advantages may be claimed, from the uncommon variety and greater cheapness of situations adapted to Mill seats, with which different parts of thc United States abound.

To the general allegation, connected with the circumstances of scarcity of hands and dearness of labour, that extensive manufactures can only grow out of a redundant or full population, it will be sufficient, to answer generally, that the fact has been otherwise. That the situation alleged to be an essential condition of success, has not been that of several nations, at periods when they had already attained to maturity in a variety of manufactures.

The supposed want of Capital for the prosecution of manufactures in the United States, is the most indefinite of the objections which are usually opposed to it.

It is very difficult to pronounce any thing precise concerning the real extent of the monied capital of a Country, and still more concerning the proportion which It bears to the objects that invite the employment of Capital. It is not less difficult to pronounce how far the effect of any given quantity of money, as capital, or in other words, as a medium for circulating the industry and property of a nation may be increased by the very circumstance of the additional motion, which is given to it by new objects of employment That effect, like the momentum of descending bodies, may not improperly be represented, as in a compound ratio to mass and velocity. It seems pretty certain, that a given sum of money, in a situation, in which the, quick impulses of commercial activity were little felt, would appear inadequate to the circulation of as great a quantity of industry and property, as in one in which their full influence was experienced.

It is not obvious, why the same objection might not as well be made to external commerce as to manufactures; since it is manifest that our immense tracts of land occupied and unoccupied are capable of giving employment to more capital than is actually bestowed upon them. It is certain, that the United States offer a vast field for the advantageous employment of Capital; but it does not follow, that there will not be found, in one way or another, a sufficient fund for the successful prosecution of any species of industry which is likely to prove truly beneficial.

The following considerations are of a nature to remove all inquietude on the score of the want of Capital.

The introduction of Banks, as has been shown on another occasion, has a powerful tendency to extend thc active Capital of a Country. Experience of the Utility of these Institutions is multiplying them in the United States. It is probable that they will be established wherever they can exist with advantage; and wherever they can be supported, if administered with prudence, they will add new energies to all pecuniary operations.

The aid of foreign Capital may safely, and, with considerable latitude, be taken into calculation. Its instrumentality has been long experienced in our external commerce; and it has begun to be felt in various other modes. Not only our funds, but our Agriculture, and other internal improvements, have been animated by it. It has already in a few instances extended even to our manufactures.

It is a well-known fact, that there are parts of Europe, which have more Capital than profitable domestic objects of employment. Hence, among other proofs, thc large loans continually furnished to foreign states. And it is equally certain, that thc capital of other parts may find more profitable employment in the United States, than at home. And notwithstanding there are weighty inducements to prefer the employment of capital at home, even at less profit, to an investment of it abroad, though with greater gain, yet these inducements are overruled either by a deficiency of employment or by a very material difference in profit. Both these causes operate to produce a transfer of foreign capital to the United States. It is certain, that various objects in this country hold out advantages, which are with difficulty to be equalled elsewhere; and under the increasingly favorable impressions, which are entertained of our government, the attractions will become more and more strong. These impressions will prove a rich mine of prosperity to the Country, if they are confirmed and strengthened by the progress of our affairs. And to secure this advantage, little more is now necessary than to foster industry, and cultivate order and tranquillity, at home and abroad.

It is not impossible, that there may be persons disposed to look with a jealous eye on the introduction of foreign Capital, as if it were an instrument to deprive our own citizens of the profits of our own industry; But, perhaps, there never could be a more unreasonable jealousy. Instead of being viewed as a rival, it ought to be Considered as a most valuable auxiliary, conducing to put in Motion a greater Quantity of productive labour, and a greater portion of useful enterprise, than could exist without it. It is at least evident, that in a Country situated like thc United States, with an infinite fund of resources yet to be unfolded, every farthing of foreign capital, which is laid out in internal ameliorations, and in industrious establishments, of a Permanent nature, is a precious acquisition.

And, whatever be the objects which originally attract foreign Capital, when once introduced it may be directed towards any purpose of beneficial exertion, which is desired. And to detain it among us, there can be no expedient so effectual as to enlarge the sphere within which it may bc usefully employed: Though introduced merely with view to speculations in the funds, it may afterwards be rendered subservient to the Interests of Agriculture, Commerce, and Manufactures.

But the attraction of foreign Capital for the direct purpose of Manufactures, ought not to bc deemed a chimerical expectation. There are already examples of it, as remarked in another place. And the examples, if the disposition be cultivated can hardly fail to multiply. There are also instances of another kind, which serve to strengthen the expectation. Enterprises for improving the Public Communications by cutting canals, opening the obstructions in Rivers and erecting bridges have received very material aid from the same source.

When the Manufacturing Capitalist of Europe shall advert to the many important advantages, which have been intimated, in the Course of this report, he cannot but perceive very powerful inducements to a transfer of himself and his Capital to the United States. Among the reflections, which a most interesting peculiarity of situation is calculated to suggest, it cannot escape his observation, as a circumstance of Moment in the calculation, that the progressive population and improvement of the United States, insure a continually increasing domestic demand for the fabrics which he shall produce, not to be affected by any external casualties or vicissitudes.

But while there are Circumstances sufficiently strong to authorize a considerable degree of reliance on thc aid of foreign Capital towards the attainment of the object in view, it is satisfactory to have good grounds of assurance, that there are domestic resources of themselves adequate to it. It happens, that there is a species of Capital, actually existing within the United States, which relieves from all inquietude on the score of want of Capital. This is the funded Debt.

The effect of a funded debt, as a species of Capital, has been Noticed upon a former Occasion, but a more particular elucidation of the point seems to be required by the stress which is here laid upon it. This shall accordingly be attempted.

Public Funds answer the purpose of Capital, from the estimation in which they are usually held by Monied men, and consequently from the Ease and dispatch with which they can be turned into money. This capacity for prompt convertibility into money causes a transfer of stock to be in a great number of Cases equivalent to a payment in coin. And where it docs not happen to suit the party who is to receive to accept a transfer of Stock, the party who is to pay is never at a loss to find elsewhere a purchaser of his Stock, who will furnish him in lieu of it, with the Coin Of which he stands in need.

Hence in a sound and settled state of thc public funds, a man possessed of a sum in them can embrace any scheme of business, which offers, with as much confidence as if he were possessed of an equal sum in Coin.

In the question under discussion, it Is important to distinguish between an absolute increase of Capital or an accession of real wealth and an artificial increase of Capital, as an engine of business, or as an instrument of industry and Commerce. In the first sense, a funded debt has no pretensions to being deemed an increase of Capital; In the last, it has pretensions which are not easy to be controverted. Of a similar nature is bank credit and in an inferior degree every species oE private credit.

But though a funded debt is not in the first instance, an absolute increase of Capital, or an augmentation of real wealth; yet by serving as a new power in the operations of industry, it has within certain bounds a tendency to increase the real wealth of a Community, in like manner as money borrowed by a thrifty farmer, to be laid out in the improvement of his farm, may, in the end, add to his Stock of real riches.

There are respectable individuals, who from a just aversion to an accumulation of Public debt, are unwilling to concede to it any kind of utility, who can discern no good to alleviate the ill with which they suppose it pregnant; who cannot be persuaded that it ought in any sense to be viewed as an increase of capital lest it should be inferred that the more debt the more capital the greater the burthens the greater the blessings of the community.

But it interests the Public Councils to estimate every object as it truly is; to appreciate how far the good in any measure is compensated by the ill, or the ill by the good. Either of them is seldom unmixed.

There remains to bc noticed an objection to the encouragement of manufactures, of a nature different from those which question the probability of success. This is derived from its supposed tendency to give a monopoly of advantages to particular classes, at the expense of the rest of the community, who, it is affirmed, would be able to procure the requisite supplies of manufactured articles on better terms from foreigners, than from our own Citizens, and who, it is alleged, are reduced to the necessity of paying an enhanced price for whatever they want, by every measure, which obstructs thc free competition of foreign commodities.

It is not an unreasonable supposition, that measures, which serve to abridge the free competition of foreign Articles, have a tendency to occasion an enhancement of prices and it is not to be denied that such is the effect, in a number of Cases; but the fact does not uniformly correspond with the theory. A reduction of prices has, in several instances immediately succeeded the establishment of a domestic manufacture. Whether it be that foreign manufactures endeavour to supplant, by underselling our own, or whatever else be the cause, the effect has been such as is stated, and the reverse of what might have been expected.

But though it were true, that the immediate and certain effect of regulations controlling the competition of foreign with domestic fabrics was an increase of Price, it is universally true, that the contrary is the ultimate effect with every successful manufacture. When a domestic manufacture has attained to perfection, and has engaged in the prosecution of it a competant number of Persons, it invariably becomes cheaper. Being free from the heavy charges which attend the importation of foreign commodities, it can be afforded, and accordingly seldom or never fails to be sold Cheaper, in process of time, than was the foreign Article for which it is a substitute. The internal competition which takes place, soon does away every thing like Monopoly, and by degrees reduces the price of the Article to the minimum of a reasonable profit on the Capital employed. This accords with the reason of the thing, and with experience.

Whence it follows, that it is the interest of a community, with a view to eventual and permanent economy, to encourage the growth of manufactures. In a national view, a temporary enhancement of price must always be well compensated by a permanent reduction of it.

It is a reflection which may with propriety be indulged here, that this eventual diminution of the prices of manufactured Articles, which is the result of internal manufacturing establishments, has a direct and very important tendency to benefit agriculture. It enables the farmer, to procure, with a smaller quantity of his labour; the manufactured produce of which he stands in need, and consequently Increases the value of his income and property.

The objections which are commonly made to thc expediency of encouraging, and to the probability of succeeding in, manufacturing pursuits, in the United States, having now been discussed, the Considerations which have appeared in the Course of the discussion, recommending that species of industry to the patronage of the Government, will be materially strengthened by a few general and some particular topics, which have been naturally reserved for subsequent Notice–

I. There seems to be a moral certainty, that the trade of a country which is both manufacturing and Agricultural will be more lucrative and prosperous than that of a Country, which is merely Agricultural.

One reason for this is found in that general effort of nations (which has been already mentioned) to procure from their own soils, thc articles of prime necessity requisite to their own consumption and use, and which serves to render their demand for a foreign supply of such articles, in a great degree occasional and contingent. Hence, while the necessities of nations exclusively devoted to Agriculture, for the fabrics of manufacturing states, are constant and regular, the wants of the latter for the products of the former, are liable to very considerable fluctuations and interruptions. The great inequalities resulting from difference of seasons have been elsewhere remarked. This uniformity of demand on one side, and unsteadiness of it on the other, must necessarily have a tendency to cause the general course of thc exchange of commodities between the parties to turn to the disadvantage of the merely agricultural States. Peculiarity of situation, a climate and soil adapted to thc production of peculiar commodities, may, sometimes, contradict thc rule, but there is every reason to believe that it will be found, in the Main, a just one.

Another circumstance which gives a superiority of commercial advantages to states that manufacture as well as cultivate, consists ifl thc more numerous attractions, which a more diversified market offers to foreign Customers, and in the greater scope which it affords to mercantile enterprise. It is a position of indisputable truth in Commerce depending too on very obvious reasons, that 1he greatest resort will ever be to those marts where commodities, while equally abundant, are most various. Each difference of kind holds out an additional inducement. And it is a position not less clear, that thc field of enterprise must be enlarged to the Merchants of a Country, in proportion to the variety as well as the abundance of commodities which they find at home for exportation to foreign Markets.

A third circumstance, perhaps not inferior to either of the other two, conferring the superiority which has been stated, has relation to the stagnations of demand for certain commodities which at some time or other, interfere more or less with the sale of all. The nation which can bring to Market but few articles is likely to be more quickly and sensibly affected by such stagnations, than one which is always possessed of a great variety of commodities. The former frequently finds too great a proportion of its stock of materials for sale or exchange lying on hand– or is obliged to make injurious sacrifices to supply its wants of foreign articles which are Numerous and urgent, in proportion to the smallness of the number of its own. The latter commonly finds itself indemnified, by the high Prices of some articles, for the low prices of others– and the Prompt and advantageous sale of those articles which are in demand, enables its merchants the better to wait for a more favorable change in respect to those which are not. There is ground to believe that a difference of situation, in this particular, has immensely different effects upon the wealth and prosperity of Nations.

From these circumstances collectively–two important inferences are to be drawn, one, that there is always a higher probability of a favorable balance of Trade, in regard to countries in which manufactures founded on the basis of a thriving Agriculture flourish, than in regard to those, which are confined wholly or almost wholly to Agriculture; the other (which is also a consequence of the first), that countries of the former description are likely to possess more pecuniary wealth, or money, than those of the latter.

Not only the wealth, but the independence and security of a Country, appear to be materially connected with the prosperity of manufactures. Every nation, with a view to those great objects, ought to endeavour to possess within itself all the essentials of national supply. These comprise the means of Subsistence, habitation, clothing, and defence.

The possession of these is necessary to the perfection of the body politic; to the safety as well as to the welfare of the society; the want of either is the want of an important Organ of political life and Motion; and in the various crises which await a state, it must severely feel the effects of any such deficiency. The extreme embarrassments of the United States during the late War, from an incapacity of supplying themselves, are still matter of keen recollection: A future war might be expected again to exemplify the mischiefs and dangers of a situation to which that incapacity is still in too great a degree applicable, unless changed by timely and vigorous exertion. To effect this change, as fast as shall be prudent, merits all the attention and all the Zeal of our Public Councils; 'tis the next great work to be accomplished.

One more point of view only remains in which to Consider the expediency of encouraging manufactures in the United states.

It is not uncommon to meet with an opinion that though the promoting of manufactures may be the interest of a part of thc Union, it is contrary to that of another part. The Northern & southern regions are sometimes represented as having adverse interests in this respect. Those are called Manufacturing, these Agricultural states; and a species of opposition is imagined to subsist between the Manufacturing and Agricultural interests.

This idea of an opposition between those two interests is thc common error of the early periods of every country; but experience gradually dissipates it. Indeed, they arc perceived so often to Succor and to befriend each other, that they come at length to bc considered as one: a supposition which has been frequently abused, and is not universally true. Particular encouragements of particular manufactures may be of a Nature to sacrifice the interests of landholders to those of manufacturers; But it is nevertheless a maxim, well established by experience, and generally acknowledged where there has been sufficient experience, that the aggregate prosperity of manufactures, and the aggregate prosperity of Agriculture are intimately connected. In the Course of the discussion which has had place, various weighty considerations have been adduced operating in support of that maxim. Perhaps the superior steadiness of the demand of a domestic market for the surplus produce of the soil, is alone a convincing argument of its truth.

Ideas of a contrariety of interests between the Northern and southern regions of the Union, are in the Main as unfounded as they are mischievous. The diversity of Circumstances on which such contrariety is usually predicated, authorizes a directly contrary conclusion. Mutual wants constitute one of the strongest links of political connection, and the extent of these bears a natural proportion to the diversity in the means of mutual supply.

Suggestions of an opposite complexion are ever to be deplored, as unfriendly to the steady pursuit of one great common cause, and to the perfect harmony of all the parts.

In proportion as the mind is accustomed to trace the intimate connection of interest which subsists between all the parts of a Society united under the same government–the infinite variety of channels will serve to Circulate the prosperity of each to and through the rest–in that proportion will it be little apt to be disturbed by solicitudes and Apprehensions which originate in local discriminations.

It is a truth as important as it is agreeable, and one to which it is not easy to imagine exceptions, that every thing tending to establish substantial and permanent order in the affairs of a Country, to increase the total mass of industry and opulence, is ultimately beneficial to every part of it. On the Credit of this great truth, an acquiescence may safely be accorded, from every quarter, to all institutions and arrangements which promise a confirmation of public order, and an augmentation of National Resource.

But there are more particular considerations which serve to fortify the idea that the encouragement of manufactures is the interest of all parts of the Union. If the Northern and Middle states should be the principal scenes of such establishments, they would immediately benefit the More southern, by creating a demand for productions, some of which they have in common with the other states, and others of which, are either peculiar to them, or more abundant, or of better quality, than elsewhere. These productions, principally, are Timber, flax, Hemp, Cotton, Wool, raw silk, Indigo, iron, lead, furs, hides, skins and coals. Of these articles Cotton and Indigo are peculiar to the southern states, as are hitherto Lead and Coal, Flax and Hemp are or may be raised in greater abundance there, than in the More Northern states; and the Wool of Virginia is said to be of better quality than that of any other state: a Circumstance rendered the more probable by the reflection that Virginia embraces the same latitudes with the finest Wool Countries of Europe. The Climate of the south is also better adapted to the production of silk.

The extensive cultivation of Cotton can perhaps, hardly be expected but from the previous establishment of domestic Manufactories of the Article; and the surest encouragement and vent, for the others, would result from similar establishments in respect to them.

If then, it satisfactorily appears, that it is the Interest of the United states, generally, to encourage manufactures, it merits particular attention, that there are circumstances which Render the present a critical moment for entering, with Zeal upon the important business. The effort cannot fail to be materially seconded by a considerable and increasing influx of money, in consequence of foreign speculations in the funds–and by the disorders, which exist in different parts of Europe.

The first circumstance not only facilitates the execution of manufacturing enterprises, but it indicates them as a necessary mean to turn the thing itself to advantage, and to prevent its being eventually an evil. If useful employment be not found for the Money of foreigners brought to the country to be invested in purchases of the Public Debt, it will quickly be re-exported to defray the expense of an extraordinary consumption of foreign luxuries; and distressing drains of our specie may hereafter be experienced, to pay the interest and redeem thc Principal of the Purchased debt.

This useful employment too ought to be of a nature to produce solid and permanent improvements. If the money merely serves to give a temporary spring to foreign commerce; as it cannot procure new and lasting outlets for the products of the Country, there will be no real or durable advantage gained. As far as it shall find its way in Agricultural ameliorations, in opening canals, and in similar improvements, it will be productive of substantial utility. But there is reason to doubt whether in such channels, it is likely to find sufficient employment, and still more whether many of those who possess it, would be as readily attracted to its objects of this nature, as to manufacturing pursuits, which bear greater analogy to those to which they are accustomed, and to the spirit generated by them.

To open the one field, as well as the other, will at least secure a better prospect of useful employment for whatever accession of money there has been or may be.

There is at the present juncture, a certain fermentation of mind, a certain activity of speculation and enterprise which if properly directed may be made subservient to useful purposes; but which if left entirely to itself, may be attended with pernicious effects.

The disturbed state of Europe, inclining its citizens to emigration, the requisite workmen will be more easily acquired than at another time; and the effect of multiplying the opportunities of employment to those who emigrate, may be an increase of the number and extent of valuable acquisitions to the population, arts, and industry of the Country.

To find pleasure in the calamities of other nations would be criminal; but to benefit ourselves, by opening an asylum to those who suffer, in consequence of them, is as justifiable as it is politic….