Report on Manufactures

The Report on Manufactures is the third report, and magnum opus, of American Founding Father and 1st U.S. Treasury Secretary, Alexander Hamilton to Congress on December 5, 1791 recommending economic policies to stimulate the new republic's economy and ensure its independence won in 1783 with the completion of the Revolutionary War.

Hamilton's "Report on Manufactures" laid forth economic principles, rooted in both the Mercantilist System of Elizabeth I's England and the practices of Jean-Baptiste Colbert of France. The principle ideas of the "Report" would later be incorporated into the "American System" program by Senator Henry Clay of Kentucky and his Whig Party. Abraham Lincoln who called himself a "Henry Clay tariff Whig" during his early years would later make the principles outlined in the "Report" and furthered by Clay's "American System" program as cornerstones, together with opposition to the institution and expansion of slavery, of the fledgling Republican Party.

Hamilton's ideas formed the basis for the "American School" of economics.

Economic plan

Hamilton reasoned that to secure American independence the United States needed to have a sound policy of encouraging the growth of manufacturing and secure its future as a permanent feature of the economic system of the nation. These he argued could be achieved through: bounties or subsidies to industry, regulation of trade with moderate tariffs not to discourage imports but to raise revenue to support American manufacturing through subsidy, and other government encouragement. These policies would not only promote the growth of manufacturing but provide diversified employment opportunities and promote immigration into the young United States, but it would also expand the applications of technology and science for all quarters including agriculture.

The tariff

Hamilton reasoned that tariffs issued in moderation, would raise revenue to fund the nation and to encourage domestic (or national) manufacturing and growth of the economy by applying the funds raised in part towards subsidies (called bounties in his time) to manufacturers. The main purposes sought by Hamilton through the tariff were to:

*protect the infant American industry for a short term until it could compete;
*raise revenue to pay the expenses of government;
*raise revenue to directly support manufacturing through bounties (subsidies).

ubsidies to industry

Hamilton reasoned that bounties (subsidies) to industry, which would rely on funds raised by moderate tariffs, would be the best means of growing manufacturing without decreasing supply or increasing prices of goods. Such encouragement through direct support would make American enterprise competitive and independent along with the nation as a whole. In part subsidies would be used to:

*encourage the spirit of enterprise, innovation, and invention within the nation;
*support the building of roads and canals to encourage internal trade;
*grow the infant United States into a manufacturing power independent of control by foreign powers through reliance on their goods for domestic and especially defense supplies.

Adoption by Congress

Much of Hamilton's third report was eventually adopted by the United States Congress after its issuance despite strong opposition to the support of industry through subsidy. Both sides agreed that manufacturing independence was desirable and necessary but disagreed on how to obtain it. The Jeffersonian Democratic-Republican Party's main objection to subsidy was their fear that subsidy would lead to corruption and favortism of certain sections of the new nation over others; namely the north over the agragrian south. This divide (north vs. south) would come up again and again in issues of economic policy until the outbreak of the American Civil War.

In response Congress adopted the report's entire recommendation with the exception of subsidy to industry; favoring increasing tariff rates and import restrictions to encourage manufacturing (which incidentally led many manufacturers to switch party allegiance from Federalist to Republican, being upset at Hamilton's moderate tariff policy).

Opposition to the Report

Leading opponents of Alexander Hamilton's economic plan were Thomas Jefferson (until later years) and James Madison who were opposed to the use of subsidy to industry along with most of their fledgling Democratic-Republican Party. Instead of bounties they reasoned in favor of high tariffs and restrictions on imports to increase manufacturing; which interestingly was favored by the manufacturers themselves who desired protection of their home market. Although the Jeffersonian stance originally favored an "agrarian" economy of farmers, this changed over time to encompass much of Hamilton's original ideas.

ee also

*First Report on the Public Credit - Hamilton's report on public finance.
*Second Report on Public Credit - Hamilton's report on national banking.
*Federalist Party - Hamilton's political party.
*Political economy - Overview of economic theory research.
*Free Market - Opposing school of thought rooted in Adam Smith and British/French physiocrats with branches such as Austrian School.
*Socialism - Opposing School of thought based on the work of Karl Marx and Frederich Engles advocating government ownership of manufacturing or production.

Notes

References

*Croly, Herbert, "The Promise of American Life" (2005 reprint)
*Joseph Dorfman. "The Economic Mind in American Civilization, 1606–1865" (1947) vol 2
*Joseph Dorfman. "The Economic Mind in American Civilization, 1865–1918" (1949) vol 3
* [http://www.questia.com/PM.qst?a=o&d=90104191 Foner, Eric. "Free Soil, Free Labor, Free Men: The Ideology of the Republican Party before the Civil War" (1970)]
*Gill, William J. "Trade Wars Against America: A History of United States Trade and Monetary Policy" (1990)
*Lind, Michael "Hamilton's Republic: Readings in the American Democratic Nationalist Tradition" (1997)
*Lind, Michael "What Lincoln Believed: The Values and Convictions of America's Greatest President" (2004)
*Richardson, Heather Cox. "The Greatest Nation of the Earth: Republican Economic Policies during the Civil War" (1997)
*Edward Stanwood, "American Tariff Controversies in the Nineteenth Century" (1903; reprint 1974), 2 vols.

External links

* [http://olldownload.libertyfund.org/Home3/HTML.php?recordID=0249.04#LF-BK0249-4pt02ch02 Manufactures] - from The Works of Alexander Hamilton, edited by Henry Cabot Lodge.
* [http://www.union.edu/PUBLIC/ECODEPT/kleind/eco024/documents/hamilton/mfg_text.doc the Report] - with page numbers for Selected Writings, Annals of Congress, Works of Alexander Hamilton.
* [http://press-pubs.uchicago.edu/founders/documents/v1ch4s31.html Excerpts from the Report (Columbia University Press) (University of Chicago)]
* [http://history.sandiego.edu/gen/text/civ/1791manufactures.html Excerpts from the Report (University of San Diego)]