October 01, 2003

The Impact of Hamilton's "Report on Manufactures"

A very nice present to find in my mailbox this afternoon:

Doug Irwin | The Aftermath of Hamilton's "Report on Manufactures": Alexander Hamilton's Report on Manufactures (1791) is a classic document in the history of U.S. economic policy, but its fate in Congress is not well known. It is commonly believed that the report was never implemented. Although Hamilton's proposals for bounties (subsidies) failed to receive support, virtually every tariff recommendation put forward in the report was adopted by Congress in early 1792. These tariffs were not highly protectionist duties because Hamilton feared discouraging imports, which were the critical tax base on which he planned to fund the public debt. Indeed, because Hamilton's policy toward manufacturing was one of encouragement and not protection, those interests shifted their political support from the Federalists to the Jeffersonian Republicans during the 1790s.

Posted by DeLong at October 1, 2003 08:25 PM | TrackBack

Comments

Question: did the U.S. have a fixed or floating exchange rate regime in 1791? I ask simply because of what Mundell refers to as the ineffectiveness of commercial policy theorem. This Mundell theorem is often used to suggest that trade protection does not increase overall net exports as export demand falls by the decrease in import demand. But the same holds for export subsidies - import demand rises by the increase in export demand. So whether it's trade protection or export subsidies, commercial policy only reshuffles production from one sector to another.

Posted by: Harold McClure on October 2, 2003 06:44 AM

Floating exchange rate.
Nice argument.

Posted by: anne on October 2, 2003 10:25 AM

At that point US paper money was deeply suspect (because of the rebels' track record, not yet redeemed by good financial behaviour), the usual international trade used bullion of some sort, and the argument leading to the gold standard was favouring bullionists over real bills theorists (mainly because people could see what paper money had done, both in North America and in Europe).

Posted by: P.M.Lawrence on October 2, 2003 06:22 PM
Post a comment