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David Skeel

Founding Finance

Against the consensus account of America's formative years.

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Next up is the Newburgh Crisis of 1783, which flared when a group of military officers, weary of waiting for their pay, threatened to launch an insurrection. Only a famous speech by George Washington averted bloodshed. Washington began his call for unity by reaching for his glasses and saying that not only had his hair gone gray during his years of service to America, he'd given his eyesight too. But before Washington got there, Hogeland shows, Alexander Hamilton had tried to maneuver him into leading the insurrection rather than quelling it. It was all part of Hamilton and financier Robert Morris' plan to pressure Congress to enact an impost—that is, a tax—that could be used to pay the interest on the new nation's debt and thus establish a stable basis for finance in the new country.

The final chapters of the book chronicle Shays Rebellion in Massachusetts, a revolt by the radical egalitarians against taxes, debt, and the paucity of coinage to pay either; Hamilton's eventual success in getting his impost, plus assumption by the federal government of the states' debt; Thomas Paine's growing disillusionment with George Washington and eventual imprisonment in France when the Washington Administration refused to come to his aid; and the military crackdown on the egalitarian rebellion against a whiskey tax in Pennsylvania.

It's a rip-roaring story whose most remarkable rips come in an unusual chapter ("History on the Verge of a Nervous Breakdown") in the exact middle of the book. "I'm untrained," Hogeland begins. He isn't confessing so much as throwing down the gauntlet against the élites in the history business. Starting with the blockbuster biographies of John Adams and Alexander Hamilton by David McCullough and Ron Chernow, Hogeland assails recent historians for having airbrushed the radical egalitarians out of the history of America's founding. McCullough's account of the preamble to the 1776 resolution, which ignores its dislodging of the Pennsylvania assembly and "empower[ment of] a Pennsylvania working- class movement," is "disingenuous." Chernow downplays Hamilton's role in the Newburgh Crisis. He "goes out of his way to give readers the impression that Hamilton confronted the debt for the first time when he became treasury secretary, and that Hamilton's plan was not to fund the debt, as everybody, including Chernow, knows it was … but to pay it off."

Scholarly historians are no better: "only the least well-known [including several on whom Hogeland relies] focus on early American struggles between wealthy founders and ordinary people." Hogeland points to a symptomatic 1955 study by Robert E. Brown purporting to find that nearly all white male adults were able to vote in Massachusetts in the founding era, whether or not they owned property, and thus that the colony was quite democratic. Brown's argument made it easy to forget the passionate protests by the disenfranchised in North Carolina, Massachusetts, and Pennsylvania. Even progressive historians like Richard Hofstadter and Gordon Wood, Hogeland notes, have tended to take Brown's findings as dispositive and as debunking the early 20th-century historian Charles Beard's claims that the Constitution was an élitist document. Although Wood does not ignore the radical egalitarians, he dismisses them by "reflexively identify[ying] the movement with 'egalitarian resentments,' " seeming "to presume that envy and aggrievement are the sole possible causes for egalitarian agitation."

While Hogeland is taking his swings at the big boys, I'll lodge a small complaint about his own story. I wish Founding Finance had a little more finance. Hogeland devotes only three or four pages (in chapter 2) to 18th-century credit, debt, and banking. In this brief interlude, he gives an admirably clear overview of some of the chief features of 18th-century finance, such as the bills of exchange—IOUs—that merchants issued due to the severe scarcity of coinage. It would have been helpful to consider the increasing use of debt by ordinary Americans during this period; to note the wide variation in the colonies' laws on default, insolvency, and debtors' prison; and perhaps to include the details of an actual debtor who lost a farm or livelihood because he couldn't repay his debts. (Among the excellent recent books on these issues is one by Bruce Mann, a legal historian at Harvard who is best known at the moment as the husband of Elizabeth Warren).

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