One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe

by Robert E. Wright

Like its current citizens, the United States was born in debt-a debt so deep that it threatened to destroy the young nation. Thomas Jefferson considered the national debt a monstrous fraud on posterity, while Alexander Hamilton believed debt would help America prosper. Both, as it turns out, were right. One Nation Under Debt explores the untold history of America's first national debt, which arose from the immense sums needed to conduct the American Revolution. Noted economic historian Robert Wright, Ph.D. tells in riveting narrative how a subjugated but enlightened people cast off a great tyrant-“but their liberty, won with promises as well as with the blood of patriots, came at a high price.” He brings to life the key events that shaped the U.S. financial system and explains how the actions of our forefathers laid the groundwork for the debt we still carry today. As an economically tenuous nation by Revolution's end, America's people struggled to get on their feet. Wright outlines how the formation of a new government originally reduced the nation's debt-but, as debt was critical to this government's survival, it resurfaced, to be beaten back once more. Wright then reveals how political leaders began accumulating massive new debts to ensure their popularity, setting the financial stage for decades to come. Wright traces critical evolutionary developments-from Alexander Hamilton's creation of the nation's first modern capital market, to the use of national bonds to further financial goals, to the drafting of state constitutions that created non-predatory governments. He shows how, by the end of Andrew Jackson's administration, America's financial system was contributing to national growth while at the same time new national and state debts were amassing, sealing the fate for future generations.

Genres: History, Economics, Nonfiction

432 pages, Hardcover

First published January 1, 2008

About the author

Wright is the Nef Family Chair of Political Economy at Augustana College in Sioux Falls, S.D.

Reviews

[James Williams · Rating 3 out of 5]

This review is structured more like a book report than a book review. This is because my main concern with the book is the things it left out. I’m not sure how to describe why I miss these things without first describing what is included. Please forgive this.

Given the recent (summer, 2011) political squabbles around the United States’ national debt, it seemed like a great time to read up on the history. While the present and future fate of the debt is the talk of the nation at the moment, it struck me as prudent to take a quick look at the past to see how we got here.

This book certainly strives to satisfy on the history front. It takes a long look at the national economy from before there was actually a “nation” to put behind that “national”. Indeed, the first part of the book concerns itself heavily with the history of national debts in general: from ancient Kings borrowing from the wealthy against their own crown jewels to the innovations in Holland which led to the first modern national debt, the reader receives a crash course on the scope of national borrowing during the earlier years of civilization up through the Enlightenment.

Here, the author concerns himself with the financial structure of Colonial America as the colonies began the hard fight for Independence. (Spoiler: there wasn’t much.) It’s the post-Independence, post-Constitutional America where the reader who is aware of the structure of America’s current debt starts to become more comfortable. Here, the author delivers an in-depth discussion of Hamilton’s grand plan for the nation’s finances , the basic model of which is still in use today. (It’s possible that the discussion is too in-depth as the description of all of the bonds and their interest rates and their payment schedules started to make my head swim a little. But it’s hard to criticize a non-fiction book for containing too much information.)

This leads past some political squabbles to a rather lengthy chapter which examines some individual federal bond-holders in the great Commonwealth of Virginia. Name-by-name, paragraph-by-paragraph, he lists these people. He tells us who they were and what they did for a living. He tries to divine if they were wealthy or poor. He tells us how much they invested in bonds, when they purchased them, and when they sold them. On and on it goes. At least to an extent, I think I understand the purpose of this chapter: he’s trying to reinforce the idea that the bond-holders at the time weren’t special. They were just ordinary citizens.

But it comes across as “My assistant and I have spent years reading these old ledger books and we want you to see how hard we worked.” Whatever purpose the chapter had, it could have served it just as well at half the length (if not a quarter). By the end of it, I was just happy to have reached the end of it.

After this, there’s a short discussion about how the Jackson administration actually finished paying off the debt. And then the history stops.

At least as far as the national debt is concerned, this book seems to be of the opinion that nothing of note really happened between the Jackson administration and the present day. There’s no talk about the US borrowing for WWII. There’s no talk about how the devastation that war caused in Europe turned America into such an economic powerhouse and how that would have made its treasuries the safest investment around. There’s no talk about how the US dollar’s growth into the international reserve currency would have caused our people and politicians to start to see our debt as something set apart from the debts of lesser nations. In a book about the United States national debt, there’s no discussion of the US Federal Reserve. There’s no discussion of the debt ceiling, despite it being (as near as I can tell) unique to the country.

Which is to say, that this book completely falls apart if you want to learn the history of the debt that the United States actually has right now. There’s all sorts of history about the debt we paid off, but essentially none at all about the one that we actually possess.

Instead, there’s a chapter devoted to some sort of preaching. It may be my political bias framing the way I read it, but the last chapter seemed to start with the presumption that the current national debt is an evil instead of a blessing. And, it may be that same bias which makes me think that it comes down rather hard on the side of slashing entitlements like healthcare and social security. But that could just be because the chapter is so weakly written. Whatever larger point the author was wanting to make, he tried to keep it subtle (probably because this is ostensibly an objective academic history). But the fact that he just couldn’t help himself and included the chapter anyway (even though he tried really hard to not actually say anything in it) comes across as a collision of poor writing and lax editing. It demeans the whole work.

In summary, it would be hard to recommend this book. Both because of the things it chose not to cover (like the entire 20th century) and the things it chose to include (detailed histories of Virginians who happened to buy bonds, a sloppy bit of political something-or-other), I can’t recommend it. I’m not even sure I’m glad I read it. But I guess I’m not upset that I read it and I don’t feel like it was a waste of time.

So that’s something.

[Jason Mccool]

Actually very interesting. A bit dry in parts as it delves into economic details, but the overall, it's well worth reading, especially with the current economic problems facing America and the world. Mr. Wright looks at both sides of the debate between our founding fathers over whether to allow a national debt. There were benefits and dangers, and Mr. Wright points out the important distinction between funded and unfunded national debt, the former building the credit of a young nation while allowing capital improvements, much like a mortgage paid monthly, and the latter more akin to a person maxing out every credit card they own. I had not really considered any benefits of a national debt until reading this, but the key is in the funding of it. Read this book, and then watch the government budget fiasco with a new perspective.

[Nathan · Rating 3 out of 5]

A great text to read alongside the flood of books that were released following the crash of 2008 about the nature of public and private debt and the common perception thereof; it provides an interesting (if not the most robust) historical context and a reminder that these are not new issues by any means. It does focus primarily on the very early history of the US, however, so you'll need to find other sources the long gap between the mid-1800's and the present day.

[Rick · Rating 4 out of 5]

Definitely worth reading, though it seems more geared for people with training in economics or finance.

[Paul Lee · Rating 4 out of 5]

An interesting angle on the evolution of the US financial system.