By Hunter Wallace
This excerpt from Michael Lind’s Land of Promise: An Economic History of the United States will illuminate some recent debates here. I just got this book in the mail, but it describes the essential differences between the Hamiltonian and Jeffersonian camps of economics:
“Developmental economics holds that the basic unit of the world economy is not the individual or the firm, but the polity – typically an empire or city-state in premodern times and a nation-state today. Competition or collaboration among countries, rather than among households or companies, is considered to be the central fact of economics. Developmental states, whether democratic or authoritarian, have usually encouraged private property and private enterprise. But they have viewed the private and public sectors as collaborators in a single national project of maximizing the military security and well-being of the community by means of technological modernization, while minimizing dependence on other political communities. The market is good to the extent that it helps necessary national industries and bad to the extent that it hurts them. The government is not the enemy of the private economy, but its sponsor and partner. Developmental capitalism looks at the economy from the point of view of the manufacturer and the engineer, rather than that of the merchant or banker.”
As Lind points out, there are Hamiltonians of the right, left, and center, as well as liberal, conservative and centrist Jeffersonians. My own views are Hamiltonian, centrist, and authoritarian.
“The alternative in America to the Hamiltonian version of the developmental state is the antistatist tradition associated with Thomas Jefferson and his philosophical descendants. The term “liberal” is misleading, because developmental economics comes in liberal forms as well, so I will use a term that many historians use for the political economy of Jefferson and Smith: “producerism.”
In this tradition, the implications of economic power for military power, which are central to developmental economics, are ignored. In the utopia of producerism, competition in free markets among great numbers of producers who lack the power to manipulate prices to their own benefit is assumed to minimize the cost of goods and services. The central role of government-sponsored technological innovation in reducing prices over time, even in monopolistic and oligiopolistic markets, is ignored in producerist thought and its offspring, the academic school of neoclassical economics. Market-driven price reduction is equated with the interests of individuals as consumers. Other than a government with minimal defense and police functions, there is no public good or national interest distinct from the short-term interest of consumers in the lowest possible prices.
This vision of the economy translates into an adversarial vision of relations among governments and businesses. The purpose of the state is to remove barriers to free exchange among individuals and firms, and then, once those barriers have been removed, to limit its activities to enforcing the rules of competiton, as a “nightwatchman” or “umpire.” Cooperation by firms or their merger into large entities is viewed with suspicion and seen as a proper object of antitrust prosecutions. Producerist economics is hostile as well to collaboration between business and government.”
More here on the developmental state.