The Republic of Virtue and the Empire of Liberty*

by

Norman Schofield

Center in Political Economy

Washington University in St. Louis

Campus Box 1208

One Brookings Drive

St. Louis, Missouri 63130-4899

 

September 28, 2001

 

Abstract

Two quite different, but equally plausible, theories of the ''cause'' of Union in 1787 have been put forward, first by Charles Beard (1913), and then by William Riker (1964).  Beard's thesis was that the preferences underlying the Ratification were generated by economic interests associated with capital -- the differing interests of ''merchants, money lenders and financiers ''against ''farmers and debtors.''  Riker, in contrast, focused on the clear threat posed by Spain on the Mississippi.  The confederation was too weak,  politically and militarily, to face this threat.  Voting by the States, over Jay's attempt to negotiate with Gardoquin, suggested to Madison that the weak Confederation would fragment as states followed their differing geopolitical interests. To bind them together required a federal apparatus.  This apparatus could both deal with the military threat, and, by enforcing a hard money principle, exercise the fiscal discipline required for economic growth.  While both Beard and Riker were thus correct, there was one aspect of Union that they did not discuss.  Prior to 1787, democracy was feared because of its potential for factionalism.  Madisons' deep arguments in ''Federalist X'' and ''Federalist LI'' may have allayed the fear of factionalism and helped create a winning Federalist coalition.  In the 1790's, it became obvious that Hamilton's scheme to construct a powerful fiscal machine based on a ''Walpole equilibrium,'' would benefit capital over land.  This led both Jefferson and Madison to the creation of a 'loyal opposition party' in the manner of Bolingbroke.  The economic logic underlying the Republican party was, thus, a conflict, again, but this time between the interests of land and capital.  This Republican coalition, and later, the Democracy depended on the coincidence of interests between the agrarian concerns of both free labor and slavery.  From 1800 to 1860 this coalition dominated U.S. politics.

 

*  I thank Annette Milford, Larry Kramer, Andrew Rehfeld and Andrew Rutten for comments and for many helpful conversations.  Rehfeld's unpublished work on the extended Republic was particularly useful.

 

                           

 

The Republic of Virtue and the Empire of Liberty

 

 

 

1.  The Empire for Liberty.

 

                 In 1781, Edward Gibbon published his third volume of History of the Decline and Fall of the Roman Empire.  Near the end he comments on the ''sad prospect of misery and desolation'' in the Italy of the reign of the Barbarian Odoacer (after 476 CE).  Then later, surprisingly, he goes on to comment

Should the victorious Barbarians carry slavery and desolation as far as the Atlantic Ocean,… Europe would revive and flourish in the American world, which is already filled with her colonies, and institutions. (Gibbon, 1994  [1781], 514).

 

                Ever since the end of the Roman empire, the causes of its decline have been debated.  Salvian (born 400 CE) had noted that even as the empire died, ''the poor [were] dying of the increase in taxes that they already found too great for endurance.'' [quoted in Grant, 1998: 26].  Of course, as the western Roman empire died, the eastern empire, based in Constantinople (and founded in 330 by Constantine the Great), flourished.  The great church there, Hagia Sophia, was finished in 415 CE.  During the reign of the eastern emperor, Justinian (527-565 CE), North Africa, and part of Italy (including Ravenna) were re-conquered by his general, Belisarius.  The magnificent church of  S. Vitale in Ravenna (rivaling Hagia Sophia) was consecrated in 547 CE.  Gibbon's later volumes, describing the transformation of the western Roman empire into its long-lived Byzantine offspring, would not be published until 1788.  However, it is not far-fetched to believe that the Founders of the American Republic considered themselves to be creating a new Constantinople, a new ''Empire for Liberty'' in the West.[1] 

                In his draft of the Declaration of Independence, Thomas Jefferson accused the British King, George III, of

abolishing the free system of English laws in a neighboring province, establishing therein an arbitrary government and enlarging its boundaries, so as to render it at once an example and fit instrument for introducing the same absolute rule into these states (Peterson, 1984: 21).

 

                The action that Jefferson referred to was the passing of the Quebec Act in the British Parliament, in 1774, removing the entire Ohio valley from the grasp of the Colonies and placing it under the jurisdiction of Quebec.  Jennings (2000: 169) sees the response of the Colonies to this act of tyranny as the beginning of the creation of an American empire.  Indeed, the success of the Colonies in the War of

1776-1783, the Louisiana Purchase in 1803, and the appropriation of the Floridas in the War of 1812-1815 can all be seen as part of a consolidation of a land empire, very different from the commercial or mercantile empire of Britain.

                        Although Hamilton and Madison were agreed in 1787 in the necessity of constructing a federal Union, their conceptions of how this Union would evolve became very different during the administrations of Washington and John Adams.  I contend that these differing conceptions can be identified with an implicit conflict between the imperatives of land and capital.  In Britain, this conflict was resolved in a particular institutional fashion, by what I shall term the ''Walpole equilibrium''.  In a sense the logic of this equilibrium set Britain on a path to its commercial empire, allowing it to contend with, and eventually defeat, France.  Both Hamilton, and John Adams made certain constitutional inferences from Britain's success, and attempted to utilize these in reconstructing the institutions of the new Union.

                Historians have noted the similarities between Hamilton's ''system'' of the 1790's in the USA, and Walpole's scheme as ''prime minister'' in Britain in the 1720's (McCoy, 1980; 164).  They have also observed that Bolingbroke's ''country'' arguments against Walpole (Kramnick, 1992) bear a certain resemblance to Madison and Jefferson's contentions against Hamilton.  They have not emphasized, however, the differences in the economic systems of Britain in the first part of the 1700's and of the U.S. in the latter part of the same century, I shall argue that these differences provide a justification of the Madison-Jefferson plan for the long run growth of the U.S.

                The problem facing Britain in the early 1700's was to construct a fiscal system for the country that would balance land and capital, and provide revenue for government in its efforts against France.  As North and Weingast (1989) have argued, the establishment of the Bank of England shortly after the Glorious Revolution of 1688 was an attempt to give credible commitment to fiscal responsibility.  By 1720, it had proved necessary to establish further institutions, particularly the South Sea Company, to provide capital for the government.  Speculation in the South Sea Bubble made it clear that these institutions had to be established on a more secure foundation.  Henry St. John, Viscount Bolingbroke, (earlier a minister of Queen Anne) in his writing of this period had rejected the corruption and speculation associated with these commercial institutions.  Indeed, Bolingbroke's ideas were taken by Pocock (1975) to refer back to Machiavellian notions of civic virtue, and even further back to the Roman authors of the Augustinian period. 

                Walpole's genius was to base the funding of the British fiscal institutions on the tariff and excise.  Although land tax formed approximately 50% of government revenue in 1698, by 1740 land tax comprised only 20% of government revenue (Brewer, 1987).  Dramatically increased government revenue came from customs.  Since Britain's imports comprised mostly raw materials and food, a tariff on these effectively protected land.  Because land (and food) prices were kept high, agriculture attracted further capital, and labor's contribution to agricultural production fell (Floud and McCloskey, 1994).

                The fiscal institutions invigorated commercial development, while the tariff, the principal means of funding the debt, benefited the landed interest.  Thus the Walpole equilibrium, balancing land and capital, allowed for the dominance of the Whig party, until at least 1815.  In essence the equilibrium was kept in place until the repeal of the Corn Laws in 1846.  (The details of this equilibrium are dealt with more fully below, in Sections 4 and 5.)  Bolingbroke may have been correct in his perception of the corruption associated with this equilibrium, but he was wrong in inferring that the landed interest would necessarily be damaged by the commercial development taking place in Britain after 1720.

                However, Hamilton's attempt to replicate the Walpole equilibrium in the U.S. could not succeed in the same fashion.   Since U.S. imports were predominantly manufactures, any attempt to sustain Walpolean fiscal institutions by a tariff could only benefit capital. Relative prices of land and capital would move in opposite directions, and the scarce factor, capital, would become more privileged. This would stimulate commercial development in the cities in the Northeast, but relatively depress land prices, and thus agricultural productivity.

                It is my contention that Madison and Jefferson realized the long-run consequences of Hamilton's moves in the 1790's.  The reasons for their rejection of Hamilton's innovation was due to a number of insights that can be traced back to Condorcet in Paris.  Although the influence of the philosophers of the Scottish Enlightenment on Madison and Jefferson has been noted (Adair, 1943), the precise and parallel influence of the French Enlightenment (and particularly Condorcet) has not been given so much attention.  Sloan (1995: 242) has observed the similarity of ideas of Jefferson and Condorcet with regard to Jefferson's comments on ''the earth belongs in usufruct to the living'' (Peterson, 1984: 959).  More significantly, Appleby (1992) has remarked that Jefferson was persuaded by the free trade arguments of Turgot, previously the Finance Minister to Louis XVI.  Since Condorcet and Jefferson are known to have been friends and dined together in Paris, it is more than likely that Condorcet, Turgot's protégé, was the one who explained the consequences of free trade to Jefferson.  Appleby also mentions Jefferson's rejection of the Malthusian argument that population would outstrip food production.  Since Malthus' book (Malthus, 1970 [1798]) was written in opposition to the optimism of Condorcet's Esquisse (1794), it also follows fairly clearly that Jefferson's view was very probably the result of Condorcet's influence.  Finally, Appleby notes, that after his presidency, Jefferson was involved in the translation and publication of Commentarire sur l'esprit des lois de Montesquieu by Destutt de Tracy (1798).  This essay, rejecting Montesquieu's argument on the soundness of the British Constitution (based as it was, to some degree, on Bolingbroke's works), also included a chapter by Condorcet.  Since Condorcet had died, prior to 1798, during the Terror, this suggests that Condorcet's arguments for the rejection of Montesquieu was also known to Jefferson.

                While these observations are no more than suggestions, they indicate to me that both Jefferson and Madison developed an optimistic view over the probable development of the U.S. political economy, and that this view derived from Condorcet. 

                The logic of the Madison-Jefferson position was that the future of the U.S. lay in the development of the factor of land.  By enlarging the expanse, and increasing the productivity of this factor, the U.S. could become a great ''empire for liberty.''  In fact, Madison and Jefferson were correct in this view.  Without American grain, Britain could never have become a great commercial empire, because it could not have fed its population.  It is not too outrageous to suggest that Britain and the U.S. were indeed in some sense analogous to the Western Empire of Rome and the Eastern of Constantinople.

                As it happened the consolidation of this Empire of Liberty depended on a coalition of southern free states and western free labor.  Appleby (1992) suggests that what Madison and Jefferson had in mind was the growth and dominance of a commercial agrarian empire, rather than one depending on slave labor and cotton.  So in this regard, their vision did not come true in the expected fashion.

                To present the construction of this agrarian empire of liberty, as envisioned by Madison and Jefferson, I shall first pursue the consolidation of the land empire up to 1815, focusing on the related issues of foreign threat and debt.  In Section 3, I shall examine the logic of the Republic, as argued by Madison and Hamilton in the Constitutional Convention and the Federalist.  Section 4 gives an outline of the nature of the Walpole equilibrium in Britain, as well as a prJcis of the reasons for Bolingbroke's opposition.  In Section 5, I argue that the logic of Bolingbroke's opposition was invalid for the British situation, but correct for the Americans.    Indeed, I contend that Madison's argument in ''Federalist X,'' to the effect that only presidential choice could be fit in the Republic, gave added force to the Madison-Jefferson position in rejecting Hamilton.  Hamilton's attempt at recreating the Walpole equilibrium would, by my analysis, have created a commercial economy damaging to agrarian interests.  Thus the ideology of Bolingbroke, the theory underlying Madison's arguments in The Federalist, and the economic agrarian interest coincided, and led to the creation of the Republican coalition.  I conclude with some comments on the long term effects of the Republican coalition fashioned by Jefferson and Madison.

               

2.  Quandaries of Foreign Threat and Debt.

Many necessary causes of the Declaration of Independence have been proposed. Schofield (2002a) argues that a significant necessary cause arose out of the success of the British in their war with the French in 1756-63.  By taking Quebec, and thus the Ohio Valley and the eastern bank of the Mississippi, the British found themselves caught between the desire of the American colonists to settle the interior, and the anger of the Indian tribes at this intrusion.  By declaring the Proclamation line of 1773, passing the Quebec Act of 1774, and manning a line of forts (at considerable expense), the British attempted but failed to restrict settlement.  This effort at restriction was perceived as British tyranny and hastened the move to independence.  However, by themselves the colonies had little hope of success.  French aid was promised (in May 1776) by Louis XVI, and his minister Vergennes; this promise was the trigger for the Declaration of Independence on July 4.   However, the Spanish had been ceded the west bank of the Mississippi by the French in 1783.  Their patrols, departing from St. Louis during the revolutionary war, claimed areas near the Great Lakes in Michigan, etc.  After the success of the Americans in 1783, the Spanish suspended the right of deposit (transfer of goods from barge to ship) at New Orleans.  John Jay attempted by treaty to deal with the Spanish, accepting this closure in exchange for trade privileges in the Caribbean.  Madison, in a letter to Jefferson, in August 1784, vehemently objected (Smith, 1995: 341).  More importantly, since seven of the thirteen states approved the treaty, Madison feared the Confederation would collapse.  This threat by Spain can be seen as a necessary cause of the Convention meeting in 1787 to create the constitutional framework of Union (Riker, 1964). 

                From the perspective of this paper, the purpose of the Federalists, in proposing Union, was to construct an Empire, diverse in population and extent, that would somehow preserve liberty.  Although the Union created by the federal ratification of 1788 was limited in population, it was almost unlimited in potential population and extent.  Indeed, Madison's argument in ''Federalist X'' (Rakove, 1999; 160) was that diversity itself was crucial for the stability of the republic.  For Union to be successful at thwarting foreign threat, it had not only to help maintain cooperation between the various states, but had to involve an efficient fiscal apparatus.  It was obvious to the Founders that Britain, perceived as one of the aggressive European powers, was a threat precisely because of its capacity to engage in war.  Since war involved debt (as everyone knew from the experience of 1776-1783), fiscal efficiency meant managing debt.  Britain had created a fiscal apparatus, involving the Bank of England, the South Sea company and the East Indian company in the early 17th century.  However, this apparatus entailed (according to Bolingbroke) a profound corruption.  The fiscal quandary was how this corruption could be avoided.

                After the Ratification period, France entered into its Revolution, and any threat from France was muted until after 1796.  The treaty negotiated by John Jay with Britain in 1794, ratified by Congress and signed by Washington, provided for the British evacuation of the northwest posts, and opened up ''full settlement of the Ohio Valley'' (Johnson, 1997: 226).  However, the treaty also opened up the Mississippi to British traders, and failed to address American grievances against impressment  (Ketcham, 1971: 357).  In a letter to Monroe (December 20, 1795), Madison spoke of the Federalists as the British party, and considered any support for it to be due to the influence of British capitalists (Rakove, 1999: 555).

During John Adams' administration (1797-1800), France and the U.S. were engaged in what became known as a quasi-war. The Alien and Sedition Acts (1798), passed by the Federalists, were declared to be war measures, and caused Vice President Jefferson to abandon his office.  Of equal concern to Madison and Jefferson were the imposition of a war tax on land, and the request to borrow $5 million for the effort against France.  The slaves of Sainte Domingue (Haiti) under Toussaint L'Ouverture, influenced by the French Revolution, had revolted against their masters, but had not yet declared independence from France.  The embargo that had been imposed against the rebellion was lifted by Adams (much to Jefferson's disgust) and the American fleet, such as it was, sailed to Sainte Domingue to show support for Toussainte (McCullough, 2001: 519).

In September 1798, Jefferson drafted the Kentucky Resolutions.  These seemingly denied that the Constitution was a compact among the people. 

Whensoever the General government assumes undelegated powers, it's [sic] acts are unauthoritative, void, and of no force: that to this compact each state acceded as a state… each party has an equal right to judge for itself [Smith, 1995: 1080].   

 

The Virginia Resolutions, drafted by Madison, went further.

[I]n case of a deliberate, palpable and dangerous exercise of other powers not granted by the said compact, the states who are parties thereto have the right, and are in duty bound, to interpose for arresting the progress of the evil (Rakove, 1999: 589).

 

The resolutions were passed in their state legislatures on November 16 and December 24, 1798 (McDonald, 2000: 41).

                Meanwhile, Adams resisted Hamilton's pressure for aggression against France, and continued with his cautious negotiations (McCullough, 2001: 531). The death of George Washington on December 14, 1799, and the news somewhat later of the Coup d'Etat of 18 Brumaire (9 November) 1799, making Bonaparte First Consul, seemed to end both the Federalist period and the French Republic.  Public perceptions that the Republicans were more likely to bring peace with France probably contributed to the legislative victory over the Federalists in New York in 1800.  This victory was to prove the key to Jefferson's presidential victory in November 1800.  News did reach the U.S. in mid November that Bonaparte had agreed to a treaty of friendship, but this was too late to affect the election (McCullough, 2001: 552).

In the November election, ten of the sixteen states chose their electoral college representatives by vote of the state legislatures. In the college, Jefferson and Aaron Burr won 73 each to 65 for Adams and 63 for Pinckney.  McCullough notes that Adams would have won but for New York.  Because of the draw between Jefferson and Burr, the vote went to the House of Representatives, where Federalists preferred Burr to the arch Republican, Jefferson.  In the ballots, Vermont and Maryland were equally divided and so were not counted.  Eight states stood for Jefferson and six for Burr, so neither had the required majority of nine.  After five days, on February 17, 1801, on the basis of hints by Jefferson that he would not dismiss Federalist officials for political reasons, the Federalists in Maryland and Vermont abstained.  These states were then counted Republican, giving Jefferson ten states in all.  Bayard cast a blank ballot for Delaware, as did the Federalists of South Carolina, so Burr ended with only four states, all in New England (Weisberger, 2000: 275).  Jefferson became president and Burr vice-president, by what was, in essence, an 'heresthetic' maneuver (Riker, 1986) by the former.

                Relations with France, in the early years of the Jefferson presidencies, were still uncertain.  In the beginning of 1801, Jefferson offered support for the French in their attempt to retake Sainte Domingue, by restricting trade with the rebellious Haitians (Langley 1996: 222).  However, news came in 1802 of the secret treaty ''retroceding'' Louisiana from Spain to France.  ''Later that year a Spanish imperial official abruptly suspended the American privilege of deposit at New Orleans'' (Meinig, 1993; 10).  In April 1802, Jefferson had written to his ambassador in Paris, Robert Livingston, remarking that, as a result of the French threat, ''We must marry ourselves to the British fleet and nation'' (Peterson, 1997; 1105).  This comment may have been due to fears that the French intended to take possession of the west bank of the Mississippi after dealing with Sainte Domingue (Adams, 1986; [1889]: 264).  However, the French army was devastated in Haiti, and Livingstone, to his surprise, was offered Louisiana for $15 million.

                In his speech to Congress in October 1803, Jefferson implied that the United States was a new kind of empire, whose citizens had to divest ''themselves of those passions and partialities [which would] embarrass and embroil us in the calamitous scenes of Europe'' [Peterson, 1984: 516].  It is worth remarking that, in his proclamation of Haitian independence, made on January 1, 1804, the cause of the French defeat in Sainte Domingue, Jean Jacques Dessalines, stated that ''it assured forever an empire of liberty in this country of our birth.''   The Floridas, however, were still in Spanish hands, and Madison, as Secretary of State, tried, without immediate success, to force Spain to relinquish them to the United States. 

                In response to decrees by Napoleon and the British, essentially abolishing the notion of neutrality in trade, the U. S. Congress passed the Embargo Act of December 1807, limiting all U.S. imports from Britain and France, as well as exports from the U.S. to the imperial colonies of the Caribbean.  Madison believed this would force Britain, in particular, to honor neutrality (Ketcham, 1971: 457).  The popularity of the embargo may have won Madison the presidency in the 1808 election.

                Jefferson saw various possibilities for the expansion of the American empire, arising out of the relationship with France.  In his letter to Madison of April 27, 1809, he expressed the opinion that Bonaparate, though crooked,

would give us the Floridas to withhold intercourse with the residue of [the Spanish] colonies…and…will consent to our receiving Cuba into our union to prevent our aid to Mexico and the other provinces….  We should then have only to include the North in our confederacy, which would be of course in the first war, and we should have such an empire for liberty as she has never surveyed since the creation (Smith, 1995: 1585) (my italics).

 

Presumably by the North, he meant British Canada.

Madison replied on May 1, 1809, that the difficulty in the

relations with France, lies in the effort she may make to render us…subservient to the reduction of Spa[i]n.… the school of adversity may have taught [Britain of the advantage of]  a conciliating moderation towards the U.S. (Smith, 1995: 1586).

 

                In 1810, settler agitation in the Floridas prompted Madison to request William Claiborne, Governor of the Orleans Territory, to enter West Florida to establish civil government, and, if invasion threatened, to occupy East Florida.  In Madison's letter to Jefferson in October 1810 he explained that although this occupancy would be resented by Spain, by England and by France, the prize made the ''quadrangular contest'' worthwhile (Smith 1995: 1648).

                As both France and Britain grew more aggressive against the U.S., it become clear that war was on the horizon.  Albert Gallatin, Madison's Secretary of the Treasury, an old ally, proposed doubling the tariff, and imposing stamp duties and excise taxes, as well as raising a loan of $10 million.  As Madison wrote, however, to Jefferson, on May 25, 1812, 

the business is become more than ever puzzling.  To go to war with England and not with France arms the Federalists…and divides the Republicans… . To go to war against both, presents a thousand difficulties, above all, that of shutting all the ports of the Continent of Europe ag[ainst] our Cruisers….The only consideration of weight in favor of this triangular war… is that it might hasten thro' a peace with [Great Britain] or [France] a termination…of the obstinate questions now pending with both.  But even this advantage is not certain.  For a prolongation of such a war might be viewed by both Bellig[erents] as desirable… as has prevailed in the past conduct of both [Smith, 1995: 1696).

 

On June 4, 1812, the House voted by a substantial majority for war with Britain.

                The quandary of 1812 was `resolved', in a sense, in a similar way to the resolution of the quandary of independence of 1776.  On the later occasion, however, no French aid was forthcoming.  Despite military setbacks in the West, Madison won the presidential election of 1812, and rejected proposals by the British offering armistice.  Just as the war of Independence of 1776-83 was preceded by Pontiac's Indian rebellion, so was the war of 1812-15 preceded by the resistance of the Shawnee under the influence of the prophet, Tesukwatawa, and his brother Tecumseh, to U.S. expansion in the Old Northwest.  Prophet's Town, the center of the Indian unrest, in present day Indiana, was destroyed by the forces of the governor of the Indiana territory, William Harrison, in November, 1811.  Tecumseh himself was killed at Moraviantown, in Upper Canada, in October 1813 [Sugden, 1997; 375].

                American unpreparedness for the war was illustrated by the destruction of the capital, Washington, on 24 August 1814.  The British force, under Admiral Cochrane, left Bermuda in early August; it comprised 20 men-of-war and 30 transports, with a brigade of 2,500 troops.  On the American side were 2000 men under Brigadier General Stansbury, plus 7,000 militia. The British forces broke thorough the disorganized defenses, and finding no one available to ransom the city, burned the Capitol, Senate, Chamber and House of Representatives, Treasury, War Office and ''President's Palace.'' The British lost 300 men, in what was termed ''a lasting Monument of disgrace to the [American] nation at large.''

                This disgrace was, to some degree, mitigated by Andrew Jackson's victory over the British at New Orleans on 8 January 1815.  Before his victory, Jackson had already defeated the Creek Indians at Tohopeka and forced them to cede 23 million acres to the U.S.  Just as with the Shawnee in the North, the tribes of the South had previously been forced to give up territory to the government.  Choctaws, Chickasaws, and Cherokee had ceded millions of acres at between 2 to 10 cents an acre [Sugden, 1997: 240].  Tecumseh himself had visited the Creek territory in Alabama in October 1811, and the Upper Creeks (or Red Sticks) had responded to his call for rebellion.  It was this rebellion that Jackson destroyed at Tohopeka on March 14, 1814, with a force of 3,000 men (Remini, 2001: 67).  As a result of the victory, Jackson was promoted to major general and made commander of the Seventh U.S. military district (including Louisiana, Tennessee and the Mississippi Territory) and ordered by Madison to negotiate with the Creek Indians.  Given that the British were believed to be massing on the Gulf Coast, Jackson wanted a buffer zone between the Indian territory and the Gulf.  To the dismay of the tribes, he demanded a huge swathe of territory.  The Treaty of Ghent between Britain and the U.S. (24 December 1814) stipulated the return of rights and land of the Indian tribes who had allied with the British.  Since this category included the Creeks, the British argued that Jackson's buffer zone should be returned to the Creek nation.  The Americans retorted that the Treaty of Fort Jackson, ceding this land, was signed on 9 August 1814, and preceded Ghent.  Thus the Creeks were not belligerents at the signing of the Treaty of Ghent, so the stipulation of the Treaty did not apply (Heidler and Heidler, 192, 1997).

                The conclusion of the war of 1812-1814 brought about the creation of a secure boundary for the U.S., since the Floridas and New Orleans were safely enclosed.  The war had vastly increased the national debt, but greater trade and tariff income were expected to restore confidence and specie payments.  In his seventh annual address (December 5, 1815), Madison noted that the national debt was $120 million, of which $39 million had been contracted prior to the war, $64 million during the war, and $17 million in Treasury notes.  Madison also argued that '' It is, however, essential to every modification of the finances that the benefits of a uniform national currency should be restored….'' (Rakove, 1989: 714).  As Ketcham (1971: 606) observes,

[I]n April 1816, the President signed bills rechartering the national bank, setting tariffs at mildly protectionist levels, retaining many war taxes and maintaining both the army and navy…

 

For the British in late 1814, war with the U.S. no longer appeared necessary.  Napoleon had been forced to abdicate on April 12, 1814, and the Bourbon, Louis XVIII, had agreed to the creation of a constitutional monarchy (with limited enfranchisement and Roman Catholicism as the official state religion) on June 4.  Of course, Napoleon came back from Elba and was only finally defeated at Waterloo, on June 14, 1815.  The latter part of the war cost Britain at least six hundred million pounds sterling (Schom, 1997: 702), while Kennedy (1987: 81) estimates total British government expenditure at over 1.6 billion pounds between 1793 and 1815.  British government debt increased by 440 million pounds in this war period.  Between 1786 and 1815 British per capita debt rose from approximately 7.5 pounds to at least 40 pounds.  In contrast, the U.S. national debt, per capita, was about $24, or 6 pounds.  Madison may well have considered that Britain was falling into the imperial trap of war, tax and debt.  In fact, the fiscal machinery put in place in Britain after the Glorious Revolution of 1688 allowed Britain to continue to fund its debt, and to create its 19th century empire (Brewer, 1988; North and Weingast, 1989).  This empire eventually fell not perhaps through fiscal over-reach (as Kennedy suggests) but in the cataclysms of two world wars.  It is not, at present, possible to determine whether the American hegemonic empire faces the same prospect of decline.   It is evident, however, that both Jefferson and Madison believed that the imperial trap could be avoided by the constitutional rules instituted and adapted in the period 1787-1815.

                It is clear from this narrative that there was a tendency by Federalists such as Jay and Hamilton to favor Britain during the period in question.  John Adams seems to have attempted above all to remain neutral.  Madison, and particularly Jefferson (as discussed in O'Brien, 1996) favored the French.  Such a diplomatic divide is insufficient to account for the intense disagreements between the two sides.  In what follows I shall ascribe this divide to two different ideological, constitutional, and economic conceptions of Empire.

 

3.  The Extended Republic

                In ''Federalist XI,'' Hamilton expressed his view on the possibility for the future.

Europe, by her arms and by her negotiations, by force and by fraud, has in different degrees extended her dominion over [Africa, Asia, and America].  The superiority [Europe] has long maintained has tempted her to plume herself as the mistress of the world, and to consider the rest of mankind as created for her benefit.  Facts have too long supported these arrogant pretensions….  It belongs to us to teach that assuming brother moderation.  Union will enable us to do it.  Let the thirteen States, bound together in a strict and indissoluble Union, concur in erecting one great American system to control all translatlantic force…. and able to dictate the terms of the connection between the old and the new world! (Rossiter, 1961 [1787], 90).

 

                As I have suggested above, the threat from Spain on the Mississippi provided the motivation to consider Union.  For a Union to be successful however, it had to deal both with the problem of fiscal efficiency and with the potentially even greater problem of factionalism.  For Hamilton, both problems could be dealt with by what I shall term the ''Walpole'' solution.  Madison, in contrast, was more concerned with the problem of factions, and had a solution, which he presented in ''Federalist X", and which I shall term the ''Condorcet'' solution.  Adair, of course, in his doctoral thesis of 1943 (Adair, 1943; 2000), pointed out the differences of focus between Madison and Hamilton.  Many historians, developing Adiar's insights into the origins of Madison's solution in the ideas of the Scottish enlightenment, have created what has become known as the Republican synthesis (Bailyn, 1967; Wood, 1969; McDonald, 1979).  This has led to an interpretation of the conflicts between Federalists and Republicans in the period after 1790 as, in some sense, a replay of the conflicts between Court and Country in Britain in the early part of the eighteenth century.  In this conflict in the U.S., Hamilton plays the part of Walpole aspirant, and Jefferson/Madison as the antagonist, Bolingbroke.  In Britain, however, Walpole created the institutions of a commercial empire.  In the U.S., Jefferson and Madison created a style of empire that was very different from the one envisaged by Hamilton (Elkins and McKittrick, 1993).  I shall argue that the Country won in the U.S. in 1800 because of a subtle difference between the contrasting ideologies of Court and Country in Britain and the U.S. and because of the quite different economic structures in the two countries.  I shall, somewhat anachronistically, use social choice theory in an attempt to contrast the Walpole, or Hamiltonian, solution with that of Madison's Condorcetian solution, without doing injury, I hope, to their logic.  This will allow us to draw out what I believe is a fundamental flaw of the Court/Country analogy, and give us access to the implicit logic of the Republicans. 

Adair gives a brief outline of the understanding of the monarchy, aristocracy and democracy as set out in Montesquieu.  In essence, there is an

inveterate and incorrigible tendency to use the apparatus of government to serve the special interests of the one [in monarchy] or the few [in aristocracy].… However, the aristocratic form offered…. the best possibility of wisdom…,while monarchy promised the necessary energy, secrecy , and despatch…. A government by the people always possessed fidelity….  However, the vices of democracy were that the people were not wise… and could be easily duped. [Adair, 1974: 173]. 

 

As John Gillies wrote, in dedicating his History of Greece  to George III, ''History… exposes the dangerous turbulence of Democracy, and arraigns the despotism of Tyrants'' (Adair, 2000: 57).  Madison used a similar expression in ''Federalist X'' [Rakove 1999: 160-167].

[A] pure democracy…can admit of no cure for the mischiefs of faction.  Hence it is that such democracies have ever been spectacles of turbulence and contention….

The instability, injustice and confusion introduced into the public councils, have in truth been the mortal diseases under which popular governments have everywhere perished….

From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results: And from the influence of these on the sentiments….ensues a division of the society into different interests and parties. 

 

These parties or factions may originate from ''religion…as well as of speculation and practise.''  Adair suggests that Madison's phraseology derives from Hume's ''parties from principle, especially abstract speculative principles'' [Hume, 1985 [1777]: 57]  (Hume continued his discussion on factions by illustrations from the history of Constantinople and Rome.) 

                It is obvious enough that, with many factions, derived from very many differing kinds of interests, the creation of a stable, possibly tyrannical, majority would be almost impossible.  Indeed the more heterogeneous or the more extensive the society, the less likely is it that such a permanent majority can form.  Many readings of ''Federalist X'' focus on this interpretation.  However, this interpretation would hold for a Democracy -- the system of direct popular choice.  Madison takes pains to argue that Democracy (whether large or small) cannot deal with the problems of faction.  It therefore cannot be the tyranny of a majority faction that he fears, but something quite different --- namely turbulence.

                What he does present is a ''ratio'' theorem about republics -- systems, or schemes, of representation.  If the proportion of 'fit' characters in the extended republic be at least as large as in the small republic, then the probability of a fit choice in the extended republic will be greater than in the small.  The definitions of a 'fit character', and of a `fit choice', are not clearly set out, however.

                Clues about the notion of `fit' are given in the earlier ''Vices of the Political System of the U.S.''  (April 1787).  There Madison observes that a great desideratum is a sufficient neutrality between the different interests and factions.  ''In absolute Monarchies, the prince is sufficiently neutral,…but frequently sacrifices their happiness to his ambition or avarice….  An auxiliary desideratum is a process of elections as will most certainly extract from the mass of Society the purest and noblest characters.'' [Rakove 1999: 79].

                Adair is surely correct in pointing to the influence that Hume's ''Idea of a Perfect Commonwealth'' [Hume 1985 [1777]: 512-529] had on Madison.[2]  But Adair does not point out the essential feature of the Republic on which Madison concentrates: republican elections are for representatives, not outcomes.  The term 'fit' refers to a person, not to an alternative. 

                To see the importance of this distinction, consider political behavior in a House of Representatives.  Some of these representatives may well be fit, of pure and noble character.  However, as Hume observed, ''love, vanity, ambition, resentment'' all beget public decision.  Factions must dominate, and therefore so must ''turbulence.''  What exactly is this turbulence that follows from faction?  I regard it as precisely the same as the social choice notion of  ''chaos.''  As McKelvey (1976) and Schofield (1978) showed, if diversity (or dimensionality) is sufficiently high, then sequences of outcomes (associated with particular winning coalitions) can lead anywhere in the set of possible policies.  Clearly a permanent, tyrannical majority cannot be expected, unless some cohesive principle, a ''party'', is at work.  But Madison, in ''Federalist X,'' does not assert that party is a solution to factional turbulence.  It follows, therefore, that if the electorate is ''numerous extended and diverse in interests'' and this diversity is reflected in Congress, ''then the development of a majority faction can be limited'' (Dahl, 1956: 16).  However, this heterogeneity does not imply that ''competing interests cancel one another out'' (Williams, 1998: 39).  The pluralist reading of Madison is only half correct.  To limit the effects of turbulence in the House of Representatives requires a different institutional device.

                I shall argue below that Hamilton's insights, into how to limit turbulence, were essentially correct.  Although Adair understands Hamilton's fiscal ambitions for the U.S., he does not quite realize the significance of the political mechanism proposed by Hamilton.  I return to this theme below.

                If Madison's theorem does not apply to the House, where is it intended to apply? Rehfeld (2000) argues that it applies to the large district or constituency.  For Rehfeld, an electoral district is sufficiently heterogeneous for Madison's argument to be valid: in such a district, the factional interests must put aside their differences and choose a ''fit'' representative.  It is unclear however that this argument works.  Modern theories of candidate competition suggest that contenders would swarm into the center of the electoral distribution (Calvert 1985; Banks and Duggan, 1998).  Such spatial models tend not to pay close attention to Madison's notion of interest and faction, and there is no evidence at all that Madison thought such maximizing behavior would occur.  It is more likely that Madison would consider a single district to be dominated by a particular interest, or small set of interests, who would choose a representative of this interest, `fit' or otherwise.

                I contend that there are two arenas where the theorem is most likely to apply: Presidential elections and Senate elections. The President is, of course, chosen by electors.  Each state has electors equal in number to the House representatives plus two (for the two Senators).  Since states vary, the electors will be heterogeneous across states.  It is not impossible that electors will cluster into factions, but unlike policy making in a House, the factions in the electoral college must coalesce round a small number of presidential candidates.  If enough of the electors are fit, it is likely that the presidential choice will also be fit. 

                Hamilton in ''Federalist LXVIII'' agreed with Madison on this point.  ''It will not be too strong to say, that there will be a constant probability of seeing the station [of chief magistrate or President] filled by characters pre-eminent for ability and character'' (Bailyn, 1993b: 336). 

                Senate decisions may come under the same rubric, but the argument is more difficult to sustain.  Since a senator, in this early period, was chosen by the State House and Senate, the question of  'fitness' turns on heterogeneity within these institutions.  Since a State house district is small, no representative in the state house is likely to be fit, but will rather express a local interest.  For large states, there may be a degree of heterogeneity in the state house, which by Madison's argument would lead to some probability of a fit choice. In general, though, the probability of a fit choice for Senator will be lower than for a presidential choice.

                This discussion, of course, begs the question of what exactly Madison meant by a 'fit choice'.  I contend that the idea of ''probability of a fit choice,'' and indeed the  'ratio' argument, derives from the work of Condorcet (1785).  As discussed in McLean and Urken (1992) and McLean and Hewitt (1994), Condorcet's work came into Madison's hands in the period 1786-88.

                In a letter to Jefferson in Paris (dated September 6, 1787) Madison mentions that he had received a letter and book from Philip Mazzei.  As McLean and Urken detail, the book, Mazzei's Recherches Historiques, had inserted in them Condorcet's Lettres d'une bourgeois de New Haven.  Condorcet's Essai sur l'application de l'analyse B la probabilitJ (1785) was also passed on by Jefferson, but there is no proof that Madison read the latter.  However, Madison did read the Recherches, because we know he rejected Condorcet's argument in Lettres supporting unicameralism.  In the Lettres, Condorcet writes that it can be proven rigorously ''that increasing the number of legislative bodies could never increase the probability of obtaining true decisions'' (McLean and Hewitt, 1994: 325).  For Condorcet, a law was a set of true or false propositions, where true meant good, and false meant bad.  In his Essai Condorcet had proved a ''Jury Theorem'' about the probability of passing a ''true'' or ''good'' law.  Each voter is characterized by some intrinsic probability of making a ''good'' choice: under majority rule in the voting body, the probability of making a ''good'' choice is higher than the average individual probability.  Moreover, as the voting body increases in size, the collective probability approaches certainty.

                There is a clear parallel between Madison's ''ratio'' argument that the probability of a fit choice is greater in the large than the small republic (if I identify size with number) and Condorcet's limit argument.  Secondly, the phraseology ''probability of a fit choice'' used by Madison, and ''probability of a true or good choice'' are too close to be accidental.  However, Madison did not agree with Condorcet that the theorem was relevant to choice in a House of Representatives.  As I have asserted, for Madison, his ''theorem'' was applicable only to the choice of a person, not an outcome.  For this reason, Madison rejected Condorcet's ''unicameralism''.

                It is worth observing, also, that Condorcet's probabilistic analysis of voting derived from Hume's notion of probable belief (as presented in Hume's Treatise of Human Nature, Hume 1985 [1752]).  In fact, as Condorcet's biographer (Baker, 1975: 13) has noted, there is a line of thought from Hume through Condorcet to Keynes' important (and of course much later) work on decision making under risk (Keynes,1921).

                It is possible that Madison heard more about Condorcet's theorem from Franklin, who had been minister in France until July, 1785.  As a member of l'AcadJmie FranHaise, Franklin must have heard the talks by Condorcet and his protagonist, Borda, in the Academy, and certainly knew him personally (Brands, 2000: 559).  Moreover, Franklin was interested in the problem of decision-making under risk (Brands, 2000: 457).  The ''Society for Political Enquiry'' that Franklin founded (and presided over) in early 1787 discussed the various constitutional issues of the times (van Doren, 1938: 771; Campbell, 1999: 209).  It is possible that Madison, after sketching the Humean extended Republic argument in his ''Vices'' paper of 1787, discussed the more refined Condorcetian logic with Franklin in Philadelphia in mid 1787, and adapted it to his purpose in writing ''Federalist X'' in late 1787. 

                If I am correct in my interpretation of ''Federalist X,'' then the extended republic argument was irrelevant to the prevention of turbulent instability in the House.  In ''Federalist LXIII'' Madison discusses the Senate as an ''institution that will blend stability with liberty'' (Rakove, 1999: 348).  When he uses the argument that ''[A]mbition must be made to counteract ambition'' in ''Federalist LI,'' he does not say that ambition will counteract ambition  (Rakove, 1999: 295).  Instead he goes on to comment that ''[a]n absolute negative, on the legislature, appears at first view to be the natural defense with which the executive magistrate should be armed'' [Rakove, 1999: 296].

                Jefferson, writing from Paris on December 20, 1787, also seemed to be of two minds about the House.  He approved that it be chosen by the people directly, principally because of its legislative power to raise taxes, but he also commented that it ''will be illy [sic] qualified to legislate for the Union.'' On the veto by the president he says ''I like the negative given to the Executive with a third of either house, though I should have liked it better had the Judiciary been associated for that purpose, or invested with a similar and separate power'' [ Smith, 1995: 512].

                The above comments strongly indicate that both Madison and Jefferson saw the presidential veto against Congress as an essential tool to limit either turbulence, or tyranny.  Since Madison saw majority tyranny as unlikely in the legislature of the extended Republic, the purpose of the veto must have been primarily to limit turbulence.

                Madison also saw a further need for the exercise of veto, by the Federal government against the States.  In a letter to Jefferson (October 24, 1787) Madison observed that the exercise by Congress of a veto against the laws of the states had been rejected by a bare majority.  ''Without such a check in the whole over the parts, my system involves the evil of ''imperia in imperio.''   Indeed he saw such a check as necessary ''to prevent instability and injustice'' [Smith, 1995: 498].  He later comments that ''in the extended Republic of the United States, the general Government would hold a pretty even balance between the parties of the particular states'' [Smith, 1995: 502]. 

                This observation is consistent with my interpretation.  Each State House and Senate, though perhaps not as diverse as the Federal Congress, will nonetheless be turbulent, and this turbulence may induce encroachments on the rights of citizens in the particular state.  A veto by the neutral president (or by the Judiciary) is the only likely method of prevention of this encroachment.

                Hamilton, in his very long and complex speech to the Constitutional Convention on June 18, 1787 had pressed for a powerful Executive appointed for life, with a ''negative'' (veto) against all laws about to be passed, and the execution of all laws passed'' (Madison, 987 [1840]: 138).  Hamilton had also proposed that the Executive be chosen by a system of electoral refinement: voters, in particular local districts, would choose electors, who would again choose electors, who would choose the Executive.

                Adair (2000: 114) suggests that, in the Federalist era, Hamilton used his genius in an attempt to recreate the political and economic conditions of the Walpole era in Britain.  While creating a ''U.S. government with a strong soul,'' he also showed he did not understand the new Constitutional structure that had been created in 1787. 

                If Hamilton misunderstood the new Constitution, so did John Adams.  Adams, who had been minister in London for many years, completed his Defense of the Constitution of Government of the United States of America in January, 1787.  Adams's biographer, David McCullough, quotes from this as follows:

The people's rights and liberties…can never be preserved without a strong executive…. If the executive power…is left in the hand of an aristocratical or democratical assembly, it will corrupt the legislature…and when the legislature is corrupted, the people are undone.

 

From Adair's perspective, Hamilton and Adams both looked back to an outdated constitutional idea framed in Britain.  As Gordon Wood (1969: 578) has put it:

Only an independent executive power…the monarchical element of the society, could mediate these clashing passions of the democracy and the aristocracy.

 

According to Adair, the reason the Hamiltonian-Adams logic was irrelevant was because of their belief that the disequilibrium between democracy and aristocracy was driven by the divergent interests of land and money.  However, in his essay ''Of Parties in General,'' Hume (1985 [1777]: 60) had commented that, in England, attempts had been made

to divide the landed and trading part of the nation: but without success.  The interests of these two bodies are not really distinct, and never will be so, till our public debt encrease [sic] to such a degree, as to become altogether oppressive and intolerable.

 

                For Adair, Madison's view of heterogeneous interests in the extensive republic meant that the republic would be stable.  My reading of Madison contradicts this argument. Turbulence, for both Madison and Hamilton in 1787, could only be countered by Executive veto.  For Hamilton, however, the Executive meant a Walpole executive, able to balance land and monied interests, and create a stable fiscal state.

                A student of the Constitution and the Federalist, reading them before 1920, might very well follow Beard (1913) and assume that conflicts over capital (between creditors and debtors) and land would necessarily be the fundamental political cleavages in a society.  From this viewpoint, Hamilton would be the only serious theorist worth reading.  Beard (1913) resurrected ''Federalist X'' not to discuss the extended republic argument, but to argue for the primacy of property as a cleavage. 

                In my view, there are three fundamental sources of conflict in a society; these coincide with the economic factors of capital, labor and land.  As I shall describe in the next section, Hamilton intended to create a Walpole equilibrium which would balance land and capital.  When Madison and Jefferson eventually realized what this entailed, they jettisoned some of their assumptions about the Republic, and constructed a ''Bolingbroke'' party representing land. This process has been studied at length by Elkins and McKittrick (1993).  What has not been emphasized (except perhaps by Beard, 1915) is that the coalition representing land also depended on slavery.  The success of the Jeffersonian Republican coalition in the election of 1800 led to the dominance of a ''land'' coalition -- later called the Democracy -- that persisted until 1860.

                To pursue this argument, I shall in the next section, examine the equilibrium and dynamic properties of Walpole's Whig coalition of 1720-1740, in Britain, and compare it with the Federalist-Republican conflict in the U.S. circa 1790-1800. 

 

4.  An Empire of Commerce or of Land

                The themes of tyranny and turbulence pervaded British interpretations of history and the constitution throughout the seventeenth and eighteenth centuries.  It is impossible to give a full account of the constitutional arguments, and their relationship to political events, but I shall attempt a sketch, using social choice theory, on occasion, to provide, I hope, some formal insight.

                It is useful to start with Adair's interpretation of the monarchy that it ''promised the necessary energy, secrecy and dispatch.'' For the British, the monarch, by his nobility, should maintain stability,  prevent turbulence within the legislature, and make wise decisions in the defense of the realm.  At the same time, however, given this power he must be prevented from exercising tyranny.  Because of the monarch's greater power, and his propensity to risk-taking in bringing the nation to war, the result might well be increasing extravagance and debt.  The French king, Louis XIV, personified such a danger.  Charles I also seemed to personify many of the same tyrannical tendencies.  His acts against the Scots in 1625-1637 brought on rebellion;  when parliament refused to vote the subsidies for Charles to put down the rebellion, he dissolved  the House.  When it was recalled, in 1640, Civil War ensued and eventually Charles was beheaded, in January 1649.

                Cromwell gradually took on the r^le of autocrat, putting down the Scottish army in 1649, and invading Ireland.  In 1651 the Navigation Act was passed, and in 1654 ''came the massive [naval] build-up of the First Dutch War'' (Bough, 1994).  In 1655 Jamaica was captured, and became the core of the rich commercial-maritime empire that was to be developed in the future.  As Bough  (1994, 191) notes, ''Cromwell demonstrated…how much he was willing to risk to keep [the navy].''  The quandary for the British was that the high cost of maintaining both navy and army was too high to be sustainable.  An efficient bureaucracy was put in place, however, to maintain the funding of the navy. Fiscal conflicts were part of the reason Cromwell dissolved the House in 1654.  After Cromwell died in 1658, it was with great relief that the country realized that his son, Richard, was no autocrat, and Charles II was welcomed back as monarch.  It was quite clear at this point that the political game between monarch and Parliament was, in the terminology of game theory, an apex game.  The monarch was a crucial member of every coalition in parliament, bar one -- a House unified against a tyrannical move.  At the same time, it was understood that the monarch was essential in coordinating the country in time of war, as long as his risk-taking did not plunge the country into debt.  After coming to the throne in 1685, James II immediately began to act in what appeared a tyrannical fashion, favoring France, and apparently intending to raise his son a Catholic.  Parliament acted almost in unison, offering the joint crown to Mary, James's daughter, and her husband,  William of Orange.

                The contract between William and Parliament was essentially that the monarch would prosecute war, and Parliament would fund it.  Not all the Parliament approved the fiscal device, the Bank of England, that provided the funds; many in the opposition feared it would enhance the autocracy of the Crown.  Although North and Weingast (1989) regard the founding of the Bank in 1694 as a device to ensure 'fiscal commitment,' this device depended on a contract, or arrangement within Parliament, that could, in exigency, be broken. 

Stasavage (2000) has made this point, and his argument can be adopted to provide a better understanding of the contract.  From the beginning of the Nine Years War in 1689 to the end of the War of Spanish Succession in 1713, British government debt rose from a negligible amount to 36 million pounds sterling (Brewer, 1988: 30).  Clearly the Bank played a significant role in making this debt feasible.  While annual government income rose from about 3.6 million sterling to 5.4 million in this period, the greater share of it, initially, was from land taxes.  In fact, at the end of the Nine Years War, land tax comprised over 50% of revenue.  To fund the debt, the landed interest had to approve both the debt and the tax.

                The commercial, or money, interest, and their representatives in Parliament, would presumably accept the increasing indebtedness, because debt was a necessary consequence of war, and war was necessary to protect the growing empire against France and Spain.  Some, among the landed interest, would accept the necessity of war, and thus accept the land tax.

                Figure 1 illustrates a plausible positioning of the four resulting factions in Parliament.  Stasavage proposes that the bargain between landed pro-war Whigs and monied pro-war Whigs created the equilibrium.  I suggest that the game is slightly different, since the sovereign had the remnants of a veto power.  In 1710, war weariness brought in a Tory government.  Queen Anne herself was opposed to war, as were the Tories under Bolingbroke.  It seemed entirely likely that the landed interest would repudiate the Bank of England equilibrium by reducing land taxes. In fact, as Stasavage observed, interest rates on long term government borrowing jumped from about 6% to nearly 10%.  The point labeled the Anne-Tory ''Core'' in Figure 1, represents the resulting political fiscal equilibrium.