Psychologist Albert Ellis famously observed, “...the best predictor of a man’s future behavior is his past behavior.” If this is true, can we infer from George Washington’s economic decisions how our first President might direct the US economy today? As President’s Day is here, MoneyTips thought it would be fun to try. So dust off your wooden teeth, chop down a cherry tree, and travel back with us to the birth of our republic.
George Washington became America’s first President on April 30, 1789. As he took the oath of office – on the steps of Federal Hall in New York City – he inherited a government nearly bankrupt, weighed down by crushing war debt, and lacking any federal currency, credit, or monetary system. Put simply, the fledgling American economy was in shambles.
While daunted by these challenges, he remained confident our young democracy would overcome them. For George Washington had first-hand knowledge of the ingenuity and industriousness of the American people.
He himself was a capitalist of rare vision and courage. Before the Revolution – concerned by heavy-handed British control over the tobacco trade – he broke with tradition by diversifying his own plantation into the production of wheat and corn. He planted several varieties of the former, each ripening in a different season. This allowed his mill, another shrewd investment, to remain productive throughout the year. He diversified his holdings further, with a bold move away from agriculture, building a weaving plant to produce textiles and a schooner to fish for shad and herring.
Thus, just as General Washington led his armies to victory over a superior enemy, President Washington knew he could lead Americans in the forging of a strong economy. Like any smart CEO, however, he knew he needed help. So the plantation owner from Virginia chose the banker from New York to establish the new nation’s financial system.
Alexander Hamilton was born in the West Indies to an unwed mother, and orphaned at age 11. Despite these trials, he made his way to colonial America where he rose to become founder of the Bank of New York and America’s first Secretary of the Treasury. Despite their regional and cultural differences, the President turned to Hamilton for shrewd economic guidance.
A Federalist who believed in a strong central government, Hamilton pushed for the founding of a Central Bank of the United States, the levying of federal taxes, and the incurring of a national debt to spark our struggling economy. Over the strenuous objections of Thomas Jefferson, Washington supported Hamilton’s bold economic prescriptions, which set America on the long road to becoming the world’s richest and most powerful nation.
While Washington accepted that America needed strong economic medicine – in the form of a centrally administered financial system – he was also a staunch believer in the power of the individual and primacy of the private sector. He saw clearly that deep and sustainable economic development could only be driven by a strong, private business and finance engine. At the same time, he knew this engine required a public sector that was equally confident and efficient.
Consequently, our first President had the wisdom to balance our economy on the pillars of both private and public sector indispensability. He knew the strength of one would add strength and dynamism to the other. When one was listing in the storm, the other could provide ballast and aid. Together, they would eventually create the most spectacular – and liberating – economic juggernaut the world has ever known.
The value of this alliance between public and private sectors – while sometimes awkward and derided – has nonetheless proven essential throughout our history. The transcontinental railroad, for example, could never have been completed after the Civil War without the partnership of business and government. Nor could the triumph over fascism in Europe and Asia have been achieved during World War II. Neither could the Interstate Highway system have been accomplished nor the moon landing.
None of these achievements – which rank among the greatest in the history of civilization – would have been possible without George Washington. For it is he who established the fateful balance, and interdependency, between public and private sectors.
Fast-forwarding to 2016, it’s reasonable to assume George Washington would be deeply frustrated by the gridlock in the city that bears his name. If he were President today, he would likely use that high office to remind the polarized factions that you can’t sink half a boat. He would further remind them how far we have come as a nation and society since the dark, uncertain days of our founding.
His economic policies would likely be balanced and centrist today, as they were when he first led our nation. He would encourage a vibrant and strong private sector, but not one free from regulation. He would ask government to be fair and effective, but would scrupulously limit its powers. Most of all, he would take a long, proud look around and marvel at what Americans have accomplished by ensuring that both private and public sectors remain strong.
It worked for America in 1789, and it still works for America today. Happy President’s Day from MoneyTips.