“Corruption” is a very open concept. In my book A Republic No More: Big Government and the Rise of American Political Corruption, I define it as the maldistribution of federal resources, which narrows it to the national government and focuses on dollars and cents. This is not a comprehensive account of corruption, but it does speak to a unique aspect of the subject. I am going to stick to that definition here, but for the purposes of this essay amplify it a bit. Corruption is the maldistribution of federal resources to vested interests. These are groups or factions that can make some compelling political claim to federal benefits without having a very good civic republican claim. A republic is supposed to operate on behalf of the people at large, and because of their political connections, these vested interests are able to draw resources from the government even though the people at large do not benefit, or are even harmed.
My starting point is the Federalist papers. Written primarily by Alexander Hamilton and James Madison, their purpose was to persuade the delegates of the New York ratifying convention to support the Constitution. These essays have been studied as a blueprint for how the new government was to function. And it is often assumed that there is a political theory that unifies these essays.
To a large extent this is true. Madison and Hamilton both agreed on the basic principles of the Declaration of Independence. Both were appalled by the behavior of the state governments during the 1780s. Both thought that the national government under the Articles of Confederation was far too weak. And both thought that the Constitution was a dramatic improvement because it created a more powerful national government that drew its legitimacy directly from the people.
Madison and Hamilton both agreed on the basic principles of the Declaration of Independence.
But there were differences between them—not so much on the surface, but lurking underneath, in the subtext of the Federalist. The first dozen or so essays deal with the virtues that an American union would supply—as opposed to a confederation of the thirteen states, and it is here that one can detect some points of disagreement between Hamilton and Madison.
Federalist 10 is Madison’s ingenious contribution to the case for a national union. It attempts to turn the fatal weakness of republican government into its very foundation. Human beings, Madison acknowledges, are selfish by nature and prone to forming factions, which are “[u]nited and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.”
Factionalism is an existential threat to republican government, which empowers the people at large to promote the public interest and protect individual rights. If a faction amounts to a majority of the people, they will win all the elective offices, and can then use the authority of government to pursue their own interests against the common good or the rights of the minority.
Eighteenth-century European republicans, like Burke and Montesquieu, thought the British had solved this problem by creating mixed estates—or the investiture of a landowning nobility and a hereditary monarch, independent of the people but ruling alongside them. According to Madison, however, this is a “precarious security; because a power independent of the society may as well espouse the unjust views of the major, as the rightful interests of the minor party, and may possibly be turned against both parties.”
In Federalist 10 Madison offers an alternative: a large republic that includes a variety of factions. This will make it so that no faction can comprise a majority of the people. Instead, each will be but a minority, and therefore the self-interested behavior of one faction will cancel out the self-interested behavior of another. As Madison puts it, a large republic makes it “less probable that a majority of the whole will have a common motive to invade the rights of other citizens; or if such a common motive exists, it will be more difficult for all who feel it to discover their own strength, and to act in unison with each other.”
In Federalist 51 Madison goes on to outline what he calls the auxiliary precautions the Constitution utilizes to supplement the large republic, the system that we today call checks and balances: each branch was to have a will that was independent of the other branches, and have the means at its disposal to combat any abuses from the others. Thus, our government will be studiously neutral in its dealing with factions in society. This will generate republican balance without recourse to creating vested interests in a nobility or a monarch.
To use a sports metaphor, Madison sees the national government functioning like the referees in an NFL game. Federalist 10 brings the teams to the field, while Federalist 51 outlines the rules of the game. The government’s job is to remain neutral and ensure that the game is fair and the final result legitimate.
Meanwhile, in Federalist 11, Hamilton takes a different approach, focusing on the link between commerce, foreign affairs, and national greatness. He sees a union as a necessary prerequisite for American commercial prosperity, which would eventually make the young nation a world power:
Under a vigorous national government, the natural strength and resources of the country, directed to a common interest, would baffle all the combinations of European jealousy to restrain our growth. This situation would even take away the motive to such combinations, by inducing an impracticability of success.
Hamilton further sees commerce connecting the diverse parts of the country:
An unrestrained intercourse between the States themselves will advance the trade of each by an interchange of their respective productions, not only for the supply of reciprocal wants at home, but for exportation to foreign markets. The veins of commerce in every part will be replenished, and will acquire additional motion and vigor from a free circulation of the commodities of every part.
And he ultimately anticipates the forging of a national identity, based on the shared quest for prosperity:
Let the thirteen States, bound together in a strict and indissoluble Union, concur in erecting one great American system, superior to the control of all transatlantic force or influence, and able to dictate the terms of the connection between the old and the new world!
Hamilton’s vision of the union is not necessarily at odds with Madison’s, but it is not necessarily consistent, either. Return to the football metaphor. The game for Hamilton is not fought amongst domestic factions, but rather between America and foreign rivals. Thus, Hamilton sees the job of the national government like we might think of a head coach’s task: arrange and coordinate the players of the American team to defeat the opposition. That does not imply balance. Some players will start, while others ride the bench. Some will get more snaps than others. Some will get paid more than others. It all is for the greater good, but the players themselves take on roles of varying importance.
In Madison’s vision, the federal government is neutral. But in Hamilton’s vision it might create vested interests for some higher purpose.
In Madison’s vision, the federal government is neutral. But in Hamilton’s vision it might create vested interests for some higher purpose. Both have the same end in mind, broadly speaking—the promotion of the public good and the protection of individual rights. But Madison sees the government of a large republic balancing a multiplicity of factions in the way that mixed estates supposedly functioned: everybody checks everybody else, nobody wins anything special. Hamilton, however, implies a level of comfort with favoring some groups over others, for the sake of the national interest. Federalist II, for instance, calls for the facilitation of commerce, which would help the merchants and financiers of New York City, Boston, and Philadelphia. It should, of course, help everybody over the long haul, but these groups would necessarily operate as the mediators of the national interest, thereby acquiring a vested interest.
As the first secretary of the treasury, Hamilton set about implementing his political–economic vision, which centered around three policy items. First, assume the state debts, and promise the current debtholders full repayment. Second, create a national bank that mixed private and public ownership. Third, promote manufacturing through policies like tariffs.
Combined, these policies were reminiscent of the economic program implemented by Sir Robert Walpole, Britain’s first prime minister, and they amounted to a huge boon for the commercial, financial, and manufacturing classes of American society. The commercial and financial classes could invest in government debt, and draw a reliable interest payment. Manufacturers would benefit from the tariffs.
Hamilton thought this was all for the greater good. The commercial and financial classes would have to be brought in as allies of the new government, if ever the latter hoped to borrow money at a reasonable rate. And manufacturing had to be encouraged while agriculture had to be deemphasized in the long run. But there were costs associated with this program, which accrued mostly to the agricultural majority. Landowners would have to pay higher taxes to subsidize the debt. Tariffs would make capital more scarce and prompt retaliatory measures from foreign governments against American agricultural exports.
Madison was a planter, so his socioeconomic interests inclined him to oppose this. But there was more to his opposition than that, for Madison also saw the threat that could arise from a government that did not explicitly treat citizens neutrally, but rather played favorites based upon the national leadership’s vision of the public interest.
That threat was the revival of mixed estates—through the rise of a ruling class that is independent of the people but possessing a vested interest in the government. By utilizing the commercial, financial, and manufacturing classes as intermediates between the government and the public interest, Hamilton was basically granting them a permanent stake in public policy. As Madison put it to Jefferson, they would, “become the pretorian band of the Government, at once its tool & its tyrant; bribed by its largesses, & overawing it by clamours & combinations.”
Hamilton thought that, by yoking the interests of these classes to the fate of the young nation, he could secure the country’s future. Maybe so, but Madison saw the other side of the coin. By granting them special benefits, Hamilton was ensuring that they could lobby successfully for their plums to be sustained—and enlarged.
How did this threat operate in practice? Madison believed that the pathway of corruption would be the executive branch using patronage to corrupt the will of the legislature, similar to what the Country Whigs had claimed the Hanoverian monarchs did to co-opt the Parliament. The Emoluments Clause in the Constitution explicitly prevents the executive branch from granting sinecures or titles to members of the legislature, but Madison believed that Hamilton was making an end run around this prohibition by allowing members of Congress to invest in the bank.
As Jefferson warned Washington, Hamilton’s system was
calculated to undermine and demolish the republic, by creating an influence of his department over the members of the legislature. I saw this influence actually produced, & its first fruits to be the establishment of the great outlines of his project by the votes of the very persons who, having swallowed his bait were laying themselves out to profit by his plans: & that had these persons withdrawn, as those interested in a question ever should, the vote of the disinterested majority was clearly the reverse of what they made it. These were no longer the votes then of the representatives of the people, but of deserters from the rights & interests of the people.
Madison and Jefferson were never quite clear about exactly what Hamilton and his Federalist allies were looking to replace the republican form of government with. They often suggested monarchy, but this passage from Jefferson implies an oligarchy. Either way, what we’re talking about is the introduction of a vested interest independent of the people at large. The government, in this situation, has captured the interests of the commercial, financial, and manufacturing classes, as Hamilton hoped, but those classes have also captured the government right back, as Madison and Jefferson feared.
Though Madison and Jefferson ultimately triumphed in the political skirmishes of the 1790s, Hamilton won the broader philosophical war, in two ways. First, a Hamiltonian commitment to economic development is now a bipartisan ethos. The main difference between the two sides of our political divide is how best to develop the economy, not over whether the government should be doing that in the first place. Second, the people expect their leaders to follow the Hamiltonian model of leadership. Government should actively and vigorously pursue the national interest, even if that pursuit favors some groups over others. It should be the head coach, not the ref.
Historians and political scientists have generally been much more favorable to Hamilton than Madison. The consensus is: Hamilton was right. He was right about the course the American economy would chart. He was right about the need for the government to play an active role in it. He was even right about the necessity of playing favorites sometimes, for the sake of the greater good. Federalist 10 makes for great reading in a graduate political philosophy course, but Federalist 11 is how things really get done.
There is a lot of truth to this. The fact is that Madison and Jefferson never developed a sensible alternative. Their political economy struck a self-conscious balance, the kind envisioned in Federalist 10, for the first decade they were in power, and so naturally aided the agricultural class more than Hamilton’s did. But it proved itself completely incapable during the War of 1812—when the lack of a standing army, satisfactory transportation network, and sufficient financial infrastructure kept the country from accomplishing its objectives. It is not surprising that the disastrous result of that war pushed a faction of the old Jeffersonians—including Madison himself—toward Hamilton’s political economy.
Nevertheless, their critique of Hamiltonianism was spot on, if we put aside the impracticability of their alternative. Jefferson’s vision of an agrarian nation centered primarily around local life was never going to survive the Industrial Revolution. Frankly, Jefferson himself more or less outlived its usefulness. But if we separate their alternative to Hamilton from the critique of Hamilton, we find a lot of insight, which helps sharpen our view of contemporary corruption.
To be sure, Madison and Jefferson erred in fingering the executive branch as the fount of the threat. Modern corruption is a lot more like oligarchy than it is a monarchy run amok. Beyond this, their critique really resonates some 225 years later.
Politicians in our country, on both sides of the aisle and all ideological orientations, do not approach politics from the Madisonian standpoint of neutrality or balance. Instead, they like to favor certain groups over others in the expectation that this will eventually benefit the country at large. Indeed, the main political debate between Republicans and Democrats often comes down to the question: which group or faction should serve as the mediator for the national interest?
All such policies, whether they be increased construction spending or accelerated depreciation of capital equipment, run the risk of creating a vested interest: those who receive the aid from the government inevitably organize to protect and extend that subsidy. And they are regularly successful in their efforts, even when it becomes obvious to everybody else that the program in question is doing nobody else any good. We can call this favoritism, partiality, investiture, or corruption. These are all different words to describe the same thing: the government is treating some group or faction differently than others.
Of course, a moderate amount of favoritism is tolerable. Sometimes you need a little corruption to get things done. The problem is a matter of degree. Specifically, our system forces the Hamiltonian to perpetuate a lot of corruption to get those things done.
The reason is that while our politicians might be Hamiltonian, the system in which they operate is Madisonian! It was explicitly designed to balance factions against one another by ensuring that each has a point of access to public policy. So, for the Hamiltonian to get those big, bold national agenda items enacted, he has to pay off a lot of groups along the way.
There are three features of our system in particular that exacerbate the tendency of Hamiltonianism to produce corruption.
Our system has strong parochial aspects
First, our system has strong parochial aspects. The Senate is basically an anti-national institution, and was made that way by design. The House of Representatives, which is supposed to represent the country at large, does so in a very parochial way. We vote for House members in local constituencies. Compounding this is the committee system in both chambers, which basically amplifies the parochial impulse of the Congress. Members gravitate to committees with oversight of the policy domains that their constituents are most interested in.
Second, the nationalistic aspects of our system are weak by original design. The president is the one agent in government who can be said to represent the national interest. Yet he has no positive powers over domestic legislation whatsoever. He has a veto, sure. He also has the state of the union address, to influence the national conversation. Beyond that, decisions are up to our Congress, which often forces the president to accept parochial initiatives, especially when they are embedded within must-sign pieces of legislation.
Recently, conservatives have complained about the overbearing nature of the Obama presidency, that this president has claimed too much power and is exercising it irresponsibly. They have a point, so this claim about weak nationalistic structures might seem a little peculiar at first glance. But I would suggest to you that so much of Obama’s abuses have to do with Congress granting the executive branch power it was never supposed to have in the first place.
Usually, it does this for political purposes—for instance, members of Congress see no electoral benefit from possessing the power to decide what is and is not a wetland, so they outsource it to the EPA. Sometimes, it happens because Congress has embarrassed itself with its own irresponsibility. This is, for instance, how we wound up with the BRAC commission on military base closures, and why Congress has precious little role in setting tariff policy anymore. Usually what happens when Congress sends power to the executive branch is it is handed to the president only nominally. In reality, it goes to unelected bureaucrats, who are very difficult to remove from government, and whose dictates can only be challenged via an expensive legal process. So, while congressional outsourcing may have centralized power in our government, it has also made it less responsive to the public’s will, which is supposed to be the final arbiter of the common good in a republic.
Third, the system of checks and balances works against Hamiltonian nationalism. For a policy to become law, it must have sign-off from a vast array of political actors, all of whom represent different factions. Each is given an effective veto over legislation, which they can use as a bargaining chip to extract payoffs. We think about the president having a veto, but in a lot of instances the Chairman of the Senate Finance Committee, or the swing vote in the House Energy and Commerce Committee, has a veto as well. So, to get stuff done, you often have to buy them off. And, once the dirty deed has been done, it is very hard to undo.
The system of checks and balances works against Hamiltonian nationalism.
When you combine these three structural features of the government with Madison’s large republic thesis, what we get is: a vast array of groups willing and able to join that praetorian band of government. This makes it very difficult for a Hamiltonian to accomplish his grand agenda without paying off one group, increasing the payoffs to another, or protecting the payoffs of yet another.
Compounding this, the scope of Hamiltonian ambition has only grown since the 1790s. Hamilton wanted the government to transform the nation into a world economic power. Politicians still endeavor to use the government’s vast authority to develop the domestic economy. But now they also wish to regulate the economy for non-economic purposes, like environmental or public-health concerns. They also provide direct social welfare to specific groups, like the poor and the elderly, for the sake of the public good. All of this just increases the policy domains where payouts to vested interests may be made, or increased.
It is not my purpose here to condemn Hamiltonianism. Indeed, the fact that Madison ended up endorsing a moderate version of it suggests it’s ineluctable. The point, rather, is that our system is supposed to function more like what Madison initially envisioned: the government as referee, not head coach.
In other words, there is a contradiction at the heart of our system of government. In 1787 we endorsed a fundamentally Madisonian document, but have since proceeded to behave like a bunch of Hamiltonians. The two approaches are not necessarily consistent. And the result is that politicians who want to implement some grand vision of the national interest usually have to create a lot of vested interests. This yields a vast, complicated system of corruption embedded in the laws themselves.
And I think this nation now has something akin to what we fought against in 1776. We have a government of mixed estates. The people rule, sure, but they rule in conjunction with the vast array of factions or interests that have been vested in public policy—what Madison so aptly called the praetorian band of government.
This article originally appeared in The New Criterion, Volume 34 Number 5, on page 30
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