This commentary was first published in the Star Tribune.
American history is coming alive in Minnesota on Aug. 29 as “Hamilton: An American Musical” opens. Those lucky enough to have tickets will see and hear a hip-hop homage to one of our nation’s most important Founding Fathers. We should all use this opportunity to learn more about Alexander Hamilton and his bold economic ideas, which have powered the U.S. economy for more than 200 years.
The Federal Reserve Bank of Minneapolis is continuing his legacy through our work to ensure economic stability and a strong job market for all Americans. And during the six-week run of “Hamilton,” we honor that legacy and invite the public to come in and see a special exhibit to learn about this remarkable American hero and about the work we do on your behalf at the Minneapolis Fed.
Why is Alexander Hamilton so important to our nation’s history?
He was not only instrumental in crafting and ratifying our nation’s Constitution with its unprecedented design of checks and balances, but also, as Treasury secretary for President George Washington, Hamilton developed economic institutions that were decades — and in some ways centuries — ahead of their time. He realized that to unlock the full potential of the United States, the new country needed a national economy that built on the strengths of the individual states, rather than a federation of independent rivals each competing with one another. While this unified vision may seem obvious now, it was highly controversial at the time.
The tensions between state and federal authority and between local vs. national control have been with us from the earliest days of the nation and are still with us today. Such challenges aren’t unique to America. Indeed, in 2018, more than two centuries after Hamilton’s era, Europe is struggling with these same issues, and its inability to resolve them is a fundamental source of Europe’s current economic uncertainty.
Europe wants the economic muscle that a united France, Germany, Italy and Spain could provide. But the individual countries are reluctant to cede control to a central authority that can act on their collective behalf. The same struggles were a challenge in Hamilton’s time, with individual states such as Virginia, Massachusetts, New York and Pennsylvania each cautious about ceding its own power.
Hamilton realized that national institutions, such as a national or central bank, and a national currency could unite the new country and unlock an economic powerhouse.
But history rarely moves forward in one continuous motion. It evolves, in fits and starts. The history of our nation’s central banks confirms that. With President Washington’s support, Hamilton created the First Bank of the United States. Unfortunately, Congress allowed it to expire 20 years later. Then Congress created the Second Bank of the United States, which lasted until President Andrew Jackson saw to its demise in the 1830s because he didn’t like the centralization of power that it represented. But after the economy was hammered by repeated banking panics in the late 1800s and a financial crisis in 1907, Congress once again concluded that the United States needed a central bank to stand behind the economy.
Tension between local and national control was again paramount; Congress wanted to make sure regions across the country were directly represented in policymaking. So in 1913 it took a concept from the Constitution and built checks and balances into a new central bank, creating the Federal Reserve System, which includes the Board of Governors in Washington, D.C., and 12 independent, regional Federal Reserve Banks — the 9th of which is here in Minneapolis.
The Federal Reserve is the modern manifestation of Alexander Hamilton’s original vision for an American national bank, updated to meet the needs of a large, diverse economy. Our job at the Minneapolis Fed is literally to represent you.
The Minneapolis Fed is offering free tours to the public to learn about Hamilton’s vision and about the work we do today to build on his legacy. Come learn about monetary policy, financial stability, the services we provide to the financial system and the research we do to promote an economy where all Americans can thrive. We have 1,000 employees who are proud to represent the Ninth Federal Reserve District in our nation’s economic policymaking.
Come visit us, and let’s celebrate Hamilton together.