Answer – Alexander Hamilton’s financial plan consisted of three elements: federal assumption of the states’ debts, the establishment of a national bank by Congress, and the promotion of the American manufacturing industry through mercantilism. 

Explanation:

Appointed by President George Washington, Alexander Hamilton was the US’ first Secretary of the Treasury, and a key figure in the organization of the American economy as a capitalist one. 

At the time, the country faced a major economic crisis following the Revolutionary War. Both state and federal governments had borrowed heavily during the War, but now seemed unable to pay. The security bonds they had issued at the time of borrowing were now almost valueless due to this inability. Thus, inflation was high, and credit was hard to come by. 

To address this problem, Hamilton advised the federal government to assume all the debt incurred by the states. The old bonds would be exchanged for new notes at the Treasury. The federal government would then repay the debt by borrowing more money at lower rates of interest, by imposing higher taxes for the production and sale of items such as luxury goods and liquor (whiskey), and by attracting foreign investments. 

This plan was opposed by various members of Congress. In particular, the Southern states did not agree with it as these were the state governments that had managed to clear debts from the War. However, a compromise was reached, and Hamilton’s measures were adopted. 

Alexander Hamilton also proposed the establishment of a national bank – the bank of the United States – that would function in a manner similar to the bank of England. Among its primary responsibilities would be the printing of currency, linking the country’s economy with the government. In the face of opposition (which argued that Congress did not have constitutional authority to establish a national bank), the final decision on the matter was left to President Washington. After consideration, he agreed with Hamilton, and the bank of the United States was instituted. It is a precursor to the modern Federal Reserve. 

Hamilton also pushed for the growth of America’s manufacturing sector as opposed to its established agricultural industry. At the time, the US imported cheap manufactured goods from England and Europe; its exports were agricultural, and did not yield a value equal to their imports. As the Industrial Revolution raged across Europe, Hamilton sought to take advantage of it on American soil. Subsidies were made available to US manufacturers, while heavy tariffs were imposed on imports. This mercantilist policy established the United States as a major industrial power. 

All of Hamilton’s policies resulted in controversy and opposition in Congress, especially from the representatives of the Southern states. These were the relatively richer states, and had agricultural economies. On the other hand, he had tremendous support from the wealthy of the Northeast who benefited greatly from his policies.

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