NRPLUS MEMBER ARTICLE {I} t is difficult to find an original angle on George Washington, but Cyrus Ansary’s 2019 book George Washington: Dealmaker-In-Chief manages the effort. Ansary argues that Washington was more than just a wealthy landowner, military victor, and founding president. Washington, in Ansary’s telling, was a superb serial entrepreneur who deserves top billing among the creators of America’s uniquely free and vibrant economy.
Washington’s role as the arguable father of the world’s richest economy is one worthy of study and too often overlooked by biographers. More debatable is whether Ansary’s evidence sustains his bold thesis.
As a veteran corporate lawyer who brings more business savvy to his subject than most academic historians do, Ansary draws a stark contrast between the shackled economy of colonial America and the robust system that emerged during and after Washington’s presidency. Ansary makes a compelling argument that the great events of Washington’s career — freeing the colonies from British rule, upgrading the ramshackle Articles of Confederation by replacing it with a durable constitution, and implementing a new economic, financial, and legal system under the Constitution under his presidential leadership — revolutionized the American economy.
The work didn’t end with the Revolution. Ansary cites an estimated 46 percent drop in GDP between 1774 and 1790. The turnaround would prove equally dramatic, as the country experienced an estimated 9.78 percent annual nominal GDP growth for the decade of the 1790s. America until Washington’s presidency had neither a functional national currency nor a unified domestic market nor the capacity to pay its debts. All of that turned around by the time Washington retired in 1797.
Washington was the central player in the great events of 1775–97, as the commander of the Continental Army, president of the Constitutional Convention, the most prestigious supporter of the ratification of the new Constitution, and the first president overseeing the new government as it was organized. How big a role did he, personally in his actions and philosophically in his influence, exercise in each of these developments?
As Ansary details, Washington came to office with an ambitious presidential agenda, laid out in a lengthy proposed first inaugural address that James Madison talked him out of delivering (about two-thirds of which has been tragically lost to history). Consider ten elements identified by Ansary:
- A National Interstate Market
Trade among the 13 colonies was highly restricted. Products, especially manufactured goods, were subject to punishing taxes and tariffs when they weren’t banned from inter-colonial trade entirely. The Revolution didn’t sweep these all away, as states under the Articles of Confederation still acted as if they were separate sovereigns.
The Constitution itself abolished these restrictions, banning states from imposing tariffs or taxes on imports or exports and reserving to Congress the regulation, at the national level, of interstate commerce. The early republic saw the creation of a true national market with no internal barriers to trade. Given its size — the new nation was 70 percent larger than France in 1783, and doubled in size in 1803 — that alone spawned a geographically vast free-trade marketplace unequaled anywhere in Europe until at least the 1850s.
Washington oversaw this. He had little direct role in either the drafting of the constitutional rules or implementing them, given that they were largely self-executing. The credit he deserves on this score is more for his general influence on ousting the British and promoting the replacement of the Articles of Confederation.
- Interstate Infrastructure
The British, being hostile to internal trade and determined to prevent westward expansion that would engender conflict with Native American tribes, had no interest in improving roads, canals, and other means of internal commerce. Washington aimed to change that. His western orientation dated back to the 1754 expedition that triggered war with France. He had extensive landholdings in what is now Ohio and West Virginia.
Washington’s undelivered inaugural address emphasized his goals of improved communications and infrastructure. For Washington, knitting together the nation was of economic, political, and national-security importance. He promoted building post offices and post roads and urged the post office to distribute newspapers free of charge, given “the importance of facilitating the circulation of political intelligence and information” nationwide.
Washington put improved infrastructure into practice in Virginia, gaining the state government’s support in 1787 for what would become the Albemarle and Chesapeake Canal, only finally built in the 1850s and still in operation.
One example Ansary explores at great length, albeit more to demonstrate his business savvy than his influence on public infrastructure, is how Washington obtained the land for Washington, D.C., despite Congress’s having appropriated no money with which he could buy it. Washington convened a meeting of the major landholders and asked them to donate enough land for the public buildings, which would cause their remaining holdings to appreciate greatly in value. After all, the area was an undeveloped swamp. Washington told them, in effect, they had only one chance to take the deal; if he couldn’t get the land, Congress might change its mind and decide to put the capital somewhere else.
- Domestic Manufacturing
Besides the restrictions on trade, colonial manufacturing was directly restricted by British mercantilist policies that aimed to keep the American market dependent upon imported British manufactures. Americans were barred from manufacturing products that might compete with the British, and banned from building certain types of facilities such as mills, forges, and furnaces. There were onerous occupational licensing rules and, at times, orders to stop planting crops such as tobacco.
The Revolution swept away all of that, leaving Americans free to make and sell whatever they could. Washington’s chief role in this was winning the war; it required no further implementation once independence was secured. That said, Washington set an example of benign federal neglect of most forms of industrial policy, and this remained American economic orthodoxy until 1933. In his 1796 State of the Union address, Washington observed that, “as a general rule, manufactures on public account are inexpedient,” although he acknowledged “an exception to the general rule” for essential defense contractors.
- Ending Dependence on British Vendors
The combined effects of British colonial policies and royal trading and shipping monopolies put Americans at the mercy of British trading houses if they wanted to sell their own products or buy manufactured goods, even machinery for their own farms. Under the Navigation Acts, trade from the colonies had to be carried only in British-flagged ships, and many agricultural products could be shipped only to Britain — even if better prices were available in other markets. Similarly, Americans could buy the products of other countries only if they were sold through Britain as a middleman. There were even tariffs on exports to Britain, in spite of its exclusive right to buy American produce. The resulting system was a dead weight on American economic activity.
In the best of times, going through London was an inefficient way to do business under 18th-century conditions for transoceanic communications. Moreover, the distance and power imbalance were such that the trading houses had little incentive to treat them fairly. Ansary notes how Washington felt ill-used by British intermediaries:
For years, in letters to [the London trading house of Robert Cary & Co.], he complained about wrong sizes or defective merchandise shipped to him, packages misaddressed to wrong ports, and unfair or exorbitant fees and charges heaped on his account. It was clear to Washington, as to his fellow planters attached to other trading houses, that shoddy British merchandise was being foisted on the colonists at inflated prices, and that fraud was rampant. Often, after Washington placed an order, the product’s price unexpectedly leaped, or, conversely, when he was selling his tobacco, prices plunged after his produce was already on the way to England.
This, too, was swept away by the Revolution.
- Limited Liability for Business Risk
Entrepreneurial risk-taking in colonial America was a daunting proposition. Washington — who founded many business enterprises — was acutely aware of the problem. Individual businessmen who took major risks frequently ended up in debtors’ prisons, where conditions were often harsher than the imprisonment of criminals. Royal permission was needed to form a limited-liability corporation — which meant that only the favored and connected few got a corporate charter, and only after much direct or indirect palm-greasing. There was only one chartered company in North America before 1700, and they remained rare in 1789. The early republic set the nation on the ultimate path to abolish debtors’ prisons, enable the easy formation of state-chartered corporations without advance permission, and write the national bankruptcy law envisioned in the Constitution in order to allow business debts to be discharged. All of this enabled more business risks to be taken, while dispersing the costs of those risks.
Washington publicly deplored debtors’ prisons and made a celebrated visit to Revolutionary War financier Robert Morris when he was locked up in one. As president, he pressed for a national bankruptcy law in 1792, although it was stymied in Congress; the first such law, passed in 1797, was short-lived. Not until 1898 would there finally be a uniform and enduring federal bankruptcy code. State legislatures gradually took up the role of granting corporate charters, ultimately adopting the modern model of allowing businesses to incorporate without legislative permission.
It’s hard to credit Washington as the decisive figure in these developments, but he saw the problem and urged the direction the nation eventually followed.
- Sound, Liquid Currency
One of the most elementary building blocks of a functioning economy is money. Without a reasonably available and predictable currency, business transactions are stifled by the difficulty of arranging terms or the risk that contracts will prove worthless when payment is due.
The problem for colonial America was a shortage of currency, caused largely by British policies. Exactions of gold and silver to pay for the French and Indian War between 1756 and 1763 drained much of the hard currency out of circulation — Ansary cites a total of £2.5 million sterling, a huge sum in relation to the colonial economies of the day. Adding insult to injury, Parliament then passed the Currency Act of 1764, which banned the issuance of paper money in the colonies and “effectively ended the practice of using a rate of exchange of colonial money for pounds sterling, rendering any existing local currency worthless.” This was followed by a ban on circulating foreign coins as substitutes. As Ansary concludes, “of all the restrictions placed on the daily lives of Americans by the home government, the prohibition on the creation of a national currency was perhaps the tightest straitjacket of all.”
The problem for Revolutionary America was a surplus of currency, which swiftly became almost worthless — as the saying went, “not worth a Continental.” Washington complained to John Jay in April 1779 that “a wagon load of money will scarcely purchase a wagon load of provisions.”
The new government’s challenge was striking a happy medium. After 1791, the Bank of the United States issued paper currency. That same year, Washington complained to Congress about “the disorders in the existing currency, and especially the scarcity of small change, a scarcity so peculiarly distressing to the poorer classes,” which in his view “strongly recommend the carrying into immediate effect the resolution already entered into concerning the establishment of a mint.” Federal monetary policy would remain controversial until well into the 20th century, but under Washington’s leadership and the management of his treasury secretary, Alexander Hamilton, early America had the money it needed to grow.
- Fiscally Responsible Government
The new federal government that convened upon Washington’s inauguration was flat broke. It needed to borrow money just to meet payroll. The national debt of over $75 million was daunting. American credit was in the toilet. The story is now well-known how Hamilton turned this around to the point where America’s national credit was strong, it was able to assume the debts of the states and repay all obligations at face value, and it set us on a trajectory that paid down the whole debt by 1835.
By 1794, American sovereign-debt securities were trading at a premium on European markets, reflecting confidence that American credit was more stable than that of many thrones of Europe after the French Revolution. Trading in the early Treasuries also spurred the growth of Wall Street and other American securities markets.
Without denying Hamilton’s crucial role — to which Washington appointed him — Ansary details both Washington’s hands-on management and the importance of his quiet support for Hamilton’s plans. For example, Washington personally sat down and wrote his own digest of the federal debt structure in the 1780s, with attention to the interest and maturities of all loans. He reviewed Hamilton’s voluminous “Report on Public Credit” in advance of its delivery to Congress and gave it his approval the day after New Year’s in 1790. Washington was not in the room when Hamilton cut the deal with Madison and Thomas Jefferson to pass his debt plan in exchange for moving the capital to the Potomac — given Washington’s landholdings there, he was sensitive not to be seen as a strong backer of the Potomac site — but the president privately wrote to Gouverneur Morris in 1791 that “the establishment of public credit is an immense point gained in our national concerns,” and he publicly praised the progress of Hamilton’s system in his second and third State of the Union messages.
- The Rule of Law
A national market requires the impartial enforcement of contract and property rights. Constitutional guarantees of these things are not self-executing. State courts were often an unreliable venue for enforcing interstate debts and contracts. America before 1789 lacked a nationwide federal court system, let alone one with a reputation for being respected, impartial, and incorruptible.
Washington made it a high priority of his presidency to swiftly establish that system. He signed the Judiciary Act of 1789 five months after his inauguration. Significant parts of it govern the federal courts to this day.
The Supreme Court formally opened for business in February 1790, before it even had any cases to hear. Washington moved swiftly to select its six justices, yet he took great care to choose men from six different states, each of them a prominent and respected drafter or supporter of the Constitution. Under the system designed by the Judiciary Act, the justices rode circuit around the country, not only to hear cases but to build public confidence in the impartial justice of the federal courts and the virtues of the new Constitution. Whatever the discontents around the federal courts since then, they have consistently maintained the confidence of business.
Federal courts were one element of Washington’s broader effort to install an ethic of disinterested public service in place of the corruption and patronage that still governed much of Britain. Even shady practices already forbidden by British law, such as selling offices to the highest bidder, were notorious and rarely punished. Washington’s personal example (including declining a salary during the Revolution) was important to this ethic, and so was his visible effort to select men of merit regardless of their backgrounds. Washington’s support for a free press, even when its attacks wounded him deeply, similarly reflected his view that press freedom was necessary to keep public officials honest and public-spirited.
- Intellectual-Property Law
Innovation flourishes when inventors and creators can secure profits from their creations. This was tenuous in colonial America. The Constitution empowered Congress to protect patents and copyrights; it did both in 1790. Washington prodded passage of the first patent legislation, which he signed three months after calling for it in his first State of the Union address. Three years later, near the end of his first term, Congress streamlined the law to eliminate advance review of patent applications by the cabinet. As with the system for forming corporations, the trend was toward removing official red tape at the front end.
- National Security
Finally, Ansary makes the case that Washington’s foreign policy, by keeping the United States out of Europe’s raging wars, gave it crucial breathing space to grow its economy and stabilize its finances during the turbulent 1790s. While that is a more indirect contribution to our economic growth, it is one for which Washington deserves personal credit.
George Washington supported and oversaw America’s transition from a dependent colony fettered by the mother country into a booming young nation with what would swiftly become the world’s largest common domestic market. He saw great economic potential in the American nation if it could be freed of the artificial limits on its growth and overcome domestic opposition to some of the policies needed to do so. Ansary argues as well that Washington was as current as any statesman of his generation with the work of Adam Smith and other pioneers of free-market economics. Washington’s signature appears on his copy at Mount Vernon of The Wealth of Nations, published in 1776. Ansary hasn’t quite made the case that the genius of the American economy was all Washington’s master plan, orchestrated by his actions. But the father of our country isn’t on the quarter and the one-dollar bill just for his generalship.