Hamilton’s SEUM at Paterson Was an Early Failure of Centrally Planned Industrial Policy

(p. 384) The 1792 financial panic came on the heels of the two great projects by which Hamilton hoped to excite the public with the shimmering prospects for American manufacturing: the Society for Establishing Useful Manufactures and submission of his Report on Manufactures. The outlook for both was badly damaged by the panic. Even a short list of the worst offenders in the share mania–William Duer, Alexander Macomb, New York broker John Dewhurst, Royal Flint–included so many SEUM directors that it almost sounded like a company venture. Duer’s notoriety was especially detrimental since he had been SEUM governor, its largest shareholder, and its chief salesman in hawking securities.
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(p. 385) How exactly would the SEUM, its coffers cleaned out by Duer, pay for its property on the Passaic River? Hamilton privately approached William Seton at the Bank of New York and arranged a five-thousand-dollar loan at a reduced 5 percent interest rate. He cited high-minded reasons, including the public interest and the advantage to New York City of having a manufacturing town across the Hudson, but more than the public interest was at stake: “To you, my dear Sir, I will not scruple to say in confidence that the Bank of New York shall suffer no diminution of its pecuniary faculties from any accommodations it may afford to the Society in question. I feel my reputation concerned in its welfare.” The SEUM’s collapse, Hamilton knew, could jeopardize his own career. In promising Seton that he would see to it as treasury secretary that the Bank of New York was fully compensated for any financial sacrifice entailed by the SEUM loan, Hamilton mingled too freely his public and private roles.
(p. 386) For several days in early July 1792, Hamilton huddled with the society directors to hammer out a new program. “Perseverance in almost any plan is better than fickleness and fluctuation,” he was to lecture one superintendent, with what could almost have been his personal motto. Rewarding his efforts, the society approved wide-ranging operations: a cotton mill, a textile printing plant, a spinning and weaving operation, and housing for fifty workers on quarter-acre plots. Never timid about his own expertise, Hamilton pinpointed the precise spot for the factory at the foot of the waterfalls that had so impressed him with their strength and beauty during the Revolutionary War.
It was an index of the hope generated by Hamilton that the SEUM, at his suggestion, hired Pierre Charles L’Enfant, the architect who had just laid out plans for the new federal city on the Potomac River, to supervise construction of the society’s buildings and plan the futuristic town of Paterson. At the same time, it was an index of Hamilton’s persistent anxiety that he dipped into managerial minutiae befitting a factory foreman rather than an overworked treasury secretary. For instance, he instructed the directors to draw up an inventory of tools possessed by each worker and stated that, if any were broken, the parts should be returned and “a report made to the storekeeper and noted in some proper column.” With his reputation at stake, Hamilton even subsidized the venture with his own limited funds, advancing $1,800 to the mechanics. Despite the Duer fiasco, the SEUM commenced operations in spinning, weaving, and calico printing.
The subsequent society records make for pretty dismal reading, as Hamilton was beset by unending troubles. L’Enfant was the wrong man for the job. Instead of trying to conserve money for the cash-strapped society, he contrived extravagant plans for a seven-mile-long stone aqueduct to carry water. He was enthralled by the idea of creating a grand industrial city on the pattern of the nascent Washington, D.C., with long radiating avenues, rather than with building a simple factory. By early 1794, L’Enfant shucked the project and spirited off the blueprints into the bargain. To find qualified textile workers, the society sent scouts to Scotland and paid for the laborers’ passage to America. Even the managers clamored for better pay, and SEUM minutes show that some disgruntled artisans personally hired by Hamilton began to sabotage the operation by stealing machinery. One of the saddest parts of the story relates to the employment of children. Whatever hopeful vision Hamilton may have had of children performing useful labor and being educated simultaneously, they had neither the time nor the money to attend school. To remedy the problem, the board hired a schoolmaster to instruct the factory children on Sundays–which, as Hamilton must have known, was scarcely a satisfactory solution.
By early 1796, with Hamilton still on the board, the society abandoned its final (p. 387) lines of business, discontinued work at the factory, and put the cotton mill up for sale. Hamilton’s fertile dream left behind only a set of derelict buildings by the river. At first, it looked as if the venture had completely backfired. During the next two years, not a single manufacturing society received a charter in the United States. Hamilton’s faith in textile manufacturing in Paterson was eventually vindicated in the early 1800s as a “raceway” system of canals powered textile mills and other forms of manufacturing, still visible today in the Great Falls Historic District. The city that Hamilton helped to found did achieve fame for extensive manufacturing operations, including foundries, textile mills, silk mills , locomotive factories, and the Colt Gun works. Hamilton had chosen the wrong sponsors at the wrong time. In recruiting Duer and L’Enfant, he had exercised poor judgment. He was launching too many initiatives, crowded too close together, as if he wanted to remake the entire country in a flash.

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.
(Note: italics in original.)

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