“A powerful machine,” part I: James Madison, the First Bank of the United States, and the dangers of public-private partnerships
American Enterprise Institute
Key Points
- Typically, policymakers do not look first and foremost to the constitutional debates of the American founding to guide their decisions. But James Madison’s use of his constitutional theories of 1787–88 to inform his opposition to the First Bank of the United States shows these debates can and should inform policy decisions.
- Madison worried the public-private partnership Secretary of Treasury Alexander Hamilton was looking to forge with the bank could disrupt power relations in the republic.
- Madison was correct in important respects, and his anxiety over the bank has modern corollaries in many industries that effectively lobby the federal government.
Introduction
Normally, when we think of the American founding, we think of it mainly in terms of constitutional design. The framers, drawing on centuries of Enlightenment political thought, came together in Philadelphia in the summer of 1787 to design a government intended to secure the public good. And that was the end of that.
But that is not really the case. In truth, the Constitution—and the varying and often competing ideas that went into its formation—was premised on an idea of human nature, its virtues and its defects, and a view of how justice in a republic should look. These ideas did not merely influence how the founders built the government’s structure but also the debates they had over public policy after the government was enshrined. This means, in turn, that careful policymakers today can learn a great deal about how to design public policy from the constitutional debates of the 1780s and 1790s, even though they were ostensibly about different subjects.
James Madison’s opposition to the First Bank of the United States, drawing from his work on the Constitution, provides a good example of how constitutional theory can inform policymaking. Most biographers see these as two different parts of Madison’s public persona, but a closer view demonstrates they were all part of the same piece—a Madisonian vision of how power should be distributed, how it could be abused, and how policymakers should guard against such dangers.
In this two-part series, I examine Madison’s complicated relationship with the First Bank of the United States to tease out guidelines for contemporary policymakers. In the 1790s, Madison was rightly worried about the way in which the bank—a public-private venture—could be a tool of corruption and self-dealing. That is the subject of Part I. In Part II, I will detail how and why Madison changed his mind about the bank, realizing that its benefits outweighed its potential dangers. From that, I will elucidate ways that pragmatic policymakers should build government programs in the 21st century.
