The Price of Greatness

Alexander Hamilton, James Madison, and the Creation of American Oligarchy


By Jay Cost

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An incisive account of the tumultuous relationship between Alexander Hamilton and James Madison and of the origins of our wealthy yet highly unequal nation

In the history of American politics there are few stories as enigmatic as that of Alexander Hamilton and James Madison’s bitterly personal falling out. Together they helped bring the Constitution into being, yet soon after the new republic was born they broke over the meaning of its founding document. Hamilton emphasized economic growth, Madison the importance of republican principles.

Jay Cost is the first to argue that both men were right — and that their quarrel reveals a fundamental paradox at the heart of the American experiment. He shows that each man in his own way came to accept corruption as a necessary cost of growth. The Price of Greatness reveals the trade-off that made the United States the richest nation in human history, and that continues to fracture our politics to this day.



For the convenience of the reader, I have altered the spelling, capitalization, and punctuation of historical passages to make them conform to modern conventions. No substantive changes of any sort have been made to direct quotations.


LIKE FASHION, AMERICAN political biography is notoriously faddish. With the exception of a few hardy perennials like Abraham Lincoln and George Washington, historical figures often fall in and out of favor with biographers. Not that long ago, Thomas Jefferson and Andrew Jackson were popular subjects, but interest in them has waned noticeably in recent years. Lately, more attention has been paid to Alexander Hamilton and James Madison—perhaps more so than at any point since their own times. Hamilton was the subject of a widely acclaimed 2004 biography by Ron Chernow, which reintroduced the first secretary of the treasury to Americans and inspired the award-winning Broadway hit Hamilton. There will probably never be a musical written about Madison, a quiet, diminutive planter from Virginia, but he has also enjoyed a renaissance and has been the subject of many scholarly treatments in recent years as well as of biographies geared toward a mass audience, including one written by Lynne Cheney, the former second lady of the United States.

This renewed interest in Madison and Hamilton is richly deserved. Too young to lead the country into the Revolutionary War, they were nevertheless among the heroes who helped save the peace. Having ascended to the summit of American politics by the mid-1780s, they were indispensable in framing the Constitution. Remarkably well educated, politically savvy, and possessing the boldness that comes naturally with youth, they helped draft the new government at the Constitutional Convention and then defended it in the Federalist Papers and at the Virginia and New York ratifying conventions. These two giants of the early republic are well worth our attention.

Yet despite this recent revival, little has been written about the relationship between Madison and Hamilton. This leaves significant gaps in their stories. Not only were they central actors in the early years of the new republic, but their stories are inseparable. Though they were close allies and even friends in the 1780s, they became bitter rivals in the 1790s. After the project of framing a new government was finally completed, they turned on each other, and their dispute led to the first partisan political divide in our country. What happened? And more important, what does their falling-out tell us about the Constitution, our government, and our politics? More than two hundred years later, these questions continue to linger.

JAMES MADISON JR. was born on March 16, 1751, into a family with a large estate in the Piedmont region of Central Virginia. He went to the College of New Jersey (now Princeton University), where he was instructed by the influential Scottish Presbyterian minister John Witherspoon, a signer of the Declaration of Independence. In 1776 Madison entered the Virginia House of Delegates, where he fell into the orbit of Thomas Jefferson. This was the start of a lifelong friendship and one of the greatest political partnerships in American history.

Alexander Hamilton, the illegitimate child of James Hamilton and Rachel Faucette, was born on the Caribbean island of Nevis on January 11, 1757. Abandoned by his father and orphaned by the death of his mother, his early life was one of hardship and loss. But he was an unusually bright boy, and he landed a job as a clerk at an import-export firm. As a young man, he emigrated to North America and enrolled in King’s College (now Columbia University), where he was soon caught up in the fervor of the revolutionary cause. His courage and intellect placed him in the first rank of young recruits, and George Washington hired him as his aide-de-camp.

In the summer of 1782, Hamilton was named a delegate from New York to the Congress of the Confederation, where Madison had been serving since 1780 as a delegate from Virginia. From that point forward, the fate of the one would be inextricably connected to that of the other. They would seem to make for an unlikely duo. Hamilton was a man brimming with confidence and passion. Having bootstrapped himself from a lowly life in the West Indies to a promising career in American politics, he was convinced he was a man of destiny. Madison, on the other hand, was usually underwhelming on first impression. Short and slight, he had a soft voice and an unassuming disposition. But he was widely known to be a dogged, skillful, and pragmatic legislator.

Background and personality aside, the two had much in common. They were both extremely well read. By the time the Constitution was ratified, Hamilton’s only equal on matters of public finance was Robert Morris, and Madison’s knowledge of political philosophy was rivaled only by John Adams and Jefferson. They were both formidable debaters and writers; they had thought through virtually every public matter and could defend their views with uncommon skill. They also inclined toward arrogance. Convinced of the rectitude of their own beliefs, they were quick to cast aspersions on those who disagreed—including, eventually, one another. But that was still years away, when they entered national politics.

In November 1777, the newly freed colonies adopted a new governing charter, called the Articles of Confederation, which called for just a “firm league of friendship” among the thirteen states, each of which retained its sovereignty. There were no federal courts and no executive branch, and Congress was endowed with little real authority. The result was a national power vacuum, which was filled by state governments looking out for themselves. Madison and Hamilton were determined to fix that.1

They would find nothing but frustration in Congress, and they eventually turned their attention to radically revising the terms of government, replacing the Articles of Confederation with a system that actually worked. Their behind-the-scenes politicking was essential in helping organize the Constitutional Convention, which opened on May 25, 1787, in Philadelphia.

As was his habit, Madison came to the meeting better prepared than anybody else. Arriving before the convention began, he and his nationalist allies—those who wanted a strong central government—agreed on a bold new vision: the Virginia Plan, formally introduced by Governor Edmund Randolph but largely Madison’s brainchild. It was the culmination of Madison’s study of government since his Princeton days. His research had lately been aided by a steady stream of books sent to him by Jefferson, then serving as minister to France. The Virginia Plan was not only a brilliant plan of government; it was also a political masterstroke. By seizing the initiative, Madison and the nationalists dominated the agenda through the early weeks of the convention and oriented the delegates toward the idea of replacing, rather than merely revising, the articles.

Though Hamilton served at the convention as a delegate from New York, his role was limited. Modeled on the British constitution, his plan of government envisioned life tenures for the president and senators—making it too elitist for the convention. Worse for Hamilton, John Lansing and Robert Yates, his fellow delegates from New York, were opposed to a strong national government. Because each state received one vote on all matters, Lansing and Yates overrode Hamilton again and again. He departed the convention on June 30, and though he returned for brief spells, he contributed little thereafter except his signature on the final draft.

Neither Madison nor Hamilton was particularly satisfied with the finished project. The nationalists had to compromise on many points with delegates who opposed centralizing power. Still, the two thought it was the best that could be practically achieved, so they committed themselves to its defense. Their first task was to coauthor a series of essays, published in New York newspapers, laying out the logic behind the Constitution and the case for ratification. The first entry in what would be known as the Federalist Papers was published on October 27. Hamilton would compose more than half of the eighty-five essays, and Madison penned twenty-nine. John Jay was originally engaged to assist, but he took ill, so he authored only five articles.

The bulk of the Federalist Papers was published prior to the spring of 1788, after which Madison and Hamilton turned to their respective states’ ratifying conventions. By the time the proceedings in Virginia and New York began, eight states had already ratified the Constitution, meaning that just one more was needed for it to technically become the law. But for all practical purposes, the assent of Virginia and New York was necessary. Virginia was at that point the most populous state in the union, and although New York was smaller, its central location gave it special importance.

Opposition within each state was fierce. New York governor George Clinton disapproved of the Constitution, and his allies were well represented in the state convention. In Virginia, the charismatic Patrick Henry came out against it, as did George Mason. However, the Constitution had the support of Madison; of Randolph, who had refused to sign it at the Constitutional Convention but now supported ratification; and of George Washington, who did not participate in the ratifying convention but whose influence in Virginia was everywhere felt. Madison was no rhetorical match for the fiery Henry, but the convention decided to debate the Constitution clause by clause, enabling Madison to offer careful, considered arguments. Henry, for all his eloquence, could not mount an effective counterattack, and the convention approved the Constitution by a margin of 89 to 79 on June 25. With New Hampshire having ratified it a few days earlier, there were now ten states on board, creating sufficient pressure on New York that that state approved it as well.

With the Constitution ratified, Washington was the obvious choice for president. He selected Hamilton as secretary of the treasury. Meanwhile, Madison won election to the House of Representatives, despite the best efforts of Henry, whose allies in the state legislature situated Madison’s Orange County home in a congressional district that was, on the whole, Anti-Federalist. Madison had to contest the seat against James Monroe—his friend and Jefferson’s former pupil—who had voted against ratifying the Constitution. Ultimately, Madison won a comfortable though not overwhelming victory and took his seat in Congress when it opened in New York in the spring of 1789. The first session was largely spent organizing the government, and Madison served as the Washington administration’s de facto prime minister. He shepherded through bills to create the cabinet and the courts, funneled the many suggestions for revising the Constitution into the Bill of Rights, and helped craft a national tax plan. Meanwhile, Hamilton was hard at work finalizing the details of his economic program. He submitted his groundbreaking Report Relative to a Provision for the Public Credit (commonly called the Report on Public Credit) to Congress in January 1790. This was followed in December of that year by The Second Report on the Further Provision Necessary for Establishing Public Credit, commonly called the Report on a National Bank. In December 1791, he submitted the Report on the Subject of Manufactures, commonly called the Report on Manufactures.

Taken as a whole, these reports represented Hamilton’s ideas on how the new government could forge a national economic marketplace. The first step was the management of the public credit. He called for a full repayment of the national debt to the current holders of public certificates, as well as an assumption of the state debts. Next, he proposed a national bank, modeled on the Bank of England, that would be privately owned but would house public tax revenues and offer loans to the government. Finally, he called on the government to patronize manufacturing, through policies like bounties and protective tariffs, as a way to diversify the American economy. Hamilton’s program was highly controversial. The ratification of the Constitution notwithstanding, Americans still remained fearful of an overly powerful central government.

What shocked many was that Madison, one of the premier nationalists of the 1780s, could not abide Hamilton’s plan. Although Madison wanted a strong and effective central government, he thought Hamilton’s ambition was to invest the moneyed elite with permanent governing power, thereby diluting the authority of the people and ultimately centralizing authority around himself. Madison looked back to the debates of the Constitutional Convention, when Hamilton called Britain’s constitutional monarchy the best system in the world. Madison feared that the secretary, having lost that battle at the convention, was now seeking to win the war via public policy. He resolved to thwart what he perceived were dark designs, and in this effort he was soon joined by Jefferson. Their alliance against Hamilton’s economic policies would mark the start of party politics in the United States, with Hamilton’s Federalist Party facing off against Jefferson and Madison’s Republican Party (or, as they are commonly called today, the Democratic-Republican Party).

The Republican-Federalist dispute soon took on a foreign-policy dimension. The French Revolution precipitated a war between Great Britain and the new French Republic, which placed the United States in the middle. The United States had a treaty of alliance with France (or at least with prerevolutionary France), but Great Britain was its primary trading partner. President Washington dispatched John Jay, then serving as chief justice of the Supreme Court, to hammer out an agreement with the British, though he won few concessions. Still, Hamilton vigorously supported the resulting Jay Treaty, writing pamphlets on its behalf. Madison, for his part, struck back by trying to have the House deny the funding necessary to carry the treaty into effect.

By the end of Washington’s presidency, American politics had become a morass of hyperbole, backbiting, and paranoia. Vice President Adams, who had not been directly involved in the vitriolic debates of the previous eight years, narrowly defeated Jefferson for the presidency in 1796. He inherited a politically untenable situation. The Republicans lined up against him, and the so-called High Federalists—that is, those Federalists loyal to Hamilton—did not trust him. Intrigues by foreign agents led to a bout of anti-French hysteria, emboldening the prowar wing of the Federalist Party and outraging the Republicans. Adams, however, was committed to neutrality and came to peace terms with France in the Convention of 1800.

Jefferson won his presidential rematch against Adams in 1800, and the Federalists were driven from government, never to return. Tragically, Hamilton was killed in a duel with Vice President Aaron Burr in 1804, robbing his party of its leading intellectual light. Meanwhile, the nation enjoyed several years of peace and prosperity under Republican rule. Jefferson’s first presidential term was a success, capped off by the purchase of Louisiana in 1803. But international affairs would dominate his second term, as the United States was caught between the British and the French once more.

Madison succeeded Jefferson to the presidency in 1809, and like his predecessor, he tried to broker a lasting peace. But the effort was to no avail, and the country went to war against Great Britain again, in 1812. Prowar Republicans thought this an opportunity to assert the nation’s independence once more, and maybe even to take Canada. But the war was fought to a draw, and in 1814 British soldiers burned the fledgling capital, Washington, DC. The Treaty of Ghent brought peace between the two nations, although with no major concessions from either side. After the war, the Republicans markedly changed course from their previous views, endorsing an aggressive program of national development, which included several old Hamiltonian proposals, such as the Second Bank of the United States and a protective tariff—both of which were signed into law by President Madison himself.

By the time Madison retired to private life in 1817, he seemed to have come full circle. He allied with Hamilton in the 1780s, opposed him in the 1790s, and finally acquiesced to his plan for the nation in the 1810s. Madison and Jefferson had won the political battle when they defeated the Federalists in 1800. However, Hamilton’s ideas on economics and finance would dominate the remainder of the nineteenth century, having been implemented by none other than Madison himself.

These are the undisputed facts of the changing relationship between Hamilton and Madison, but an acceptable theory that connects all these episodes has remained elusive. Instead, historians are inclined to offer partial accounts—favoring either Madison or Hamilton, often at the expense of the other. Pro-Hamilton writers claim that Madison’s turn against Hamilton was tantamount to “denying an earlier version of himself,” which he did under “ideological strain.” Madison saw the old world he knew—one dominated by the landed gentry of Virginia—slipping away, to be replaced by a commercial class stationed in New York. He responded by trying to “inhibit government from undertaking a range of things one does not approve of.” Though pro-Madison historians tend not to be so pointed in their critiques of Hamilton, they suggest that Hamilton’s commitment to popular government was somehow disingenuous. This academic debate has a parallel in the present-day political divide too. Today, Republicans are more likely to favor Madison for his praise of limited government, whereas Democrats are apt to think highly of Hamilton, not least because of his status as an immigrant and his antislavery attitudes. It has not always been so—Hamilton was until recently a hero of business-minded Republicans—but the general point stands. Madison and Hamilton are often seen to represent opposing views of the kind of nation the United States was, is, and should be.2

In this sense, both sides of the argument are right: Madison and Hamilton did and still do represent different visions for the country. But it is only by studying them together, and by tracking the making and then the dissolution of their friendship, that we can fully understand those visions, how they relate, and why they still matter today.

MADISON AND HAMILTON belonged to a political movement in the 1780s that generally cohered around three basic principles. The first was a commitment to a liberal government, which emphasized the protection of individual rights. As Jefferson argued in the Declaration of Independence, “governments are instituted among men” to secure certain “unalienable rights,” including life, liberty, and the pursuit of happiness. The Virginia Declaration of Rights, authored by Mason, added the protection of property to the list. This view of the ends of government was heavily influenced by the writings of English philosopher John Locke.3

Second, they were part of the tradition of republicanism, or self-government. As Cicero put it, “res publica, res populi” (the commonwealth is the concern of a people), who are “associated with one another through agreement on law and community of interest.” Liberty, in the republican conception, has less to do with protecting property and more to do with the proper construction of the state. Citizens in a republic are free because they are governed by laws that they themselves have a hand in making and not by the whims of an arbitrary sovereign. Typically, republics were thought to be unstable—easily corrupted from their proper form into a tyranny (misrule by a king), oligarchy (misrule by the rich), or ochlocracy (misrule by the mob). Philosophers had concluded that a secure government required mixing the republican principle of majority rule with some other form, like monarchy, to create a balance between factions of society as a bulwark against decay. Montesquieu, a French philosopher and historian who was widely read in the United States at the time, had argued in The Spirit of the Laws that Great Britain—which balanced the democratically elected House of Commons against the aristocratic House of Lords and a hereditary sovereign—was the one system in the modern world founded on the spirit of liberty. The Founders, however, had rejected the mixing of classes or estates in government and sought to found a stable republic solely on the principle of majority rule.4

Third, they were nationalists, arguing that the thirteen states had to bind themselves more firmly together if the ideals of liberalism and republicanism were to be secured. This view was more practical than moral, as it involved a question of how to achieve the shared principles of liberalism and republicanism. It was also much more controversial. Though most Federalists and Anti-Federalists agreed in general on liberalism and republicanism, they disagreed on the nature of the union. The Anti-Federalists, having just thrown off the shackles of a distant government in the Revolution, were not too keen on sanctioning another one. Plus, the Federalists were arguing against the conventional view of republicanism, which held that a smaller republic was preferable, because the citizenry would be more homogeneous and better able to keep an eye on their representatives. Nevertheless, the miserable experiences of the 1780s—an impotent national Congress combined with selfish and often illiberal states—had convinced most Americans that a firmer union was necessary.5

Liberalism, republicanism, and nationalism were broad categories, and it was up to each statesman to figure out for himself how they should be blended together. As such, it was typical for the Founders to disagree, if not on the big principles then at least on the finer points. Even Jefferson and Madison—whose friendship and political alliance endured for half a century—had respectful but sharp disagreements about the permanence of the Constitution and the role of the masses in government. Meanwhile, Hamilton and Madison agreed on enough points to align in the 1780s, but they always had vast disagreements, which came to the forefront in the 1790s.6

It is not my intention to elaborate the full scope of their political thought, as that would be an unwieldy task; rather, I will emphasize certain themes within each view that help account for their complicated relationship. Hamilton’s program emphasized what I call national vigor. He thought it necessary to develop the country’s commercial strength to bind the country together and strengthen its ability to rival foreign powers. In Federalist 11 he described this vision as “one great American System” that “would baffle all the combinations of European jealousy to restrain our growth.” This meant establishing a reliable currency, encouraging the expansion of credit, and promoting economic diversification. These policies admittedly rewarded the wealthy, but he had a bigger purpose in mind. He wished to turn the wealthy into mediators of the general welfare—dispensing benefits to them in the short run but ultimately reorienting their self-interests to the national interest. Hamilton’s vision of government was not “of, by and for rich people,” as some critics have said, but rather a public-private partnership between the wealthy and the state, for the benefit of all Americans. The quintessential example of Hamilton’s approach was the Bank of the United States—mostly owned by private investors but holding federal tax revenues and serving as a lender for the government. Yes, the wealthy would profit from their ownership of the stock, but a well-run bank promised benefits that would flow throughout the whole economy.7

Madison’s views, on the other hand, emphasized what I call republican balance. He believed the government had to behave like a neutral judge, fairly dispensing policy benefits and burdens according to the merits of each case. As such, he thought Hamilton’s policies were too one-sided in their favoritism to the wealthy. The rest of the nation should derive some immediate benefits too. He also worried about the potential for Hamiltonian mediation to corrupt republican government. He perceived a dangerous dynamism inherent in the secretary’s use of the moneyed class to promote the general welfare. Institutions like the Bank of the United States are not a one-way street: the government can employ it for the public good, but the bank’s directors and stockholders can leverage its special status for their own purposes, to enrich themselves at the public’s expense or even to take control of economic policy. In the parlance of classical republicanism, this is corruption, as the government begins to look like an oligarchy—rule by and for the rich at the expense of the national interest. Madison looked warily at the experience of Great Britain, which had empowered private corporations like the East India and the South Sea Companies to execute national economic policy, only to see those private corporations come to wield political influence in Parliament and wreak economic havoc when their schemes failed. He feared the same dangers from Hamilton’s system.

As it turned out, both were right, each in his own way. Hamilton’s economic plan was brilliant and has rightly been praised for establishing the financial foundation for the Industrial Revolution in the United States. He borrowed the best ideas from the great European finance ministers of the 1700s and reimagined them for the American context. His plan for the national and state debts created a stable currency for the first time since the Revolution. The Bank of the United States kept tax revenues secure and was always ready to lend money to the government as the need arose. Moreover, it facilitated economic development by responsibly extending credit throughout the private sector. And though Hamilton’s program to protect American manufacturing was too controversial for the 1790s, it eventually came to form the basis of the nation’s industrial policy.

Even so, the criticisms Madison leveled against Hamilton had merit. The secretary’s program was egregiously one-sided, offering few direct benefits to common people, most of whom were farmers. Moreover, Hamilton’s policies did in practice breed corruption, in that they intermingled popular sovereignty with oligarchy. He wanted to redirect the interests of the moneyed class toward the needs of the nation, and he succeeded, but the relationship was dynamic, as Madison had feared. The wealthy effectively captured the government, at least in crucial instances. The protracted fight in 1790 over the assumption of state debts was in large part due to the defiance of wealthy speculators, who risked the national credit to reap a windfall profit. The Panic of 1792 was a product of speculative frenzy by this same group, whose key players had been in or were closely connected to the new government. Ultimately, they forced Hamilton to, in effect, buy them off with federal tax dollars.


  • "Remarkable and insightful... a fascinating look at the interaction of money and politics in the early years of our Republic, showing that, like much of human nature, issues of greed and corruption are not sudden creations of the modern era."—New York Journal of Books
  • "[A] compelling account.... Cost has written an engrossing and useful book in The Price of Greatness, for it both provides an accessible (short) history of this country's beginnings and illustrates dynamics fundamental to the American model."—Washington Free Beacon
  • "Cost's descriptions of post independence political wrangling and the first decades of the new United States are clear and easily grasped."—Publishers Weekly
  • "Focusing on James Madison and Alexander Hamilton.... Cost offers a revealing look at how their contrastingg political philosophies shaped the new nation's domestic and foreign policies.... A well-argued examination of the nation's founding principles."—Kirkus Reviews
  • "In his lively new book, Jay Cost continues his fascinating inquiry into the sources of American political corruption by examining Alexander Hamilton's and James Madison's divergent understandings of the Constitution and the proper balancing of liberty, republicanism, and national unity and prosperity."—Bradford Wilson, Executive Director, James Madison Program, Princeton University
  • "Thoughtful people differ concerning why so many of today's most talented writers on American history practice their craft outside academia. Thoughtful people agree, and this book demonstrates, that Jay Cost is among those writers."—George F. Will, WashingtonPost columnist
  • ""Jay Cost has managed to do the unthinkable. He's written an insightful account of the principles and practices of two great founding fathers, Alexander Hamilton and James Madison, without savaging one or the other. This terrific book is destined to reshape our thinking about the key events of the early republic including the tragic break between Hamilton and Madison.... A must-read for those interested in a deeper understanding of two giants whose principles animate America's conflicted soul."—Stephen F. Knott, author of Alexander Hamilton and the Persistence of Myth
  • "Jay Cost brings alive the profound dispute between Madison's republicanism and Hamilton's nationalism and helps us see why it still matters. At once a discerning scholar of political theory and a perceptive student of political practice, he is the perfect guide to this rich story."—Yuval Levin, author of TheFractured Republic and editor of NationalAffairs

On Sale
Jun 5, 2018
Page Count
256 pages
Basic Books

Jay Cost

About the Author

Jay Cost is a visiting scholar at the American Enterprise Institute and has written for the Wall Street Journal, National Review, and Commentary. He holds a PhD in political philosophy from the University of Chicago. The author of The Price of Greatness and A Republic No More, he lives in western Pennsylvania.

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