The Right Coast

July 05, 2004
Africa and Alexander Hamilton
By Gail Heriot

I mentioned in an earlier post that I am reading Ron Cherow's biography of Alexander Hamilton. (No, I haven't finished yet; I must be a slow reader.)

Perhaps Hamilton's most important achievement was to win Congressional acceptance of the plan outlined in his Report on the Public Credit. Under it, the national government was able to pay off both its own Revolutonary War debt ($54 million) and the states' remaining Revolutionary War debt ($25 million), both of which had been allowed to go into serious default during the 1780s. "States, like individuals, who observe their engagements are respected and trusted," he wrote, "while the reverse is the fate of those who pursue the opposite conduct."

It is interesting to speculate on how the nation's history would have been changed if this had not been accomplished. Surely, the Louisiana Purchase would have been impossible. Who would want to lend more money to a deadbeat nation? But the likely consequences would have been even more serious.

Of more immediate concern, however, is what will become of the sub-Saharan African nations, if they default on their debts, as they are now being advised to do by Jeffrey Sachs, a top economic advisor to Kofi Annan. The Associated Press (hat tip Little Green Footballs) reports:

"'The time has come to end this charade. The debts are unaffordable,' said Sachs, director of the Earth Institute at Columbia University and special advisor to Annan on global anti-poverty targets. 'If they won't cancel the debts, I would suggest obstruction; you do it yourselves.'"

I don't pretend to have any solution to the economic problems of sub-Saharan Africa. I don't know if the consequences of default will be more or less serious than the consequences of payment, though the fact that I regard Hamilton as a national hero tells you something about my general outlook on issues of public credit. I strongly suspect that the story for Africa will be a sad one no matter what course is taken. Here's hoping they pick the best out of the unfortunate array of alternatives.