Alexander Hamilton’s Typical Prosperity Function

By Travis Johnson

August 9, 2009 (LPAC)--On August 1st, 2009, Lyndon LaRouche presented the update to his now-famous Triple Curve Typical Collapse Function.

While this is in regard to the current dynamic of a General Breakdown Crisis, as also investigated by earlier economists, such as Rosa Luxemburg, let us take a momentary glance at what should be happening if we were to take up LaRouche’s solution. In other words, by readopting the American System of Political Economy of Alexander Hamilton, the dynamic would not be toward a dark age, but a Renaissance.

Alexander Hamilton had an understanding of his own triple curve, but for Hamilton, this should be called the Typical Prosperity Function. In the Report on Manufactures, Hamilton states the conclusive need for public debt to be used to foster and protect new employment of industries and manufactures, which were otherwise attacked by the cheap market produce dumped onto the United States from European Oligarchy-controlled markets. Hamilton demonstrates how the United States may go into debt unto itself, distribute the credit with simple interest as a means of increasing the manufactures, and then extinguishing that debt. At the time the debt is extinguished, the increase in the economy stays the same. For example, after the farmer pays off his debt, he still retains the farm he purchased with it.

This credit now flows into other economic ventures, ever augmenting the national wealth, to such an extent that the ratio of circulating credit to physical wealth is very low. Further, all credit must be uttered, to promote those activities which increase what Hamilton calls, “the productive powers of labor,” because we cannot simply rely on any inherent value of money. And finally, the method that this credit circulates, as it passes hands, does so by formation of new credits to other branches of industry, to an extent that the ratio of physical coin to financial instruments is also low.

In Hamilton’s words, “It remains to be seen what further deduction ought to be made from the capital which is created by the existence of the debt on account of the coin which is employed in its circulation….It is impossible to say what proportion of coin is necessary to carry on the alienations which any species of property usually under goes. The quality, indeed, varies according to circumstances. But it may still, without hesitation, be pronounced, from the quickness of the rotation, or, rather, of the transitions, that the medium of circulation always bears but a small proportion to the amount of the property circulated. And it is thence satisfactorily deducible that the coin employed in the negotiations of the funds, and which serves to give them activity, a capital, is incomparably less than the sum of the debt negotiated for the purpose of the business.” [emphasis added.]