Ukrainians are not going to miss their economic shot
Nation-Building Is Not Dead Yet: What Ukraine Can Learn from Hamiltonian Capitalism
A Founding Father’s Guide to Wartime Economics
Ukraine is a 32-year-old democracy navigating the brutal realities of war while rapidly transforming its economy for survival. Who better to advise this maturing nation than Alexander Hamilton, the first U.S. Treasury Secretary and the architect of its economic independence?
Hamilton’s brilliant foresight, dare I say clairvoyance, offers urgent relevance to modern Ukraine. His vision embraced private enterprise while advocating for strategic government intervention to build national power, an economic realism that still resonates in today’s polarized debates on tariffs, trade, and wartime industry. Let’s also examine how Hamilton’s thinking has aged, how economists have debated his legacy, and how Ukraine might interpret and apply these lessons in the crucible of war.
Hamilton, Smith, and Ricardo
In March of 1776, Adam Smith published The Wealth of Nations, just months before the signing of the Declaration of Independence. At the time, a 19-year-old Hamilton was serving in the Continental Army. Smith’s “invisible hand” theory argued that individual self-interest, channeled through free markets, leads to efficient resource allocation and a more prosperous society than one guided by top-down state control.
While Smith championed laissez-faire capitalism, Hamilton emphasized the need for a more muscular economic state, especially in times of crisis.
As cataloged by The Alexander Hamilton Society:
He “was certainly a nationalist,” writes scholar Edward Mead Earle, “and he certainly believed in using economic policy as an instrument of both national unification and national power.”1
Despite his willingness to meddle in the economic sphere, however, Hamilton remained a staunch market capitalist. He “was emphatic in his commitment to private enterprise and to a market economy,” historian Forrest McDonald claims.2 A closer look at Hamilton’s writings verifies McDonald’s assessment. In “Federalist No. 12,” for instance, the New Yorker endorsed market capitalism for introducing “human avarice and enterprise” as a way to “vivify and invigorate all the channels of industry.”3 And, as Thomas G. West notes, many of Hamilton’s points in his Report on Manufactures paraphrase arguments made by Adam Smith, including his emphasis on the domestic manufacture of supplies essential for national defense.4 For Hamilton, a commitment to market capitalism was more than compatible with economic nationalism.
Rejecting absolutism, Hamilton held two seemingly conflicting views and left room for the nuance required when weighing the trade-offs in a complex, globalized economy.
Hamilton died in 1804, before David Ricardo advanced his theory of comparative advantage, which demonstrates how nations benefit most from specializing in what they produce most efficiently. Ricardo departed from Smith, who supported free trade but claimed that fairness is integral to these relationships. Ricardo doubled down on free trade, arguing that even "unfair" practices, like export subsidies ("dumping"), are less harmful than the inefficiencies of protectionism. Today’s economists who study tariffs and global price distortions still build upon Ricardo’s core logic.
But Hamilton carved out a critical exception. His rationale for protectionism was less concerned with “dumping” and noncompetitive practices, and more focused on the preservation and expansion of domestic manufacturing capabilities essential to national security.5 French support during the Revolutionary War was an essential input to the colonies’ eventual victory. Hamilton understood that relying on foreign powers, though convenient, could become dangerous if their political interests diverged. Thus, he established economic independence as a core principle of early U.S. governance.
Protectionism: Strategic Tool or Political Theater?
Throughout human history, economic revolution has been spurred by technological advancement, creatively destroying antiquated products and industries. The graph below depicts manufacturing employment totals in blue, and the steady decline of these workers as a percentage of the total workforce in red.
Fear of offshoring and its impact on workers and one-factory town economies is not new. Today politicians on both sides of the aisle blame NAFTA and China’s World Trade Organization entrance for hollowing out America’s industrial base. In Hamilton’s time, Thomas Jefferson warned that manufacturing could undermine the agricultural sector.
The data shows us that America’s industrial workforce peaked in the 1940’s, long before NAFTA, as post-war global integration and technological advancement led to further economic differentiation. The American economy expanded into entertainment, financial services, and technological innovation itself. Technology, not free trade, is the underlying cause of creative destruction, a term coined by Austrian economist Joseph Schumpeter in 1942. Technology generally boosts economic value and productivity, and the concentrated job losses are relatively small.
A prime example of protectionism run afoul took place in the 1980’s automobile industry. Paying full-salary unemployment benefits to laid-off auto workers would have been more economical than the “voluntary export restraints” (pseudo-tariffs) on Japanese automobiles that drained $6B from the pockets of car consumers in a single year, disproportionately burdening low-income Americans who depend on car transportation. The costs shared by American consumers far outweigh the “saved” jobs of auto workers. Mitigating this inevitable harm with mid-career education and training can help facilitate the re-alignment of these workers to sectors of the future. A more robust social safety net, including universal health care, can catch workers who fall through the cracks of tectonic economic shifts.
Made-in-America policies touted by the Biden administration gave into the fear of natural economic transformation. Protectionism is a misguided policy embraced across the political spectrum. Pandering to swing-state voters in the industrial Midwest, if not disingenuous, is a losing game that we should refuse to play.
American products, whether cars or denim jeans dripping with cultural nostalgia, don’t need protection. Domestically manufacturing clothing at the scale necessary to spread out overhead costs and lower prices, is an unrealistic relic of the past. As Jenna Lyons, former Executive Creative Director at J. Crew and Real Housewife of New York notes on TikTok, high-quality denim production was smartly acquired by Japan in the 1950s and 60s. In business jargon, this is considered “cultural arbitrage,” a value-creation tactic that taps into international demand for American fashion.
Those who value American-made products are free to pay a premium for American labor and small-batch manufacturing. Fast fashion brands that manufacture in Bangladesh, China, and Vietnam are rightly criticized for unsafe working conditions and unlivable wages. The 2013 garment factory collapse in Rana Plaza, which claimed 1,134 lives and injured thousands more, is a tragic example of corporate irresponsibility.
Coupling higher labor standards with free trade deals can incentivize safer and more humane business practices. The European Union’s Corporate Sustainability Reporting Directive (CSRD) is a step in the right direction, requiring supply chain transparency from multinational corporations (MNCs) who seek access to European consumers with immense purchasing power. Future U.S. administrations would be wise to join this higher global standard by implementing equivalent policy through the Securities and Exchange Commission. MNCs with revenues overshadowing the Gross Domestic Product (GDP) of developing nations are critical to improving human rights, but nation-state human rights violators like Russia remain among the worst offenders. Leaders of MNCs grew to understand geopolitical risk exposure in the months following Russia’s 2022 invasion, with over 1,000 businesses exiting Russia.6
Which brings us back to Ukraine and its economy. It will cease to exist if Russia achieves an imperialist takeover. In the words of Friedrich List, "power is of more importance than wealth ... because the reverse of power-namely, feebleness - leads to the relinquishment of all that we possess, not of acquired wealth alone, but of our powers of production, of our civilization, of our freedom, nay, even of our national independence, into the hands of those who surpass us in might."7
Industries like microchip production, cybersecurity, and other essential components of modern technological warfare, fall under Hamilton’s exception, in line with List’s thinking.
“The nation which can prefer disgrace to danger is prepared for a master and deserves one” -Alexander Hamilton
When safety of civilians is existentially threatened, an economic behavioral shift occurs. Individuals are willing to sacrifice freedoms in exchange for perceived safety. Some sacrifices are direct and clear, for example, conscripted military service. Other sacrifices are less apparent, taking the form of higher consumer prices and fewer choices due to investments redirected to the defense industry. Though capital and labor resources may lead to greater profitability if invested elsewhere, this short-term gain risks greater near-term and long-term costs under Russian occupation.
Under these certain circumstances, protectionism and government-directed investment is without a doubt necessary. Russian occupation is not only detrimental from a human rights perspective, it also stifles the Ukrainian economy to a greater extent than interfering with the free market.
From Dependence on NATO to Defense Tech Leader
Ukraine has experienced Hamilton’s cautionary tale of foreign dependence firsthand. When Russia launched its full-scale invasion in 2022, Ukraine lacked the military infrastructure to defend itself. NATO, led by the Biden administration, rallied behind Ukraine with weapons and limited personnel support. The closest the French came to sending a modern-day Marquis de Lafayette was floating the idea of covering Ukraine under their nuclear umbrella.
Earlier this year The New York Times reported on the deep intertwinement of U.S. and Ukrainian military operations. Hamilton, no stranger to the political volatility of alliances, would have called out this risk. Leaning on its partners was imperative for Ukraine, but foreign dependency exposed the country to the unpredictable winds of American politics.
When Trump entered office, intelligence sharing switched off and on, jeopardizing Ukraine’s battlefield awareness. Soon after, Ukraine was pressured to spend time and political capital on negotiating a mineral deal in order to shore up continued U.S. support.
Trump’s transactional approach to domestic and foreign policy came into full view in the heated Oval Office meeting between Ukrainian President Zelenskyy, Trump, and Vice President JD Vance.
When I hear sirens in Kyiv warning of ballistic missiles, I have learned to be relieved by the booming and shaking of American Patriot systems that provide aerial defense. Ukraine’s gratitude for American support is obvious here, irrespective of Vance’s demands for continued groveling.
Bridget Brink, the former U.S. ambassador to Ukraine, later described that meeting as her first glaring signal that official U.S. policy under the Trump administration was to pressure Ukraine, instead of the clear violator, Russia. She resigned last month in protest of the policy direction, warning that “peace at any price is no peace at all.”8
While Biden understood the alignment between Ukraine’s security interests and the United States, Trump and Vance do not. They blamed NATO, Biden, and Zelenskyy for provoking Putin, providing justification and cover for Russia’s illegal and murderous invasion. Trump and Vance do not prioritize morality or human rights as objectives in foreign policy. Shamelessly, they engage in international cooperation primarily for resource extraction and personal or political gain.
The Russian economy is kept alive by fossil fuel exports, a tit from which even Ukraine’s European allies have struggled to completely wean themselves. Facilitated by warming relations with Russia and other Oil Producing and Exporting Countries like Saudi Arabia and Qatar, the goal of Trump administration’s “drill baby drill” energy policy is to lower domestic manufacturing costs. These interests are fundamentally misaligned with Ukraine’s, and explain Trump’s floundering as he struggles to broker the “peace” he promised.
War by Wi-Fi: Drones and Deterrence
Hamilton’s reference points for national security belong to a bygone era. Firstly, due to the development of nuclear weapons; and secondly, due to the internet and emergence of cyber warfare.
The introduction of nuclear technology radically changed the strategy of war, privileging countries in possession of nuclear weapons with deterrence. In the post-World War era, international military cooperation reduced the need for domestically-outfitted militaries. Liberal democracies formed alliances with guarantees of mutual protection. When two nuclear powers, the U.S. and the USSR, faced off throughout the Cold War, mutual destruction was narrowly avoided in several instances of brinksmanship.
Today, France’s proposal to include Ukraine under its nuclear umbrella echoes this logic. Ukraine, with its nuclear power infrastructure, can develop weapons of its own. However, the cost would be enormous, and the political risks higher still. A nuclear-armed Ukraine would likely deter Russia, but it could just as easily provoke a catastrophic escalation.
Ukraine’s security edge is not nuclear. It’s digital, and increasingly self-produced. In the past two years, Ukraine has transformed itself into a manufacturing hub for drones, precision weaponry, and electronic warfare. Ukraine’s wartime economy embodies Hamilton’s vision of domestic strength: where the U.S. once built ships, Ukraine now builds code for drones.
Ukraine’s aerial defense systems include the IRIS-T from Germany, Ravens from the United Kingdom, and Patriots from the United States. Duplicative manufacturing of these systems domestically would require intense investment over time that Ukraine does not have. Instead, the country has carved out a comparative advantage that NATO never developed: high-volume, tactical drone warfare. Western drones were designed for limited strikes, whereas Ukraine’s are built for relentless defense, and increasingly, for offense.
This new industrial niche has been made possible by Ukraine’s educated, tech-savvy workforce and by the government’s focus on strategic investment rather than all-out protectionism. The state didn’t resort to tariffs or trade barriers, instead betting on competitive labor, innovation, and wartime necessity.
The results are striking. Ukraine is now producing long-range drones with larger payloads, making it a leader in defense technology. NATO countries, recognizing Ukraine’s expertise in cyber warfare and unmanned systems, are shifting course and investing directly in Ukrainian manufacturing with the goal of incorporating these technologies into their own military arsenals.
Meanwhile, European consumer goods steadily flow into the country. Food prices remain low, with grocery stores stocked full of both imported goods and those produced domestically in Ukraine’s fertile farmlands. Hamilton would be proud of Ukraine’s delicate economic balance, but it might take us a while to explain drone technology to him, starting with the internet.
Power, Principles, and What Comes Next
The macroeconomic force of globalization is not Ukraine’s only challenge. Like many nations, it faces the pressure of demographic decline: longer life expectancy, falling birth rates, and the risk of a lopsided population skewed toward retirees. Ukraine’s decision to set the conscription age at 25 protects its ability to educate and train a new generation, insulating the economy from the consequences of a shrinking labor force.
At the same time, inequality continues to erode the legitimacy of capitalism. As oligarchs and the “One Percent” hoard wealth, average workers miss out on the gains of global growth. Hamiltonian economics offers a blueprint for building national strength, but it must be updated with modern lessons, especially from social democracies that have invested in labor alongside technology.
Investment in public education pays for itself with workforce productivity gains that bolster GDP. A smarter, healthier work force is simply good for economic growth. Nationalization of the health care system not only drives down costs, but also centralizes investment in medical innovation, which is already heavily subsidized with public grant funding for research and development. Health care and education, unlike consumer goods, cannot be imported. They must be built. Public ownership ensures that the value created is returned to the people, not siphoned off by shareholders.
Ukraine’s future cannot rest solely on drones and deterrence. Its postwar economy must be diverse, inclusive, and strategically ambitious. That means resisting both cronyism and austerity, and embracing public investment, shared prosperity, and long-term planning. The United States should follow Ukraine’s lead, returning to its Hamiltonian roots.
Edward Mead Earle, “Adam Smith, Alexander Hamilton, Friedrich List: The Economic Foundations of Military Power,”
Forrest McDonald, Alexander Hamilton: A Biography (New York: W.W. Norton & Company, 1982): 235.
Alexander Hamilton, “Federalist No. 12,” 55.
Thomas G. West, The Political Theory of the American Founding: Natural Rights, Public Policy, and the Moral Conditions of Freedom (Cambridge: Cambridge University Press, 2017), 380-381.
Note - Trump’s definition of national security has been distorted in service of White Christian ultranationalism. And yes, I recognize that our founding fathers claimed Christianity as their creative inspiration, and that many of them owned slaves. They were also constitutionalists who laid a legal foundation for social progress—drafting amendments that would eventually enfranchise minority groups and women. Religious freedom, moreover, was prioritized in the Bill of Rights as a fundamental right. In stark contrast, Trump and Kristi Noem have act outside the bounds of constitutional law to concentrate executive power and deploy ICE agents to abduct residents off of the street. Simultaneously they are importing White South Afrikaners. This is race-bating kleptocracy, not democracy. Alarmingly, Steven Miller, Trump’s Deputy Chief of Staff threatened the suspension habeas corpus, or due process. Falsely characterizing the presence of undocumented immigrants as a wartime invasion threatening national security, Miller’s linguistic gymnastics is offensive to those living under legitimate occupation.
Yale Chief Executive Leadership Institute’s List of Companies Leaving and Staying in Russia
Friedrich List, National System of Political Economy
Face the Nation interview with former U.S. Ambassador to Ukraine Bridget Brink