FOR ALMOST 200 years, American politics has been profoundly warped by the Founding Fathers' greatest mistake: moving the capital from Philadelphia.

Washington, unlike Philadelphia, was set apart in the beginning. Thus the illusion that the federal government was isolated from the affairs of the country, or an interloper, was given physical form. "Washington" became a symbol of illegitimate power in a political rhetoric spanning both parties, a rhetoric employed to arouse discontent without resolving the problems that gave rise to it. The use of the anti-Washington symbol reached a height under presidents Jimmy Carter and Ronald Reagan who, in 1985, denounced the capital as "un-American." There is no more pejorative dismissal of a person or an idea than to label it "inside the Beltway."

The distortion exists from both perspectives. From the Potomac, America appears mostly as shadows racing across a distant landscape. From time to time, these phantoms intrude and disturb the elegance of expertise. By making the capital artificial, the founders made difficult its purpose of giving coherence to a diverse country.

The Constitution, of course, stipulated that a capital be designated. But transplanting the federal government from the second English-speaking city in the world after London to a desolate swamp was hardly inevitable. Nor was the new capital framed in the spirit that was later claimed for it, as an assertion of the new republic's self-creating ability. Rather, Washington was born in a deal: a spirit that would animate many of the capital's future inhabitants.

The placement of the capital on the Potomac was the solution to what seemed to be an intractable problem: paying the debt incurred by the states during the Revolution. Alexander Hamilton wanted the federal government to assume the debt, the better to bind the banks to the central government. The southerners, however, opposed his plan. Over dinner, Hamilton and Thomas Jefferson worked out a compromise. The federal government would assume the debt in exchange for the construction of a new capital in Virginia.

Hamilton was a centralizer, who believed that in the deal his principle triumphed. In fact, he cared little where the capital was located, having scant attachment to any particular American place. He was, after all, born in Barbados, "the bastard son of a Scotch pedlar," as John Adams acidly remarked. Hamilton failed to grasp that location is everything. By trading the capital for debt assumption, Hamilton gave up the possibility of America ever having its own London.

As part of the arrangement, Philadelphia became the federal city for 10 years, from 1790 to 1800, when the new capital of mud and mosquitos was ready. The Washington of, say, 1930 still had fewer dimensions as a city than the Philadelphia of 130 years earlier. In 1800, Philadelphia was the leading American city in population, culture, education, finance, industry and architecture. If it had remained the capital it might well have grown organically into a true national center.

Philadelphia was a city of all classes, from bankers to artisans. The forces contending for power in the country were represented by more than representatives. Underlying shifts in the economy registered instantly among the citizenry, who rode the cycles of boom and bust. And these citizens organized into political societies, unions and associations to express their interests. What was unreal was insulating the capital from the social effects of commerce -- and the coming Industrial Revolution. The representative classes of American life never thrived in the one-company town of Washington. The direct effects of both economic growth and suffering have always been filtered into the capital, almost as if they were abstractions.

Even partisanship, the stock-in-trade of Washington, appears here in an oddly muted form. Absent is the strong presence of local party organizations. By contrast, during the decade in which Philadelphia was the seat of government the Democratic Society, the local branch of the swelling Jeffersonian party, mobilized. It had a large and active base in the community; about a quarter of the members were artisans. The Democrats' battle for control of government with the dominant Federalists played out locally as the same fight raged nationally. From city to state to central government, there was no political discontinuity.

The effect on other cities would undoubtedly have been enormous had Philadelphia remained the capital. New York might not have ever eclipsed Philadelphia as the financial center. A great university in proximity to government, the University of Pennsylvania, might have reduced the importance of Harvard -- and Boston. Literary and intellectual life generally might have flourished side by side with political life, coloring it as it was colored. Germantown, not Greenwich Village, might have been the Bohemian mecca. Who knows? With Philadelphia as the capital, the functions that make up a traditional capital might not have been scattered across the country.

The passing of George Washington in December 1799 was mourned in Philadelphia as the passing of its days as capital. Adams lived only two years in the presidential mansion at 190 High Street before leaving for the White House, which was still under construction.

The dream of a Potomac capital was George Washington's dream long before he became president. He imagined a truly national center, united to the burgeoning West by a Potomac Canal connecting the Potomac and Ohio rivers. The effect on Virginia, the leading southern state, would be to spur industry and gradually make slavery uneconomical. Then Washington planned to erect a national university "to spread systematic ideas through all parts of the rising empire," he wrote. But that canal was never completed, the university never founded. When he died, wrote Brook Adams, he left "his federal capital, which should have been the focus of American exchanges, industry and thought, little better than a wilderness." More than anything else, the Civil War dramatized Washington's failed dream of a unifying capital.

Philadelphia missed its chance to rule the nation almost two centuries ago. Now, to get the effect that Washington sought -- a city at the heart of the economy in the presence of great universities -- the capital would have to be moved to Chicago, which has two major league baseball teams.

Sidney Blumenthal, a Washington Post staff writer, grew up in Chicago. His wife grew up in Philadelphia.