American System (economic plan)

The American System was an economic plan that played an

important role in American policy during the first half of the 19th
century. Rooted in the "American School" ideas of Alexander
Hamilton, the plan "consisted of three mutually reinforcing parts: a
tariff to protect and promote American industry; a national bank to
foster commerce; and federal subsidies for roads, canals, and other
'internal improvements' to develop profitable markets for
agriculture".[1] Congressman Henry Clay was the plan's foremost
proponent and the first to refer to it as the "American System." The Monkey System or Every
One For Himself: Henry Clay
A plan to strengthen and unify the nation, the American System, was
says "Walk in and see the new
advanced by the Whig Party and a number of leading politicians
improved grand original American
including Henry Clay and John Quincy Adams. Motivated by a
System!" The cages are labeled:
growing American economy bolstered with major exports such as
"Home, Consumption, Internal,
cotton, tobacco, native sod, and tar they sought to create a structure for Improv". This 1831 cartoon
expanding trade. This System included such policies as: ridiculing Clay's American
System depicts monkeys,
Support for a high tariff to protect American industries and
labeled as being different parts of
generate revenue for the federal government
a nation's economy, stealing each
Maintenance of high public land prices to generate federal other's resources (food) with
revenue commentators describing it as
Preservation of the Bank of the United States to stabilize either great or a humbug.
the currency and rein in risky state and local banks
Development of a system of internal improvements (such as
roads and canals) which would knit the nation together and be financed by the tariff and land
sales.

Clay protested that the West, which opposed the tariff, should support it since urban factory workers would
be consumers of western foods. In Clay's view, the South (which also opposed high tariffs) should support
them because of the ready market for cotton in northern mills. This last argument was the weak link. The
South never strongly supported the American System and had access to plenty of markets for its cotton
exports.

Portions of the American System were enacted by the United States Congress. The Second Bank of the
United States was rechartered in 1816 for 20 years. High tariffs were first suggested by Alexander
Hamilton in his 1791 Report on Manufactures but were not approved by Congress until the Tariff of 1816.
Tariffs were subsequently raised until they peaked in 1828 after the so-called Tariff of Abominations. After
the Nullification Crisis in 1833, tariffs remained the same rate until the Civil War. However, the national
system of internal improvements was never adequately funded; the failure to do so was due in part to
sectional jealousies and constitutional squabbles about such expenditures.

In 1830, President Jackson rejected a bill which would allow the federal government to purchase stock in
the Maysville, Washington, Paris, and Lexington Turnpike Road Company, which had been organized to
construct a road linking Lexington and the Ohio River, the entirety of which would be in the state of
Kentucky. Jackson's Maysville Road veto was due to both his personal conflict with Clay and his
ideological objections.
Contents
Main points
Annual message of 1815 (Seven Points)
See also
Further reading
Modern books
Other/older books
Sources and notes
External links

Main points
The establishment of a protective tariff, a 20%–25% tax on imported goods, would protect a nation's
business from foreign competition. Congress passed a tariff in 1816 which made European goods more
expensive and encouraged consumers to buy relatively cheap American-made goods.

The establishment of a national bank would promote a single currency, making trade easier, and issue what
was called sovereign credit, i.e., credit issued by the national government, rather than borrowed from the
private banking system. In 1816, Congress created the Second Bank of the United States.

The improvement of the country's infrastructure, especially transportation systems, made trade easier and
faster for everyone. Poor roads made transportation slow and costly.

The American System became the leading tenet of the Whig Party of Henry Clay and Daniel Webster. It
was opposed by the Democratic Party of Andrew Jackson, Martin Van Buren, James K. Polk, Franklin
Pierce, and James Buchanan prior to the Civil War, often on the grounds that the points of it were
unconstitutional.

Among the most important internal improvements created under the American System was the Cumberland
Road.

Henry Clay's "American System," devised in the burst of nationalism that followed the War of
1812, remains one of the most historically significant examples of a government-sponsored
program to harmonize and balance the nation's agriculture, commerce, and industry. This
"System" consisted of three mutually reinforcing parts: a tariff to protect and promote
American industry; a national bank to foster commerce; and federal subsidies for roads, canals,
and other "internal improvements" to develop profitable markets for agriculture. Funds for
these subsidies would be obtained from tariffs and sales of public lands. Clay argued that a
vigorously maintained system of sectional economic interdependence would eliminate the
chance of renewed subservience to the free-trade, laissez-faire "British System."

— United States Senate website[1]

Annual message of 1815 (Seven Points)

 Funds for national defense
Frigates for the Navy
A standing army and federal control of the militia
Federal aid for building roads and canals
A protective tariff to encourage manufacturers
Re-establishing the National Bank
Federal assumption of some state debt

See also
American School (economics)
Economic nationalism
Protectionism
Tariffs
Tariffs in United States history
Protectionism in the United States
Friedrich List, German-American economist
Import substitution industrialization, a key feature of the American System adopted in much
of the Third World during the twentieth century
Lincoln's expansion of the federal government's economic role
National Policy, a similar economic plan used by Canada circa 1867–1920s
Australian settlement

Further reading

Modern books
Michael, Diaz, The Promise of American Life (2005 reprint)
Joseph Dorfman. The Economic Mind in American Civilization, 1606–1865 (1947) 2 vol
Eckes,Jr. Alfred E. "Opening America's Market—U.S. Foreign Trade Policy Since (1995)
University of North Carolina Press
Foner, Eric. Free Soil, Free Labor, Free Men: The Ideology of the Republican Party before
the Civil War (1970) (https://www.questia.com/PM.qst?a=o&d=90104191)
Gill, William J. Trade Wars Against America: A History of United States Trade and Monetary
Policy (1990)
Carter Goodrich, Government Promotion of American Canals and Railroads, 1800–1890
(Greenwood Press, 1960 (https://www.questia.com/PM.qst?a=o&d=100695027))
Goodrich, Carter. "American Development Policy: the Case of Internal Improvements,"
Journal of Economic History, 16 (1956), 449–60. in JSTOR
Goodrich, Carter. "National Planning of Internal Improvements," Political Science
Quarterly, 63 (1948), 16–44. in JSTOR
John Lauritz Larson. Internal Improvement: National Public Works and the Promise of
Popular Government in the Early United States (2001)
Lively, Robert A. "The American System, a Review Article," Business History Review, XXIX
(March, 1955), 81–96. recommended starting point
 Lind, Michael Hamilton's Republic: Readings in the American Democratic Nationalist
Tradition (1997)
Lind, Michael What Lincoln Believed: The Values and Convictions of America's Greatest
President (2004)
Remini, Robert V. Henry Clay: Statesman for the Union, 1991
Edward Stanwood, American Tariff Controversies in the 19th Century (1903; reprint 1974), 2
vols., favors protectionism
Charles M. Wiltse, John C. Calhoun: Nationalist, 1782–1828 (1944)

Other/older books
G. B. Curtiss, Protection and Prosperity: an ; W. H. Dawson, Protection in Germany (London,
1904)
Alexander Hamilton, Report on the Subject of Manufactures, communicated to the House of
Representatives, 5 December 1791
H. C. Carey, Principles of Social Science (3 vols., Philadelphia, 1858–1859), Harmony of
Interests Agricultural, Manufacturing and Commercial (Philadelphia, 1873)
Friedrich List, Outlines of American Political Economy (1980 reprint)
Friedrich List, National System of Political Economy (1994 reprint)
A. M. Low, Protection in the United States (London, 1904); H. 0. Meredith, Protection in
France (London, 1904)
Ellis H. Roberts, Government Revenue, especially the American System, an argument for
industrial freedom against the fallacies of free trade (Boston, 1884)
J. P. Young, Protection and Progress: a Study of the Economic Bases of the American
Protective System (Chicago, 1900)
Clay, Henry. The Papers of Henry Clay, 1797–1852. Edited by James Hopkins

Sources and notes

1. Classic Senate Speeches: Henry Clay In Defense of the American System (https://www.sen
ate.gov/artandhistory/history/common/generic/Speeches_ClayAmericanSystem.htm) at the
U.S. Senate website

External links
The American System: Speeches on the Tariff Question and Internal Improvements (http://w
ww.hti.umich.edu/cgi/t/text/pageviewer-idx?c=moa;cc=moa;q1=American%20System;rgn=ful
l%20text;idno=AEU5176.0001.001;didno=AEU5176.0001.001;view=image;seq=0003) by
Congressman Andrew Stewart

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