The American System was a philosophy of political economy in the 19th century which held that the federal government had a legitimate role to play in spurring economic development and growth. This program of economic nationalism was most closely associated with Henry Clay of Kentucky, first a representative and then for many years a senator. Clay borrowed some of his ideas from Alexander Hamilton, the first secretary of the Treasury and a Federalist. Hamilton was the most forceful and prominent spokesman in the early republic for the idea that the national government should take an active role in developing an integrated, commercial economy based in part on manufactures.
Early in his congressional career, Henry Clay had been one of the nationalist War Hawks who pushed for war with England in 1812. He had also been among the majority who opposed the rechartering of the first Bank of the United States in 1811, believing it to be unconstitutional and unnecessary. However, the experiences of the War OF 1812, in which the United States struggled to fund its military effort, changed the minds of Clay and many other Republicans, who by the 1820s had formed the National Republican Party. This faction was crucial in the chartering of the Second Bank of the United States in 1816. The war had also highlighted the inadequacy of existing transportation networks, which led to calls for improved transportation after the war.
It was during the administration of President James Monroe that Henry Clay first articulated a program that became known as “The American System.” It was in part a response to the changes, economic and otherwise, that the United States underwent after the War of 1812. Manufacturing was increasing, people were moving to cities for work, and there was a growing number of Americans migrating into the Ohio and Mississippi valleys in search of farmland. In 1819 during the crisis over the admission of Missouri as a state, the United States had a serious debate on the question of slavery, which caused some to fear for national unity. The panic of 1819 also convinced some Republicans that the United States needed to provide safeguards against further panics or depressions. Clay and others believed that a series of policies was needed to make the ties between sections stronger and help to forge a more united country. With Clay now a committed economic nationalist as well, the core elements of his American System were (1) a high protective tariff to protect U. S. manufactured goods and secure the domestic market against foreign competition; (2) a federal bank to regulate domestic currency and the economy;
(3) funding of internal improvements by the federal government, especially transportation networks to better enable the American people to distribute their goods and crops; and
(4) the maintenance of a high price for lands that the federal government would sell to companies and individuals. The revenue from these sales would be sent to states to use on their own “internal improvements,” as they were called.
Clay genuinely believed that the American System would encourage a harmony of interests from which all classes and regions would benefit. Much as Hamilton had before him, Clay argued that if the United States failed to develop its own manufacturing capability, it was destined to remain an economic colony of European powers. The lack of a strong manufacturing base to the national economy would place the nation’s ability to defend itself in wartime in jeopardy. Such a situation was unacceptable to Americans who thought of their nation as destined for greatness. Clay believed that his system would benefit American cities, allowing them to become manufacturing and commercial centers and provide a balance in a nation that was still overwhelmingly rural and agricultural. Urban workers would see a raise in wages and jobs less prone to panics. Farmers would benefit as well, as by trading their produce to city dwellers for manufactured goods, their own standard of living, as well as their agricultural outputs, would rise. The improvements in transportation that the American System promised would help goods to move faster and more freely around the country. The Bank of the United States was needed to oversee and guide all of this financial activity and bring needed stability to an increasingly complex economy.
Henry Clay wanted to be president, and he was convinced that his advocacy for the American System would enable him to build a political base in all sections of the country and send him to the White House. Clay’s ambitious plan, however, met with spirited opposition. From the founding of the republic, there had been a great many Americans, both northerners and southerners, who were resolutely opposed to enlarging the powers of government beyond those explicitly given to it in the Constitution. Originally this party, the Republicans, was led by Thomas Jefferson. Although James Madison had signed into law the chartering of the Second Bank of the United States, before he left office in 1817 he had also vetoed funds to help New York build a canal, asserting that the power to do so was not in the Constitution. His successor, James Monroe, also believed that the federal government did not possess such authority under the Constitution. Therefore, Monroe vetoed a plan that would have allowed Washington to administer toll gates on the Cumberland Road. The dominant Republican Party subsequently divided in the 1820s, in part over the proper role of the federal government in making internal improvements.
Despite this formidable tradition in American politics, Clay did have some success in getting Congress to enact into law some parts of the American System. Proponents of the protective tariff passed several measures raising duties on imported goods, including one in 1824 and another in 1828. The latter was described as the “Tariff of Abominations” by its critics and nearly caused disunion, as South Carolina protested bitterly and claimed to have the right to nullify federal laws it believed not in its interest. Clay helped to craft a compromise tariff in 1833 that lowered duties and helped to mollify the South while maintaining the integrity of the Union. By that time, another distinct party, led by Andrew Jackson and Martin Van Buren, had emerged by 1830; they referred to themselves as Democrats. During his successful bid for the presidency in 1828, although Jackson had given the impression in the West that he was not opposed to the American System, over the course of his time as president he came to be a pronounced enemy of its principles. In 1830 Jackson vetoed the Maysville Road bill, which allowed federal monies to buy stock in a private company that was building a road that happened to run through Henry Clay’s state of Kentucky. Jackson based his decision both on constitutional grounds and on the more pragmatic grounds that it benefited only one state. As former president John Quincy Adams described it, the veto was a blow to “the system of internal improvements by national energies.”
Jacksonian Democrats believed that the American System was unjust because it put the federal government on the side of the wealthy and property-owning classes, and what was worse, it called for the government to exercise powers on behalf of the affluent that it did not possess under the Constitution. Some critics of the American System feared that it favored urban growth at the expense of farming interests and denied poorer Americans the opportunity to own land in the West because it promised to keep federal land prices too high. Southerners, led by John C. Calhoun of South Carolina, were wary of any plan that would bolster the powers of the federal government, which might then turn its increased authority toward the question of slavery. Slave owners also objected to the prospect of paying artificially high prices for manufactured goods, since their own agricultural products would suffer as trade between the United States and Europe declined as a result of the American System. Virtually all opponents of the American System feared that it was bent on creating a new aristocracy, this one economic, and that the creation of a small privileged class would gravely harm the republican ideals of equality before the law and a rough social egalitarianism.
Clay vigorously defended his system as in keeping with the Constitution. Indeed, he saw his plan as embodying the spirit of that document, which was to encourage a more perfect union. He also argued that the “necessary and proper” clause of the Constitution gave the federal government the power to build roads; after all, the same Constitution had created a national post office, the object of which was to deliver mail. This mission, Clay maintained, implied the building of roads and their maintenance, if necessary, by the federal government. Despite this, the American System suffered another serious defeat in 1832 when its opponents succeeded in abolishing the Bank of the United States. With the bank a key issue, Jackson easily won reelection in 1832 over his National Republican opponent, Henry Clay.
In 1834 the Whig Party formed and became the proponent of the American System. But because the Democrats held the White House for most of the remainder of the antebellum period, the Whigs were unable to revive the Bank of United States or keep the price of federal lands high enough to suit them. The nation’s economic growth and expansion continued in the 1830s and 1840s, however, even if the federal role in this process was not quite what Clay and the others had hoped for. Not until after the secession of southern states in the 1860s and then in the decades after the Civil War did Henry Clay’s vision of an economically integrated United States come to pass, as the nation, with federal assistance, moved into an era of great industrial growth and improvements in transportation.
Further reading: Robert Remini, Henry Clay: States-man for the Union (New York: W. W. Norton, 1991); Charles Sellers, The Market Revolution: Jacksonian America, 18151846 (New York: Oxford University Press, 1991).
—Jason Duncan
World History
