The American System

The American System was an economic plan championed by statesman Henry Clay. The policy involved having larger government control of the economy in order to bolster the American economy. This went against the previous laissez-faire style of economics which had been practiced. The system had 3 major components: tariffs to reduce outside interference, a national bank to promote economic improvements, and subsidies for the construction of roads and canals which would help the agricultural sector. The money to pay for these internal improvements would come from tariffs and government sale of land.

Clay argued that markets within the US would grow while the American System provided protection from foreign economic threats. This would lead to a long term benefit for all Americans, as the different sectors of the economy would build off of each other. This appealed to many Americans during the times of war in Europe early in the 19th century because these often caused economic disruptions in the US. By having greater control over the economy by lessening the role of imports and exports, the US could be protected from foreign issues. In addition, Clay’s system had a strong national appeal due to the core idea of growing America’s economy without foreign markets.

However, the high tariffs often saw opposition, especially from the South. Oftentimes, tariffs would protect Northern industries which couldn’t compete well with European imports. This meant higher prices for manufactured goods, harming the South. In addition, if the US imported less goods from Europe, Europe would be less able to import goods from the US. This harmed the cotton exports which the South relied on for its wealth. Eventually, tariffs would become a major sectional issue, even leading to the Nullification Crisis where South Carolina threatened to nullify a tariff put in place by the federal government.

In the end, only parts of the American System were utilized. The Second Bank of the US was chartered in 1816 and lasted until 1836 and high tariffs were also implemented during this time period. However, government funding for internal improvements was never pursued in earnest, mainly due to conflicts over the constitutionality of such measures.

http://www.u-s-history.com/pages/h278.html
https://www.senate.gov/artandhistory/history/common/generic/Speeches_ClayAmericanSystem.htm
https://www.thoughtco.com/economic-ideas-advanced-by-henry-clay-1773361