The American System

The American System was Henry Clay's program for national economic development. It had three parts: a protective tariff for American manufacturing, a national bank (the Second Bank of the United States) for a sound currency and credit, and federally funded internal improvements such as roads and canals. Clay named it in a House speech on the tariff in March 1824.

Where did the American System come from?

Its roots lie in Alexander Hamilton's reports to Congress: the Report on Public Credit (1790), the Report on a National Bank (1790) and the Report on Manufactures (1791), which argued that the young republic should build up its own industry and not stay a supplier of raw materials to Britain. After the War of 1812, Congress passed the Tariff of 1816 and chartered the Second Bank of the United States the same year. Clay gathered these measures into one program.

Who supported the American System?

Clay and the National Republicans, and later the Whig Party, championed it. The German-American economist Friedrich List defended it in his Outlines of American Political Economy (1827), and Henry C. Carey extended the argument later in the century. Abraham Lincoln, a Whig in his early career, called Clay his "beau ideal of a statesman" (Ottawa debate, 1858) and delivered his eulogy in 1852.

Who opposed it?

Andrew Jackson and his supporters. Jackson vetoed the Maysville Road bill in 1830 and vetoed the recharter of the Second Bank in 1832. Southern planters, who exported cotton and bought manufactured goods, opposed high tariffs; the dispute peaked in the Nullification Crisis of 1832-33.

Why does the American System matter today?

Arguments over tariffs, a national bank and public investment in infrastructure have returned again and again in American politics. The Veil of the Square Mile treats the American System as the Hamiltonian alternative to the free-trade policy Britain promoted in the 19th century.

Read the full account in The Veil of the Square Mile.

Sources

• Hamilton, Report on Public Credit, 9 Jan 1790 (Founders Online)
• Hamilton, Report on a National Bank, 13 Dec 1790 (Founders Online)
• Hamilton, Report on the Subject of Manufactures, 5 Dec 1791 (Founders Online)
• First Lincoln-Douglas Debate, Ottawa, Illinois, 21 Aug 1858 (National Park Service transcript)
• Andrew Jackson, Veto Message on the Bank Recharter, 10 July 1832 (Avalon Project, Yale Law School)
• Federal Reserve History, "The Second Bank of the United States"