American System (economic plan)
Encyclopedia
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
policy during the first half of the 19th century
History of the United States (1789–1849)
With the election of George Washington as the first president in 1789, the new government acted quickly to rebuild the nation's financial structure. Enacting the program of Treasury Secretary Alexander Hamilton, the government assumed the Revolutionary war debts of the state and the national...
. Rooted in the " American School
American School (economics)
The American School, also known as "National System", represents three different yet related constructs in politics, policy and philosophy. It was the American policy for the 1860s to the 1940s, waxing and waning in actual degrees and details of implementation...
" ideas of Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
, the plan "consisted of three mutually reinforcing parts: a tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
to protect and promote American industry; a national bank to foster commerce; and federal subsidies
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
for roads, canals, and other 'internal improvements
Internal improvements
Internal improvements is the term used historically in the United States for public works from the end of the American Revolution through much of the 19th century, mainly for the creation of a transportation infrastructure: roads, turnpikes, canals, harbors and navigation improvements...
' to develop profitable markets for agriculture." Congressman
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
Henry Clay
Henry Clay
Henry Clay, Sr. , was a lawyer, politician and skilled orator who represented Kentucky separately in both the Senate and in the House of Representatives...
was the plan's foremost proponent and the first to refer to it as the “American System”.
History
A plan to strengthen and unify the nation, the American System was advanced by the Democratic-Republican PartyWhig Party (United States)
The Whig Party was a political party of the United States during the era of Jacksonian democracy. Considered integral to the Second Party System and operating from the early 1830s to the mid-1850s, the party was formed in opposition to the policies of President Andrew Jackson and his Democratic...
and a number of leading politicians including Henry Clay
Henry Clay
Henry Clay, Sr. , was a lawyer, politician and skilled orator who represented Kentucky separately in both the Senate and in the House of Representatives...
, John C. Calhoun
John C. Calhoun
John Caldwell Calhoun was a leading politician and political theorist from South Carolina during the first half of the 19th century. Calhoun eloquently spoke out on every issue of his day, but often changed positions. Calhoun began his political career as a nationalist, modernizer, and proponent...
and John Quincy Adams
John Quincy Adams
John Quincy Adams was the sixth President of the United States . He served as an American diplomat, Senator, and Congressional representative. He was a member of the Federalist, Democratic-Republican, National Republican, and later Anti-Masonic and Whig parties. Adams was the son of former...
. The System was a new form of federalism
Federalism
Federalism is a political concept in which a group of members are bound together by covenant with a governing representative head. The term "federalism" is also used to describe a system of the government in which sovereignty is constitutionally divided between a central governing authority and...
that included:
- Support for a high tariffTariffA tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
to protect American industries and generate revenue for the federal governmentFederal government of the United StatesThe federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and... - Maintenance of high public land prices to generate federal revenueInternal Revenue ServiceThe Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
- Preservation of the Bank of the United StatesSecond Bank of the United StatesThe Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the...
to stabilize the currency and rein in risky state and local banks - Development of a system of internal improvementsInternal improvementsInternal improvements is the term used historically in the United States for public works from the end of the American Revolution through much of the 19th century, mainly for the creation of a transportation infrastructure: roads, turnpikes, canals, harbors and navigation improvements...
(such as roads and canals) which would knit the nation together and be financed by the tariff and land sales revenues.
Clay argued that the West
Western United States
.The Western United States, commonly referred to as the American West or simply "the West," traditionally refers to the region comprising the westernmost states of the United States. Because the U.S. expanded westward after its founding, the meaning of the West has evolved over time...
, 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
Southern United States
The Southern United States—commonly referred to as the American South, Dixie, or simply the South—constitutes a large distinctive area in the southeastern and south-central United States...
was never really on board with the American System and had access to plenty of markets for its cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
exports.
Portions of the American System were enacted by the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
. The Second Bank of the United States
Second Bank of the United States
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the...
was rechartered in 1816 for 20 years. High tariffs were maintained from the days of Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
until 1832. 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.
The American System did not enjoy universal success, however. In 1830, President Jackson vetoed 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
Maysville Road veto
The Maysville Road veto occurred on May 27, 1830, when President Andrew Jackson vetoed 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...
was due to both his personal conflict with Clay and his ideological objections.
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 1816Dallas tariff
The United States passed the Tariff of 1816 and enforced it between 1816 and 1824.Introduced following a report from Secretary of the Treasury Alexander J. Dallas and adopted by the Fourteenth Congress, the tariff was staunchly supported by Henry Clay, then Speaker of the House, who saw the measure...
which made European goods more expensive and encouraged consumers to buy relatively cheap American-made goods.
The establishment of a national bank
National bank
In banking, the term national bank carries several meanings:* especially in developing countries, a bank owned by the state* an ordinary private bank which operates nationally...
would promote a single currency, making trade easier, and issue what was called sovereign credit
Sovereign credit
Sovereign credit is the credit of a sovereign country backed by the financial resources of that state. Sovereign credit is the opposite of sovereign debt. Fiat money is sovereign credit and sovereign bonds are sovereign debts. When money buys bonds, sovereign credit cancels sovereign...
, 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
Second Bank of the United States
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the...
.
The improvement of the country’s infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
, especially transportation systems, made trade easier and faster for everyone. Poor roads made transportation slow and costly.
This program became the leading tenet of the Whig Party
Whig Party (United States)
The Whig Party was a political party of the United States during the era of Jacksonian democracy. Considered integral to the Second Party System and operating from the early 1830s to the mid-1850s, the party was formed in opposition to the policies of President Andrew Jackson and his Democratic...
of Henry Clay and Daniel Webster
Daniel Webster
Daniel Webster was a leading American statesman and senator from Massachusetts during the period leading up to the Civil War. He first rose to regional prominence through his defense of New England shipping interests...
. It was opposed by the Democratic Party of Andrew Jackson
Andrew Jackson
Andrew Jackson was the seventh President of the United States . Based in frontier Tennessee, Jackson was a politician and army general who defeated the Creek Indians at the Battle of Horseshoe Bend , and the British at the Battle of New Orleans...
, Martin Van Buren
Martin Van Buren
Martin Van Buren was the eighth President of the United States . Before his presidency, he was the eighth Vice President and the tenth Secretary of State, under Andrew Jackson ....
, James K. Polk
James K. Polk
James Knox Polk was the 11th President of the United States . Polk was born in Mecklenburg County, North Carolina. He later lived in and represented Tennessee. A Democrat, Polk served as the 17th Speaker of the House of Representatives and the 12th Governor of Tennessee...
, Franklin Pierce
Franklin Pierce
Franklin Pierce was the 14th President of the United States and is the only President from New Hampshire. Pierce was a Democrat and a "doughface" who served in the U.S. House of Representatives and the Senate. Pierce took part in the Mexican-American War and became a brigadier general in the Army...
, and James Buchanan
James Buchanan
James Buchanan, Jr. was the 15th President of the United States . He is the only president from Pennsylvania, the only president who remained a lifelong bachelor and the last to be born in the 18th century....
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 were the Erie Canal
Erie Canal
The Erie Canal is a waterway in New York that runs about from Albany, New York, on the Hudson River to Buffalo, New York, at Lake Erie, completing a navigable water route from the Atlantic Ocean to the Great Lakes. The canal contains 36 locks and encompasses a total elevation differential of...
and the Cumberland Road.
Annual Message of 1815 (Seven Points)
- Funds for national defense
- FrigateFrigateA frigate is any of several types of warship, the term having been used for ships of various sizes and roles over the last few centuries.In the 17th century, the term was used for any warship built for speed and maneuverability, the description often used being "frigate-built"...
s for the NavyUnited States NavyThe United States Navy is the naval warfare service branch of the United States Armed Forces and one of the seven uniformed services of the United States. The U.S. Navy is the largest in the world; its battle fleet tonnage is greater than that of the next 13 largest navies combined. The U.S... - A standing armyStanding armyA standing army is a professional permanent army. It is composed of full-time career soldiers and is not disbanded during times of peace. It differs from army reserves, who are activated only during wars or natural disasters...
and federal control of the militia - Federal aid for building roads and canalCanalCanals are man-made channels for water. There are two types of canal:#Waterways: navigable transportation canals used for carrying ships and boats shipping goods and conveying people, further subdivided into two kinds:...
s - A protective tariff to encourage manufacturers
- Re-establishing the National BankFirst Bank of the United StatesThe First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...
- Federal assumption of some state debt
See also
- National PolicyNational PolicyThe National Policy was a Canadian economic program introduced by John A. Macdonald's Conservative Party in 1876 and put into action in 1879. It called for high tariffs on imported manufactured items to protect the manufacturing industry...
, a similar economic plan used by Canada circa 1867-1920s - Import substitution industrialization, a key feature of the American System that was adopted in much of the Third World during the twentieth century
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)
- 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)
- 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
- The American System: Speeches on the Tariff Question and Internal Improvements by Congressman Andrew Stewart