American System (economic plan)

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American System (economic plan)

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Early 19th-century US economic plan promoting tariffs, national banking, and infrastructure.

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Origins & Early Life

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 and of the Hamiltonian economic program of Alexander Hamilton. A plan to strengthen and unify the nation, the American System was advanced by the Whig Party and a number of leading politicians including Henry Clay and John Quincy Adams. Clay was the first to refer to it as the "American System". Motivated by a growing American economy bolstered with major exports such as cotton, tobacco, native sod, and tar, the politicians sought to create a structure for expanding trade. This System included such policies as: Support for a high tariff to protect American industries and generate revenue for the federal government Maintenance of high public land prices to generate federal revenue Preservation of the Bank of the United States to stabilize 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.

Career & Major Achievements

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 foreign markets for its cotton exports. Portions of the American System were enacted by the United States Congress.

Enduring Legacy & Impact

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.

Chronological Milestones & Life Events

1. 1791: 1791 Milestone — 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.
2. 1816: 1816 Milestone — The Second Bank of the United States was rechartered in 1816 for 20 years.
3. 1828: 1828 Milestone — Tariffs were subsequently raised until they peaked in 1828 after the so-called Tariff of Abominations.
4. 1833: 1833 Milestone — After the Nullification Crisis in 1833, tariffs remained the same rate until the Civil War.

Notable Quotes by American System (economic plan)

“Clay’s own description of the American System—as a tariff, national bank, and federal support for internal improvements intended to “harmonize and balance” the nation through “sectional economic interdependence,””

Historical Fact-Check Quiz: American System (economic plan)

True or False: “The primary goal of the American System was solely to promote free trade by eliminating all tariffs.”

Answer (FALSE ❌): The system explicitly advocated for a high tariff to protect nascent American industries from foreign competition.

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Frequently Asked Questions about American System (economic plan)