American System (economic plan)

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The Monkey System or Every One For Himself Henry Clay says "Walk in and see the new improved original grand American System!" The cages are labeled: "Home, Consumption, Internal, Improv". This 1831 cartoon ridiculing Clay's American System depicts monkeys, labeled as being different parts of a nation's economy, stealing each other's resources (food) with commentators describing it as either great or a humbug.

The American System was an economic plan, based on the "American School" ideas of Alexander Hamilton, expanded upon later by Friedrich List, consisting of a high tariff to support internal improvements such as road-building, and a national bank to encourage productive enterprise and form a national currency. This program was intended to allow the United States to grow and prosper, by providing a defense against the dumping of cheap foreign products, mainly at the time from the British Empire.

The system was first proposed--and largely passed--in the Era of Good Feelings after the War of 1812 produced a sense of nationalism and an awareness that the economic infrastructure needed help. Congress passed a protective tariff and a national bank. In Congress the main sponsors were Henry Clay of Kentucky and John C. Calhoun of South Carolina. Calhoun was especially keen to build up a manufacturing base and a transportation system, as a matter of national defense. The main voting support in Congress came from New York and Pennsylvania, which both dreamed of becoming "empire states" or "keystone states" sponsoring rapid industrialization. The main opposition came from John Randolph, who said the Constitution did not allow such programs. ^[1]

The plan had three main points:

1. The establishment of a protective tariff; a 20%-25% tax on imported goods that protects a nation’s business from foreign competition. Congress passed a tariff in 1816 which made European goods more expensive and encouraged consumers to buy relatively cheaper American-made goods.
2. The establishment of a national bank that would promote a single currency, making trade easier, and issue what was called sovereign credit, 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.
3. The improvement of the country’s infrastructure, especially transportation systems, making trade easier and faster for everyone. Poor roads made transportation slow and costly.

This program became the leading tenet the Whig Party of Henry Clay and Daniel Webster. It was opposed by the Democratic Party of Andrew Jackson, Martin Van Buren, James K. Polk, Franklin Pierce, and James Buchanan prior to the Civil War

Among the most important internal improvements created under the American System were the Erie Canal and the Cumberland Road.

[edit] Further reading

[edit] Modern books

• Croly, Herbert, 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 1776" (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 Nineteenth Century (1903; reprint 1974), 2 vols., favors protectionism
• Charles M. Wiltse, John C. Calhoun: Nationalist, 1782-1828 (1944)

[edit] Older books

1. G. B. Curtiss, Protection and Prosperity: an ; W. H. Dawson, Protection in Germany (London, 1904
2. Alexander Hamilton, Report on the Subject of Manufactures, communicated to the House of Representatives, 5th December 1791
3. H. C. Carey, Principles of Social Science (3 vols., Philadelphia, 1858-1859), Harmony of Interests Agricultural, Manufacturing and Commercial (Philadelphia, 1873)
4. Friedrich List, Outlines of American Political Economy (1980-reprint)
5. Friedrich List, National System of Political Economy (1994-reprint)
6. A. M. Low, Protection in the United States (London, 1904); H. 0. Meredith, Protection in France (London, 1904)
7. Ellis H. Roberts, Government Revenue, especially the American System, an argument for industrial freedom against the fallacies of free trade (Boston, 1884)
8. J. P. Young, Protection and Progress: a Study of the Economic Bases of the A merican Protective System (Chicago, 1900)
9. Clay, Henry. The Papers of Henry Clay, 1797-1852. Edited by James Hopkins

[edit] Sources and notes

1. ^ Charles M. Wiltse, John C. Calhoun: Nationalist, 1782-1828 (1944), pp 103-41.

• The American System: Speeches on the Tariff Question and Internal Improvements by Congressman Andrew Stewart