The American System, pioneered by Henry Clay, was an economic plan 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.

This mercantilist system benefited New England which was largely industrial and hurt the American South and West which were largely rural and rooted in agriculture. It was inspired by the Hamiltonian economic program that formed the basis of the American School of economics.

The plan had three main points:

1. The establishment of a protective tariff; a 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 the country’s infrastructure, especially transportation systems, making trade faster and easier. 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.

Further reading

Modern books

• Buchanan, Patrick J., The Great Betrayal (1998)
• 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 (Outstanding!)
• 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. New York: W. W. Norton Co., 1991
• Edward Stanwood, American Tariff Controversies in the Nineteenth Century (1903; reprint 1974), 2 vols., favors protectionism

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

Sources and notes