The Monkey System or Every One For Himself: Henry Clay says "Walk in and see the new improved grand original 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.
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.
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 markets for its cotton exports.
Portions of the American System were enacted by the United States Congress. 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.
In 1830, President Andrew Jackson rejected 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 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 1816 which made European goods more expensive and encouraged consumers to buy relatively cheap American-made goods.
The establishment of a national bank 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.
The improvement of the country's infrastructure, especially transportation systems, made trade easier and faster for everyone. Poor roads made transportation slow and costly.
Among the most important internal improvements created under the American System was the Cumberland Road:
Henry Clay's "American System," devised in the burst of nationalism that followed the War of 1812, remains one of the most historically significant examples of a government-sponsored program to harmonize and balance the nation's agriculture, commerce, and industry. This "System" consisted of three mutually reinforcing parts: a tariff to protect and promote American industry; a national bank to foster commerce; and federal subsidies for roads, canals, and other "internal improvements" to develop profitable markets for agriculture. Funds for these subsidies would be obtained from tariffs and sales of public lands. Clay argued that a vigorously maintained system of sectional economic interdependence would eliminate the chance of renewed subservience to the free-trade, laissez-faire "British System."
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
Henry Clay Sr. was an American lawyer and statesman who represented Kentucky in both the U.S. Senate and House of Representatives. He was the seventh House speaker as well as the ninth secretary of state. He unsuccessfully ran for president in the 1824, 1832, and 1844 elections. He helped found both the National Republican Party and the Whig Party. For his role in defusing sectional crises, he earned the appellation of the "Great Compromiser" and was part of the "Great Triumvirate" of Congressmen, alongside fellow Whig Daniel Webster and Democrat John C. Calhoun. Clay died at the age of 75 in 1852.
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. Protective tariffs are among the most widely used instruments of protectionism, along with import quotas and export quotas and other non-tariff barriers to trade.
Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold economically liberal positions, while economic nationalist and left-wing political parties generally support protectionism, the opposite of free trade.
Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. Proponents argue that protectionist policies shield the producers, businesses, and workers of the import-competing sector in the country from foreign competitors and raise government revenue. Opponents argue that protectionist policies reduce trade, and adversely affect consumers in general as well as the producers and workers in export sectors, both in the country implementing protectionist policies and in the countries against which the protections are implemented.
The nullification crisis was a sectional political crisis in the United States in 1832 and 1833, during the presidency of Andrew Jackson, which involved a confrontation between the state of South Carolina and the federal government. It ensued after South Carolina declared the federal Tariffs of 1828 and 1832 unconstitutional and therefore null and void within the sovereign boundaries of the state. However, courts at the state and federal level, including the U.S. Supreme Court, repeatedly have rejected the theory of nullification by states.
The American School, also known as the National System, represents three different yet related constructs in politics, policy and philosophy. The policy existed from the 1790s to the 1970s, waxing and waning in actual degrees and details of implementation. Historian Michael Lind describes it as a coherent applied economic philosophy with logical and conceptual relationships with other economic ideas.
The National Policy was a Canadian economic program introduced by John A. Macdonald's Conservative Party in 1876. After Macdonald led the Conservatives to victory in the 1878 Canadian federal election, he began implementing his policy in 1879. The protective policy had shown positive responses in the economy with new industries flourishing Canada's economy in the 1880s. John A. Macdonald combined three elements as a strategy for the post-Confederation economy. First, by calling for high tariffs on imported manufactured items to protect the manufacturing industry. Second, by calling for a massive expansion of physical infrastructure, such as roads and railroads. Finally, enabled and supported by the former two, by promoting population growth, particularly in western Canada. The building of the Canadian Pacific Railway, and the fostering of immigration to Western Canada. Macdonald campaigned on the policy in the 1878 election, and defeated the Liberal Party, which supported free trade. It lasted from 1879 until sometime in the early 1950s.
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. This older term carries the connotation of a political movement that called for the exercise of public spirit as well as the search for immediate economic gain. Improving the country's natural advantages by developments in transportation was, in the eyes of George Washington and many others, a duty incumbent both on governments and on individual citizens.
In United States history, the Report on the Subject of Manufactures, generally referred to by its shortened title Report on Manufactures, is the third of four major reports, and magnum opus, of American Founding Father and first U.S. Treasury Secretary Alexander Hamilton. It was presented to the Congress on December 5, 1791.
The Tariff of 1824 was a protective tariff in the United States designed to protect American industry from cheaper British commodities, especially iron products, wool and cotton textiles, and agricultural goods.
The Tariff of 1833, enacted on March 2, 1833, was proposed by Henry Clay and John C. Calhoun as a resolution to the Nullification Crisis. Enacted under Andrew Jackson's presidency, it was adopted to gradually reduce the rates following Southerners' objections to the protectionism found in the Tariff of 1832 and the 1828 Tariff of Abominations; the tariffs had prompted South Carolina to threaten secession from the Union. This Act stipulated that import taxes would gradually be cut over the next decade until, by 1842, they matched the levels set in the Tariff of 1816—an average of 20%. The compromise reductions lasted only two months into their final stage before protectionism was reinstated by the Black Tariff of 1842.
The Maysville Road veto occurred on May 27, 1830, when United States President Andrew Jackson vetoed a bill that 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, Kentucky, to Maysville on the Ohio River, the entirety of which would be in the state of Kentucky. Its advocates regarded it as a part of the national Cumberland Road system. Congress passed a bill in 1830 providing federal funds to complete the project. Jackson vetoed the bill on the grounds that federal funding of intrastate projects of this nature was unconstitutional. He declared that such bills violated the principle that the federal government should not be involved in local economic affairs. Jackson also pointed out that funding for these kinds of projects interfered with paying off the national debt.
The infant industry argument is an economic rationale for trade protectionism. The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale. The logic underpinning the argument is that trade protectionism is costly in the short run but leads to long-term benefits.
The Tariff of 1816, also known as the Dallas Tariff, is notable as the first tariff passed by Congress with an explicit function of protecting U.S. manufactured items from overseas competition. Prior to the War of 1812, tariffs had primarily served to raise revenues to operate the national government. Another unique aspect of the tariff was the strong support it received from Southern states.
Tariffs have historically served a key role in the trade policy of the United States. Their purpose was to generate revenue for the federal government and to allow for import substitution industrialization by acting as a protective barrier around infant industries. They also aimed to reduce the trade deficit and the pressure of foreign competition. Tariffs were one of the pillars of the American System that allowed the rapid development and industrialization of the United States.
The presidency of John Quincy Adams, began on March 4, 1825, when John Quincy Adams was inaugurated as President of the United States, and ended on March 4, 1829. Adams, the sixth United States president, took office following the 1824 presidential election, in which he and three other Democratic-Republicans—Henry Clay, William H. Crawford, and Andrew Jackson—sought the presidency. Adams was not a strong president, and he was under continuous attack from Jackson who easily defeated him in the 1828 presidential election, after one term in office.
Protectionism in the United States is protectionist economic policy that erects tariffs and other barriers on imported goods. In the US this policy was most prevalent in the 19th century. At that time it was mainly used to protect Northern industries and was opposed by Southern states that wanted free trade to expand cotton and other agricultural exports. Protectionist measures included tariffs and quotas on imported goods, along with subsidies and other means, to restrain the free movement of imported goods, thus encouraging local industry.
Protective tariffs are tariffs that are enacted with the aim of protecting a domestic industry. They aim to make imported goods cost more than equivalent goods produced domestically, thereby causing sales of domestically produced goods to rise, supporting local industry. Tariffs are also imposed in order to raise government revenue, or to reduce an undesirable activity. Although a tariff can simultaneously protect domestic industry and earn government revenue, the goals of protection and revenue maximization suggest different tariff rates, entailing a tradeoff between the two aims.
The United States Senate Select Committee on the Tariff Regulation was a Select Committee for the U.S. Senate from February 25, 1823 until March 3, 1923. It is now a defunct congressional committee, having been consolidated into the Committee of Finance in 1923.
The infrastructure policy of the United States is the set of objectives and programs of the federal government to build, maintain, and regulate hard infrastructure in the United States. Infrastructure policy is overseen and carried out by several departments and agencies.
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