Clay’s American System

Identification: Economic plan to allow for the internal development of the United States by levying a protective tariff, establishing a national bank, and providing subsidies for the building of infrastructure
Date: Instituted in 1824
Significance: Clay’s system helped define the nature and drive the development of U.S. business from the nineteenth through the twenty-first centuries.
Henry Clay, a nineteenth century U.S. representative and later senator from Kentucky, devised the American System to fashion a compromise to unite the United States into a single political unit by providing a way for all sections to benefit economically from national policies. After the War of 1812, Britain flooded the United States with cheap goods and undermined U.S. business growth. In 1816, Clay proposed a tariff to protect American industries, but this was opposed by western and southern agricultural interests who feared British retaliation against U.S. exports.
To make this tariff more attractive to agricultural interests, Clay proposed that the national government undertake major internal improvements, such as federally financed roads and canals paid for by the tariff revenue and public land sales. This compromise also depended on the Second Bank of the United States for economic stability. Although Clay saw this compromise as helping everyone, President Andrew Jackson vehemently opposed it. Jackson favored the antibusiness views of President Thomas Jefferson and saw Clay as continuing the probusiness ideas of Alexander Hamilton, the first secretary of the Treasury. Eventually the Clay-Jackson disagreements led to the founding of the Whig Party and later the Republican Party.
In a sense, the Clay-Jackson dispute is a precursor to the business philosophies in both Republican and Democratic Parties as late as the twenty-first century. Clay also lost virtually every battle he fought with Jackson, but his ideas won out in the long run. Clay had a vision of the federal government using its national revenue-raising power to fund a wide variety of internal improvements. In a single-member legislative district system (such as that used for both the U.S. House of Representatives and Senate), internal improvements based on pork barrel politics is a very likely outcome. Clay recognized this and provided the underlying rationale for the system widely used by both U.S. political parties from the nineteenth to the twenty-first centuries. Clay’s American System can be seen in national internal improvement polices from the development of canals to railroads to the development of the interstate highway system. During the early twenty first century, only comparatively minor differences over the degree of probusiness emphasis separate the Republican and Democratic Parties.

Further Reading
Baxter, Maurice G. Henry Clay and the American System. Lexington: University Press of Kentucky, 1995.
_______. Henry Clay the Lawyer. Lexington: University Press of Kentucky, 2000.
Watson, Harry L., ed. Andrew Jackson vs. Henry Clay: Democracy and Development in Antebellum America. Boston: Bedford/St. Martin’s, 1998.
See also: banking; U.S. Congress; Constitution, United States; Government spending; tariffs; taxation.

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