The American System
The American System was an economic plan proposed in the Era of Good Feelings after the War of 1812. The primary supporters of the plan in Congress were Henry Clay of Kentucky and John C. Calhoun of South Carolina. In short, the American System consisted of a high tariff to support internal improvements, and a national bank to form a national currency and encourage business.
After the War of 1812 ended in 1815, British warehouses shipped their stockpiles of products from lack of trade during the war to the States. Many of these products were sold well below costs that American competitors could afford. Convinced that the British were now making an economic war on America, after they lost their conventional war, many American merchants took their displease to the streets where public officials could hear.
In 1816, the nationalist Congress, out-Federalizing the old Federalists, passed the Tariff of 1816. This was the first tariff in American history that was passed for protection, not revenue. It was a 20 to 25 percent tax on all dutiable imports. The tariff was a strong start to a protective trend that would appeal to those that were protected.
Henry Clay sought to develop a profitable home market using an ambitious plan. The plan became known as the American System and it radiated ideals of Clay's War Hawk days. The American System consisted of three parts:
1.A strong central bank to provide a single currency and abundant sovereign credit to create business.
2.The improvement of infrastructure throughout the nation, especially in the quickly growing Ohio Valley. Better infrastructure would encourage trade and business.
3.A protective tariff on imports to help east coast factories sell their goods and whose revenues would support the improvement of the national infrastructure.
If all three of these parts tied together, Clay proposed, the economy of the country would be stronger than ever. Using credit gained from the central bank, merchants and buyers across the country could buy goods and products that were both cheaper than foreign imports and less costly to produce and transport.
Clay's insistence on improved roads agreed with the public, who noted that the recent attempt to invade Canada failed, at least partially, because of the lack of accessible roads into Canada. Others were tired of constantly digging their wagons out of inches of mud. Calhoun hoped that the roads could secure a national defensive structure, especially in the distant west.