Was the American System a success?
 Show Henry Clay Senator Henry Clay of Kentucky is considered the architect of the “American System,” the first government-sponsored attempt to invigorate the national economy. Not a “system” in the true sense of the word, the American System was really a series of plans for strengthening the infrastructure and financial institutions of the United States. The plan included:
The system was an attempt to bring Alexander Hamilton’s proposals to fruition, as outlined in his 1792 “Report on Manufacturers.” Did you know...The most important internal improvements resulting from the American System were the Erie Canal and the Cumberland Road. The Erie Canal created a system of interlocking canals that ran from the Hudson River to Lake Erie. The Cumberland Road, also called the National Road, was the first “highway” built by the Federal government. It ran from Maryland to Virginia. Cartoon by E.W. Clay published in 1831 cartoon lampooning the American System as a Monkey System. The Northeast benefited greatly from the American System because industry was beginning to grow in the region and good transportation routes were needed to move products and supplies around. But the American system did not offer much to the South where little industrial growth was occurring and navigable rivers provided easy transportation routes for farmers and planters moving their crops to markets. Tariffs and Internal ImprovementsAs proposed under the American System, a protective tariff of 20 to 25 percent on imported goods—such as woolens, cottons, leather, fur, hats, paper, sugar and candy—would protect the nation’s fledgling industries from foreign competition. Congress passed a tariff in 1816 that increased the price of European goods, which encouraged consumers to buy less expensive American-made goods. Clay argued that America has a “great diversity of interests,” from agriculture and fishing to manufacturing, shipbuilding, and commerce and that the “good of each...and of the whole should be carefully consulted.” Clay believed that stimulating manufacturing would create a demand for western raw materials and as westerners grew more affluent, they would purchase eastern manufactured goods. To move products and materials between western and eastern states efficiently, the government looked to improve the country ’s infrastructure, particularly its transportation routes. Improved roads and canals would facilitate commerce, speeding it up and making it less costly. Bank of the United StatesNorth façade of the Second Bank of the United States Congress chartered the first Bank of the United States in 1791. The charter lasted twenty years and gave the Bank the power to meet the financial needs of the newly formed government. Supported mainly by northern merchants and the New England states, southern states eyed the Bank with suspicion because agriculture formed the basis of the southern economy and it did not require the concentrated capital that northern industries needed to succeed. When the Bank ’s charter expired, the Democratic-government refused to extend its charter, claiming it was unconstitutional. With no centralized banking system in place, the government found it difficult to finance the War of 1812. Five years later, the Second Bank of the United States was chartered, primarily to stabilize the country’s currency. Patterned after the first, the Bank established branches in several states. The Bank remained politically controversial throughout the period, especially following the economic downturn of the Panic of 1819. Critics complained that the bank was corrupt and that it had mismanaged funds, promoting detrimental conservative policies. Several states enacted legislation that levied taxes to restrict the Bank’s power. For example, Maryland imposed a tax on the bank’s operations, a move that led to the Supreme Court case McCulloch v. Maryland, where the Supreme Court denied Maryland’s ability to tax the bank, claiming it unconstitutional. Despite this, the Bank remained controversial and President Andrew Jackson repealed its charter in 1832. Why was the American System a success?That system has had a wonderful success. It has more than realized all the hopes of its founders. It has completely falsified all the predictions of its opponents. It has increased the wealth, and power, and population of the nation.
Why did the American System fail?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.
Did Henry Clay's American System fail?By 1828, the South called for the nullification of the Tariff of 1816. The issue was ultimately resolved in 1833 when tariffs were lowered by Congress. The goal of the American System to create a national interdependence also failed.
Who benefited from the American System?The Northeast benefited greatly from the American System because industry was beginning to grow in the region and good transportation routes were needed to move products and supplies around.
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