Term used by Henry Clay, representative from Kentucky, in a speech before the House of Representatives on March 31, 1824, in favor of a protective tariff and a federal program designed to stimulate the nation’s economic growth and reduce economic dependency on Europe.
During the “Era of Good Feelings” from 1816 to 1824, businesspeople in the North implemented the factory system, which was characterized by water-powered machinery and interchangeable parts. Factory owners wanted protection against European-made goods. At the same time, a transportation revolution occurred, with the extensive use of steamboats on major inland waterways and the state-supported construction of canals to link these waterways with coastal rivers that emptied into the Atlantic Ocean. The admission of six new western states also motivated public support for economic nationalism and the use of federal power to stimulate the expanding frontier.
Clay’s speech on the 1824 protective tariff bill helped to ensure its passage in the House of Representatives by the narrow vote of 107 to 102. A conservative Senate modified the bill, but the average rate ended up at 37 percent—although some items, like imported wool, were as low as 30 percent. Clay believed that a protective tariff would greatly assist the growth of American industries and also provide a domestic market for farm produce. Because the protective tariff would generate surplus revenue for the federal treasury, Congress could use the funds to extend the National Road and construct turnpikes and canals to link northern factories to distant western markets.
Earlier, in 1816, to further promote economic nationalism, Clay had joined John C. Calhoun of South Carolina to recharter a Second Bank of the United States. Stepping down from the Speaker’s chair, Clay told his colleagues that although he had opposed the rechartering of the First Bank of the United States in 1811, he believed Congress possessed the “constructive power” to incorporate such an institution. The House passed the bank bill by 80 to 71, and President James Madison signed it into law on April 10,1816.
Clay’s American System of protective tariffs, federal internal improvements, and a national bank aroused increasing opposition after the panic of 1819—a depression exceeded in severity only by the Great Depression of the 1930s—among planters, farmers, and land speculators, all of whom feared the consolidating power of the national government. They embraced an agrarian philosophy that feared the federal government growing stronger and aligning itself with manufacturing and financial interests against the interests of the farmer. Beginning in 1824, a political realignment began over the American System that led to the creation of two new political parties out of the old Jeffersonian-Republican consensus of the “Era of Good Feelings.” One group, led by Clay, John Quincy Adams, and Daniel Webster, eventually called themselves Whigs; they believed in the American System and its economic nationalism. The Democrats, led by Andrew Jackson, Martin Van Buren, and John Calhoun, championed agrarian interests and states’ rights against federal consolidation. In the 1832 presidential election Henry Clay, the Whig candidate, ran against incumbent Andrew Jackson on the strength of the American System, with a special focus on Jackson’s veto of the rechartering of the Second Bank of the United States. But Clay carried only six states: Massachusetts, Rhode Island, Connecticut, Maryland, Delaware, and Kentucky. A third-party candidate, William Wirt of the Antimasonic Party, won Vermont. Jackson carried all the rest. The American System, as a viable political program, never recovered from the defeat.
