Henry Clay’s American System Unit 2: The Growth of Nationalism

1. Henry Clay’s American SystemUnit 2: The Growth of Nationalism Ms. Muraca US History I

2. Post-War Issues • Stimulated growth of manufacturing • Need to protect new industries • Textiles • Brits. unload cargo in American ports at low cost • Banking fall into chaos • Need to re-establish the Bank of the United States • State banks issue bank notes • Passed between people as money • Banks not retain enough specie to back the notes • Rhode Island bank issued $580,000 in bank notes backed-up by only y $86.48 in gold & silver • Inadequate transportation & financial systems • Need a nationwide network of roads & canals

3. American System: Introduction • In 1815, President James Madison presented a plan to Congress • Help unite the different regions of the United States. • Wanted to create a self-sufficient country that would maintain a stable economy • Three major points of the American System: • Developing transportation systems • Establishing a protective tariff • Resurrecting the national bank

4. American System: Definition • What is Henry Clay’s American System? • House Speaker, Henry Clay coined the term “American System” in 1815, after President Madison created a plan to unite the Northern and Southern economies. • The President’s plan was welcomed by the Senate and the House, and quickly a plan was set in place to employ this new American System.

5. Northern Economy: +/- • Strengths • Experienced an Industrial Revolutionand was producing manufactured goods. • New methods of transportation that brought goods to and from the manufacturing north. • A new, national currency that enabled the north to trade with the south and west. • Weaknesses • Poor soil, low crop production, few livestock.

6. Southern/Western Economy: +/- • Strengths • Good and rich soil for plantation farming. • Increased slavery, increased productivity. • Use of the Mississippi River for transportation of goods between the north and south economies. • Weaknesses • No factories for manufacturing goods. • Heavy, intense labor needed to run the plantations smoothly in the south.

7. Transportation Developments • 1807- Robert Fulton’s Clermont makes its maiden voyage, 150 miles from New York City to Albany. • 1811- Construction of the National Road begins between Cumberland, MD and Vandalia, Il. • 1825- Erie Canal opens a 363-mile waterway that connects the Hudson River to Lake Erie. • 1825- First steam locomotive was used to transport goods across different regions of the country. • 1838- National Road opens to the public, tolls are required to help offset construction costs.

8. Protective Tariffs: Tariff of 1816 • 1816- President James Madison proposes a tariff, 20-25% tax on all imported goods. • Would help the American manufacturing economy become more competitive with the foreign markets, • Tariff would offset the prices of foreign/domestic goods. • North encouraged the tariff • Improve the their economy & increase total profits. • South and West discouraged the tariff • Would have to pay more for the same products.

9. National Bank • 1816- The Second Bank of the United States (BUS) was approved for a 20-year term by the Congress. • Establish a national, guaranteed currency • improve national and regional trading of goods and services. • Force state banks to issues only sound bank notes • Could force non-compliant banks out of business • Issue sovereign credit • Credit issued by the national government • Not have to borrow from private banking system

10. Thought Question • To what extent was Henry Clay’s “American System” a continuation of Hamilton’s philosophy? • In your groups, discuss the answer to this question. • First, you will need to review Hamilton’s philosophy. • Then, you will need to determine whether or not elements of Clay’s plan are a continuation of the philosophy.