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American System

Last Updated: 2006

The American System was an economic development program that was actuated by Henry Clay of Kentucky. The American System became the cornerstone of the Whig Party platform in the nineteenth century. The American System had three essential components: federal aid for internal improvements, a protective tariff for industry, and a national bank. The American System provided an urbanist model of economic growth that contrasted with the rural model of Jeffersonians. The Whigs advocated a system of internal improvements to facilitate commercial development combined with mercantilist economic policy centered around protective tariffs. As Arthur Schlesinger remarked on Clay’s leadership, “He made federalism a living vision, replacing the dry logical prose of Hamilton with thrilling pictures of a glorious future. . . . [U]nder Clay’s solicitous care, this rebaptized federalism slowly won its way to the inner councils of government” (Schlesinger 1945, 12).

Henry Clay and the Whigs formalized this economic model and termed it the American System, as distinct from the hegemonic British System of laissez-faire economic development. The economic policy theory behind it promoted policy nationalism and centralization at the expense of states’ rights. Ultimately, Clay’s system of “distribution,” or intergovernmental revenue sharing, provided a means of building cooperation between levels of government through fiscal policy.

The American System established the constitutional foundation of modern economic development policy and defined strong national government powers as essential for securing the economic prosperity of strong national commercial enterprises. As noted historian Daniel Walker Howe, “Most of the Whig’s economic platform was enacted by their successors: the Republican Party firmly established a protective tariff and subsidized business enterprise, and the Democrats under Wilson finally organized a nationwide banking system” (Howe 1979, 22). As American international economic hegemony displaced Britain, the protectionist aspect diminished, but internal improvements, intergovernmental grants, and nationally directed monetary policy based upon central banking remain enduring cornerstones of the American System.

SEE ALSO: Civil WarClay, HenryEconomic DevelopmentInternal ImprovementsJackson, AndrewRural PolicyUrban Policy


Maurice G. Baxter, Henry Clay and the American System (Lexington: University Press of Kentucky, 1995); Henry Clay, “The American System,” in Speeches of the Hon. Henry Clay, of the Congress of the United States, ed. Richard Chambers (Cincinnati: Shepard & Stearns, 1842); Daniel Walker Howe, The Political Culture of the American Whigs (Chicago: University of Chicago Press, 1979); Robert V. Remini, Andrew Jackson and the Bank War (New York: W.W. Norton, 1967); and Arthur M. Schlesinger Jr., The Age of Jackson (Boston: Little, Brown, 1945).