American System (economics)

The American System was an economic regime pioneered by Henry Clay which created a high tariff to support internal improvements such as road-building. This approach was intended to allow the United States to grow and prosper by themselves, without foreign products or foreign markets. The plan had three main actions. The first was to establish a protective tariff: a tax on imported goods that protects a nation’s business from foreign competition. Congress passed a tariff in 1816 which made European goods more expensive and encouraged consumers to buy relatively cheaper American-made goods. The second action of the American System was to establish a national bank that would promote a single currency, making trade easier. In 1816, Congress created the second Bank of the United States. The third step in the American System was to improve the country’s transportation systems, making trade faster and easier. Poor roads made transportation slow and costly.

Related Topics:
Henry Clay - Tariff - Internal improvements - National bank - 1816

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