American System (Economic Ideas Advanced by Henry Clay)

Definition: The American System was a program for economic development championed by Henry Clay, an influential member of Congress in the early decades of the 19th century. Clay's idea was that the federal government should implement protective tariffs and internal improvements and a national bank should help develop the nation's economy.

Examples of the ideas put into practice would be the building of the National Road, the chartering of the Second Bank of the United States in 1816, and the first protective tariff, which was passed in 1816. Clay's American System was essentially in practice during the Era of Good Feelings, which corresponded with the presidency of James Monroe from 1817 to 1825.

Clay, who had served as a Congressman and a Senator from Kentucky, ran for president in 1824 and 1832 and advocated extending the American System. But by that time sectional and partisan disputes made aspects of his plans controversial.

Indeed, in the late 1820s tensions over the role the federal government should play in economic development escalated to the point that South Carolina threatened to withdraw from the Union over a tariff in what became known as the Nullification Crisis.

Also Known As: American System of Henry Clay