In the first half of the 19th century, the predominantly agricultural economy of the USA, the usual way of life,and the mentality of the traditional society were eroded under the influence of industrial revolution. The development of the economy and social sphere was determined by its deployment, as well as the development of Western lands, and the strengthening of plantation economy in the South, stimulated by the “cotton boom” (Baxter, 2004). At the same time, the underdeveloped industrial sector of the country needed state support.
Thus, medium and large entrepreneurs, financiers, representatives of big business advocated protectionism and “internal improvements.” They supported these measures to allow the American economy to compete more successfully with the most developed English at that time (Baxter, 2004). These ideas were developed and promoted by Henry Clay (1777–1852), whose program was a continuation and development of the ideas of Hamilton. It was focused on the needs of national economic development.
In the 1820s, Clay suggested economic demands, which were called the “American system,” assuming the active participation of the state in economic life, the expansion of its functions. To a certain extent, Clay’s moderate statist aspirations ran counter to the classical liberal concept of limited government and was strongly opposed by both his contemporaries and many later researchers (Baxter, 2004). Throughout his life, Clay strove to strengthen the American state, to turn Americans into people, united in their feelings and interests (Baxter, 2004). He believed that namely the implementation of the “American system,” the development of economic ties between the states, and the expansion of transport communications would help strengthen the Union. He made protectionist tariffs the centerpiece of his economic program. Clay said that the truth is that the former colonies of England, now independent and free in politics, remain slaves in commerce (Clay, 2018). He considered the principle of free trade the main instrument of British economic domination, despite it was then considered the pinnacle of economic thought.
In England free trade was possible because its industry could not be afraid of foreign competition. Applying this principle to a young developing country meant condemning it to constant dependence, backwardness, and poverty; therefore, he consistently defended the idea of industrial protectionism. The future of the country, according to Clay (2018), lies in the priority development of national industrial production, in ensuring the stable sale of its own goods in the domestic market. The protection of the interests of industrialists by the state, as he repeatedly stated, consisted in the adoption by legislators of high customs duties on foreign manufactured goods, in the reduction of raw materials exports (Clay, 2018). An important component of Clay’s program was a centralized banking system. The Whigs saw in the activities of the state bank a reliable way to establish financial stability, ensure a solid money circulation and a profitable lending system throughout the country.
Moreover, the “American system” included the so-called “internal improvements,” which boiled down mainly to the construction of communication lines (roads, canals) at the expense of the federal budget. In turn, building appropriate infrastructure implied mechanization, due to which large projects were initiated, such as National Road and Chesapeake and Ohio Canal. The development of transport infrastructure was supposed to contribute to the formation of a single internal economic space. Clay argued that the creation of transport arteries is a national affair, that it is simply beyond the power of individual states (Clay, 2018). Only the federal government can allocate the necessary funds for this. Since the main source of funds for the federal budget was the sale of western lands, Clay (2018) believed that prices for them should be maintained at a high level. This point of his program ran counter to the interests of both farmers and planters and alienated them from the Whigs. During the Jackson administration, Clay became one of the founders of the Whig party; he is responsible for the development of its basic economic requirements.
References
Baxter, M. G. (2004). Henry Clay and the American system. University Press of Kentucky.
Clay, H. (2018). Mr. Clay’s speech in support of an American system for the protection of American industry: Delivered March 30th and 31st, 1824. Forgotten Books.