The Rise and Fall of the American System

Nationalism and the Development of the American Economy, 1790-1837

Songho Ha

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317313748
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

The American System was implemented by the US government after the American-British War of 1812 to develop a national domestic market. This study explores the rise and fall of the system between its inception in 1790 and the Panic of 1837.

1 EMERGENCE OF THE AMERICAN SYSTEM, 1790–1815

The idea of the American System emerged from the start of George Washington’s administration. Both Federalist and Republican administrations wanted to promote domestic manufactures through protective tariffs, advocated construction of roads and canals, and started and supported the 1BUS. They also tried to refine American culture by establishing cultural institutions, including a university. But the presence of a large amount of national debt and tumultuous international relations with European countries prevented political leaders’ attempts to implement their ambitious programs.

George Washington and the Origin of the American System

From George Washington’s first presidential term, an embryonic form of the American System existed in American political discourse. In his first annual message to Congress, Washington suggested ‘the expediency of giving effectual encouragement … to the exertions of skill and genius in producing them [inventions] at home, and of facilitating the intercourse between the distant parts of our country’. He also solicited Congressional patronage to promote ‘science and literature’ and advised legislators to consider ‘aids to seminaries of learning already established or creation of a national university’.¹ Washington repeated and elaborated on his vision of a more refined nation by calling for the protection of domestic manufactures, construction of internal improvements and support of science and culture throughout his tenure as President.

In his Farewell Address to the American people, on 17 September 1796, Washington advocated the creation of a domestic market in which the north, south, east and west sections would exchange their products. He stated that the North ‘in an unrestrained intercourse with the South … finds in the productions of the latter great additional resources of maritime and commercial enterprise and precious materials of manufacturing industry’. The South, argued Washington, ‘sees its agriculture grow and its commerce expand’ through intercourse with the North. The East, in trading with the West, finds ‘a valuable vent for the commodities which it brings from abroad or manufactures at home’. The West likewise receives from the East ‘supplies requisite to its growth and comfort’, and ‘must … owe the secure enjoyment of indispensible outlets for its own productions’.² Washington concluded by arguing that all sections of the Union shared a common interest in supporting the national union. As such, ‘Here [in the common interest] every portion of our country finds the most commanding motives for carefully guarding and preserving the union of the whole.’³ In particular, Washington felt that ‘all the parts combined’ find ‘greater strength, greater resource … greater security from external danger, a less frequent interruption of their peace by foreign nations’.⁴ To facilitate the creation of such a domestic market, particularly for East–West commerce, Washington expected a ‘progressive improvement of interior communications by land and water’.⁵

Washington’s vision of what would eventually become the American System rested upon a positive conception of federal power. He also stated in his farewell address that ‘your union ought to be considered as a main prop of your liberty, and that the love of the one ought to endear to you the preservation of the other’.⁶ It is important to note that Washington did not foresee any conflict between federal power and the liberty of ordinary Americans. This positive view of a strong central government would later prove an essential component of the American System. Washington continued to lay out his plans for a powerful and free nation by urging his fellow citizens to establish ‘institutions for the general diffusion of knowledge’, because ‘it is essential that public opinion should be enlightened’.⁷

In his eighth and last annual message to Congress on 7 December 1796, Washington stated that ‘[t]he object [of the encouragement of manufactures] is of too much consequence not to insure a continuance of their [Congresses’] efforts in every way which shall appear eligible.’⁸ He also exhorted Congress to consider establishing a national university and also a military academy, because ‘a flourishing state of the arts and sciences contributes to national prosperity and reputation’. To help jumpstart such a project, Washington offered twenty acres of public land in the District of Columbia and his fifty shares of Potomac Company stock.⁹ Washington’s speech provided two very important reasons for the national government to establish educational institutions: the need for a larger fund for such an institution and a need to train groups of future leaders who would share common perspectives. He stated that although there were already many excellent local universities, ‘the funds upon which they rest are too narrow to command the ablest professors in the different departments of liberal knowledge’. A national university, however, would contribute to ‘the assimilation of the principles, opinions, and manners of our countrymen by the common education of a portion of our youth from every quarter’.¹⁰ He stated ‘[t]he more homogeneous our citizens can be made … the greater will be our prospect of permanent union.’¹¹

It is clear that Washington understood the establishment of cultural institutions such as a national university under the auspices of the federal government as essential to the long-term preservation of the union. In a sense, it was very natural for George Washington to be nationalistic. Although he started his political and military career as a member of the colonial Virginia legislature and an officer of the colonial Virginia militia, Washington came to national prominence as Commander in Chief of the Continental Army, President of the Constitutional Convention of 1787 and, most importantly, the first President of the United States.¹² His long experience on the national scene expanded the breadth of his political vision, which was not always the case with some of his colleagues.

John Adams and Cultural Improvements

Washington’s successor, John Adams, also advocated the cultural development of the United States. In his inaugural address, Adams included in his long list of duties as President ‘a love of science and letters and a wish to patronize every rational effort to encourage schools, colleges, universities and religion among all classes of the people’.¹³ The international problems between France and the United States, however, consumed most of Adams’s time and energy. In addition, the inability of the federal government to raise sufficient revenue kept Adams from actively pursuing a plan of internal improvements. To be certain, on 24 April 1800, President John Adams signed a bill which authorized him to remove various Executive Departments to Washington DC, the permanent capital of the United States. The legislation appropriated $5,000 ‘for the purchase of such books as may be necessary for the use of Congress … and for fitting up a suitable apartment for containing them’. Yet, the creation of the Library of Congress represented Adams’s only real contribution to encouraging education on the national level.¹⁴

Alexander Hamilton’s Report on Manufactures, a Precursor of the American System

Alexander Hamilton, George Washington’s protégé and the first United States Treasury Secretary, shared his mentor’s nationalistic outlook. Born on the island of Nevis in the West Indies, Hamilton did not set foot on the North American mainland until 1772 to enrol in King’s College in the colony of New York. Thus, Hamilton was not attached to any single state by birth. Instead, he developed an important political and personal relationship with Washington, serving as the General’s aide-de-camp during the American Revolution. Hamilton continued to support his former commander as a New York delegate to the Constitutional Convention in 1787. Hamilton helped to draft the Constitution and promote it through publication of the Federalist Papers in no small part to create a national government in which to fulfil his unbounded political ambition.¹⁵ It was therefore no coincidence that Hamilton titled a series of political and economic essays he wrote in 1781 and 1782, ‘The Continentalist’, in which he demanded more power for the federal government over state interests.¹⁶

Hamilton presented a rudimentary blueprint for a system of national improvements in his famous report on manufactures, delivered to the House of Representatives on 5 December 1791. In his report, Hamilton advocated the encouragement and protection of domestic manufactures.¹⁷ In classical Hamiltonian style, the report comprehensively discussed the various justifications for protecting domestic manufactures, the arguments against such protectionism, a constitutional rationale for federal tariffs, the positive long-term effects of protective tariffs for raising revenue, a survey of the currently established domestic manufactures and the means of promoting domestic manufactures.¹⁸

Hamilton’s report rested on the ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Acknowledgements
• List of Tables and Figures
• Introduction: What Was the American System?
• 1. Emergence of the American System, 1790–1815
• 2. The Growth of the American System and Its Challenges, 1815–24
• 3. Reform Mentalities and the Implementation of the American System, 1825–9
• 4. Decline of the American System, 1829–37
• Conclusion: The American System and American Society and Economy, 1790–1837
• Notes
• Works Cited
• Index