THE AMERICAN SYSTEM

Henry Clay and other nationalists in Congress proposed the American System in the aftermath of the War of 1812. This plan was supported by James Madison and most fully implemented by James Monroe. The purpose of this plan was to make America less economically dependent on Europe by encouraging the production of goods in the United States that had previously been purchased abroad. Important to this economic growth would also be a second national bank, so that credit would be readily available, and a rather large protective tariff, which would encourage production and interstate commerce.

The Tariff of 1816 raised tariff rates to nearly 22 percent, providing more than adequate protection for American business interests and revenues for improvements in the internal transportation system of the United States. A Second National Bank was also chartered in 1816. There was rapid economic growth in the postwar years, as Europeans and others traded for American tobacco, cotton, and grain. Economic growth could not last forever, and a depression gripped America in 1819.