Internal Improvements: The American System

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Internal Improvements: The American System

A Blueprint for Growth. The brainchild of former War Hawk and Speaker of the House Henry Clay, the American System was a neo-Federalist program of protective tariffs, a national bank, and internal improvements. Clay and his allies argued that it would foster economic growth and interdependence between geographical sections. Yet the system had its greatest impact in the West. In return for Western support of a tariff to aid domestic manufacturers, Eastern lawmakers backed federal aid for the construction of canals, roads, and turnpikes.

Impact. The largest effect of these internal improvements was to link rural farmers with markets. In 1816 a Senate report stated that nine dollars would move one ton of goods from Britain to the United States. Once on American soil, that same nine dollars covered the costs of moving the goods just thirty miles inland. To help remedy this crisis, Congress ordered construction of a federally funded national road to link the Chesapeake with the Trans-Appalachian West. Soon, the boom in canal and road construction led to a full-fledged transportation revolution, which drove the costs of moving people and goods down even further.

Second Bank of the United States. The chartering of a second Bank of the United States, another hallmark of the American System, greatly increased the frenzied sale of land in the West. The boom in land sales was fueled by the availability of easy credit to both settlers and speculators. Many of the politicians working to create the American System were also land speculators themselves, and they were often the most enthusiastic about rechartering the bank. By federal law the bank’s notes were accepted as payment for government land, so a land speculator could borrow the bank’s money to buy thousands of acres of land in the new territories. This situation quickly injected capital into the West, but problems arose when speculators failed to pay back the generous loans. The nation’s first severe depression—the Panic of 1819—was the result of these unsound financial practices.

Unity. Clay hoped that the federal government would create a market-driven economy that would help unify the nation’s various regions. For example, stimulating the nation’s infant industries would, in turn, create more demand for the West’s raw materials. By the 1840s Western farmers and Northeastern businessmen fulfilled his dream; but the vast national market they created, which moved goods from place to place at a low cost, excluded Southerners. As a result much of the West’s economy became increasingly tied to the energy of the North.

A Transportation Revolution. The American System was an attempt to put government power and money behind improvements such as roads, canals, and steamboats. While government projects such as the National Road made it easier for settlers and peddlers to move West, the cost of moving agricultural goods to markets in the East remained high. New York State funded the Erie Canal project to link the Hudson River with Lake Erie, opening a water route between the West and New York City and cutting New Orleans out of the market equation. The canal transformed sleepy western New York into a bustling grain-growing region and repaid the state’s investment several times over.

Steamboats and Railroads. Steamboats and railroads completed the transportation revolution. When the entrepreneur Robert Fulton launched the Clermont upriver towards Albany, New York, in 1807, he began a new era of cheap transport. Within a decade new flat-bottomed steamboats made the trip up the Mississippi between New Orleans and Louisville in twenty-five days. Like the Erie Canal did in New York, the steamboat rapidly transformed the interior from rugged frontier into a busy commercial region. Railroads picked up where steamboats left off in the 1840s. By the eve of the Civil War most farmers in the North and West lived within a day’s ride of a railroad, canal, or river that helped them move their goods to market.