The timely return of Henry Clay

With the collapse of the post-Reagan consensus, US politics is finding renewed inspiration in the interventionist creed of Henry Clay's ‘American System’.

Henry Clay Sr., 1777 – 1852. American attorney and statesman. From a painting by Alonzo Chappel. Credit: Classic Image / Alamy Stock Photo
Henry Clay Sr., 1777 – 1852. American attorney and statesman. From a painting by Alonzo Chappel. Credit: Classic Image / Alamy Stock Photo

The public memory of America’s politicians goes through various cycles after their deaths. A few become timeless figures in the nation’s collective consciousness: George Washington, Abraham Lincoln, Franklin D. Roosevelt. Many continue to be remembered, but our interpretations of their lives change, resulting in the revival of Alexander Hamilton and the shaming of Thomas Jefferson. Others are forgotten, only to be called back when their ideas and career acquire a renewed relevancy. Henry Clay is one of the most recent beneficiaries of this last trend.

Named in 1957 as one of the United States’ five greatest Senators by a special committee headed by then-Senator John F. Kennedy, Clay’s place in history seemed assured. But the arrival of the postwar conservative movement, with its more Jeffersonian outlook, led to the eclipse of Clay and the Hamiltonian school of economics. Hero worship of Goldwater, Buckley, and Reagan has narrowed the conservative movement’s historical horizons even further. It is only the breakdown of the conservative consensus, favouring free trade and limited government, that has created an opening for Clay’s return.

Moving on from the Reagan revolution has forced many on the right to look further back in the nation’s history for inspiration. Between the Founding and the New Deal there is a long line of political practitioners, intellectuals, and innovative industrialists who helped build the American republic. Clay’s words and actions did much to shape this period and can again be a revitalising source of ideas. The challenges posed by the end of unipolarity, an economic cold war with China, and the consequences of de-industrialisation all echo the problems that Clay faced in his lifetime. His solution was to forcefully assert the economic independence of the United States.

Clay dubbed his economic program the ‘American System’. In contrast to the ‘British System’, which embraced laissez-faire and free trade, Clay believed that American power could be enhanced through what he called national developmentalism. Political independence had been secured by the Revolutionary War, but economic independence continued to be in jeopardy. Under British rule, the colonies were prevented from enjoying commerce with other territories, and forbidden from manufacturing goods that could compete with the metropole. Britain wanted to keep America as a source of cheap food and raw materials, even after losing political control. It was these economic tensions, within the context of the Napoleonic Wars, that eventually helped pave the way to the War of 1812.

This Second War of Independence unleashed a wave of nationalism across the United States. Clay started his political career as a follower of the Jeffersonian Republican Party, but supported Hamiltonian economics, which he believed could help to decouple the United States from Britain. Drawing upon Hamilton’s Federalist Paper No.11, Clay argued for a protective tariff to support ‘infant industries’, a strong national bank to enable a reliable and stable flow of credit, and internal improvements to connect vast swathes of the nation through roads, canals, and railroads. The goal was nothing less than the transformation of American industrial growth. Even when the war was long over, Clay continued to make the case for the American System as the best means of advancing the stability and prosperity of the republic.

Speeches in 1824 and 1832 were major milestones in the intellectual emergence of national developmentalism, especially in the debates over tariff legislation. Yet, for all his eloquence, Clay was thwarted many times in his career. Three unsuccessful presidential runs, in 1824, 1832, and 1844, as well as two failed attempts to win the Whig nomination in 1840 and 1848, meant he was largely confined to serving in the House and then the Senate. It was from this position that Clay was able to influence the political weather and inspire future generations to fight for the American System.

As a state legislator and ‘disciple of Henry Clay’, Lincoln tried to put the principles of the American System into practice in Illinois. It was an economic creed he stayed true to as a congressman and then as president. The American System had previously been implemented half-heartedly under some administrations, with their measures eventually repealed or abandoned. Lincoln would persevere with a comprehensive program of reform of tariffs, credit, infrastructure, land, and education during his historic presidency. Building a strong national economy was a central part of his mission to restore the Union. His Republican successors would press ahead with these economic principles and turn the United States into the world’s leading industrial power, surpassing even the British Empire.

This legacy secured Clay’s place in US history, and he would be remembered well into the New Deal-era. Now, as the post-Reagan consensus continues to collapse, both left and right are beginning to recover economic ideas and traditions neglected during the years of economic liberalism’s ascendancy. American Compass under Oren Cass has played an important role in the restoration of Clay and his ideas, publishing Rebooting the American System in 2020 and holding its inaugural Henry Clay Lecture in Political Economy in 2021, given by Senator Marco Rubio. Last year, at an Intercollegiate Studies Institute economic forum, the former Trade Representative Robert E. Lighthizer called for a ‘new American System’.

The American System has taken on a symbolic meaning for those who want a return to national developmentalism, an aim shared by both conservative and progressive legislators. In a written statement for the congressional hearing on the railroad disaster in East Palestine, Ohio, Senator J.D. Vance wrote: ‘The strength of the thread is the strength of the fabric. It’s something we’ve forgotten and remembered, again and again, through the American System, the New Deal, and the Civil Rights Movement.’ Representative Ro Khanna stated during a recent congressional hearing: ‘China basically incorporated many elements of Hamilton’s formula. They copied, in part, what we invented with Alexander Hamilton and the American System.’

Just as Clay is being held up as a model, he has also been attacked by defenders of economic liberalism. It is true that there were tensions between Clay’s vision and how far founding fathers such as Jefferson and James Madison were willing to go. However, Hamilton’s writings and the policies enacted under Washington created the foundations on which Jeffersonian administrations would later advance national developmentalism. Clay was not deviating from the Founding. His ideas were the logical conclusion of establishing independence and separation from Britain – the American System was a natural progression for the republic.

There is a tendency on the libertarian right to argue that the freer the market the freer the people and therefore any extension of state power is an infringement on the freedom of the individual. While it is true that market economies are the best means of delivering human happiness, in contrast to the totalitarianism of planned economies, there is a point at which market economies can tip into disorder and exploitation without government intervention, and harm people’s freedom. National developmentalism has been a method used by left and right throughout American history to safeguard against this danger. Far from representing an illiberal turn, national developmentalism is the best means of securing American liberty. Clay argued for a more active federal government to provide greater equality of opportunity and generate solidarity between the republic’s citizens. This did not translate into a rejection of free speech, checks and balances, or the separation of powers. It was proof that national developmentalism could not only work but thrive alongside republican governance.

At the forefront of Clay’s thinking was the defence of the republican order in America and the understanding that economics and politics are intimately connected. Much like today, the early American republic was responding to the challenges of an economic hegemon. Clay understood that political independence could never be fully realised while the nation remained economically dependent on Britain. China’s economic reach has allowed itself to exercise political influence well beyond the Indo-Pacific, affecting American allies such as Canada and Australia. The American System sought to end the republic’s economic dependency on Britain, which is why Clay’s ideas are relevant again during a time when the nation is attempting to decouple from China. It is this zeal for economic independence that made Clay such a vital figure and which should inspire Americans today.

Clay deserves further attention as an advocate for national and social cohesion. In a nation as large and diverse as the United States, the federal government has a responsibility to preserve the unity of the republic. With politics deeply polarised to a level not seen in decades, and with the culture wars raging, America’s political class has failed to confront major economic and foreign policy challenges. Clay hoped that economic integration and stability could preserve the Union, which was still in its infancy. Ultimately, the republic’s original sin of slavery prevented this from happening, but Lincoln believed that the American System could rebuild the nation after the Civil War.

Clay’s new-found relevance is also apparent in his belief in foreign policy realism and restraint. Throughout his career, Clay was committed to putting the national interest first. This led to him backing the War of 1812 against Britain to reaffirm the republic’s economic independence. As Secretary of State, Clay provided international leadership and maintained the Monroe Doctrine while navigating the great power competition between the European empires. He also opposed the Mexican-American War, which he saw as serving the interests of slave-owners who wanted to expand their power and territory. With the return to a multipolar world, the United States should re-examine past practitioners of foreign policy, such as Clay and John Quincy Adams, who were acutely aware of the need to conserve their political capital and not overstretch their resources.

In its embrace of economic liberalism at home and liberal interventionism abroad, the modern Republican Party has wandered far from its intellectual origins. Donald Trump shattered the post-Reagan consensus and, as a consequence, American politics is in flux. Yet the beginning of a new consensus around national developmentalism could be taking shape. Through the Infrastructure Investment and Jobs Act, CHIPS and Science Act, and Inflation Reduction Act, Joe Biden is forging a new industrial strategy that is unlikely to be reversed entirely under a Republican administration. The European Union is following the American example in the global competition for economic power with China.

Change is in the air, but the Republican Party does not yet look ready to take the initiative on national developmentalism. Mid-term messaging last year was focused on traditional arguments against tax rises and spending increases, and Kevin McCarthy has shown no interest in departing from these themes as Speaker. Establishment orthodoxy and donor interests continue to be the main stumbling blocks. To overcome such objections, Republicans who are interested in reshaping their party’s agenda need to make it clear that arguing over the size of the federal government is the wrong debate. National developmentalism requires an active state that can target support for American industry and workers. Fulfilling Clay’s principles in the twenty-first century means massively improving the state capacity of the United States. This is not only crucial to expanding the American middle class across the republic, but also to decoupling from China in a way that leaves the nation stronger.

Recovering the American System can play a powerful role in charting a new course for the republic. Clay is one of the nation’s greatest statesmen and has much to say about the modern world. But this is just the beginning. Breaking free of economic liberal mythology can reveal the rich tapestry of the American republican tradition. There is the American School of economists that theorised national developmentalism, and the industrialists who put these ideas into practice. Generations of Republican leaders, from Lincoln to Eisenhower, were vigilant custodians of American greatness. Turning the United States into an independent industrial power was the work of many hands. National developmentalism needs a similar collective movement to make it the republic’s economic creed once more.


David Cowan