Henry Clay: National Development Must Take Precedence Over Debt Payments
by Anton Chaitkin
On Feb. 2, 3, and 6, 1832, Sen. Henry Clay of Kentucky delivered a speech, entitled “In Defense of the American System, Against the British Colonial System.” Clay defended the American System of government-guided development of industry, from the attack of British agents of influence in northern and southern states.
Henry Clay had recently completed a term as U.S. Secretary of state (1825-29), in which post he had ably advanced and defended the joint interests and independence of the new republics in North and South America, urging the adoption of the anti-colonial principles of the American Revolution for all developing nations.
The instruments of the American System included: the Bank of the United States — run by American nationalists — controlling speculators and guaranteeing cheap credit for farmers and developers; tariffs to protect home industry against foreign trade war; and growing government expenditures for the creation of roads, canals, and rail lines.
South Carolina was threatening to secede from the Union unless the protective system were ended. The anti-national (”Free Trade” or what would today be termed a “pro-free market”) movement was led by the former U.S. Treasury Secretary Albert Gallatin of Switzerland. During his own long reign at the Treasury (1801-14), Gallatin had canceled the Founding Fathers’ industrial development program and had virtually dissolved the American armed forces, using the money instead to “try to pay off the national debt.”
“[The] decision on the system of policy embraced in this debate, involves the future destiny of this growing country. One way…it would lead to deep and general distress; general bankruptcy and national ruin; the other, the existing prosperity will be preserved and augmented, and the nation will continue rapidly to advance in wealth, power and greatness….
“Eight years ago, it was my painful duty to present to the other House of Congress, an unexaggerated picture of the general distress pervading the whole land. We must all yet remember some of its frightful features. We all know that the people were then oppressed and borne down by an enormous load of debt; that the value of property was at the lowest point of depression; that ruinous sales and sacrifices were everywhere made of real estate [such as forced sales of farms]; that stop laws and relief laws [i.e., debt moratoria] and paper money were adopted to save the people from impending destruction; that a deficit in the public revenue existed, which compelled Government to seize upon, and divert from its legitimate object, the appropriation to the sinking fund to redeem the national debt….
“[Today by contrast] we behold cultivation extended, the arts flourishing, the face of the country improved, our people fully and profitably employed…a People out of debt; land rising slowly in value, but in a secure and salutary degree; a ready, though not extravagant market for all the surplus productions of our industry; innumerable flocks and herds browsing and gamboling on ten thousand hills and plains, covered with rich and verdant grasses; our cities expanded, and whole villages springing up, as it were, by enchantment; our exports and imports increased and increasing; our tonnage [shipping], foreign and coastwise, swelling and fully occupied; the rivers of our interior animated by the perpetual thunder and lightning of countless steam boats; the currency sound and abundant; the public debt of two wars nearly redeemed; and, to crown all, the public treasury overflow- ing….
“This transformation of the condition of the country from gloom and distress to brightness and prosperity, has been mainly the work of American legislation, fostering American industry, instead of allowing it to be controlled by foreign legislation, cherishing foreign industry….
“It is now proposed to abolish the system, to which we owe so much of the public prosperity…I have been aware that, among those who were most eagerly pressing the payment of the public debt, and, upon that ground, were opposing appropriations to other great interests [i.e., to pay debts develop and defend the nation, there were some who cared less about the debt than [preventing] the accomplishment of other objects. But the People- of the United States, have not coupled the payment of their public debt with the destruction of the protection of their industry….If it is to be attended or followed by the subversion of the American system, and an exposure of our establishments and our productions to the unguarded consequences of the selfish policy of foreign Powers, the payment of the public debt will be the bitterest of curses. Its fruit will be like the fruit “Of that forbidden tree, whose mortal taste “Brought death into the world, and all our woe, “With loss of Eden.” ” …[There] is scarcely an interest, scarcely a vocation in society, which is n
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