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Arguing that continued dependence on Europe for manufactured goods jeopardized the independence of the U.S., Hamilton encouraged Congress to implement protective tariffs and invest in new mechanization processes and technical innovations.
The American system of manufacturing was a set of manufacturing methods that evolved in the 19th century. The two notable features were a system for making interchangeable parts and high degree of mechanization which resulted in more efficient use of labor compared to hand methods.
The "American System" featured semi-skilled labor using machine tools and jigs to make standardized, identical, interchangeable parts, which could be assembled with a minimum of time and skill. The name "American System" came simply from the fact that for a time in the 1800s the system was strongly associated with the American companies who had first successfully implemented it. Within a few decades, manufacturing technology had evolved further, and the ideas behind the "American System" were in use worldwide.
Interchangeability of parts was finally achieved by combining a number of innovations and improvements in machining operations and machine tools, which were developed primarily for making textile machinery . These innovations included the invention of new machine tools and jigs (in both cases, for guiding the cutting tool), fixtures for holding the work in the proper position, and blocks and gauges to check the accuracy of the finished parts. Since the parts were interchangeable, it became possible to separate manufacture from assembly, which could then be carried out by semi-skilled labor on an assembly line - an example of the division of labor. The system typically involved replacing hand tools with specialized machinery and allowed industrialists to greatly reduce costs.
Such innovation, as demonstrated in the American System, had been extolled by Hamilton and the Federalist Party in the 1790s as the supreme virtues of American republicanism. In his Report on Manufacturers, Hamilton argued that an expansion of manufacturing (particularly of textiles) was necessary in order to produce nationally made finished goods--and thereby reduce American dependence on European products. Arguing that continued dependence on Europe for manufactured goods jeopardized U.S. independence, Hamilton encouraged Congress to implement protective tariffs and invest in new mechanization processes and technical innovations. Furthermore, Hamilton and the Federalists believed that the characteristics of the successful industrialists--self-reliance, autonomy, innovation, and entrepreneurship--were the bedrock of values on which they sought to model the national political system. According to Hamilton, the commercial classes created a class of talented, industrious, and virtuous men who could be trusted to wield federal political power. Hence, for the Federalists, manufacturing was of primary importance to federal policy because it served as a breeding ground for new generations of talented, virtuous republican leaders.