Unit 1
Part 1
A History of the US Economy
economy superpower, recession, expansion, agricultural economy, industrial infrastructure, entrepreneurship, manufacturing, commerce, currency, mass production, “military-industrial complex”, labor union, consumer confidence, dot.com industries, global marketplace, unemployment
Text
A History of the US Economy
Once the world’s leading economic superpower, in the twentieth century America assumed the role of financial capital of the world. As America’s trade deficit continues to increase, much of America’s massive debt is now controlled by China, and a transfer of power seems to be in progress. But even amidst recession, the model of the American Dream still exists. Whether America and her dream can emerge unscathed in the coming years remains to be seen. It is a complex economic question, and one that cannot be separated from the global economy.
The Economy of Colonial America (Pre-1776)
Colonial America was a predominately agricultural economy. Even as the economy expanded over the decades of the eighteenth century, the colonies only moved slowly toward industrialization by the year of the Declaration of Independence, in 1776. Dynamic economic expansion occurred with population growth from births and immigration, but colonial Americans had naturally become increasingly self-sufficient.
Northern prosperity from the fur industry and fishing boosted the local economy .
By 1776, the standard of living of free white American society was already high, with abundant food and land supporting a comparatively high income. Officially sanctioned as a sovereign nation with the Treaty of Paris in 1783, the global economy of the United States of America is born.
The Constitution and Pre-Civil War Economy (1787 – 1850s)
From the writing of the United States Constitution in 1787, America’s economy saw tremendous growth. The Constitution provided a kind of “economic charter,” laying out regulation of both commerce and money by Congress. Most importantly, it opened the market of the United States territory. Open borders allowed for an internal free flow of goods and ideas. One exception was an unpopular tax on whiskey enacted in 1791 to help pay the national debt established and expanded as a consequence of the Revolutionary War. Thanks to a strong institutional core adopted from the British, America quickly caught up economically to her former ruler
American entrepreneurship was given free reign with the departure of British investments. Regional economic character developed with shipyards in New England, crops and furs in the middle colonies, and the plantation economy of the Old South. The idea of free enterprise has remained for the country’s economic development ever since.
There existed an intense debate over what kind of economy America should be. America’s third president, Thomas Jefferson, was a major proponent of the agrarian society.
America’s first Secretary of the Treasury, Alexander Hamilton and his Federalist Party were proponents of a stronger central government in order to encourage manufacturing and commerce as the core of the new American economy. Hamilton further advocated for a national bank to back a strong currency and push policy that would generate capital to support young American industry.
The first half of the nineteenth century saw a frontier opened by significant developments in transportation. After the 1840s a new mode of transportation, the railroad, picked up the reigns of the American economy, and took it to places and heights it had never before seen. The east was finally and forever linked to the west with the completion of the Transcontinental Railroad in 1869. The railroads became the driving economic force of America in the second half of the nineteenth century, backed by governmental land grants and multi-national investments. By then, however, the United States economy had been hit by two major forces: the California Gold Rush and the Civil War.
The Economics of War
The 1848 discovery of gold in California not only drew hundreds of thousands of people out West; it also shifted the balance of economic attention of the United States. By the beginning of the Civil War in 1861, gold not only backed American currency. Before long, however, both the North and the South resorted to paper currency.
Reconstruction through the Roaring Twenties (1865 – 1929)
By the Civil War, already a third of the national economy was powered by manufacturing, most of which was in the North. Following the war, the American economy was driven by innovation and invention that spurred tremendous growth of the industrial infrastructure. In short, rapid development—and much of itwas a result of advances in mass production. Individual business enterprise became the backbone of the United States economy. It was a “Gilded Age” in America, built by entrepreneurs in manufacturing and commerce, which outpaced the economic contribution of agriculture by the beginning of the 20th century.
In the economic history of the United States, the early twentieth century remains critical for major advancements in technology. The steam- and water-powered economy received a jolt by the spread of modern electricity, and the advent of the automobile. Entering late into World War I, the United States was primed to shift its industry and vast amounts of raw materials to wartime.
At the time, America was sticking to a gold standard to back its currency, so avoiding simply printing additional money was meant to help preserve the standard, while preventing inflation. The war altered the American economy in many ways. The Federal Reserve assumed a more dominant role as New York became the financial center of the world. The federal government, in short, showed it could be a dominant force in the American economy.
Great Depression through World War II (1929 – 1945)
The two most influential economic events of the twentieth century in America are the Great Depression and World War II. While the precise causes of the Great Depression are both numerous and challenging to pinpoint, the economic effects were disastrous. At its peak, unemployment was nearly 25 percent of the workforce as hundreds of banks failed (about 40 percent) and hundreds of millions of deposits were lost. In summary, after “increasingly stock speculation, the stock market crash of 1929 wiped out millions of investors and crippled confidence among business executives and consumers”.
Under the watch of President Franklin Delano Roosevelt, America launched a vast economic stimulus program called the “New Deal.” The program was designed to rebuild the confidence lost during the Depression and put people back to work through government-sponsored works projects. The New Deal vastly expanded the role of the federal government in the American economy.
A close relationship between the private sector of the economy and the American government was developed as a result of the Great Depression. That relationship would continue into World War II, when the nation’s industrial sector was mobilized and coordinated by the government to contribute products directly to the war effort. The gross national product (GNP) of the United States increased over 50 percent between 1941 and 1945 and unemployment hit its lowest point ever at 1.2 percent. America, meanwhile, was becoming increasingly urban as populations shifted to cities and agriculture became more mechanized and absorbed by big business as a result of wartime technology.
Into the Modern Era (1950s – Present)
The United States continued to grow after the war, both in population and economically. The postwar “baby boom” consumer spending and numbers of consumers increased substantially. The American “middle class” became dominant. By now the United States was the richest nation in the world. As a result, America was developing an extensive infrastructure to match its wealth. The completion of the Interstate Highway System “remains the largest public works project in the history of the world”. Finally, the strong interrelationship between the government and the ever-expanding industrial sector (the “military-industrial complex”) helped establish the United States as the economic superpower of the world.
The middle of the twentieth century saw a brief expansion of labor unions and then labor policy. The Civil Rights movement of the 1960s urged President to further expand and guarantee access to opportunity by minorities in America while Congress helped support new federal spending in the form of programs such as Medicare and Food Stamps. But economic trouble largely resulting from the Vietnam War and high domestic spending plagued the economy in the 1970s. The economy faced inflation and shockwaves from global crises that drove oil prices and consumer discontent high.
As a result of increased expenditures (particular in the military and defense) but decreased taxes there were significant increases in both the budget deficit and the national debt as the U.S. government was forced to borrow heavily from other countries.
A recession of the early 1990s lingering from the stock market crash of 1987 was drawn out by high oil prices, but consumer confidence and spending helped keep the economy afloat. The economy of the 1990s was driven by the rise of technology and the Internet, whose companies made startling gains on the stock market. Personal and business technology alike broadened and streamlined access to the global marketplace. Economic optimism was based upon high-tech “dot.com” industries who built their success from low interest rates and enthusiastic investors during an era of low unemployment and low inflation.
The Federal Reserve closely monitored America’s economic pace and played an active role in the American economy. But it is also because of the Reserve selling billions in bonds to the Chinese that China has gradually assumed role of banker to America. That, in addition to America’s virtual dependence upon cheaply manufactured Chinese goods to sustain America’s consumer-driven economy, had managed to keep inflation, interest rates, and corporate wage costs in America artificially low. Low, even as the economy was taxed by terrorism, military fronts and natural disasters.
Understanding the Recession: Stock Markets, Subprime Lending, and Bursting Bubbles
In all, there have been over thirty cycles of expansions and recessions of the U.S. economy just since 1854. When markets are surging, “bubbles” form out of wild speculation and overvaluation that are based largely upon euphoria and greed. Electronic “herds” of investors are populated with optimistic, or “bull” buyers. In 2000, the dot.com economic boom came to an end as interest rates rose and investments in technology slowed. When an economic bubble bursts, the herd became fearful. A pessimistic “bear” market is a seller’s stock market in decline. Some of these economic forces were the same key factors that caused the “subprime” mortgage bubble that burst in late 2007. However, it was dubious and unregulated lending practices (with encouragement from the U.S. government) that caused this shutter in the economy—with aftershocks felt around the world.
Americans have tried to be cautiously optimistic, embracing the message of “Hope” in the presidential campaign of Barack Obama. Like many presidents who took over in the midst of recession, President Obama faced the task of virtually “remaking America”. Direct effects of smaller government and deregulation under previous administrations, but most recently with the energy and environmental policies of President Bush, were seen in the Gulf of Mexico when as much as 180 million gallons of oil gushed from a self-regulated rig’s blown out wellhead. The question, then, seems virtually the same as that which faced a younger America: how big should the government be? The answer is overwhelmed by the sheer number of complexities that complicate the task facing President and Americans today—the task of remaking another new American economy.
Vocabulary list
economic superpower – экономическая сверхдержава
to assume a role – взять на себя роль syn. to take a role
recession – спад экономической активности
agricultural economy– экономика, ориентированная на сельское хозяйство n. agriculture
to expand – расширяться, увеличиваться, расти n. expansion
income - доход
sovereign nation – суверенная нация
internal – внутренний ant. external
to layout regulation – устанавливать законы, правила
free flow of… - свободное движение
tax – налог
core – ядро, центр, суть
entrepreneurship – предпринимательство n. entrepreneur
manufacturing – производство, изготовление n. manufacturer v. to manufacture
commerce – торговля adj. commercial
to back a strong currency – поддерживать «сильную» валюту hard currency – твердая, конвертируемая валюта soft currency – неконвертируемая валюта
industrial infrastructure – промышленная инфраструктура
mass production – массовое производство
advancements in technology – достижения в технологиях
to launch a program – вводить, претворять в жизнь программу syn. to introduce to put into effect
military-industrial complex – военно-промышленный комплекс
labor (labour) union – профсоюз
domestic spending – внутренние затраты, расходы
expenditures – расходы (государства)
consumer confidence – доверие потребителей
global marketplace – мировой рынок
dot.com industries – компании, осуществляющие свою деятельность с использованием интернет-технологий
unemployment – безработица ant. employment v. to employ n. employer/employee
Notes
transfer of power – переход власти
self-sufficient – самодостаточный
to boost – резко увеличивать(ся)
standard of living – уровень жизни
the national debt – государственный долг
Gold Standard – золотой стандарт
The Federal Reserve – Федеральная Резервная Система, государственное финансовое учреждение США
the Great Depression – Великая Депрессия
the stock market crash – крах фондового рынка
to cripple confidence – наносить урон доверию
GNP (gross national product) – ВНП (валовой национальный продукт)
baby boom – резкий подъем рождаемости
middle class – средний класс
access to opportunity – зд. возможности
budget deficit – дефицит бюджета
to borrow heavily – занимать денежные средства в больших количествах
herds of investors – зд. Толпы инвесторов
bull market – рынок быков (при повышении цен) bear market – рынок медведей (при понижении цен)
economic bubble – «экономический пузырь»
dubious and unregulated lending practices – ненадежные и нерегулируемые заимствования
Ex 1. Suggest the Russian equivalents:
a transfer of power seems to be in progress; the American Dream still exists; dynamic economic expansion; abundant food and land; a strong institutional core; the driving economic force; the Gold Rush; to resort to paper currency; to be driven by innovation and invention; to outpace; to assume a dominant role; the economic effects were disastrous; government-sponsored work projects; to become increasingly urban; to guarantee access to opportunity by minorities; to keep the economy afloat; to make starting gains; electronic “herds” of investors; with aftershocks felt around the world; the energy and environmental policies.
Ex 2. Fill in the gaps with the words and expressions from the text.
Once the world’s leading ……, in the 20th country America …… of financial capital of the world.
Even amidst ……, the model of the …… still exist.
By 1776, the …… of free white American society was already high, with …… supporting a comparatively high income.
Open borders allowed for an …… of goods and ideas.
Thanks to a strong …… adopted from the British, America quickly …… to her former ruler.
A. Hamilton and his party were proponents of a stronger central government in order to encourage …… as the …… of the new American economy.
After the 1840s a new mode of transportation, the railroad, …… of the American economy.
Following the war, the American economy was …… that spurred tremendous growth of the …….
In the economic history of the US, the early 20th century remains …… for major ……
Under the watch of president Roosevelt, America …… a vast economic stimulus program called the “……”.
In all, there have been over thirty cycles of …… of the US economy since 1854.
Americans have tried to be …… embracing the message of “hope” in the …… of Barak Obama.
Ex 3. Find in the text the English equivalents for the following:
ведущая экономическая супердержава; во время экономического спада; в основном сельскохозяйственная экономика; высокий уровень жизни; свободное движение товаров и идей внутри страны; поощрять производство и торговлю как основу экономической системы; прибегнуть к чему-либо; достижения в сфере массового производства; придерживаться золотого стандарта; разрушительные экономические последствия; масштабная программа экономического стимулирования; правительственные проекты создания рабочих мест; вызвать потрясения в экономике; проявлять осторожный оптимизм.
Ex 4. Match each term with the appropriate explanation.
recession, expansion, mass production, free enterprise, agriculture, manufacturing, commerce
Growing large, wider; increasing in size and scale.
The exchange of goods and services for money or for other goods and services by way of trade and all the various business operations that make such exchange possible.
A temporary reduction in business activity.
Organized and rapid production of very large quantities of a standard article or commodity.
The systematic making of goods from raw materials. Originally it implied the making of something by hand, but now includes making by machinery.
The skilled work of cultivating the soil for crops, bringing up animals, planting trees, managing forests, and fishing.
An economic system in which private persons are free to own capital and to organize their businesses.
Ex 5. Answer the questions and do the assignments.
What are the major stages of the US economy history?
How is the economy of colonial America characterized? What boosted the local economy at that time?
What is implied in the idea of individual entrepreneurship?
How did the departure of British investment influence the American economy?
Speak of the two points of view on the development of the US economy. Which one proved the more effective?
Why was the development of transport critical for the US economy?
What is the role of individual business enterprise in the United States economy?
What is the Great Depression? How was it overcome?
What are the characteristic features of the US economy of the Modern Era?
How did the recent economic crisis affect the country?
Ex 6. Find in the text the words and phrases that refer to the following notions and comment on them:
dynamic economic expansion
the agrarian society
tremendous growth of the industrial infrastructure
the Great Depression
the economic super power