Unit 1

A History of the US Economy

economy superpower, recession, expansion, agricultural economy, industrial infrastructure, entrepreneurship, manufacturing, commerce, currency, mass production, “military-institutional complex”, labor union, consumer confidence, dot.com industries, global marketplace, unemployment

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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.

1. 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.

2. 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.