The Development of the American Economic - Essay Example

?American economic history Introduction According to Harris (572), American economic history is important in the contemporary society where Americansare concerned on the ability of the country to handle global economy. In focusing on economic history of the country, the following is revealed; its beginning, its development overtime, how the country has adjusted to various new challenges and opportunities, and its gradual growth towards being significant in the world economy. The European colonization between the 16th and the 18th century is perceived to be the basis of American economic history. Colonial economies that were marginal expanded into farming economies that were independent. In 1776, they came together leading to the formation of the United States of America. For an approximate of 230 years, the United States has expanded into an economy which is massive, integrated and industrialized. It is known to comprise of close to a quarter of the world economy. All this is attributed to extensive and unified market, substantive political and legal system, extensive farmland that is productive, immense natural resources that include timber, coal, iron, and oil and individuals commitment to invest both material and the human capital. The American economy has sustained high wages in various sectors and this has attracted several immigrants. The overall success has been boosted in America by the key roles of both the technological and the industrial factors. The white Americans viewed the economy of the Indian-American as being primitive. It involved hunting and gathering and later inclusion of farming activities. Today, scholars have highlighted the existence of harmony between the environment and the Indian-American nation’s economic life. They clearly portray the significance of the advice and education provided by the Indian- American to the survival of the European settlers. The American economy during the settlement up to the revolution is considered as colonial. It is known for its provision of raw material which included; crops, iron ore, timber for ships, furs, and cotton to its mother country. Direct economic contact existed between the Great Britain and the colonies. The American colonies fell out with its mother country due to bitterness of their reliance and underlying role in the British Empire economic life. Being in thirteen colonies, the Americans demanded for their rights, they wanted to be independent so that they could be able to elect those who will govern and tax them. This idea was greatly resisted by the British. It led to the introduction of the American Revolution, which resulted in war between the British and the Americans and later independence for the United States of America. With an attempt to bring down the American economy, the British blocked all the ports. However, the American economy remained flexible mainly because majority of its population were farming and a minority being in the cities. Its economy managed to support war that took place between 1775 and 1783. Tremendous growth was witnessed in the American economy between the period of the revolution and the civil war. Though it still remained agricultural, the manufacturing and the industry development was nurtured by the economy. The development of the American politics is attributed to the existence of economic and political competition in the north, west and south sections. Gradually, the nation established an economic system which was unified. The American economic life integration was determined by various technological developments which included invention of steamboat, the railroads and the telegraph, and the growth of new economic enterprises for example telegraph and railroads systems. The railroads had a great impact on the American economy especially between 1850 and 1873. It enabled the country to experience a transition into an urban industrial nation in possession of high finance and superior managerial skills. Railroads made the remote places accessible with costs of freight movement and the passenger travel being reduced. It also stirred up new industries which included steel and telegraphy. The rapid American growth in the 19th century was not restrained by depressions. America continued to experience enduring demographic growth, development into new farmlands, and introduction of new factories. Economic growth was boosted through new inventions and capital investment. Both domestic and European private investments were attracted by the railroads. The triumph of unions over the Confederacy during the civil war was determined by its ownership of these economic advantages. The present American industrial economy foundation was established by the rapid economic development that took place after the civil war. By 1890, America had managed to overtake Britain in manufacturing end products. There was explosion of new discoveries and inventions, a process which was termed as the second industrial revolution. Railroads improved the mileage and established tracks and bridges that were well-built and could support heavy vehicles and locomotives. There was also extensive use of refrigeration railroad cars. Moreover, invention of telephone, phonograph, typewriter and electric light took place. At the beginning of the 20th century, horse-drawn carriages were replaced by cars. In the American history, the Gilded Age is considered as having been an outstanding period of economic growth. This was between 1865 and 1900. During these period the following activities took place; improvement of industrial and agricultural productivity through the use of new technology. Secondly, the expanding cities also availed appropriate markets and workers for various industrial businesses. Majority of the Americas cities are known to have exploded during the Gilded Age. Thirdly, it was possible to transport different products to widespread markets through enhanced rail transport. Fourth, there was efficient allocation of capital by different financial innovations. Finally, rapid growth was facilitated by the introduced ways of business organization. The end of the Gilded Age took place at the same time with the depression that took place in 1983. The depression was deep and it came to an end in 1897. It marked a key realignment politically for the elections that took place in 1896. In the early years of American history, the government did not participate actively in the private sector. It only took part in transportation. Majority of the political leaders were unwilling to involve the government and opted for laissez-faire concept which was against the government interfering with the economy. The government role was just to maintain law and order. However this attitude was transformed towards the end of 19th century. The small business, farm and the labor wanted to be represented by the government. The United States proved to be a key factor in the economy of the world several decades after the civil war. Its national economy was unified further by the development of better means of communication and transportation. This led to the great industrial enterprises rise. The enterprises growth was boosted by legal ingenuity. It involved the development of different forms of organizations which included; Business Corporation, the trust and the holding company. It was during this period when the dissatisfaction increased in the American labor. The workforce in the craft and industrial sectors attempted to form unions. Their main aim was to protect their own rights from the great corporate management which was expanding its powers. The populist and the progressive movements were driven by their demand for the government to act. They wanted the government to abolish the great wealth and economic power integration or to reduce the powers exercised by the integrated entities. Through this, the workforce and the consumers could receive adequate protection. The government established regulatory agencies and enacted laws between 1890 and 1910. Its main objective was to be able to control the business powers. However, between 1920 and early 1930, these efforts were brought to an end by pro-business climate which was aggressive. The great depression catastrophe which occurred between 1929 and 1941 resulted from the economy growth in 1920s which was agitated. The lack of concern on the expansion’s potential weaknesses and its drawbacks also contributed to the depression. It occurred after the stock market crashed. It resulted in intense shift in the American thinking regarding the government and the economy relationship. The Federal Reserve board though not responsible for the occurrence of depression, was not committed to support the banks. The money supply fell sharply and loans borrowing became difficult. During his last term in office Herbert Hoover, approved substantial increase in tax, the major aim was to promote the drooping federal revenues. He also signed the protectionist Smoot-Hawley Tariff, which prompted revenge from different trading partners. According to the economists a serious crisis which was already in existence was worsened by these measures. By 1932, the rate of unemployment had increased immensely. In heavy industry, lumbering, export agriculture, and mining severe conditions were experienced. However, better conditions were experienced in the white collar sectors and in manufacturing sectors that performed light tasks. In 1932, Franklin Delano Roosevelt came into power. He did not have a structured program. In most cases he depended upon a group of advisors who had several programs which were referred to as the New Deal. In 1937 when the economy recovered, the levels of employment were also regained. The New Deal impact on the recovery of America’s economy still remains disputable among the economists, historians and economic historians. Majority of them believed that the depression was deepened and lengthened by the New Deal. The initial focus of the New Deal programs was to minimize economic competition risks and its shortcomings. However, these programs became futile economically and unacceptable according to the constitution. Therefore, the New Deal focus was changed to deal with the free economy harmful effects. This led to the establishment of the safety net which was purposed to reduce severe economic downturns impact. Some economists suggested deficit spending, among them was John Maynard Keynes in Britain. Roosevelt however, ignored Keynes recommendation. It is also disputable whether the economy was revived or harmed by the relief and public works spending. If the basis of economic health definition depended solely on the gross domestic product, the American economy could have been considered to have started recovering by 1934, and to have full recovery by 1936. Between 1941 and 1945 there was existence of wartime controls. The nation’s productive potentialities were coordinated by the War Production Board. The main aim was to meet various military priorities. Between 1942 and 1957, the baby boom witnessed high fertility. It came as a result of delay in marriages and childbearing the depression period. In 1957, the boom was at its top and then it declined gradually. The climax of the American economic history was during the wars period and the two decades that came immediately after it. This period was considered as American capitalism golden era. During this phase expansion was experienced in the middle class, the GDP and the productivity. The distribution of economic growth among the various economic classes was done fairly. This has largely been credited to the labor unions strength. In the American history, labor union membership reached its climax in 1950s, during the immense economic growth. The movement of farm workers from their low income jobs into better rewarding jobs in different towns and cities contributed a greater percentage to the economic growth. Observers were amazed and thought that the American economy which had a dynamic growth would last. As to actualize the American dream, they hailed the establishment of middle classes of well rewarded industrial workforce, middle managers and other professionals. In the late 1960s, the American dream was portrayed as having been momentary. The economic and social prosperity of the American dream was shortened by two specific developments. First, was as a result of loss of several jobs between late 1960s and early 1970s. This came as a result of prolonged climate economic recession and industrial downsizing. Secondly, it was because of the inability of the American corporations to compete with foreign competitor industries and their output. This took place between 1970s and early 1980s. The outstanding foreign competitors were the German and the Japanese manufacturers who were mostly in the automobile and the electronics sector. It became worse when the American automobile industry dominance received great challenge from the booming Japanese economy. Economic disaster affected several industries in the country. These industries relied largely on the strong domestic automobile industry. Several events took place in the early 1970s at the end of the postwar boom. This included; the Bretton Woods system collapse in 1971, the increasing inflow of manufacturing goods which included automobiles and electronics, the oil crisis in 1973, the stock market crash which occurred between 1973 and 1974, recession that was subsequent in 1970s, and the subsequent displacement of Keynesian economics by monetarist economics. There was steady decline of unemployment between 1975 and 1979, however after its period it began rising acutely. In addition, during this period several environmental and consumer movements increased. Various regulations and regulatory agencies were introduced by the government, it included; Occupational Safety and Health Administration, the Consumer Product Safety Commission, and the Nuclear Regulatory Commission. In 1980s, Most Americans thought the depression which had earlier occurred in the 1970s had come to an end. However, in 1980s the economic growth was feverish. Its basis was frequently frenzied by manipulations of both corporate takeovers and stock. It was not established on real unfolding of productive industry as desired. In the subsequent years after 1987, the stock market went down. The house of cards of the 1980s crumbled. The observers though uncertain suggested that the problems facing the American economy were widespread. Therefore, recommendation on various goals and emphasis concerning the nation’s economic system, needed to be handled once again. The experience of the country in the mid 1990s could have been conservatism shift or rejection of democratic policies which had been established in the early 1990s. The shape taken by the political changes involved an extensive rejection of the regulations of the government and fully adopting the concepts of the free market. There was increase in the real output between 1994 and 2000. During this period inflation was under control and unemployment was reduced. It resulted in high stock market which was referred to as the Dot-com boom. Well-advertised Initial Public Offerings of High-tech and "dot-com" companies described clearly 1990s second half. In 2000, it was clear that there was a bubble in stock valuations. However in 2001, the economy became worse and the output increased slightly. During this period there was significant increase in unemployment and business failures. In addition, recession was also triggered during this period; in this case the blame has largely been on the September 11, 2001 Terrorist Attacks. The decline in the US market and the investor confidence has been attributed to several corporate scandals. From 2001 up to 2007, a deceiving impression was created by the red hot housing which is widely spread in America. It did not portray a true sense of security concerning the American economy strength. In 2008, America and the entire world were hit by financial economic disasters. The impact was much felt during housing bubbles collapse in California and Florida and when construction industries and housing prices crumbled. Several mortgages had been clustered into securities known as collateralized debt obligations that were resold internationally. Most banks had taken a loan to purchase these securities which were unmarketable. Several established banks both in the U.S. and in Europe came to a standstill, however, others became bankrupt. The government stepped in and bailed out some of the companies. These included; AIG the leading insurance company, Citigroup which is the top bank and other two mortgage companies which were well established. During this period the lending policies of the banks became tightened. It was also during this time when the government took top ownership positions in the well established banks. Conclusion American economic history has changed drastically since its colonial era. Tremendous growth in the economy was witnessed during the revolution and the civil war period. Different technological developments played a key role in the integration of American economic life. Among these was the invention of the steamboat, the railroads and the telegraph. In the American history, the Gilded Age is considered as an outstanding period of economic growth. The government did not actively take part in the private sector. Most political leaders opted for the lazier-faire concept, which was against the government intervention in the economy. For several decades after the civil war, the United States was considered as the key factor in the world economy. The great depression that hit the country came as a result of the stock market crash. The American economic history climax was during the war period and the two decades that came after. This period was referred to as American capitalism golden era. Between 1994 and 2000, the country experienced real output. During this period inflation was under check and unemployment was reduced. This resulted in high stock market which was referred to as the Dot-com boom. However in 2001, the economy became worse and the output increased slightly. During this phase there was significant increase in unemployment and business failures. In addition, recession was also triggered during this period; in this case the blame has largely been on the September 11, 2001 Terrorist Attacks. In 2008, America and the entire world were hit by financial economic disasters. The impact was much felt during housing bubbles collapse in California and Florida and when construction industries and housing prices crumbled. Sources Harris, Seymour E. American Economic History. Washington, USA: Beard Books, 2002. Read More