Table of Contents

1. Table of Contents

 

 

Introduction

Part 1. Colonial economy

Part 2. New nation`s economy

Part 3. Movement south and westward

Part 4. An uncertain economy: 1820-1860

Part 5. Economic expansion, enlarged markets

Part 6. Industrial growth

Part 7. Inventions and resource development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. Introduction

But first, an overall look at the country. The main land-mass of the United States lies in central North America, with Canada to the north, Mexico to the south, the Atlantic Ocean to the east and the Pacific Ocean to the west. The two newets states, Alaska and Hawaii, are separated from the continental United States: Alaska borders on northwestern Canada, and Hawaii lies in the central Pacific.

The diversity of the country stems from the fact that it is so large and has so many kinds of land, climate and people. It stretches 2,575 kilometers from north to south, 4,500 kilometers from east to west. The deep-green mountain forests of the northwest coast are drenched with more than 250 centimeters of rain each year. At the other extreme, the desert of the southwest receive less than 13 centimeters annually. A traveler from almost any other country can find parts of the United States that remind him of home. There are pine forest dotted with lakes, and mountain peaks covered with snow. There are meadows with brooks and trees, and sea cliffs, and wide grassy plains, and broad spreads of grapevines, and sandy beached.

In some parts of the United States, the pattern of life seems to have happened by accident. Sometimes when families moved westward to new farmland their wagons broke down or they became ill along the way. As a result, today, almost 200 years later, their descendants are farmers in little hidden valleys where few would expect people to live. But these are exceptions. Most people live and work as they do because the resource of their part of the country have opened certain opportunities and closed others. Traditional occupations, political borders, feudal custom have been less important in the United States than in many other countries.

The historical  development of the American economy is rooted in the quest of European settlers for economic gain in the 16th, 17th and 18th centuries. Until this time, all of the North  America`s inhabitants were Native Americans, indigenous peoples who are believed to have traveled to America about 20,000 years earlier across a land bridge from Asia, where the Bering Strait is today. The first "discovery" of America by Europeans was made by the Vikings at about the year 1000. But the event went largely unnoticed; at that time most of European society was still firmly based on agriculture and land ownership. Commerce had not yet assumed the importance that would provide an impetus to the further exploration and settlement of North America.

But the North American wilderness offered early explorers little glory and less gold, so most did not stay. The individuals who did settle North America arrived later, and in many cases were in search of economic opportunity, or were fleeing religious intolerance and political despotism. In 1607, a daring band of Englishmen built the first permanent settlement in what was to became the United States. It was called Jamestown and was located in the present - day state of Virginia.

For a variety of reasons, those who came to settle the early colonies sought a new homeland. Puritans, for example, established several settlement in Massachusetts. There English colonists were a pious, self-disciplined people who wanted to escape religious persecution. They built a community based narrowly on their own religious ideals.

But settlers did not come to the New World solely motivated by piety. In the 17th century many colonies were founded principally as business ventures. Moreover, piety and profits were not necessarily incompatible. The Puritan settlement at Plymouth Plantation, although not organized with profits in mind, did not and indeed could not ignore economic considerations.

England was the most successful of the European nations at colonizing what would become the United States, and its success was due in large part to its use - starting with the Jamestown colony - of charter companies. Charter companies were formed of stockholders, usually merchants and wealthy landowners who hoped for personal economic gain and who perhaps wanted to advance national goals. While the private sector handled the financing, the crown provided each project with a charter or grant conferring economic rights as well as political and judicial authority.

Early attempts at making substantial profits in the colonies were mostly failures, however, at least for the original English investors. There was little gold and mining was not economical on the East Coast. Land for farming had to be cleared and, even when the harvests were good, prices were modest because little money was available. Labor was in short supply, and real wages were much higher than in England. Conditions were harsh, and profits tended to be small.

The original English investors quickly turned over both the Jamestown and the Plymouth colonies to the settlers. The political implications - although not realized at the time - were enormous: the colonists were being left to build their own lives, their own communities and their own economy - in effect, to start constructing the rudiments of a new nation, if they could.

 

 

3. Part 1. Colonial economy

 

Whatever early colonial prosperity there was, it resulted from I rapping and trading in furs. In addition, the fishing industry was; I primary source of wealth in Massachusetts. But throughout the colonies, people relied primarily on small farms and self-sufficien-cy. Households produced their own candles and soaps, preserved food, brewed beer and, in most cases, processed their own yarn U) make cloth. In the few small cities and among the larger plan-tations of North and South Carolina and Virginia, some necessi-ties and virtually all luxuries were imported in return for tobacco, rice and indigo exports, which produced large profits in England's London, Bristol and Liverpool markets. In these areas, trade and credit were essential to economic life.

Supportive industries developed as the colonies grew. A variety of specialized operations, such as sawmills and gristmills, began to appear. Shipyards were opened to build fishing fleets and, in time, to build the basic merchant marine; oak, which had become relatively rare in England, was easily available in New England. Iron manufacturing also gradually began to develop in the colonial era.

By the 18th century, regional patterns of development had become clear and reasonably stable: The New England colonies produced large-scale ship builders and ship operators; plantations in Maryland, Virginia and the Caroline's grew staple crops of tobacco, rice and indigo; and the middle colonies of New York, Pennsylvania, New Jersey and Delaware were shippers of general crops and furs. In all three regions standards of living were very high— higher for workers than in England itself. But because the colonies were slow to show profits, many English capital investors withdrew, leaving the field open to entrepreneurs among the colonists.

As a result, by 1770 the North American colonies were economically and politically ready to become part of the emerging self-government movement, which had dominated English politics since the time of James 1(1603-25). Disputes developed over taxation of colonies and other matters. Yet few Americans thought that the mounting quarrel with the English government would lead to independence for the colonies. Rather, they hoped for a modification of English taxes and regulations that would satisfy their demand for a greater measure of self-government. But in April 1775 an event occurred that would lead to a total political separation. British soldiers, intending to capture a colonial arms depot at Concord, Massachusetts, and forestall a colonial rebellion, clashed with colonial militiamen and someone—no one knows who—fired a shot, beginning the American War of Independence. The war lasted until the signing of a peace treaty in 1783 that declared the independence of the new nation, the United States.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. Part 2. New nation's economy

 

The U.S. Constitution, adopted in 1787 and still in effect to this day was, in many ways, a work of creative genius. As an economic charter, it established that the entire nation — stretching from Maine to Georgia, from the Atlantic Ocean to the Mississippi Valley — was a unified or "common" market. There were to be no tariffs or taxes on interstate commerce. The Constitution provided that the federal government could regulate commerce with foreign nations and among the states; establish uniform bankruptcy laws; coin money and regulate its value; fix standards of weights and measures; establish post offices and post roads; and fix the rules governing patents and copyrights. The last-mentioned clause was an early recognition of the importance of "intellectual property", a matter that assumed great importance in trade negotiations in the late 20th century.

Alexander Hamilton, one of the nation's "Founding Fathers" and George Washington's secretary of the treasury, advocated a means of economic development in which the federal government would nurture infant industries through overt subsidies and protective tariffs. He also urged the federal government to create a national bank and to assume the public debts that the colonies incurred during the Revolutionary War. The new government dallied over some of Hamilton's proposals, but ultimately did make tariffs an essential part of American foreign policy—a position that lasted almost until the middle of the 20th century.

Although early American farmers feared that a national bank would serve the rich at the expense of the poor, the first National Bank of the United States was chartered in 1791; it lasted until 1811. Hamilton believed the United States should pursue economic growth through diversified shipping, manufacturing and banking. Hamilton's political rival, Thomas Jefferson, based his philosophy on protecting the common man from political and economic tyranny. He particularly praised small farmers as "the most valuable citizens."

In 1801 Jefferson became president and turned to promoting a more decentralized, agrarian democracy.

 

 

5. Part 3. Movement south and westward

 

Following Eli Whitney's invention in 1793 of the cotton gin— a machine that separated raw cotton from seeds and other waste ( he cotton market boomed. Planters in the South bought land from small farmers who frequently moved farther west. Soon great plantations, supported by slave labour, made some families very wealthy.

To many Americans, the westward march illustrates a legacy of individualism, a tradition that was characterized by steadily rising living standards and an optimistic outlook about the future.

The migration consisted of three waves of settlers. First came the earliest individualistic pioneers who depended on hunting and fishing for their livelihoods. Their agricultural skills were limited, and all the farm animals they owned amounted to no more than a horse, a cow, some swine and perhaps some chickens. As a consequence, their living standards were low.

The next group of migrants purchased land, cleared fields from forests, added roads and settled permanently. Their farms were largely, but not entirely, self-sufficient.

The final wave consisted of people with equal or greater enterprise than those who preceded them and abundant stocks of capital. They created and took advantage of rising property values and thought in terms of profitable business. Their farms were intended to be almost entirely market-oriented, and they built semi-rural communities, which brought people standards of living never before imagined.

 

 

 

 

 

6. Part 4. An uncertain economy: 1820-1860

In the 1820s, America's population was still moving ever westward in search of opportunities and advancement. These people are sometimes depicted as being fiercely independent and strongly opposed to any kind of government control or interference. But in fact they received a lot of government help, directly and indirectly. Government-created national roads, such as the Cumberland Pike (1818) and the Erie Canal (1825), helped move farm produce to market. The federal government set up numerous land-grant colleges to train young people in agriculture, as well as agricultural experiment stations and an array of service agencies, all designed to further the education and welfare of the independent farmer.

Americans of this era shared a common desire to better themselves through economic participation. People who held differing opinions about how to achieve the same ends fought many of the political and economic struggles of the 19th century. The results of those struggles underscore the importance of both individualism and a degree of government involvement.

When Andrew Jackson became president in 1829, many who were poor or newly rich idealized him as an individualist in their own likeness because he had started life in a log cabin in frontier territory. President Jackson opposed the new Federal Bank of the United States, chartered in 1816. When he was reelected for a second term, Jackson opposed renewing the Bank's charter, which was due to expire in 1836. Congress supported him in 1833, effectively killing the second National Bank. Jackson preferred putting the U.S. government's deposits in the state banks controlled by his political allies.

Jackson's actions helped precipitate the sharp business panics that occurred in 1834 and 1837. The East, particularly the industrial sector, suffered from an eventually crippling tight money supply; meanwhile, in the West, federal deposits in state banks made money more plentiful in rural areas and contributed to land speculation and price inflation. But inherent in this boom were the seeds of economic disaster.

The first signs came in 1835 when crop failures made it necessary to import wheat from Europe. Some importers were frightened by the economic depression and refused to extend credit to customers. In 1836, when the amount of money in circulation was already low, the Treasury issued an order that henceforth land pur-chased from the government had to be paid for in gold or silver. But these precious metals were in short supply, having been sent abroad lo pay for imports. Confidence in the nation's financial system was shaken, even shattered, and Western banks began to close.

During this time, English traders could not collect on their sales in America, and many of them went bankrupt. Cotton mills closed in England, and American planters saw their markets disappear. By the summer of 1837, business was paralyzed, and it was not until the early 1840s that a semblance of confidence in business was restored.

But periodic economic dislocations, such as "The Panic of 1837", did not curtail rapid U.S. economic growth during the 19th century. Presidents elected after Jackson also came from the West, or were allied to those who reflected rural sentiments, and they shared Jackson's mistrust of central power.

 

 

 

 

 

 

 

 

 

7. Part 5. Economic expansion, enlarged markets

The United States was greatly affected by the Industrial Revolution taking place in Europe during the 18th and 19th centuries. New inventions and capital investment led to the creation of new industries and the spread of economic growth. Much trade, for example, was made possible by developments in the field of transportation.

Beginning in 1825 with the completion of the Erie Canal, which connected New York City with the Great Lakes region, various state governments began to play an active role in stimulating the construction of an internal system of transportation. These early efforts were often marked by corruption and economic disaster, yet more were successes than failures.

River traffic also improved when the steam engine was fitted to boats.

Like canals and turnpikes, railroads received large amounts of government assistance in the early years. However, unlike other forms of transportation, railroads also attracted a good deal of domestic and European private investment.

Railroad building requires an enormous sum of capital, and there is a long period of time before any profits are realized. Yet conservative people in rural areas were tremendously enthusiastic about buying shares of railroad stock, often mortgaging their farms or businesses to do so. Attracted by visions of profits and playing a role helping to build a better nation, they also voted for state and local taxes to support the railroads. Later, as part of the Civil War legacy, the federal government gave extensive tracts of land to those who promised to build the missing links in the national railroad system. An astonishing total of 53 million hectares of land were eventually granted to railroad builders.

Europe also caught the excitement of investing in American railroads. At one time foreign investors owned the majority of stock in six major railroads. With the discovery of gold in 1849, the United States became more able to finance additional imports of railroad machinery and materials.

The excitement of railroad building also brought abuses. Often, unsuspecting buyers paid exorbitant prices for their railroad stock, or were cheated with stock that was artificially inflated.

Nevertheless, through a combination of vision and foreign investment, the discovery of gold, and a major commitment of America's public and private wealth, the nation was able to develop a large-scale railroad system, providing the base for the industrialization that followed.

 

 

 

8. Part 6. Industrial growth

By 1860, when Abraham Lincoln was elected president, 16 percent of the population lived in urban areas and a third of the nation's income came from manufacturing. Funds were flowing into large-scale industrial development and into railroads. Urbanized industry was limited primarily to the North-east. Cotton cloth production was the leading industry, and the manufacture of shoes, woolen clothing and machinery was also expanding.

Equally important to urbanization, the nation's population was increasing. Between 1845 and 1855, European immigrants arrived at a rate of 300,000 annually. Most were poor and remained in Eastern cities, often at ports of arrival.

In contrast, the old South remained rural and dependent on the North for capital and manufactured goods. Southern economic interests, including slavery, could be protected by political power only as long as the South controlled the federal government.

The newly organized Republican Party expressed the interests of the industrialization that was sweeping the North. In 1860 Republicans and their presidential candidate, Lincoln, were speaking hesitantly on slavery, but clearly on economic policy. In 1861 a protective tariff was adopted. In 1862 the first Pacific railroad was chartered. In 1863 and 1864 a national bank code was drafted. Northern victory in the Civil War (1861-1865) and Republican victories in national elections assured that future economic policy would be determined by Northern industrialists rather than by Southern planters.

 

 

 

 

 

 

 

 

 

 

 

 

9. Part 7. Inventions and resource development

The second half of the 19th century brought an explosion of new discoveries and inventions that, in the opinion of the Beard family, prominent American historians, amounted to the heralding of a "second industrial revolution". They cite as especially important the following:

• 1859 — Discovery of petroleum in western Pennsylvania.
• 1868 — G.L. Scholes's typewriter is ready for production.
• 1875 — G.F. Swift's refrigerated railway freight car is in use.
• 1876 — Alexander G. Bell sends first telephone message.
• 1877 — Thomas A. Edison has a phonograph playing.
• 1879 — George Selden's patent for a "gasoline carriage" granted.
• 1882 — Edison's electric power plant starts operation in New York.
• 1903 — The Wright brothers complete an airplane flight.

Mining became significant after the 1850s, when iron mines opened in the Lake Superior region of the upper Midwest. These helped spur rapid development of iron and steel mills located on the shores of the Great Lakes. After the first discovery of petroleum, John D. Rockefeller realized the potential wealth and power to be gained by concentrating the production of oil and outlets for its distribution.

Soon large copper and silver mines were opened, followed by lead mines and the development of cement factories. In 1893 at the World Exposition, a dynamo was displayed. Such mechanisms were soon built into dams to harness vast amounts of electricity. With the advent of the telegraph and telephone, communications tied the nation together and facilitated large-scale diversified businesses. The use of railroads and improved machinery helped the growth and proliferation of such basic industries as steel, coal, oil and electric power.

Despite continuing immigration, artisans were scarce, and it made sense for industry to develop mass production methods. Frederick W. Taylor pioneered in the field of scientific management, carefully plotting the functions of various workers and then devising new, more efficient ways for them to do their jobs. True mass production was the inspiration of Henry Ford, who in 1913 adopted the moving assembly line, with each worker doing one simple task in the production of automobiles. In what turned out lo be an extremely far-sighted action. Ford offered a very generous wage—$5 a day — to his workers, which enabled many of them to be buyers of the automobiles they made.