Economic history of the United States
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The economic history of the United States has its roots in European settlements in the 16th, 17th, and 18th centuries. The American colonies progressed from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America. In 230 years the United States grew to a huge, integrated, industrialized economy that makes up over a fifth of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), and an entrepreneurial spirit and commitment to investing in material and human capital. The economy has maintained high wages, attracting immigrants by the millions from all over the world.
[edit] Native Americans and early settlement
While they traded among themselves, Native Americans had little contact with other peoples before European settlers began arriving. Their economic systems, for example the economy of the Iroquois, involved various combinations of hunting and gathering and agriculture. Native American economies were profoundly altered by the arrival of Europeans and the resulting arrival of disease, influx of European goods, business relations with the Europeans regarding the fur trade, acquisition of firearms, engagement in wars, loss of land, and confinement to reservations.
In 1492, Christopher Columbus, sailing under the Spanish flag, set out to find Asia and discovered a "New World." For the next 100 years, English, Spanish, Portuguese, Dutch, and French explorers sailed from Europe for the New World, looking for gold, riches, religious merit, honor, and glory. But the North American wilderness offered early explorers little glory and less gold, so most did not stay. The people who eventually did settle North America arrived later. In 1607 a small band of settlers built England's first permanent settlement in what was to become the United States at Jamestown, Virginia.
[edit] Colonial era
Early settlers had a variety of reasons for coming to America. The Puritans of Massachusetts wanted to create a purified religion in New England. Other colonies, such as Virginia, were founded principally as business ventures. England's success at colonizing what would become the United States was due in large part to its use of charter companies. Charter companies were groups of stockholders (usually merchants and wealthy landowners) who sought personal economic gain and, perhaps, wanted also to advance England's national goals. While the private sector financed the companies, the King provided each project with a charter or grant conferring economic rights as well as political and judicial authority. The colonies generally did not show quick profits, however, and the English investors often turned over their colonial charters to the settlers. The political implications, although not realized at the time, were enormous. The colonists were left to build their own lives, their own communities, and their own economy.
What early colonial prosperity there was resulted from trapping and trading in furs. But throughout the colonies, people lived primarily on small farms and were self-sufficient. In the few small cities and among the larger plantations of South Carolina, and Virginia, some necessities and virtually all luxuries were imported in return for tobacco, rice, and indigo (blue dye) exports.
Supportive industries developed as the colonies grew. A variety of specialized sawmills and gristmills appeared. Colonists established shipyards to build fishing fleets and, in time, trading vessels. They also built small iron forges. By the 18th century, regional patterns of development had become clear: the New England colonies relied on ship-building and sailing to generate wealth; plantations (many using slave labor) in Maryland, Virginia, and the Carolinas grew tobacco, rice, and indigo; and the middle colonies of New York, Pennsylvania, New Jersey, and Delaware shipped general crops and furs. Except for slaves, standards of living were generally high--higher, in fact, than in England itself. Because English investors had withdrawn, the field was open to entrepreneurs among the colonists.
By 1770, the North American colonies were ready, both economically and politically, to become part of the emerging self-government movement that had dominated English politics since the time of James I (1603-1625). Disputes developed with England over taxation and other matters; Americans hoped for a modification of English taxes and regulations that would satisfy their demand for more self-government. Few thought the mounting quarrel with the English government would lead to all-out war against the British and to independence for the colonies.
Like the English political turmoil of the 17th and 18th centuries, the American Revolution (1775-1783) was both political and economic, bolstered by an emerging middle class with a rallying cry of "unalienable rights to life, liberty, and property" -- a phrase openly borrowed from English philosopher John Locke's Second Treatise on Civil Government (1690). While political separation from England may not have been the majority of colonists' original goal, independence and the creation of a new nation -- the United States -- was the ultimate result.
[edit] New nation
The U.S. Constitution, adopted in 1787 established that the entire nation -- stretching then from Maine to Georgia, from the Atlantic Ocean to the Mississippi Valley -- was a unified, or common market. There were to be no internal tariffs or taxes on interstate commerce. The extent of federal power was much debated, with Alexander Hamilton taking a very broad view as the first secretary of the treasury. He advocated a strategy in which the federal government build a strong national credit based on a national debt held by rich people (who would then have an interest in keeping the government in healthy condition). Hamilton believed the United States should pursue economic growth through diversified shipping, manufacturing, and banking. He proposed measures like protective tariff to pay the costs of government, along with a tax on whiskey that farmers strongly resented. He sought and achieved Congressional authority to create the First Bank of the United States in 1791.
Thomas Jefferson and James Madison opposed a strong central government but they could not stop Hamilton. Jeffersonians closed the national bank in 1811, but reversed themselves and created the Second Bank of the United States in 1816. 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 called Jeffersonian democracy.
[edit] Expansion and growth
Cotton, at first a small-scale crop in the South, boomed following Eli Whitney's invention in 1793 of the cotton gin, a machine that separated raw cotton from seeds and other waste. Soon, large plantations, supported by slave labor, made some families very wealthy.
Millions moved to the more fertile farmland of the Midwest. Government-created national roads and waterways, such as the Cumberland Pike (1818) and the Erie Canal (1825), helped new settlers migrate west and helped move western farm produce to market. The Whig Party supported Clay's American System, which proposed to build internal improvements (roads, canals, harbors) protect industry, and create a strong national bank. The Whig legislation program was blocked by the Democrats, however.
President Andrew Jackson (1829-1837) opposed the Second National Bank, which he believed favored the entrenched interests of his enemies. When he was elected for a second term, Jackson opposed renewing the bank's charter, and Congress supported him. Jackson opposed paper money and demanded the government be paid in gold and silver coins. The Panic of 1837 stopped business growth for three years.
Railroads were, by far, one of the most important contributions to the economy. Many contrasting views exist regarding whether the railroad was "indispensable" or not, but it was undoubtedly very important. The railroad paved the way to new developments in running large-scale business operations, creating a blueprint for future businesses to use. They were first to encounter managerial complexities, labor union issues, and problems of competition. Due to these radical innovations, the railroad became the first large-scale business enterprise.
Panics did not curtail rapid U.S. economic growth during the 19th century. Long term demographic growth, expansion into new farmlands, and creation of new factories continued. New inventions and capital investment led to the creation of new industries and economic growth. As transportation improved, new markets continuously opened. The steamboat made river traffic faster and cheaper, but development of railroads had an even greater effect, opening up vast stretches of new territory for development. Like canals and roads, railroads received large amounts of government assistance in their early building years in the form of land grants. But unlike other forms of transportation, railroads also attracted a good deal of domestic and European private investment.
Some people made fortunes overnight, but many people lost their savings. Nevertheless, a combination of vision and foreign investment, combined with the discovery of gold and a major commitment of America's public and private wealth, enabled the nation to develop a large-scale railroad system, establishing the base for the country's industrialization.
| RAILROAD MILEAGE INCREASE BY GROUPS OF STATES | |||||
| 1850 | 1860 | 1870 | 1880 | 1890 | |
| New England | 2,507 | 3,660 | 4,494 | 5,982 | 6,831 |
| Middle States | 3,202 | 6,705 | 10,964 | 15,872 | 21,536 |
| Southern States | 2,036 | 8,838 | 11,192 | 14,778 | 29,209 |
| Western States and Territories | 1,276 | 11,400 | 24,587 | 52,589 | 62,394 |
| Pacific States and Territories | 23 | 1,677 | 4,080 | 9,804 | |
| TOTAL USA | 9,021 | 30,626 | 52,914 | 93,301 | 129,774 |
| SOURCE: Chauncey M. Depew (ed.), One Hundred Years of American Commerce 1795-1895 p 111 | |||||
[edit] Early industrialization
The Industrial Revolution began in Europe in the late 18th and early 19th centuries, and it quickly spread to the United States. By 1860, when Abraham Lincoln was elected president, 16 percent of the U.S. population lived in urban areas, and a third of the nation's income came from manufacturing. Urbanized industry was limited primarily to the Northeast; cotton cloth production was the leading industry, with the manufacture of shoes, woolen clothing, and machinery also expanding. Many new workers were immigrants. Between 1845 and 1855, some 300,000 European immigrants arrived annually. Most were poor and remained in eastern cities, often at ports of arrival.
The South, on the other hand, 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 Republican Party, organized in 1856, represented the industrialized North. In 1860, Republicans and their presidential candidate, Abraham Lincoln were speaking hesitantly on slavery, but they were much clearer on economic policy. In 1861, they successfully pushed adoption of a protective tariff. In 1862, the first Pacific railroad was chartered. In 1863 a national banking system was established to finance the war; in every city a "First National Bank" was established, and many still exist.
[edit] Civil War
The industrial advantages of the North over the South helped secure a Northern victory in the American Civil War (1861-1865). The Northern victory sealed the destiny of the nation and its economic system. The slave-labor system was abolished, making the large southern cotton plantations much less profitable. Northern industry, which had expanded rapidly before and during the war, surged ahead. Industrialists came to dominate many aspects of the nation's life, including social and political affairs. The planter aristocracy of the South, disappeared.
The devastation of the South was great and poverty ensued. During Reconstruction railroad construction was heavily subsidized (with much corruption), but the region maintained its dependence on cotton. Former slaves became wage laborers or (a little better) tenant farmers or sharecroppers. They were joined by many poor whites, as the population grew faster than the economy. As late as 1940 the only significant manufacturing industries were textile mills in the Carolinas, and some steel in Alabama.
[edit] Industrialization
The rapid economic development following the Civil War laid the groundwork for the modern U.S. industrial economy. An explosion of new discoveries and inventions took place, causing such profound changes that some termed the results a "Second Industrial Revolution." Oil was discovered in western Pennsylvania. The typewriter was developed. Refrigeration railroad cars came into use. The telephone, phonograph, and electric light were invented. And by the dawn of the 20th century, cars were replacing carriages.
Parallel to these achievements was the development of the nation's industrial infrastructure. Coal was found in abundance in the Appalachian Mountains from Pennsylvania south to Kentucky. Large iron mines opened in the Lake Superior region of the upper Midwest. Steel mills thrived in places where these two important raw materials could be brought together to produce steel. Large copper and silver mines opened, followed by lead mines and cement factories.
As industry grew larger, it developed mass-production methods. Frederick W. Taylor pioneered the field of scientific management in the late 19th century, carefully plotting the functions of various workers and then devising new, more efficient ways for them to do their jobs. Also fueling mass production was the increase in efficiency due to the electrification of factories from steam power to electric power. Electric line shafts and electric group drives improved efficiency through reduced energy loss, improved work environment, reduction in fire hazards and ability to reorgazine factories into specialized departments. (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 to be a farsighted action, Ford offered a very generous wage -- $5 a day -- to his workers, enabling many of them to buy the automobiles they made, helping the industry to expand.)
[edit] the Gilded Age
The "Gilded Age" of the second half of the 19th century was the epoch of tycoons. Many Americans came to idealize these businessmen who amassed vast financial empires. Often their success lay in seeing the long-range potential for a new service or product, as John D. Rockefeller did with oil. They were fierce competitors, single-minded in their pursuit of financial success and power. Other giants in addition to Rockefeller and Ford included Jay Gould, who made his money in railroads; J. Pierpont Morgan, banking; and Andrew Carnegie, steel. Some tycoons were honest according to business standards of their day; others, however, used force, bribery, and guile to achieve their wealth and power. For better or worse, business interests acquired significant influence over government.
Morgan, perhaps the most flamboyant of the entrepreneurs, operated on a grand scale in both his private and business life. He and his companions gambled, sailed yachts, gave lavish parties, built palatial homes, and bought European art treasures. In contrast, men such as Rockefeller and Ford exhibited puritanical qualities. They retained small-town values and lifestyles. As church-goers, they felt a sense of responsibility to others. They believed that personal virtues could bring success; theirs was the gospel of work and thrift. Later their heirs would establish the largest philanthropic foundations in America.
While upper-class European intellectuals generally looked on commerce with disdain, most Americans -- living in a society with a more fluid class structure -- enthusiastically embraced the idea of moneymaking. They enjoyed the risk and excitement of business enterprise, as well as the higher living standards and potential rewards of power and acclaim that business success brought.
[edit] Populism and the Progressive Era
In the early years of American history, most political leaders were reluctant to involve the federal government too heavily in the private sector, except in the area of transportation. In general, they accepted the concept of laissez-faire, a doctrine opposing government interference in the economy except to maintain law and order. This attitude started to change during the latter part of the 19th century, when small business, farm, and labor movements began asking the government to intercede on their behalf.
The American labor movement began with the first significant labor union, the Knights of Labor in 1867. The group helped begin the movement to end child labor, have an eight-hour workday, and use collective bargaining to help improve workers' lots.
A popular movement formed in the agricultural sector at the same time. The Grange movement, also founded in 1867, was a group of farmers who banded together to fight railroad monopolies that hurt grain shipping and to protect other farming interests.
By the turn of the century, a middle class had developed that was leery of both the business elite and the somewhat radical political movements of farmers and laborers in the Midwest and West. Known as Progressives, these people favored government regulation of business practices to ensure competition and free enterprise. They also fought corruption in the public sector.
Congress enacted a law regulating railroads in 1887 (the Interstate Commerce Act), and one preventing large firms from controlling a single industry in 1890 (the Sherman Antitrust Act). These laws were not rigorously enforced, however, until the years between 1900 and 1920, when Republican President Theodore Roosevelt (1901-1909), Democratic President Woodrow Wilson (1913-1921), and others sympathetic to the views of the Progressives came to power. Many of today's U.S. regulatory agencies were created during these years, including the Interstate Commerce Commission and the Federal Trade Commission.
Muckrakers also had a big impact on increasing regulation of American business. Upton Sinclair's The Jungle (1906) showed America what life was like in the Chicago Union Stock Yards, a giant complex of meat processing that developed in the 1870s. The federal government responded to Sinclair's book with the new regulatory Food and Drug Administration. Ida M. Tarbell wrote a series of articles against the Standard Oil monopoly. The series helped pave the way for the breakup of the monopoly.
[edit] Wilson and War Years
When Democrat Woodrow Wilson was elected President with a Democratic Congress in 1912 he implemented a series of progressive policies. In 1913, the Sixteenth Amendment was ratified, and the income tax was instituted in the United States. While public spending as a percent of GDP had declined during the Taft Administration, it began to rise under Wilson's leadership in a trend that would continue for many decades. Wilson created the Federal Reserve, a complex business-government partnership that created the first central bank since 1836. The departure of working men to serve in the armed forces was a significant blow to the workforce, and many women gained employment during the war.
[edit] Roaring Twenties: 1920-1929
Under Republican President Warren G. Harding, who called for normalcy and an end to high wartime taxes, Secretary of the Treasury Andrew Mellon raised the tariff, cut other taxes, and used the large surplus to reduce the federal debt by about a third from 1920 to 1930. Secretary of Commerce Herbert Hoover worked to introduce efficiency, by regulating business practices. This period of prosperity, along with the culture of the time, was known as the Roaring Twenties. The rapid growth of the automobile industry stimulated industries such as oil, glass, and road-building. Tourism soared and consumers with cars had a much wider radius for their shopping. Small cities prospered, and large cities had their best decade ever, with a boom in construction of offices, factories and homes. The new electric power industry transformed both business and everyday life. Telephones and electricity spread to the countryside, but farmers never recovered from the wartime bubble in land prices. Millions migrated to nearby cities. However, in October 1929, the stock market crashed and banks began to fail in the Wall Street Crash of 1929.
[edit] Great Depression: 1929-1941
The Federal Reserve Board chose to stand by, leaving interest rates high and not shoring up banks, while Congress expanded government in an effort to alleviate the recession. There was a sharp drop in the money supply, which would amount to a one-third reduction by 1933. President Herbert Hoover passed a massive tax increase to boost sagging federal revenues, and signed the protectionist Smoot-Hawley Tariff, which incited retaliation by Canada, Britain, Germany and other trading partners. The U.S. economy plunged into depression. By 1932, the unemployment rate was 23.6%. Conditions were worse in heavy industry, lumbering, export agriculture (cotton, wheat, tobacco), and mining. Conditions were not quite as bad in white collar sectors and in light manufacturing.
Franklin Delano Roosevelt was elected President in 1932 without a specific program. He relied on a highly eclectic group of advisors who patched together many programs, known as the New Deal.
Government spending increased from 8.0% of GNP under Hoover in 1932 to 10.2% of GNP in 1936. While Roosevelt balanced the "regular" budget the emergency budget was funded by debt, which increased from 33.6% of GNP in 1932 to 40.9% in 1936. [Historical Statistics (1976) series Y457, Y493, F32] Deficit spending had been recommended by some economists, most notably John Maynard Keynes in Britain. Roosevelt met Keynes but did not pay attention to his recommendations. After a meeting with Keynes, who kept drawing diagrams, Roosevelt remarked that "He must be a mathematician rather than a political economist."
The extent to which the spending for relief and public works provided a sufficient stimulus to revive the U.S. economy, or whether it harmed the economy, is also debated. If one defines economic health entirely by the gross domestic product, the U.S. had gotten back on track by 1934, and made a full recovery by 1936, but as Roosevelt said, one third of the nation was ill fed, ill-housed and ill-clothed. GNP was 34% higher in 1936 than 1932, and 58% higher in 1940 on the eve of war. Critics at the time or since never proposed any alternatives (except spend nothing for the emergency). The economy grew 58% from 1932 to 1940 in 8 years of peacetime, and then grew 56% from 1940 to 1945 in 5 years of wartime. However, the unemployment rate never went below 9% before the draft. During the war the economy operated under so many different conditions that comparison is impossible with peacetime, such as massive spending, price controls, bond campaigns, controls over raw materials, prohibitions on new housing and new automobiles, rationing, guaranteed cost-plus profits, subsidized wages, and the draft of 12 million soldiers.
[edit] Depression Statistics
As Broadus Mitchell summarized, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically." (Mitchell p 404) Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began a steady, sharp upward recovery that persisted until 1937. Thus the Federal Reserve Index of Industrial Production hit its low of 52.8 on July 1, 1932 and was practically unchanged at 54.3 on March 1, 1933; however by July 1, 1933, it reached 85.5 (with 1935-39 = 100, and for comparison 2005 = 1,342).[1]
| Statistic | 1929 | 1931 | 1933 | 1937 | 1938 | 1940 |
|---|---|---|---|---|---|---|
| Real Gross National Product (GNP) (1) | 101.4 | 84.3 | 68.3 | 103.9 | 103.7 | 113.0 |
| Consumer Price Index (2) | 122.5 | 108.7 | 92.4 | 102.7 | 99.4 | 100.2 |
| Index of Industrial Production (2) | 109 | 75 | 69 | 112 | 89 | 126 |
| Money Supply M2 ($ billions) | 46.6 | 42.7 | 32.2 | 45.7 | 49.3 | 55.2 |
| Exports ($ billions) | 5.24 | 2.42 | 1.67 | 3.35 | 3.18 | 4.02 |
| Unemployment (% of civilian work force) | 3.1 | 16.1 | 25.2 | 13.8 | 16.5 | 13.9 |
(1) in 1929 dollars (2) 1935-39 = 100
Sources: Source GNP: U.S. Dept of Commerce, National Income and Product Accounts[2]; Mitchell 446, 449, 451; Money supply M2[3]
[edit] Wartime Controls: 1941-1945
The War Production Board coordinated the nation's productive capabilities so that military priorities would be met. Converted consumer-products plants filled many military orders. Automakers built tanks and aircraft, for example, making the United States the "arsenal of democracy." In an effort to prevent rising national income and scarce consumer products to cause inflation, the newly created Office of Price Administration controlled rents on some dwellings, rationed consumer items ranging from sugar to gasoline, and otherwise tried to restrain price increases.
By the early 1940s, the United States had managed to pull itself strongly out of the Depression, largely due to World War II, but there is an ongoing, politically charged debate on whether Franklin Roosevelt's social-democratic policies had anything to do with this, and some argue that Roosevelt's policies hampered recovery, or even made the problem worse than it would have been. Recovery was also, in part, at least, due to the natural resilience of the economy; the Great Depression was the sixth depression in U.S. history. Wall Street enjoyed the longest bull run in history in this post-war period, as the stock market climbed almost uninterrupted from 1949 to 1957. The U.S. government involvement in social welfare and what Dwight Eisenhower called the "military-industrial complex" continues to this day.
Six million women took jobs in manufacturing and production; most were newly created temporary jobs in munitions. Some were replacing men away in the military. These working woman were symbolized by the fictional character of Rosie the Riveter. After the war, many women returned to household as men returned, but the use of women workers in World War II paved the way for later integration of women into the American workforce.
[edit] Postwar Prosperity: 1945-1973
The end of World War II to the late 1960s was a golden era of American capitalism.
The Council of Economic Advisors was established by the Employment Act of 1946 to provide objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues. In its first 7 years the CEA made five technical advances in policy making: 1) the replacement of a "cyclical model" of the economy by a "growth model," 2) the setting of quantitative targets for the economy, 3) use of the theories of fiscal drag and full-employment budget, 4) recognition of the need for greater flexibility in taxation, and 5) replacement of the notion of unemployment as a structural problem by a realization of a low aggregate demand. In 1949 a dispute broke out between chairman Edwin Nourse and member Leon Keyserling. Nourse believed a choice had to be made between "guns or butter" but Keyserling argued that an expanding economy permitted large defense expenditures without sacrificing an increased standard of living. In 1949 Keyserling gained support from powerful Truman advisors Dean Acheson and Clark Clifford. Nourse resigned as chairman, warning about the dangers of budget deficits and increased funding of "wasteful" defense costs. Keyserling succeeded to the chairmanship and influenced Truman's Fair Deal proposals and the economic sections of National Security Council Resolution 68 that, in April 1950, asserted that the larger armed forces America needed would not affect living standards or risk the "transformation of the free character of our economy."
During the 1953-54 recession, the CEA, headed by Arthur Burns deployed traditional Republican rhetoric. However it supported an activist contracyclical approach that helped to establish Keynesianism as a bipartisan economic policy for the nation. Especially important in formulating the CEA response to the recession - accelerating public works programs, easing credit, and reducing taxes - were Arthur F. Burns and Neil H. Jacoby.
[President Kennedy]] passed the largest tax cut in history upon entering office in 1961. $200,000,000,000 in war bonds matured, and the G.I. Bill financed a well-educated work force. The middle class swelled, as did GDP and productivity. The U.S. underwent a kind of golden age of economic growth. This growth was distributed fairly evenly across the economic classes, which some attribute to the strength of labor unions in this period - labor union membership peaked historically in the U.S. during the 1950s, in the midst of this massive economic growth. Lyndon B. Johnson (1963-69) dreamed of creating a "Great Society", and began many new social programs to that end, such as Medicaid and Medicare. The government financed some of private industry's research and development throughout these decades, most notably ARPANET (which would become the Internet) in the late 1960s. In 1968 and 1969, productivity growth climbed near the levels it had reached earlier in the decade, but this would not last.
[edit] Inflation woes: 1975s
In the late 1960s it was apparent to some that this juggernaut of economic growth was slowing down, and it began to become visibly apparent in the early 1970s. Stagflation gripped the nation, and the government experimented with wage and price controls under President Nixon. The Bretton Woods Agreement collapsed in 1971-1972, and President Nixon closed the gold window at the Federal Reserve, taking the United States entirely off the gold standard. President Gerald Ford introduced the slogan, "Whip Inflation Now" (WIN). In 1974, productivity shrunk by 1.5%, though this soon recovered. In 1976, Jimmy Carter won the Presidency. Carter would later take much of the blame for the even more turbulent economic times to come, though some say circumstances were outside his control. Inflation continued to climb skyward. Productivity growth was pitiful, when not negative. Interest rates remained high, with the prime reaching 20% in January 1981; Art Buchwald quipped that 1980 would go down in history as the year when it was cheaper to borrow money from the Mafia than the local bank.
Unemployment dropped mostly steadily from 1975 to 1979, although it then began to rise sharply.
This period also saw the increased rise of the environmental and consumer movements, and the government established new regulations and regulatory agencies such as the Occupational Safety and Health Administration, the Consumer Product Safety Commission, the Nuclear Regulatory Commission, and others.
[edit] Deregulation, 1974-1992
The deregulation movement began when Nixon left office and was a bipartisan operation under Ford, Carter and Reagan. Most important were the removals of New Deal regulations from energy, communications, transportation and banking. The hasty removal of regulation of Savings and Loans while keeping federal insurance led to the Savings and Loan crisis which cost the government about $125 billion.
In 1981, Reagan cut marginal federal income tax rates by 25%. Inflation dropped dramatically from 13.5% annually in 1980 to just 3% annually in 1983 due to the Federal Reserve's tighter control of the money supply and interest rates under Paul Volcker and Alan Greenspan. Real GDP began to grow after contracting in 1980 and 1982. The unemployment rate continued to rise to a peak of 10.8% by late 1982, but then dropped as sharply as it had risen to a level of 5.4% at the end of Reagan's presidency in January 1989. Critics of the Reagan Administration often point to the fact that the gap between those in the upper socioeconomic levels and those in the lower socioeconomic levels increased during Reagan's presidency. Critics also note that the federal debt tripled (from $930 billion on December 31, 1981 to $2.6 trillion on September 30, 1988; note that fiscal year 1986 began on October 1), reaching record levels. Every president in the later half of the 20th century before Reagan reduced debt as a share of GDP. In addition to the fiscal deficits, the U.S. started to have large trade deficits. The U.S. went from being the world's largest creditor nation to becoming the world's largest debtor nation during his second term. Also it was during his second term that the Tax Reform Act of 1986 was passed. In 1987, the stock market lost 22% of its value on Black Monday. Reagan's Vice President of eight years, George H. W. Bush, was elected in 1988. The early Bush Presidency's economic policies were essentially a continuation of Reagan's policies, but in the early 1990s, Bush let down many Reagan supporters by agreeing to a tax increase in a compromise with Congressional Democrats. Bush ended his Presidency on a moderate note, signing regulatory bills like the Americans With Disabilities Act and a law mandating that toilets use low amounts of water, and negotiating NAFTA. In 1992, Bush and third-party candidate Ross Perot lost to Democrat Bill Clinton.
[edit] Prosperity and Tech Bubble: 1990s
During the 1990s, the national debt increased by 75%, GDP rose by 69%, and the stock market as measured by the S&P 500 grew more than three-fold.
Over his term, Clinton would introduce welfare reform, while with Republicans in control of Congress, most major spending programs were opposed and government spending increases stayed relatively low.
From 1994 to 2000 real output increased, inflation was manageable and unemployment dropped to below 5%, resulting in a soaring stock market known as the Dot-com bubble. The second half of the 1990s was characterized by well-publicized Initial Public Offerings of High-tech and "dotcom" companies. By 2000, however, it was evident a bubble in stock valuations had occurred, such that beginning in 2001, the market would give back some 50% to 75% of the growth of the 1990s. The economy worsened in 2001 with output increasing only 0.3% and unemployment and business failures rising substantially, and triggering a recession that is often blamed on the September 11, 2001 Terrorist Attacks.
[edit] References
This article contains public domain text from the United States Department of State from State.gov
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- Whaples, Robert and Dianne C. Betts, eds. Historical Perspectives on the American Economy: Selected Readings (1995) articles
- Wright, Gavin. Old South, New South: Revolutions in the Southern Economy since the Civil War (1986)
- Wright, Gavin. The Political Economy of the Cotton South: Households, Markets, and Wealth in the Nineteenth Century (1978) online
- Wright, Robert E. and David J. Cowen. Financial Founding Fathers: The Men Who Made America Rich, University of Chicago Press, 2006. ISBN 0-226-91068-7.
[edit] Data
- Bureau of Economic Analysis: Official United States GDP data
- US GDP 1790 to 2005, include GDP, Real GDP, population, GDP per capita, and Real GDP per capita
[edit] See also
- Great Depression in the United States
- Labor Unions in the United States, including history
| Economic histories by country |
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