G. The Development of an American Economy
Today, in an age where Americans are increasingly concerned about the nation's ability to cope in a global economy, it is vital to address the history of the American economy -- how it began; how it developed over time, adapting to new challenges and new opportunities; how it gradually became an important part of the world economy; and what effects it has had on the other components of American history.
White Americans have long dismissed the economy of American Indians as a "primitive" economy, emphasizing hunting and gathering, only gradually adapting to include the cultivation of crops. Recent scholars have tried to redress the balance by redefining "primitive" to remove its pejorative connotations, by emphasizing the harmony between the economic life of American Indian nations and the environment, and by demonstrating how American Indians' advice to and education of European settlers was vital to the survival of those settlers.
From settlement to the American Revolution, the American economy was a "colonial" economy, in which the colonies provided raw materials (crops, iron ore, timber for ships, furs, cotton, and so forth) to -- and for the benefit of -- the mother country. The colonies had more direct economic contact with Great Britain, or its Caribbean possession, than they did with one another. One vital force leading to the American colonies' breach with the mother country was the colonists' growing resentment of their dependent, subsidiary role in the economic life of the British Empire.
The period between the Revolution and the Civil War witnessed the growth of a young national economy. Although still largely agricultural, the economy also fostered the development of manufacturing and industry (complemented by the rise of a fledgling labor movement). Serious and vigorous economic and political competition among the sections (North, South, and West) was a primary force shaping the development of American politics. At the same time, the nation slowly developed the foundations of a unified national economic system. This consolidation of American economic life was driven by such technological developments as the invention of the steamboat, the railroad, and the telegraph; by the development of new economic enterprises (e.g., railroad and telegraph systems) capitalizing on these technological advances; and by the linking of the nation's several regions through the construction of "internal improvements" such as canals and roads and toll bridges. The Union's possession of these economic advantages was a major factor in its victory over the Confederacy in the Civil War.
In the decades following the Civil War, the United States established itself as a major factor in the world economy. Development of new means of communication and transportation further knitted a national economy together, making possible the rise of great industrial enterprises. Legal ingenuity also assisted the growth of these enterprises by the development of such forms of organization as the business corporation, the trust, and the holding company. At the same time, this period witnessed the rise of dissatisfaction among American labor; craft and industrial workers attempted to organize themselves into unions to protect the rights of individual workers from the disproportionately great and growing power of corporate management.
One driving force behind the Populist and Progressive Movements was the demand for government action either to break up consolidations of great wealth and economic power or to control the powers these consolidated entities wielded, to protect the worker and the consumer. Thus, in the 1890s, 1900s, and 1910s one of the great spheres of activity for government was the enactment of laws and the establishment of the first regulatory agencies to restrain the powers of business. In the 1920s and early 1930s, however, an aggressively pro-business climate led either to the retrenchment or the abandonment of these efforts.
The feverish growth of the economy in the 1920s, and the indifference to the potential drawbacks and weaknesses of that expansion, carried in their wake the catastrophe of the Great Depression (1929-1941), which in turn led to a profound shift in American thinking about the relationship between government and the economy. The programs of the New Deal at first focused on controlling the dangers and defects of economic competition; when these programs turned out to be constitutionally invalid and economically ineffective, the New Deal shifted emphasis to controlling the deleterious effects of an unregulated economy, establishing the "safety net" that has minimized the effects of later severe economic downturns. The war years and the two decades that followed were the high-point of American economic history. Dazzled observers believed that the vigorous growth of the American economy was here to stay; they hailed the creation of a new middle class of well-paid industrial workers, middle managers, and professionals as the realization of the "American dream."
The period since the late 1960s has demonstrated that the "American dream" of the 1950s and 1960s was short-lived. Two clusters of developments spelled the end of Americans' dreams of continuing economic and social prosperity: First, in the late 1960s and early 1970s, a continuing climate of economic recession and industrial retrenchment led to the loss of thousands of jobs. Second, in the 1970s and early 1980s, American corporations seemed increasingly unable to compete with the industries and products of foreign competitors -- specifically German and Japanese electronics and automobile manufacturers. In particular, the successful Japanese challenge to the primacy of the American automobile industry spelled economic disaster, not just for the "big three" auto manufacturers, but also for the dozens of industries (for example, steel) dependent on a healthy domestic automobile industry. In the 1980s, many Americans believed that the "malaise" of the 1970s was at an end. But the 1980s was an era of feverish economic "growth" based not on the real flowering of productive industry but on the ever-more-frantic manipulations of corporate takeovers and stock manipulation. In the years following the 1987 stock-market crash, The 1980s' house of cards collapsed; worried observers suggested that the American economy's ills were perhaps endemic, and that it was necessary to reconceive what the goals and emphases of the nation's economic system should be. And yet, in the mid-1990s, the nation experienced either a right-wing shift or a spasmic rejection of the Democratic policies of the early 1990s; either way, the form that political shift seemed to take included a sweeping rejection of governmental regulation and an equally sweeping embrace of free-market concepts.