Economic History Of The United States

Economic History Economic History Of The United Of The United

StatesStates

Economic History Of The Economic History Of The United StatesUnited States

The The economic history of the United Stateseconomic history of the United States has its roots in has its roots in European settlements in the 16th, 17th, and 18th centuriesEuropean settlements in the 16th, 17th, and 18th centuries

The American colonies progressed from marginally successful The American colonies progressed from marginally successful colonial economies to 13 small, independent farming colonial economies to 13 small, independent farming economies, which joined together in 1776 to form the United economies, which joined together in 1776 to form the United States of AmericaStates of America

In 230 years the United States grew to a huge, integrated, In 230 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the industrialized economy that makes up over a quarter of the world economyworld economy

The main causes were a large unified market, a supportive The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and farmlands, vast natural resources (especially timber, coal and oil), and an entrepreneurial spirit and commitment to oil), and an entrepreneurial spirit and commitment to investing in material and human capitalinvesting in material and human capital

Technological and industrial factors played a major role.Technological and industrial factors played a major role.

Contents:Contents:

Pre-colonial Pre-colonial

• Native Americans had little contact outside the Americas before European Native Americans had little contact outside the Americas before European settlers began arrivingsettlers began arriving

• Their economic systems involved various combinations of hunting and Their economic systems involved various combinations of hunting and gathering and agriculturegathering and agriculture

• altered by the arrival of Europeans and the resulting arrival of disease, influx altered by the arrival of Europeans and the resulting arrival of disease, influx of European goods, business relations with the Europeans regarding the fur of European goods, business relations with the Europeans regarding the fur trade, acquisition of firearms, engagement in wars, loss of land, and trade, acquisition of firearms, engagement in wars, loss of land, and confinement to reservationsconfinement to reservations

• In 1492, Christopher Columbus, sailing under the Spanish flag, set out to find In 1492, Christopher Columbus, sailing under the Spanish flag, set out to find Asia and happened upon a "New World.Asia and happened upon a "New World.

• For the next 100 years, English, Spanish, Portuguese, Dutch, and French For the next 100 years, English, Spanish, Portuguese, Dutch, and French explorers sailed from Europe for the New World, looking for gold, richesexplorers sailed from Europe for the New World, looking for gold, riches

• But the North American wilderness offered early explorers little glory and But the North American wilderness offered early explorers little glory and less gold, so most did not stayless gold, so most did not stay

• In 1565 St. Augustine, Florida, was founded by the Spanish, and in 1607 a In 1565 St. Augustine, Florida, was founded by the Spanish, and in 1607 a small band of settlers built England's first permanent settlement in what was small band of settlers built England's first permanent settlement in what was to become the United States at Jamestown, Virginia.to become the United States at Jamestown, Virginia.

Colonial era :Colonial era :

• Early settlers had a variety of reasons for coming to AmericaEarly settlers had a variety of reasons for coming to America• colonies, such as Virginia, were founded principally as business ventures colonies, such as Virginia, were founded principally as business ventures

• England's success at colonizing what would become the United States was due England's success at colonizing what would become the United States was due in large part to its use of charter companiesin large part to its use of charter companies

• Charter companies were groups of stockholders who sought personal Charter companies were groups of stockholders who sought personal economic gain and, perhaps, wanted also to advance England's national goalseconomic gain and, perhaps, wanted also to advance England's national goals

• While the private sector financed the companies, the King provided each While the private sector financed the companies, the King provided each project with a charter or grant conferring economic rights as well as political project with a charter or grant conferring economic rights as well as political and judicial authorityand judicial authority

• The colonies generally did not show quick profits, however, and the English The colonies generally did not show quick profits, however, and the English investors often turned over their colonial charters to the settlersinvestors often turned over their colonial charters to the settlers

• The colonists were left to build their own lives, their own communities, and The colonists were left to build their own lives, their own communities, and their own economytheir own economy

• early colonial prosperity there was resulted from trapping and trading in furs. early colonial prosperity there was resulted from trapping and trading in furs. But throughout the colonies, people lived primarily on small farms and were But throughout the colonies, people lived primarily on small farms and were self-sufficientself-sufficient

• luxuries were imported in return for tobacco, rice, and indigo exports.luxuries were imported in return for tobacco, rice, and indigo exports.

Colonial era :Colonial era :• Colonists established shipyards to build fishing fleets and, in time, trading vesselsColonists established shipyards to build fishing fleets and, in time, trading vessels• They also built small iron forgesThey also built small iron forges• By the 18th century, regional patterns of development had become clearBy the 18th century, regional patterns of development had become clear

the New England colonies relied on shipbuilding & sailing to generate wealth, the New England colonies relied on shipbuilding & sailing to generate wealth,

plantations plantations • Except for slaves, standards of living were generally high—higher, in fact, Except for slaves, standards of living were generally high—higher, in fact,

than in England itselfthan in England itself• Because English investors had withdrawn, the field was open to entrepreneurs Because English investors had withdrawn, the field was open to entrepreneurs

among the colonistsamong the colonists• By 1770, the North American colonies were ready, both economically and By 1770, the North American colonies were ready, both economically and

politically, to become part of the emerging self-government movement that had politically, to become part of the emerging self-government movement that had

dominated English politics dominated English politics • Disputes developed with England over taxation and other matters; Americans in the Disputes developed with England over taxation and other matters; Americans in the

Thirteen Colonies demanded their rights as Englishmen, as they saw it, to select their Thirteen Colonies demanded their rights as Englishmen, as they saw it, to select their

own representatives to govern and tax them - which Britain refusedown representatives to govern and tax them - which Britain refused• The dispute led to the American Revolution, resulting in an all-out war against the The dispute led to the American Revolution, resulting in an all-out war against the

British and to eventual political independence and sovereignty for the new United States British and to eventual political independence and sovereignty for the new United States of Americaof America

• Like the English political turmoil of the 17th and 18th centuries, the American 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 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 propertymiddle class with a rallying cry of "unalienable rights to life, liberty, and property

New nation :New nation :

New nation :New nation :

• The U.S. Constitution, adopted in 1787, established that the entire nation was a The U.S. Constitution, adopted in 1787, established that the entire nation was a unified, or common market, with no internal tariffs or taxes on interstate commerceunified, or common market, with no internal tariffs or taxes on interstate commerce

• The extent of federal power was much debated, with Alexander Hamilton taking a The extent of federal power was much debated, with Alexander Hamilton taking a very broad view as the first secretary of the treasuryvery broad view as the first secretary of the treasury

• He succeeded in building a strong national credit based on a national debt held by He succeeded in building a strong national credit based on a national debt held by the wealthy and political classes and funded by tariffs on imported goods. Hamilton the wealthy and political classes and funded by tariffs on imported goods. Hamilton believed the United States should pursue economic growth through diversified believed the United States should pursue economic growth through diversified shipping, manufacturing, and bankingshipping, manufacturing, and banking

• He proposed measures like protective tariff to pay the costs of government, along He proposed measures like protective tariff to pay the costs of government, along with a tax on whiskey that western farmers strongly resentedwith a tax on whiskey that western farmers strongly resented

• He sought and achieved Congressional authority to create the First Bank of the He sought and achieved Congressional authority to create the First Bank of the United States in 1791; the charter lasted until 1811, who wielded immense power United States in 1791; the charter lasted until 1811, who wielded immense power and political clout in the Washington administrationand political clout in the Washington administration

• Jefferson became president He based his philosophy on protecting the common man Jefferson became president He based his philosophy on protecting the common man from political and economic tyranny. He particularly praised small farmers as "the from political and economic tyranny. He particularly praised small farmers as "the most valuable citizensmost valuable citizens

• As president after Jefferson, James Madison let the bank charter expire in 1811, but As president after Jefferson, James Madison let the bank charter expire in 1811, but the War of 1812 proved the need for a national bank and Madison reversed positions. the War of 1812 proved the need for a national bank and Madison reversed positions. The Second Bank of the United States was established in 1816, with a 20 year The Second Bank of the United States was established in 1816, with a 20 year chartercharter

• Then Came the expansion And Growth Of AmericaThen Came the expansion And Growth Of America

Expansion and growth:Expansion and growth:

•Cotton, at first a small-scale crop in the South, boomed Cotton, at first a small-scale crop in the South, boomed following Eli Whitney's invention in 1793 of the cotton gin, a following Eli Whitney's invention in 1793 of the cotton gin, a machine that separated raw cotton from seeds and other machine that separated raw cotton from seeds and other wastewaste


• large plantations, based on slave labor, expanded in the richest lands large plantations, based on slave labor, expanded in the richest lands from the Carolinas westward to Texasfrom the Carolinas westward to Texas

• Millions moved to the more fertile farmland of the Midwest. Millions moved to the more fertile farmland of the Midwest. Government-created national roads and waterways, such as the Government-created national roads and waterways, such as the Cumberland Pike (1818) and the Erie Canal (1825), helped new settlers Cumberland Pike (1818) and the Erie Canal (1825), helped new settlers migrate west and helped move western farm produce to Whig Party migrate west and helped move western farm produce to Whig Party supported Clay's American System, which proposed to build internal supported Clay's American System, which proposed to build internal improvements (roads, canals, harbors) protect industry, and create a improvements (roads, canals, harbors) protect industry, and create a strong national bankstrong national bank

• However, President Andrew Jackson (1829–1837) opposed the Second However, President Andrew Jackson (1829–1837) opposed the Second National Bank, which he believed favored the entrenched interests of National Bank, which he believed favored the entrenched interests of his enemieshis enemies

• When he was elected for a second term, Jackson opposed renewing the When he was elected for a second term, Jackson opposed renewing the bank's charter, and Congress supported him. Jackson opposed paper bank's charter, and Congress supported him. Jackson opposed paper money and demanded the government be paid in gold and silver coinsmoney and demanded the government be paid in gold and silver coins

• The Panic of 1837 stopped business growth for three years.The Panic of 1837 stopped business growth for three years.


• Railroads made a decisive impact on the U.S. economy, making Railroads made a decisive impact on the U.S. economy, making possible the transition to an urban industrial nation with high possible the transition to an urban industrial nation with high finance and advanced managerial skillsfinance and advanced managerial skills

• They were first to encounter managerial complexities, labor union They were first to encounter managerial complexities, labor union issues, and problems of competitionissues, and problems of competition

• Due to these radical innovations, the railroad became the first Due to these radical innovations, the railroad became the first large-scale business enterpriselarge-scale business enterprise

• Panics did not curtail rapid U.S. economic growth Long term Panics did not curtail rapid U.S. economic growth Long term demographic growth, expansion into new farmlands, and creation demographic growth, expansion into new farmlands, and creation of new factories continuedof new factories continued

• New inventions and capital investment led to the creation of new New inventions and capital investment led to the creation of new industries and economic growthindustries and economic growth

• transportation improved, new markets continuously openedtransportation improved, new markets continuously opened• The steamboat made river traffic faster and cheaper, but The steamboat made river traffic faster and cheaper, but

development of railroads had an even greater effectdevelopment of railroads had an even greater effect


• Like canals and roads, railroads received large amounts of Like canals and roads, railroads received large amounts of government assistance in their early building years in the government assistance in their early building years in the form of land grantsform of land grants

• But unlike other forms of transportation, railroads also But unlike other forms of transportation, railroads also attracted a good deal of domestic and European private attracted a good deal of domestic and European private investment.investment.

• Nevertheless, a combination of vision and foreign Nevertheless, a combination of vision and foreign investment, combined with the discovery of gold and a major investment, combined with the discovery of gold and a major commitment of America's public and private wealth, enabled commitment of America's public and private wealth, enabled the nation to develop a large-scale railroad system, the nation to develop a large-scale railroad system, establishing the base for the country's industrializationestablishing the base for the country's industrialization

View east of eastbound Lockport on View east of eastbound Lockport on the the Erie Canal by W.H. Bartlett, 1839Erie Canal by W.H. Bartlett, 1839

Engraved after a picture by W.H.BartlettEngraved after a picture by W.H.Bartlett


• The Industrial Revolution began in north Europe in the late 18th The Industrial Revolution began in north Europe in the late 18th

century and quickly spread to the United States by early 19th centurycentury and quickly spread to the United States by early 19th century

• By 1860, when Abraham Lincoln was elected president, 16% of the By 1860, when Abraham Lincoln was elected president, 16% of the

people lived in cities with 2500 or more people; a third of the nation's people lived in cities with 2500 or more people; a third of the nation's

income came from manufacturingincome came from manufacturing

• Urbanized industry was limited primarily to the Northeast; cotton Urbanized industry was limited primarily to the Northeast; cotton

cloth production was the leading industry, with the manufacture of cloth production was the leading industry, with the manufacture of

shoes, woolen clothing, and machinery also expandingshoes, woolen clothing, and machinery also expanding

• Many new workers were immigrantsMany new workers were immigrants

• Between 1845 and 1855, some 300,000 European immigrants arrived Between 1845 and 1855, some 300,000 European immigrants arrived

annuallyannually

• Most were poor and remained in eastern cities, often at ports of Most were poor and remained in eastern cities, often at ports of

arrivalarrival

Civil War and Civil War and Reconstruction: 1860sReconstruction: 1860s

•Southern economic Southern economic interests, including interests, including slavery, could be slavery, could be protected by political protected by political power only as long as power only as long as the South controlled the the South controlled the federal governmentfederal government•The Republican Party, The Republican Party, organized in 1856, organized in 1856, represented the represented the industrialized Northindustrialized North•In 1860, Republicans In 1860, Republicans and their presidential and their presidential candidate, Abraham candidate, Abraham Lincoln called for ending Lincoln called for ending the expansion of slavery the expansion of slavery and instead expanding and instead expanding industry, commerce and industry, commerce and businessbusiness•In 1861, they In 1861, they successfully pushed successfully pushed adoption of a protective adoption of a protective tariff. In 1862, the first tariff. In 1862, the first Pacific railroad was Pacific railroad was charteredchartered


•In 1863 a national banking system was established to In 1863 a national banking system was established to finance the American Civil War; in every city a "First finance the American Civil War; in every city a "First National Bank" was established.National Bank" was established.•The industrial advantages of the North over the South The industrial advantages of the North over the South helped secure a Northern victory in the American Civil War helped secure a Northern victory in the American Civil War (1861–1865). (1861–1865). •The Northern victory sealed the destiny of the nation and The Northern victory sealed the destiny of the nation and its economic system. The slave-labor system was its economic system. The slave-labor system was abolished; the world price of cotton plunged, making the abolished; the world price of cotton plunged, making the large southern cotton plantations much less profitablelarge southern cotton plantations much less profitable•Northern industry, which had expanded rapidly before and Northern industry, which had expanded rapidly before and during the war, surged aheadduring the war, surged ahead•Industrialists came to dominate many aspects of the Industrialists came to dominate many aspects of the nation's life, including social and political affairsnation's life, including social and political affairs•The devastation of the South was great and poverty The devastation of the South was great and poverty ensued; incomes of whites dropped, but income of the ensued; incomes of whites dropped, but income of the former slaves roseformer slaves rose•During Reconstruction railroad construction was heavily During Reconstruction railroad construction was heavily subsidized (with much corruption), but the region subsidized (with much corruption), but the region maintained its dependence on cottonmaintained its dependence on cotton


• Former slaves became wage Former slaves became wage laborers, tenant farmers, or laborers, tenant farmers, or sharecropperssharecroppers

• They were joined by many They were joined by many poor whites, as the poor whites, as the population grew faster than population grew faster than the economythe economy

• As late as 1940 the only As late as 1940 the only significant manufacturing significant manufacturing industries were textile mills industries were textile mills in the Carolinas, and some in the Carolinas, and some steel in Alabamasteel in Alabama

The Gilded Age: 1865–The Gilded Age: 1865–19001900

• The rapid economic development following the Civil War laid the The rapid economic development following the Civil War laid the groundwork for the modern U.S. industrial economygroundwork for the modern U.S. industrial economy

• By the late 1880s, the USA had overtaken Britain as the world's most By the late 1880s, the USA had overtaken Britain as the world's most powerful economypowerful economy

• An explosion of new discoveries and inventions took place, causing such An explosion of new discoveries and inventions took place, causing such profound changes that some termed the results a "Second Industrial profound changes that some termed the results a "Second Industrial Revolution.“Revolution.“

• Railroads greatly expanded the mileage and built heavier cars and Railroads greatly expanded the mileage and built heavier cars and locomotives, carrying far more goods and people at lower rates. locomotives, carrying far more goods and people at lower rates. Refrigeration railroad cars came into use.Refrigeration railroad cars came into use.

• The telephone, phonograph, typewriter and electric light were invented.The telephone, phonograph, typewriter and electric light were invented.• By the dawn of the 20th century, cars had begun to replace horse-drawn By the dawn of the 20th century, cars had begun to replace horse-drawn

carriagescarriages• Parallel to these achievements was the development of the nation's Parallel to these achievements was the development of the nation's

industrial infrastructureindustrial infrastructure• Coal was found in abundance in the Appalachian Mountains from Coal was found in abundance in the Appalachian Mountains from

Pennsylvania south to Kentucky.Pennsylvania south to Kentucky.


• Oil was discovered in western Pennsylvania. Large iron mines opened in Oil was discovered in western Pennsylvania. Large iron mines opened in the Lake Superior region of the upper Midwestthe Lake Superior region of the upper Midwest

• Steel mills thrived in places where these two important raw materials Steel mills thrived in places where these two important raw materials could be brought together to produce steelcould be brought together to produce steel

• Large copper and silver mines opened, followed by lead mines and Large copper and silver mines opened, followed by lead mines and cement factoriescement factories

• As industry grew larger, it developed mass-production methodsAs industry grew larger, it developed mass-production methods• Frederick W. Taylor pioneered the field of scientific management in the Frederick W. Taylor pioneered the field of scientific management in the

late 19th century, carefully plotting the functions of various workers and late 19th century, carefully plotting the functions of various workers and then devising new, more efficient ways for them to do their jobsthen devising new, more efficient ways for them to do their jobs

• After 1910 mass production was sped by the electrification of factories, After 1910 mass production was sped by the electrification of factories, which replaced water power.which replaced water power.

• The "Gilded Age" of the second half of the 19th century was the epoch of The "Gilded Age" of the second half of the 19th century was the epoch of tycoonstycoons

• Many Americans came to idealize these businessmen who amassed vast Many Americans came to idealize these businessmen who amassed vast financial empires.financial empires.


• Often their success lay in seeing the long-range potential for a Often their success lay in seeing the long-range potential for a new service or product, as John D. Rockefeller did with oilnew service or product, as John D. Rockefeller did with oil

• They were fierce competitors, single-minded in their pursuit of They were fierce competitors, single-minded in their pursuit of financial success and powerfinancial success and power

• Other giants in addition to Rockefeller and Ford included Jay Other giants in addition to Rockefeller and Ford included Jay Gould, who made his money in railroadsGould, who made his money in railroads

• J. Pierpont Morgan, banking; and Andrew Carnegie, steel. Some J. Pierpont Morgan, banking; and Andrew Carnegie, steel. Some tycoons were honest according to business standards of their daytycoons were honest according to business standards of their day

• For better or worse, business interests acquired significant For better or worse, business interests acquired significant influence over governmentinfluence over government

• Morgan operated on a grand scale in both his private and business Morgan operated on a grand scale in both his private and business lifelife

• He and his companions gambled, sailed yachts, gave lavish He and his companions gambled, sailed yachts, gave lavish parties, and built palatial homesparties, and built palatial homes

• Morgan was also a lay leader of the Episcopalian Church and one Morgan was also a lay leader of the Episcopalian Church and one of the world's leading art collectorsof the world's leading art collectors


• In contrast, men such as Rockefeller and Ford exhibited puritanical In contrast, men such as Rockefeller and Ford exhibited puritanical qualitiesqualities

• They retained small-town values and lifestyles.They retained small-town values and lifestyles.• As church-goers, they felt a sense of responsibility to othersAs church-goers, they felt a sense of responsibility to others• They believed that personal virtues could bring success; theirs was the They believed that personal virtues could bring success; theirs was the

gospel of work and thrift.gospel of work and thrift.• Later their heirs would establish the largest philanthropic foundations in Later their heirs would establish the largest philanthropic foundations in

America.America.• While upper-class European intellectuals generally looked on commerce While upper-class European intellectuals generally looked on commerce

with disdain, most Americans—living in a society with a more fluid class with disdain, most Americans—living in a society with a more fluid class structure—enthusiastically embraced the idea of moneymaking.structure—enthusiastically embraced the idea of moneymaking.

• They enjoyed the risk and excitement of business enterprise, as well as They enjoyed the risk and excitement of business enterprise, as well as the higher living standards and potential rewards of power and acclaim the higher living standards and potential rewards of power and acclaim that business success broughtthat business success brought

• The American labor movement began with the first significant labor The American labor movement began with the first significant labor union, the Knights of Labor in 1869union, the Knights of Labor in 1869


• The Knights collapsed in the 1880s and were displaced by strong The Knights collapsed in the 1880s and were displaced by strong international unions that banded together as the American Federation international unions that banded together as the American Federation of Labor under Samuel Gompers.of Labor under Samuel Gompers.

• Rejecting socialism, the AFL unions negotiated with owners for higher Rejecting socialism, the AFL unions negotiated with owners for higher wages and better working conditions.wages and better working conditions.

• Union growth was slow until 1900, then grew to a peak during World Union growth was slow until 1900, then grew to a peak during World War I.War I.

• To modernize traditional agriculture reformers founded the Grange To modernize traditional agriculture reformers founded the Grange movement, in 1867movement, in 1867

• Federal land grants helped each state create an agricultural college Federal land grants helped each state create an agricultural college and a network of extension agents who demonstrated modern and a network of extension agents who demonstrated modern techniques to farmerstechniques to farmers

• Wheat and cotton farmers in the 1890s supported the Populist Wheat and cotton farmers in the 1890s supported the Populist movement, but failed in their demands for free silver and inflationmovement, but failed in their demands for free silver and inflation

• Instead the 1896 election committed the nation to the gold standard Instead the 1896 election committed the nation to the gold standard and a program of sustained industrializationand a program of sustained industrialization

The Gilded Age: 1865–The Gilded Age: 1865–1900(Snaps)1900(Snaps)

Steel workers in Steel workers in 1905, Meadville PA1905, Meadville PA


1904 cartoon 1904 cartoon entitled entitled "Next!" "Next!" depicting depicting Standard Oil Standard Oil as a ruthless as a ruthless octopusoctopus


1900 panoramic image of the Chicago slaughter houses1900 panoramic image of the Chicago slaughter houses

Carnegie Steel Co. facility in Ohio c.1910Carnegie Steel Co. facility in Ohio c.1910

Progressive Era: 1890–Progressive Era: 1890–19201920

•In the early years of American history, most political leaders In the early years of American history, most political leaders were reluctant to involve the federal government too heavily in were reluctant to involve the federal government too heavily in the private sector, except in the area of transportationthe private sector, except in the area of transportation•In general, they accepted the concept of laissez-faire, a In general, they accepted the concept of laissez-faire, a doctrine opposing government interference in the economy doctrine opposing government interference in the economy except to maintain law and order.except to maintain law and order.•This attitude started to change during the latter part of the This attitude started to change during the latter part of the 19th century, when small business, farm, and labor movements 19th century, when small business, farm, and labor movements began asking the government to intercede on their behalfbegan asking the government to intercede on their behalf•By the turn of the century, a middle class had developed that By the turn of the century, a middle class had developed that was leery of both the business elite and the somewhat radical was leery of both the business elite and the somewhat radical political movements of farmers and laborers in the Midwest and political movements of farmers and laborers in the Midwest and WestWest•Known as Progressives, these people favored government Known as Progressives, these people favored government regulation of business practices to, in their minds, ensure regulation of business practices to, in their minds, ensure competition and free enterprise.competition and free enterprise.•Congress enacted a law regulating railroads in 1887 (the Congress enacted a law regulating railroads in 1887 (the Interstate Commerce Act), and one preventing large firms from Interstate Commerce Act), and one preventing large firms from controlling a single industry in 1890 (the Sherman Antitrust Act). controlling a single industry in 1890 (the Sherman Antitrust Act).


• These laws were not rigorously enforced, however, until the years These laws were not rigorously enforced, however, until the years between 1900 and 1920, when Republican President Theodore between 1900 and 1920, when Republican President Theodore Roosevelt (1901–1909), Democratic President Woodrow Wilson (1913–Roosevelt (1901–1909), Democratic President Woodrow Wilson (1913–1921), and others sympathetic to the views of the Progressives came to 1921), and others sympathetic to the views of the Progressives came to power.power.

• Many of today's U.S. regulatory agencies were created during these Many of today's U.S. regulatory agencies were created during these years, including the Interstate Commerce Commission and the Federal years, including the Interstate Commerce Commission and the Federal Trade CommissionTrade Commission

• Muckrakers were journalists who encouraged readers to demand more Muckrakers were journalists who encouraged readers to demand more regulation of business.regulation of business.

• Upton Sinclair's Upton Sinclair's The JungleThe Jungle (1906) showed America the horrors of the (1906) showed America the horrors of the Chicago Union Stock Yards, a giant complex of meat processing that Chicago Union Stock Yards, a giant complex of meat processing that developed in the 1870s.developed in the 1870s.

• The federal government responded to Sinclair's book with the new The federal government responded to Sinclair's book with the new regulatory Food and Drug Administrationregulatory Food and Drug Administration

• Ida M. Tarbell wrote a series of articles against the Standard Oil Ida M. Tarbell wrote a series of articles against the Standard Oil monopoly.monopoly.

• The series helped pave the way for the breakup of the monopoly.The series helped pave the way for the breakup of the monopoly.


• When Democrat Woodrow Wilson was elected President with a When Democrat Woodrow Wilson was elected President with a Democratic Congress in 1912 he implemented a series of Democratic Congress in 1912 he implemented a series of progressive policies.progressive policies.

• In 1913, the Sixteenth Amendment was ratified, and the income tax In 1913, the Sixteenth Amendment was ratified, and the income tax was instituted in the United Stateswas instituted in the United States

• Wilson resolved the longstanding debates over tariffs and antitrust, Wilson resolved the longstanding debates over tariffs and antitrust, and created the Federal Reserve, a complex business-government and created the Federal Reserve, a complex business-government partnership that to this day dominates the financial world.partnership that to this day dominates the financial world.

• In 1913, Henry Ford, adopted the moving assembly line, with each In 1913, Henry Ford, adopted the moving assembly line, with each worker doing one simple task in the production of automobiles.worker doing one simple task in the production of automobiles.

• Taking his cue from developments during the progressive era, Ford Taking his cue from developments during the progressive era, Ford offered a very generous wage—$5 a day—to his workers, arguing offered a very generous wage—$5 a day—to his workers, arguing that a mass production enterprise could not survive if average that a mass production enterprise could not survive if average workers could not buy the goods.workers could not buy the goods.

• However, the wage increase did not extend to women, and Ford However, the wage increase did not extend to women, and Ford expanded the company's Sociological Department to monitor his expanded the company's Sociological Department to monitor his workers and ensure that they did not spend their new found bounty workers and ensure that they did not spend their new found bounty on "vice and cheap thrills."on "vice and cheap thrills."

Progressive Era: 1890–Progressive Era: 1890–1920 (Snaps)1920 (Snaps)

• A political cartoon A political cartoon symbolically depicting symbolically depicting President Wilson using President Wilson using tariff, currency, and anti-tariff, currency, and anti-trust laws to prime the trust laws to prime the pump and get the pump and get the economy workingeconomy working

Progressive Era: 1890–Progressive Era: 1890–1920 (Snaps)1920 (Snaps)

• Eight-hour Eight-hour workday workday demonstration in demonstration in New York (1871)New York (1871)

Roaring twenties: 1920–Roaring twenties: 1920–19291929

• Under Republican President Warren G. Harding, who called for normalcy and Under Republican President Warren G. Harding, who called for normalcy and an end to high wartime taxes, Secretary of the Treasury Andrew Mellon raised 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 the tariff, cut other taxes, and used the large surplus to reduce the federal debt by about a third from 1920 to 1930.debt by about a third from 1920 to 1930.

• Secretary of Commerce Herbert Hoover worked to introduce efficiency, by Secretary of Commerce Herbert Hoover worked to introduce efficiency, by regulating business practices.regulating business practices.

• This period of prosperity, along with the culture of the time, was known as the This period of prosperity, along with the culture of the time, was known as the Roaring Twenties.Roaring Twenties.

• The rapid growth of the automobile industry stimulated industries such as oil, The rapid growth of the automobile industry stimulated industries such as oil, glass, and road-building.glass, and road-building.

• Tourism soared and consumers with cars had a much wider radius for their Tourism soared and consumers with cars had a much wider radius for their shopping.shopping.

• Small cities prospered, and large cities had their best decade ever, with a Small cities prospered, and large cities had their best decade ever, with a boom in construction of offices, factories and homes.boom in construction of offices, factories and homes.

• The new electric power industry transformed both business and everyday life.The new electric power industry transformed both business and everyday life.• Telephones and electricity spread to the countryside, but farmers never Telephones and electricity spread to the countryside, but farmers never

recovered from the wartime bubble in land prices. Millions migrated to nearby recovered from the wartime bubble in land prices. Millions migrated to nearby cities.cities.

Roaring twenties: 1920–Roaring twenties: 1920–1929 (Snap)1929 (Snap)

• However, in October 1929, the stock market crashed and However, in October 1929, the stock market crashed and banks began to fail in the Wall Street Crash of 1929banks began to fail in the Wall Street Crash of 1929

People filing tax People filing tax forms in 1920forms in 1920

Great Depression: 1929–Great Depression: 1929–19411941

• Following the stock market crash, the economy plunged into the Great Following the stock market crash, the economy plunged into the Great Depression.Depression.

• The Federal Reserve Board did not cause the depression but it made no effort The Federal Reserve Board did not cause the depression but it made no effort to intervene by helping banks.to intervene by helping banks.

• The money supply fell by one-third, and it was hard to get a loan. The money supply fell by one-third, and it was hard to get a loan. • President Herbert Hoover passed a massive tax increase to boost sagging President Herbert Hoover passed a massive tax increase to boost sagging

federal revenues, and signed the protectionist Smoot-Hawley Tariff, which federal revenues, and signed the protectionist Smoot-Hawley Tariff, which incited retaliation by Canada, Britain, Germany and other trading partnersincited retaliation by Canada, Britain, Germany and other trading partners

• Economists generally agree that these measures deepened an already Economists generally agree that these measures deepened an already serious crisis.serious crisis.

• By 1932, the unemployment rate was 23.6%. Conditions were worse in heavy By 1932, the unemployment rate was 23.6%. Conditions were worse in heavy industry, lumbering, export agriculture (cotton, wheat, tobacco), and mining. industry, lumbering, export agriculture (cotton, wheat, tobacco), and mining.

• Conditions were not quite as bad in white collar sectors and in light Conditions were not quite as bad in white collar sectors and in light manufacturing.manufacturing.

• Franklin Delano Roosevelt was elected President in 1932 without a specific Franklin Delano Roosevelt was elected President in 1932 without a specific programprogram

• He relied on a highly eclectic group of advisors who patched together many He relied on a highly eclectic group of advisors who patched together many programs, known as the New Deal.programs, known as the New Deal.


• The economy eventually recovered from the low point of the The economy eventually recovered from the low point of the winter of 1932-33, with sustained improvement until 1937, when winter of 1932-33, with sustained improvement until 1937, when the Recession of 1937 brought back 1934 levels of unemployment.the Recession of 1937 brought back 1934 levels of unemployment.

• There is still debate amongst economist, historians, and economic There is still debate amongst economist, historians, and economic historians as to the effect of the New Deal in America's economic historians as to the effect of the New Deal in America's economic recoveryrecovery

• One survey showed that 49% of economists felt that the New Deal One survey showed that 49% of economists felt that the New Deal lengthened and deepened the depressionlengthened and deepened the depression

• while another showed that only 5% of professional historians and while another showed that only 5% of professional historians and 27% of professional economists felt the same way27% of professional economists felt the same way

• Government spending increased from 8.0% of GNP under Hoover Government spending increased from 8.0% of GNP under Hoover in 1932 to 10.2% of GNP in 1936. While Roosevelt balanced the in 1932 to 10.2% of GNP in 1936. While Roosevelt balanced the "regular" budget the emergency budget was funded by debt, "regular" budget the emergency budget was funded by debt, which increased from 33.6% of GNP in 1932 to 40.9% in 1936which increased from 33.6% of GNP in 1932 to 40.9% in 1936

• Deficit spending had been recommended by some economists, Deficit spending had been recommended by some economists, most notably John Maynard Keynes in Britain.most notably John Maynard Keynes in Britain.


• Roosevelt met Keynes but did not pay attention to his recommendationsRoosevelt met Keynes but did not pay attention to his recommendations• After a meeting with Keynes, who kept drawing diagrams, Roosevelt After a meeting with Keynes, who kept drawing diagrams, Roosevelt

remarked that "He must be a mathematician rather than a political remarked that "He must be a mathematician rather than a political economist.“economist.“

• The extent to which the spending for relief and public works provided a 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 sufficient stimulus to revive the U.S. economy, or whether it harmed the economy, is also debatedeconomy, is also debated

• If one defines economic health entirely by the gross domestic product, the 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, 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-but as Roosevelt said, one third of the nation was ill fed, ill-housed and ill-clothed.clothed.

• GNP was 34% higher in 1936 than 1932, and 58% higher in 1940 on the GNP was 34% higher in 1936 than 1932, and 58% higher in 1940 on the eve of war.eve of war.

• The economy grew 58% from 1932 to 1940 in 8 years of peacetime, and 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 wartimethen grew 56% from 1940 to 1945 in 5 years of wartime

• However, the unemployment rate never went below 9% before the draft.However, the unemployment rate never went below 9% before the draft.


• During the war the economy operated under so many different During the war the economy operated under so many different conditions that comparison is impossible with peacetime, such as conditions that comparison is impossible with peacetime, such as massive spending, price controls, bond campaigns, controls over raw massive spending, price controls, bond campaigns, controls over raw materials, prohibitions on new housing and new automobiles, materials, prohibitions on new housing and new automobiles, rationing, guaranteed cost-plus profits, subsidized wages, and the rationing, guaranteed cost-plus profits, subsidized wages, and the draft of 12 million soldiers.draft of 12 million soldiers.

• As Broadus Mitchell summarized, "Most indexes worsened until the As Broadus Mitchell summarized, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression summer of 1932, which may be called the low point of the depression economically and psychologically”economically and psychologically”

• Economic indicators show the American economy reached nadir in Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began a steady, sharp upward summer 1932 to February 1933, then began a steady, sharp upward recovery that persisted until 1937.recovery that persisted until 1937.

• Thus the Federal Reserve Index of Industrial Production hit its low of 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 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 = 1, 1933; however by July 1, 1933, it reached 85.5 (with 1935–39 = 100, and for comparison 2005 = 1,342)100, and for comparison 2005 = 1,342)

Great Depression: 1929–Great Depression: 1929–1941(Snaps)1941(Snaps)

• Missouri migrants Missouri migrants living in a truck in living in a truck in California. Many California. Many displaced people displaced people moved to moved to California to look California to look for work during the for work during the Depression. John Depression. John Steinbeck depicted Steinbeck depicted the situation in the situation in The The Grapes of WrathGrapes of Wrath

Great Depression: 1929–Great Depression: 1929–1941(Snaps)1941(Snaps)

• Stock exchange Stock exchange trading floor after trading floor after the 1929 crashthe 1929 crash

Great Depression: 1929–Great Depression: 1929–1941(Stats)1941(Stats)

• 11 in 1929 dollars in 1929 dollars22 1935–39 = 100 1935–39 = 100

Great Depression: 1929–Great Depression: 1929–1941(Stats)1941(Stats)

• GDP annual GDP annual pattern and pattern and long-term long-term trend, 1920–trend, 1920–40, in billions 40, in billions of constant of constant dollarsdollars

Wartime controls: 1941–1945Wartime controls: 1941–1945

• The War Production Board coordinated the nation's productive The War Production Board coordinated the nation's productive capabilities so that military priorities would be metcapabilities so that military priorities would be met

• Converted consumer-products plants filled many military orders. Converted consumer-products plants filled many military orders. Automakers built tanks and aircraft, for example, making the United Automakers built tanks and aircraft, for example, making the United States the "arsenal of democracy.“ States the "arsenal of democracy.“

• In an effort to prevent rising national income and scarce consumer In an effort to prevent rising national income and scarce consumer products to cause inflation, the newly created Office of Price products to cause inflation, the newly created Office of Price Administration controlled rents on some dwellings, rationed Administration controlled rents on some dwellings, rationed consumer items ranging from sugar to gasoline, and otherwise tried consumer items ranging from sugar to gasoline, and otherwise tried to restrain price increases.to restrain price increases.

• Six million women took jobs in manufacturing and production; most Six million women took jobs in manufacturing and production; most were newly created temporary jobs in munitions.were newly created temporary jobs in munitions.

• Some were replacing men away in the military. These working Some were replacing men away in the military. These working women were symbolized by the fictional character of Rosie the women were symbolized by the fictional character of Rosie the RiveterRiveter

• After the war many women returned to household work as men After the war many women returned to household work as men returned from military service. The nation turned to the suburbs, as returned from military service. The nation turned to the suburbs, as a pent-up demand for new housing was finally unleasheda pent-up demand for new housing was finally unleashed

Wartime controls: 1941–Wartime controls: 1941–1945(Snap)1945(Snap)

• Women making Women making aluminum aluminum shells for the shells for the war in 1942war in 1942

Postwar prosperity: 1945–Postwar prosperity: 1945–19731973

• The period from the end of World War II to the early 1970s was a The period from the end of World War II to the early 1970s was a golden era of American capitalismgolden era of American capitalism

• The Council of Economic Advisers was established by the Employment The Council of Economic Advisers was established by the Employment Act of 1946 to provide objective economic analysis and advice on the Act of 1946 to provide objective economic analysis and advice on the development and implementation of a wide range of domestic and development and implementation of a wide range of domestic and international economic policy issuesinternational economic policy issues

• In its first 7 years the CEA made five technical advances in policy In its first 7 years the CEA made five technical advances in policy making:making:

1.1. the replacement of a "cyclical model" of the economy by a "growth the replacement of a "cyclical model" of the economy by a "growth model," model,"

2.2. the setting of quantitative targets for the economy, the setting of quantitative targets for the economy,

3.3. use of the theories of fiscal drag and full-employment budget, use of the theories of fiscal drag and full-employment budget,

4.4. recognition of the need for greater flexibility in taxation, and recognition of the need for greater flexibility in taxation, and

5.5. replacement of the notion of unemployment as a structural problem replacement of the notion of unemployment as a structural problem by a realization of a low aggregate demandby 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" Nourse believed a choice had to be made between "guns or butter" but Keyserling argued that an expanding economy permitted large but Keyserling argued that an expanding economy permitted large defense expenditures without sacrificing an increased standard of defense expenditures without sacrificing an increased standard of living.living.

• In 1949 Keyserling gained support from powerful Truman advisers In 1949 Keyserling gained support from powerful Truman advisers Dean Acheson and Clark CliffordDean Acheson and Clark Clifford

• Nourse resigned as chairman, warning about the dangers of budget Nourse resigned as chairman, warning about the dangers of budget deficits and increased funding of "wasteful" defense costs.deficits and increased funding of "wasteful" defense costs.

• Keyserling succeeded to the chairmanship and influenced Truman's Keyserling succeeded to the chairmanship and influenced Truman's Fair Deal proposals and the economic sections of National Security Fair Deal proposals and the economic sections of National Security Council Resolution 68Council Resolution 68

• in April 1950, asserted that the larger armed forces America needed in April 1950, asserted that the larger armed forces America needed would not affect living standards or risk the "transformation of the free would not affect living standards or risk the "transformation of the free character of our economy.“character of our economy.“

• During the 1953–54 recession, the CEA, headed by Arthur Burns During the 1953–54 recession, the CEA, headed by Arthur Burns deployed traditional Republican rhetoricdeployed traditional Republican rhetoric

• However it supported an activist contracyclical approach that helped However it supported an activist contracyclical approach that helped to establish Keynesianism as a bipartisan economic policy for the to establish Keynesianism as a bipartisan economic policy for the nationnation


• Especially important in formulating the CEA response to the recession—Especially important in formulating the CEA response to the recession—accelerating public works programs, easing credit, and reducing taxes—were accelerating public works programs, easing credit, and reducing taxes—were Arthur F. Burns and Neil H. Jacoby.Arthur F. Burns and Neil H. Jacoby.

• President John F. Kennedy passed the largest tax cut in history upon entering President John F. Kennedy passed the largest tax cut in history upon entering office in 1961. office in 1961.

• 200 billion in war bonds matured, and the G.I. Bill financed a well-educated work 200 billion in war bonds matured, and the G.I. Bill financed a well-educated work force.force.

• The middle class swelled, as did GDP and productivity. The U.S. underwent a kind The middle class swelled, as did GDP and productivity. The U.S. underwent a kind of golden age of economic growth.of golden age of economic growth.

• This growth was distributed fairly evenly across the economic classes, which some 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 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 peaked historically in the U.S. during the 1950s, in the midst of this massive economic growth.economic growth.

• President Lyndon B. Johnson (1963–69) dreamed of creating a "Great Society", and President 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.began many new social programs to that end, such as Medicaid and Medicare.

• The government financed some of private industry's research and development The government financed some of private industry's research and development throughout these decades, most notably ARPANET (which would become the throughout these decades, most notably ARPANET (which would become the Internet).Internet).

Inflation woes: 1970sInflation woes: 1970s

• In the late 1960s it was apparent to some that this juggernaut of In the late 1960s it was apparent to some that this juggernaut of economic growth was slowing down, and it began to become visibly economic growth was slowing down, and it began to become visibly apparent in the early 1970sapparent in the early 1970s

• The United States grew increasingly dependent on oil importation from The United States grew increasingly dependent on oil importation from OPEC after peaking production in 1970, resulting in oil supply shocks in OPEC after peaking production in 1970, resulting in oil supply shocks in 1973 and 1979.1973 and 1979.

• Stagflation gripped the nation, and the government experimented with Stagflation gripped the nation, and the government experimented with wage and price controls under President Nixon.wage and price controls under President Nixon.

• The Bretton Woods Agreement collapsed in 1971–1972, and President The Bretton Woods Agreement collapsed in 1971–1972, and President Nixon closed the gold window at the Federal Reserve, taking the United Nixon closed the gold window at the Federal Reserve, taking the United States entirely off the gold standard.States entirely off the gold standard.

• President Gerald Ford introduced the slogan, "Whip Inflation Now" (WIN). President Gerald Ford introduced the slogan, "Whip Inflation Now" (WIN). In 1974, productivity shrunk by 1.5%, though this soon recovered.In 1974, productivity shrunk by 1.5%, though this soon recovered.

• In 1976, Jimmy Carter won the Presidency. Carter would later take much In 1976, Jimmy Carter won the Presidency. Carter would later take much of the blame for the even more turbulent economic times to come, of the blame for the even more turbulent economic times to come, though some say circumstances were outside his control.though some say circumstances were outside his control.

Inflation woes: 1970sInflation woes: 1970s

• Inflation continued to climb skyward. Productivity growth was pitiful, when Inflation continued to climb skyward. Productivity growth was pitiful, when

not negative. Interest rates remained high, with the prime reaching 20% in not negative. Interest rates remained high, with the prime reaching 20% in

January 1981January 1981

• Art Buchwald quipped that 1980 would go down in history as the year when it 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 bankwas cheaper to borrow money from the Mafia than the local bank

• Unemployment dropped mostly steadily from 1975 to 1979, although it then Unemployment dropped mostly steadily from 1975 to 1979, although it then

began to rise sharplybegan to rise sharply

• This period also saw the increased rise of the environmental and consumer This period also saw the increased rise of the environmental and consumer

movements, and the government established new regulations and regulatory movements, and the government established new regulations and regulatory

agencies such as the Occupational Safety and Health Administrationagencies such as the Occupational Safety and Health Administration

• The Consumer Product Safety Commission, the Nuclear Regulatory The Consumer Product Safety Commission, the Nuclear Regulatory

Commission, and others.Commission, and others.

Deregulation and Deregulation and Reaganomics: 1974–1992Reaganomics: 1974–1992

• The deregulation movement began when Nixon left office and The deregulation movement began when Nixon left office and was a bipartisan operation under Ford, Carter and Reagan.was a bipartisan operation under Ford, Carter and Reagan.

• Most important were the removals of New Deal regulations Most important were the removals of New Deal regulations from energy, communications, transportation and banking. from energy, communications, transportation and banking.

• The hasty removal of some regulations of Savings and Loans The hasty removal of some regulations of Savings and Loans while keeping federal insurance led to the Savings and Loan while keeping federal insurance led to the Savings and Loan crisis which cost the government an estimated $160 billioncrisis which cost the government an estimated $160 billion

• In 1981, Ronald Reagan introduced Reaganomics, that is In 1981, Ronald Reagan introduced Reaganomics, that is fiscally-expansive economic policies, cutting marginal federal fiscally-expansive economic policies, cutting marginal federal income tax rates by 25%. Inflation dropped dramatically from income tax rates by 25%. Inflation dropped dramatically from 13.5% annually in 1980 to just 3% annually in 1983 due to a 13.5% annually in 1980 to just 3% annually in 1983 due to a short recession and the Federal Reserve Chairman Paul short recession and the Federal Reserve Chairman Paul Volcker's tighter control of the money supply and interest ratesVolcker's tighter control of the money supply and interest rates

• Real GDP began to grow after contracting in 1980 and 1982.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 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 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 1989the end of Reagan's presidency in January 1989

• CriticsCritics of the Reagan Administration often point to the fact that the gap of the Reagan Administration often point to the fact that the gap between those in the upper socioeconomic levels and those in the between those in the upper socioeconomic levels and those in the lower socioeconomic levels increased during Reagan's presidencylower socioeconomic levels increased during Reagan's presidency

• they also note that the federal debt spawned by his policies tripled they also note that the federal debt spawned by his policies tripled (from $930 billion in 1981 to $2.6 trillion in 1988), reaching record (from $930 billion in 1981 to $2.6 trillion in 1988), reaching record levelslevels

• Though debt almost always increased under every president in the Though debt almost always increased under every president in the latter half of the 20th century, it declined as a percentage of GDP under latter half of the 20th century, it declined as a percentage of GDP under all Presidents after 1950 and prior to Reagan.all Presidents after 1950 and prior to Reagan.

• In addition to the fiscal deficits, the U.S. started to have large trade In addition to the fiscal deficits, the U.S. started to have large trade deficits. Also it was during his second term that the Tax Reform Act of deficits. Also it was during his second term that the Tax Reform Act of 1986 was passed1986 was passed

• Vice President George H. W. Bush was elected to succeed Reagan in Vice President George H. W. Bush was elected to succeed Reagan in 1988.1988.


• The early Bush Presidency's economic policies were essentially a The early Bush Presidency's economic policies were essentially a continuation of Reagan's policies, but in the early 1990s, Bush went back continuation of Reagan's policies, but in the early 1990s, Bush went back on a promise and increased taxes in a compromise with Congressional on a promise and increased taxes in a compromise with Congressional Democrats.Democrats.

• He ended his presidency on a moderate note, signing regulatory bills such He ended his presidency on a moderate note, signing regulatory bills such as the Americans With Disabilities Act, and negotiating the North American as the Americans With Disabilities Act, and negotiating the North American Free Trade Agreement.Free Trade Agreement.

• In 1992, Bush and third-party candidate Ross Perot lost to Democrat Bill In 1992, Bush and third-party candidate Ross Perot lost to Democrat Bill ClintonClinton

• The advent of deindustrialization in the late 1960s and early 1970s saw The advent of deindustrialization in the late 1960s and early 1970s saw income inequality increase dramatically to levels never seen before, but at income inequality increase dramatically to levels never seen before, but at the same time never in USA consumers could buy so much goods even with the same time never in USA consumers could buy so much goods even with the inflations in the 1970s.the inflations in the 1970s.

• In 1968, the U.S.' Gini coefficient was 0.386, about equivalent to Japan In 1968, the U.S.' Gini coefficient was 0.386, about equivalent to Japan (.381), though still above that of the United Kingdom (.368) and Canada (.381), though still above that of the United Kingdom (.368) and Canada (.331). (.331).


• However, in the years since deregulation and globalization have However, in the years since deregulation and globalization have allowed U.S. companies to begin to shift their manufacturing and allowed U.S. companies to begin to shift their manufacturing and heavy industrial operations to second- and third-world countries heavy industrial operations to second- and third-world countries with lower labor costs, income inequality in the U.S. has risen with lower labor costs, income inequality in the U.S. has risen dramatically.dramatically.

• In 2005, the American Gini coefficient had reached 0.469, similar to In 2005, the American Gini coefficient had reached 0.469, similar to that of Malaysia and the Philippines, both at .461, and well-ahead of that of Malaysia and the Philippines, both at .461, and well-ahead of China (.440). China (.440).

• Critics of economic policies favored by Republican and Democratic Critics of economic policies favored by Republican and Democratic administrations since the 1960s, particularly those expanding "free administrations since the 1960s, particularly those expanding "free trade" and "open markets" say that these policies, though trade" and "open markets" say that these policies, though benefiting trading as well as the cost of products in the U.S., could benefiting trading as well as the cost of products in the U.S., could have taken their own on the prosperity of the American middle-classhave taken their own on the prosperity of the American middle-class

• But in this period, consumers were buying as never before with so But in this period, consumers were buying as never before with so many products and goods at such low costs and in high quantities.many products and goods at such low costs and in high quantities.

The New Economy: 1990s to The New Economy: 1990s to 20072007

• During the 1990s, the national debt increased by 75%, GDP rose by 69%, 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 and the stock market as measured by the S&P 500 grew more than three-foldthree-fold

• From 1994 to 2000 real output increased, inflation was manageable and From 1994 to 2000 real output increased, inflation was manageable and unemployment dropped to below 5%, resulting in a soaring stock market unemployment dropped to below 5%, resulting in a soaring stock market known as the Dot-com boom. known as the Dot-com boom.

• The second half of the 1990s was characterized by well-publicized Initial The second half of the 1990s was characterized by well-publicized Initial Public Offerings of High-tech and "dot-com" companies.Public Offerings of High-tech and "dot-com" companies.

• however, it was evident a bubble in stock valuations however, it was evident a bubble in stock valuations hadhad occurred, such occurred, such that beginning in March 2000, the market would give back some 50% to that beginning in March 2000, the market would give back some 50% to 75% of the growth of the 1990s.75% of the growth of the 1990s.

• The economy worsened in 2001 with output increasing only 0.3% and The economy worsened in 2001 with output increasing only 0.3% and unemployment and business failures rising substantially, and triggering a unemployment and business failures rising substantially, and triggering a recession that is often blamed on the September 11, 2001 Terrorist recession that is often blamed on the September 11, 2001 Terrorist Attacks.Attacks.

• Through 2001 to 2007, the red-hot housing market across the United Through 2001 to 2007, the red-hot housing market across the United States fueled a false sense of security regarding the strength of the U.S. States fueled a false sense of security regarding the strength of the U.S. EconomyEconomy

This graph shows three major stock indices since 1975. This graph shows three major stock indices since 1975. Notice the meteoric rise of the stock market in the 1990s, Notice the meteoric rise of the stock market in the 1990s, followed by the collapse of the dot-com bubble in 2000 on followed by the collapse of the dot-com bubble in 2000 on the tech-heavy NASDAQ.the tech-heavy NASDAQ.

The New Economy: 1990s The New Economy: 1990s to 2007to 2007

Ongoing financial crisisOngoing financial crisis

• In 2008 a perfect storm of economic disasters hit the country and In 2008 a perfect storm of economic disasters hit the country and indeed the entire worldindeed the entire world

• The most serious began with the collapse of housing bubbles in The most serious began with the collapse of housing bubbles in California and Florida, and the collapse of housing prices and the California and Florida, and the collapse of housing prices and the construction industriesconstruction industries

• Millions of mortgages (averaging about $200,000 each) had been Millions of mortgages (averaging about $200,000 each) had been bundled into securities called collateralized debt obligations that were bundled into securities called collateralized debt obligations that were resold worldwideresold worldwide

• Many banks and hedge funds had borrowed hundreds of billions of Many banks and hedge funds had borrowed hundreds of billions of dollars to buy these securities, which were now "toxic" because their dollars to buy these securities, which were now "toxic" because their value was unknown and no one wanted to buy them.value was unknown and no one wanted to buy them.

• series of the largest banks in the U.S. and Europe collapsed; some series of the largest banks in the U.S. and Europe collapsed; some went bankrupt, such as Lehman Brothers with $690 billion in assets; went bankrupt, such as Lehman Brothers with $690 billion in assets; others such as the leading insurance company AIG, the leading bank others such as the leading insurance company AIG, the leading bank Citigroup, and the two largest mortgage companies were bailed out Citigroup, and the two largest mortgage companies were bailed out by the government. by the government.

Ongoing financial crisisOngoing financial crisis

• Congress voted $700 billion in bailout money and an activist Treasury Congress voted $700 billion in bailout money and an activist Treasury and Federal Reserve, committed trillions of dollars to shoring up the and Federal Reserve, committed trillions of dollars to shoring up the financial system, but the measures did not reverse the declinesfinancial system, but the measures did not reverse the declines

• Banks drastically tightened their lending policies, despite infusions of Banks drastically tightened their lending policies, despite infusions of federal money.federal money.

• It became much harder to get car loans, for example. The government It became much harder to get car loans, for example. The government for the first time took major ownership positions in the largest banksfor the first time took major ownership positions in the largest banks

• The stock market plunged 40%, wiping out tens of trillions of dollars in The stock market plunged 40%, wiping out tens of trillions of dollars in wealth; housing prices fell 20% nationwide wiping out trillions morewealth; housing prices fell 20% nationwide wiping out trillions more

• By late 2008 distress was spreading beyond the financial and housing By late 2008 distress was spreading beyond the financial and housing sectors, especially as the "Big Three" of the automobile industry sectors, especially as the "Big Three" of the automobile industry (General Motors, Ford and Chrysler) were on the verge of bankruptcy, (General Motors, Ford and Chrysler) were on the verge of bankruptcy, and the retail sector showed major weaknessesand the retail sector showed major weaknesses

• Critics of the $700 billion Troubled Assets Relief Program (TARP) Critics of the $700 billion Troubled Assets Relief Program (TARP) expressed anger that much of the TARP money that has been expressed anger that much of the TARP money that has been distributed to banks is seemingly unaccounted for, with banks being distributed to banks is seemingly unaccounted for, with banks being secretive on the issue.secretive on the issue.

Ongoing financial crisis Ongoing financial crisis

• President Barack Obama has signed the American Recovery and President Barack Obama has signed the American Recovery and Reinvestment Act of 2009, a bill that $787 billion in stimulus Reinvestment Act of 2009, a bill that $787 billion in stimulus through a combination of spending and tax cuts.through a combination of spending and tax cuts.

• The plan is largely based on the Keynesian theory that government The plan is largely based on the Keynesian theory that government spending should offset the fall in private spending during an spending should offset the fall in private spending during an economic downturn; otherwise the fall in private spending may economic downturn; otherwise the fall in private spending may perpetuate itself and productive resources, such as the labor hours perpetuate itself and productive resources, such as the labor hours of the unemployed, will be wastedof the unemployed, will be wasted

• Critics claim that government spending cannot offset a fall in Critics claim that government spending cannot offset a fall in private spending because government must borrow money from private spending because government must borrow money from the private sector in order to add money to it.the private sector in order to add money to it.

• However, most economists do not think such "crowding out" is an However, most economists do not think such "crowding out" is an issue when interest rates are near zero and the economy is issue when interest rates are near zero and the economy is stagnant.stagnant.

• Opponents of the stimulus also point to problems of possible future Opponents of the stimulus also point to problems of possible future inflation and government debt caused by such a large expenditure.inflation and government debt caused by such a large expenditure.

Ongoing financial crisis Ongoing financial crisis

US ECONOMY STATS A SMALL US ECONOMY STATS A SMALL REVIEW:REVIEW:

ConClusion :ConClusion :

• The US Economy Has Faced a lot of up and Downs Over 150 yearsThe US Economy Has Faced a lot of up and Downs Over 150 years• The Major Strength Of the US Economy Was & Is the industrial Sector..The Major Strength Of the US Economy Was & Is the industrial Sector..• Though US Was dependent on Agriculture initially as Any other Country Though US Was dependent on Agriculture initially as Any other Country • The US economy Changed From an Agricultural Economy to An Industrial The US economy Changed From an Agricultural Economy to An Industrial

Economy Economy • The Economy Was built up Based on Several Indigenous Reforms by The Economy Was built up Based on Several Indigenous Reforms by

Presidents with The Help Of EconomistsPresidents with The Help Of Economists• Though they have been an Economically Well Developed Country…Though they have been an Economically Well Developed Country…• They Are Prone To Several Factors, With India and China Likely To They Are Prone To Several Factors, With India and China Likely To

Become the Next Super Powers.Become the Next Super Powers.• Finally To Conclude… US Has Been One Of the Back bone Of the World Finally To Conclude… US Has Been One Of the Back bone Of the World

Economy With a Large portion Of GDP Invested into Other Countries…Economy With a Large portion Of GDP Invested into Other Countries…• Countries Are Becoming Self dependent Which Will Make the US Countries Are Becoming Self dependent Which Will Make the US

Economy Weak in the Next 20 years as Per Economist Paul KrugmannEconomy Weak in the Next 20 years as Per Economist Paul Krugmann

Economic History Of The United States

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