Till the time of American Revolution, the American economy was basically a “colonial” economy, and worked for the benefit of — the mother country(Britain). With time the colonies resentment with the mother country grew and they breached their links much to the ire of the British Empire. The period that went by between the American Revolution and the Civil War witnessed the growth of a young national economy. Though it was still largely agricultural, the manufacturing and industrial sector was also coming up in a big way (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. After the Civil War was over, the United States was established as a major player in the world economy.
The Development of infrastructure and new means of communication resulted in bonding the national economy together, and also making feasible the rise of great industrial enterprises. Education and political legal support 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. But the labour movement in America also grew at a frantic pace in order to protect their interests from the hands of capitalists and it can be said that largely the work force was dissatisfied at the treatment meted out to them.
The labor movements initially forced the government to bring legislation protecting the interests of the worker but later during the 1920s and early 1930s an aggressively pro-business climate led either to the retrenchment or the abandonment of these efforts. The economy grew at a frantic pace in the 1920s but the lack of regulation and adequate safeguards led to monopolization that in result led to the Great Depression of 1929-1941. It led to a serious rethink on the part of the government and new rules were laid paving the way for a new relationship between the government and the economy as a whole.
At first the government tried to control the unregulated economy. After that for a while in the two decades that followed American economy thrived like anything, and also paved the way for the new American middle class. 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. The goals of free trade have also been furthered since World War II by US participation in the International Monetary Fund (IMF), the World Bank, and the General Agreement on Tariffs and Trade (GATT).
With the formation in 1995 of the World Trade Organization (WTO), most-favored-nation policies were expanded to trade in services and other areas. In 1993, Congress approved the North American Free Trade Agreement, which extended the Free Trade Agreement between Canada and the United States to include Mexico. NAFTA, by eliminating tariffs and other trade barriers, created a free trade zone with a combined market size of $6. 5 trillion and 370 million consumers. The effect on employment was uncertain—estimates varied from a loss of 150,000 jobs over the next ten years to a net gain of 200,000.
Labor intensive goods-producing industries, such as apparel and textiles, were expected to suffer, while it was predicted that capital goods industries would benefit. It was anticipated that US automakers would benefit in the short run by taking advantage of the low wages in Mexico and that US grain farmers and the US banking, financial, and telecommunications sectors would gain enormous new markets. As of 2003, the pros and cons of NAFTA were still being hotly debated.
Spokespersons for organized labor claimed in 2000 that the agreement had resulted in a net loss of 420,000 jobs, while advocates of free trade insisted that 311,000 new jobs had been created to support record US exports to Canada and Mexico, with only 116,000 workers displaced—a net gain of 195,000 jobs. In 2003, President George W. Bush introduced, and Congress passed a tax cut of $350 billion designed to stimulate the economy, which was in a period of slow growth. This came on the heels of a $1. 35 trillion tax cut passed in 2001 and a $96 billion stimulus package in 2002.
Democrats cited the loss of 2.7 million private sector jobs during the first three years of the Bush administration as evidence that the president did not have control over the economy. In 1998, for the first time since 1969, the federal budget closed the fiscal year with a surplus. In 2000, the government was running a surplus of $236 billion, or a projected $5. 6 trillion over 10 years. By mid-2003, the federal budget had fallen into deficit; the deficit stood at $455 billion, which was4. 2% of gross domestic product (GDP). Congress was debating an overhaul of the Medicare program, to provide prescription drug coverage for the elderly and disabled.
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