I.The Economy of Colonial America (Pre-1776)
Colonial America was a predominately agricultural economy. Even as the economy expanded over the decades of the eighteenth century, the colonies only moved slowly toward industrialization by the year of the Declaration of Independence, in 1776. Dynamic economic expansion occurred with population growth from births and immigration, but colonial Americans had naturally become increasingly self-sufficient.
Northern prosperity from the fur industry and fishing boosted the local economy .
By 1776, the standard of living of free white American society was already high, with abundant food and land supporting a comparatively high income. Officially sanctioned as a sovereign nation with the Treaty of Paris in 1783, the global economy of the United States of America is born.
II.The Constitution and Pre-Civil War Economy (1787 – 1850s)
From the writing of the United States Constitution in 1787, America’s economy saw tremendous growth. The Constitution provided a kind of “economic charter,” laying out regulation of both commerce and money by Congress. Most importantly, it opened the market of the United States territory. Open borders allowed for an internal free flow of goods and ideas. One exception was an unpopular tax on whiskey enacted in 1791 to help pay the national debt established and expanded as a consequence of the Revolutionary War. Thanks to a strong institutional core adopted from the British, America quickly caught up economically to her former ruler
American entrepreneurship was given free reign with the departure of British investments. Regional economic character developed with shipyards in New England, crops and furs in the middle colonies, and the plantation economy of the Old South. The idea of free enterprise has remained for the country’s economic development ever since.
There existed an intense debate over what kind of economy America should be. America’s third president, Thomas Jefferson, was a major proponent of the agrarian society.
America’s first Secretary of the Treasury, Alexander Hamilton and his Federalist Party were proponents of a stronger central government in order to encourage manufacturing and commerce as the core of the new American economy. Hamilton further advocated for a national bank to back a strong currency and push policy that would generate capital to support young American industry.
The first half of the nineteenth century saw a frontier opened by significant developments in transportation. After the 1840s a new mode of transportation, the railroad, picked up the reigns of the American economy, and took it to places and heights it had never before seen. The east was finally and forever linked to the west with the completion of the Transcontinental Railroad in 1869. The railroads became the driving economic force of America in the second half of the nineteenth century, backed by governmental land grants and multi-national investments. By then, however, the United States economy had been hit by two major forces: the California Gold Rush and the Civil War.
III.The Economics of War
The 1848 discovery of gold in California not only drew hundreds of thousands of people out West; it also shifted the balance of economic attention of the United States. By the beginning of the Civil War in 1861, gold not only backed American currency. Before long, however, both the North and the South resorted to paper currency.
IV.Reconstruction through the Roaring Twenties (1865 – 1929)
By the Civil War, already a third of the national economy was powered by manufacturing, most of which was in the North. Following the war, the American economy was driven by innovation and invention that spurred tremendous growth of the industrial infrastructure. In short, rapid development—and much of itwas a result of advances in mass production. Individual business enterprise became the backbone of the United States economy. It was a “Gilded Age” in America, built by entrepreneurs in manufacturing and commerce, which outpaced the economic contribution of agriculture by the beginning of the 20th century.
In the economic history of the United States, the early twentieth century remains critical for major advancements in technology. The steam- and water-powered economy received a jolt by the spread of modern electricity, and the advent of the automobile. Entering late into World War I, the United States was primed to shift its industry and vast amounts of raw materials to wartime.
At the time, America was sticking to a gold standard to back its currency, so avoiding simply printing additional money was meant to help preserve the standard, while preventing inflation. The war altered the American economy in many ways. The Federal Reserve assumed a more dominant role as New York became the financial center of the world. The federal government, in short, showed it could be a dominant force in the American economy.