Economy

The American economy had to be built, as they say, from the ground up. Those immigrants who were not willing to work hard seldom did well in the New World. In the beginning there were nothing – no farms, no houses, no factories – so, whatever was needed had to be made by the settlers themselves. Since then “Do-it-yourself” has become a motto and a hobby.

By any standard, the American economy that has evolved over less than 250 years has been immensely successful. With less than 5% of the world’s population, the United States in the early 1990s produced about 25% of the world’s output. It is twice as large as the next largest economy, that of Japan.

Although the American economy has transformed itself over the years, certain issues have persisted since the early days of the republic. One is the continuing debate over the proper role for government in what is basically a marketplace economy. An economy based on free enterprise is generally characterized by private ownership and initiative, with a relative absence of government involvement. However, government intervention has been found necessary from time to time to ensure that economic opportunities are fair and accessible to the people, to prevent flagrant abuses, to dampen inflation and to stimulate growth.

The greatest expansion of government’s role was the “New Deal”. New laws were passed regulating many economic activities – from sales of stock to the right of workers to form unions. Moreover, the government began to provide workers with a measure of economic security in their old age (in 1935 the Social Security program was enacted).

In the 1970s and 1980s, with taxes steadily rising and the U.S. economy stagnating, new national leaders spearheaded a drive to reduce government influence over the private sector. Their goal was to stimulate the private-sector initiative and investment which is the engine that drives free-market economies.

Another recurrent theme has been the transformation of the U.S. economy by emerging technologies. Once a nation of farmers, the United States was changed dramatically by successful adaptation of the machinery and production processes of the Industrial Revolution – and then transformed again by what amounts to a “second” Industrial Revolution.

Beginning in 1870 and lasting for around a century, the United States became the world’s manufacturing powerhouse – leading the world in the production of steel, automobiles and other products. Since the 1960s, another transformation has been taking place, as new service-based and information-processing industries gradually replace some of the old stalwarts of the traditional industrial base. By the 1990s, advances made in such fields as chemistry, electronics and biotechnology were producing goods and services ranging from semiconductor circuits to laser surgery. Similarly, new farming technology has transformed the American agricultural sector, allowing more food and fiber to be produced by a constantly dwindling number of farmers.

A third theme has been the continuous debate over international trade policy and, thus, over the degree of integration of the United States into the world economy. Trade was in many ways the linchpin of the colonial system: the export of the American commodities made possible the import of capital and machines for the expansion.

Each of these themes underscores certain fundamental characteristics of the American economy. First, the economy is changing continuously, as citizens freely express their economic preferences directly in the marketplace and indirectly in the voting booth. At the same time, the persistence of these themes over time reveals threads of continuity in the dynamic U.S. economy.

Historical retrospective

Among the European nations settling the New World, England was the most successful due in large part to its use of charter companies. Charter companies were formed of stockholders, usually merchants and wealthy landowners who hoped for personal economic gain and who perhaps wanted to advance national goals. But conditions were harsh, and profits were small; so the government left the colonies for the settlers – to build a new community and new economy.

Colonial prosperity was the result of trapping and trading in furs. In addition, Massachusetts prospered on the fishing industry. The large plantation of North and South Carolina and Virginia imported some luxuries – in return for tobacco, rice and indigo exports.

By the 18^th century, the New England colonies produced large-scale ship builders and ship operators; plantations in Maryland, Virginia and the Carolinas grew staple crops of tobacco, rice and indigo; and the middle colonies of New York, Pennsylvania, New Jersey and Delaware were shippers of general crops and furs. They were economically and politically ready to become part of the emerging self-government movement.

The U.S. Constitution, adopted in 1787, established that the entire nation – stretching from Maine to Georgia, from the Atlantic Ocean to the Mississippi Valley – was a unified or “common” market. It also provided that the federal government could regulate commerce with foreign nations and among the states; establish uniform bankruptcy laws; coin money and regulate its value; fix standards of weights and measures; establish post offices and post roads; and fox the rules governing patents and copyright. (The last items recognized the importance of “intellectual property”.)

Thomas Jefferson – who became president in 1801 – turned to promote agrarian democracy; farmers began to move westwards.

The migration consisted of three waves of settlers: first were the individualistic pioneers dependent on hunting and fishing (their living standards were low); second were people purchasing land, clearing fields from forests, building roads (their farms were largely self-sufficient); the third group consisted of people with equal or greater enterprise than those who preceded them and abundant stocks of capital (their farms were market-oriented, and their living standards were high).

New inventions of the Industrial Revolution greatly affected the U.S. Canals and turnpikes were build; the steam engine made it possible to improve river traffic; railroads expanded the trade areas. An amount of 53 million hectares of land were granted to railroad builders after the Civil War.

The second half of the 19^th century brought an explosion of new discoveries and inventions. Mining became significant after the 1850w; electricity was produced; telegraph and telephone connected the nation. Mass production was the inspiration of Henry Ford, who in 1913 adopted the moving assembly line in the production of automobiles.

Inventions:

1859 – Discovery of petroleum in western Pennsylvania;

1875 – G.F. Swift’s refrigerated railway freight car is in use;

1876 – Alexander G. Bell sends first telephone message;

1882 – Edison’s electric power plant start operation in New York;

1903 – The Wright brothers complete an airplane flight.

Business tycoons

America once idealized the businessman who amassed a vast financial empire, the business “tycoon”, the entrepreneur who not only made it big but mad it very big. His epoch was the second half of the 19^th century. It began with the spread of the railroad network in the 1850s, and it included the growth of Northern industry in the 1860s and the rise of investment banking in the 1870s. Throughout this period, business interests had significant influence over government.

Among the great tycoons were Jay Gould, J.P. Morgan, Andrew Carnegie, John D. Rockefeller, Henry Ford. Some of these men were honest, according to business standards of their days; others used force, bribery and quile to achieve their wealth and power.

Upper-class European intellectuals looked on commerce with disdain, but most Americans embraced the idea of moneymaking with enthusiasm.

By the time of the Great Depression few business barons remained; they were replaced by “technocrats”, who became the heads of corporations. The high-salaried manager replaced the business tycoon.

Today business leaders – though involved in many areas of public life – do not control the government, either openly or behind the scenes.

The 1930s are known as the years of the “New Deal”, which was the attempt of Franklin D. Roosevelt to improve the economic situation after the 1929 stock market crash. New Deal legislation extended federal authority in all fields, notably banking, agriculture, social security and public welfare. It gave attention to labor problems.

During the WWII the government intervened in the economy as it never had before. The War Production Board was created to coordinate the nation’s productive capabilities, so that military priorities would be met.

After the war there was a great fear of a new market crash. The postwar period showed steady economic growth. The sources of this growth were: the automobile industry successfully converted from making tanks and bombers; new industries – aviation and electronics; a housing boom stimulated by easily affordable mortgages for returning servicemen.

The 1960s were the years of establishing U.S. space exploration program to surpass Soviet achievements; expenditure on wars against Korea and particularly Vietnam; new welfare programs. But by the 1970s, economic prosperity was being eroded by persistent inflation – the 1973-1974 Arab oil embargo was one of the reasons. The dissatisfaction with the federal government’s policy resulted in election of R. Reagan.

The central theme of his national agenda was the limitation of government intervention into economy. Taxes were cut; environment expenditure was put on businessmen and industrialists; inflation was curbed. In 1992 a slow recovery of the economy began.

Budget deficit

One serious problem that hampered economic growth domestically and affects the United States’ ability to sell products overseas is the enormous federal budget deficit. Almost every year since 1930, the government has been spending more money than it has taken in. Deficit spending in the Reagan administration exceeded $200 billion a year – nearly three times greater than that of any previous administration. Such huge deficits can cripple the economy because they lead to inflation, high interest rates, and unemployment. One of the reasons for the value of the American dollar abroad which hurt the sale of U.S. products was these deficits.

Many experts blame the budget deficit for the sudden stock market crash in October, 1987, which caused a drop in markets all over the world.

Advances in telecommunications and transportation, the expansion of capitalism and democracy, and free trade agreements have resulted in unprecedented global economic and cultural integration. This has caused (and is continuing to cause) economic and cultural shifts which have been the subject of considerable controversy.

Law

In the US, the judiciary (a collective term for courts and judges) is divided into the national (federal) and state judiciary. The federal courts – and hence the Federal Bureau of Investigation, federal police and prisons – are involved only in matters outside the individual states’ jurisdiction (federal income tax, for example) and in cases arising under the US Constitution.

Nearly all cases involving disputes about property or divorce, or murder, theft, assault or traffic offences great and small, are dealt with by the relevant state’s hierarchy of city, county and state courts, police and prisons, in accordance with state law. Each state has s supreme court of appeal, but otherwise the systems vary.

There are about 100 Federal courts throughout the country, final authority resting in the US Supreme Courts. The Supreme Court meets in the Supreme Court Building in Washington, D.C. Above its main entrance appear the words “Equal Justice Under Law”.

The US Supreme Court is the highest tribunal in the US. It includes a Chief Justice and eight Associate Justices. They are all appointed by the President and approved by the Senate.

The Supreme Court is in session from October to June. The most interesting category is the agreement of the Constitution and state court system. If a person convicted by a state law system can produce evidence that the rights guaranteed by the Constitution were infringed by some aspect of his or her arrest, questioning or trial, a federal court can review that evidence and either uphold the sentence or overturn it. The Supreme Court also decides whether laws passed by Congress agree with the Constitution. If it is not so, the court declares the law to be unconstitutional.

There are various other Federal courts, including the district courts and courts of appeal.

The Courts of Appeals accept the facts sent up to them by the lower courts, and therefore do not need a jury. As a rule, the Court of Appeals sits with three judges together on the bench. Its principal duty is to protect the Supreme Court from routine cases.

At the ground floor are the District Courts with about 200 district judges scattered over the US. These courts handle both civil and criminal cases.

Each state has at least one district court, a few have as many as four. Each court has from one to twenty four judges depending on the volume of business, but each judge holds court separately. Judges are appointed for life by the President, or until they choose to resign, but in some states judges are publicly elected and hold office for fixed periods.

There are a number of special courts, such as the Court of Claims, the Tax Court, and the Court of Customs and Patent Appeals. They have been established to handle cases that are difficult for a judge to understand unless he devoted his whole time to this one type of problem.

The legal system is based on Common Law, brought across from England, and on the laws and ordinances passed by state legislatures. Anglo-American Common Law is based on the supposed reasonable person’s view of what is right and fair. Each decision creates a precedent, and for any particular case a court must, as far as practicable, follow a precedent set by a higher court’s previous decision.