The economic history of the United States can be traced back to the 16th, 17th, and 18th centuries when the American colonies progressed from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America.
Due to the presence of a large unified market, a supportive political-legal system, vest swears of highly productive farmlands, vast natural resources (especially timber, coal, and oil) the United States grew in 230 years to be a huge economy that makes up over a quarter of the economy of the world.
The Great Depression of the 1930s saw United States slide into recessions which were viewed as the greatest economic threats. The government sought to strengthen the economy by spending heavily itself or cutting taxes so that consumers would spend more.
In the 1970s a strong fear of inflation was created by the Vietnam conflict and so the government leaders started concentrating more on controlling inflation than on combating recession. In the 1960s the government had faith in fiscal policy (manipulation of government revenues to influence the economy) as a tool for stabilizing the economy.
However, a period of high inflation unemployment and huge government deficits weakened confidence in this policy, and instead, monetary policy became prominent. The worst recessions in terms of lost output occurred in 1973-75 and 1981-82. In 2006, the U.S. economy had its lowest saving rate since 1933 (Gordon, J. S., 41,56). This has raised concerns among economists and national politicians.
As of January 30, 2008, the total US federal debt was approximately $9.20 trillion. While the US national debt is the world’s largest in absolute size, a more convenient measure is that of its size relative to the nation’s GDP. Measured this way, it is considerably less than those of other industrialized nations like Japan. As of the end of 2006, gross U.S. liabilities to foreigners stood at $16.3 trillion while her Net International Investment Position deteriorated to a negative $2.5 trillion.
There is a significant disagreement about poverty in the U.S. One group of advocates claims that the US has eliminated poverty over the last century while another one claims that the US has a serious poverty crisis. On income equality, the U.S is ranked 73rd out of 126 countries with her Gini coefficient at 4.5 in 2007, according to the CIA. Business decisions, federal government policies, and Federal Reserve decisions are to a large extent determined by the predictions made about the U.S. economy (American Institute for Economic Research).
The US economy maintains a relatively high GDP per capita, with the caveat that it may be elevated by borrowing, a low to moderate GDP growth rate, and a low unemployment rate making it attractive to immigrants worldwide (Gordon, J. S. 138). Reliance on private decision-making in economic decision-making is a central feature in the US economy.
The low levels of regulation, taxation, and government involvement enhance this. The U.S government plays an important role in molding the economy. It does this through regulation and control of private enterprises, offering direct services and direct assistant.
In 2008 the U.S got into an economic crisis which was caused by the weakness of the US dollar, increasing oil prices, subprime mortgage crisis, and the stock market downturn. Speculation and the collapse in the value of the US dollar may have caused the recent increases in global food prices.
Works Cited
Gordon, J. S. An Empire of Wealth: The Epic History of American Economic Power (2004)
A Monetary Chronology of the United States, American Institute for Economic Research.