U.S. Economic HistoryU.S. Economic History

MercantilismMercantilism

Trade benefits Mother countryTrade benefits Mother country Colonies supplied cheap Colonies supplied cheap raw materialsraw materials Mother country provided expensive Mother country provided expensive

manufactured goodsmanufactured goods

Lack of strict enforcement encouraged Lack of strict enforcement encouraged colonies to develop profitable trade by colonies to develop profitable trade by smuggling… smuggling… Salutary neglectSalutary neglect

The Constitution: The Constitution: An Economic Document An Economic Document((Federal Government’s Economic Jobs)Federal Government’s Economic Jobs)

Protect Protect private propertyprivate property Regulation of Regulation of interstate & foreign tradeinterstate & foreign trade May May tax imports (tariffs)tax imports (tariffs), but never tax , but never tax

exportsexports Uniform Uniform currencycurrency Issue Issue patents and copyrightspatents and copyrights

Creation of a National EconomyCreation of a National Economy

Hamilton’s Financial PlanHamilton’s Financial Plan Bank of the U.S.Bank of the U.S. Tariff to protect infant industriesTariff to protect infant industries Federal assumption of state debt Federal assumption of state debt →good credit→good credit Excise tax (on Whiskey…leads to Whiskey Rebellion)Excise tax (on Whiskey…leads to Whiskey Rebellion)

Decisions of the Marshall CourtDecisions of the Marshall Court McCulloch v. Maryland- ok to use elastic clause McCulloch v. Maryland- ok to use elastic clause

(bank)(bank) Gibbons v. Ogden – federal regulation of Gibbons v. Ogden – federal regulation of

transportation (interstate commerce)transportation (interstate commerce) Dartmouth College v. Woodward- uphold terms of Dartmouth College v. Woodward- uphold terms of

contract – not even gov’t can interferecontract – not even gov’t can interfere

Factors Encouraging Economic Factors Encouraging Economic Growth in USAGrowth in USA

ResourcesResources/Land/Land CapitalCapital to invest to invest LaborLabor

SlaverySlavery Immigration – no restrictions until 1882Immigration – no restrictions until 1882

Completion of Completion of Transcontinental RailroadTranscontinental Railroad

Business ConsolidationBusiness Consolidation(late 1800’s – early 1900’s)(late 1800’s – early 1900’s)

Proprietorships & Partnerships Proprietorships & Partnerships → → Corporations Corporations Advantages of corporations:Advantages of corporations:

Rise of monopolies (pools, trusts, holding Rise of monopolies (pools, trusts, holding companies)companies) Problems caused by monopolies: higher Problems caused by monopolies: higher

consumer prices; lower wages; poorer working consumer prices; lower wages; poorer working and living conditions, widening gap between rich and living conditions, widening gap between rich and poor, etc.and poor, etc.

Regulation of BusinessRegulation of Business

Interstate Commerce Act (1887)Interstate Commerce Act (1887) To regulate railroadsTo regulate railroads Created Interstate Commerce Commission to Created Interstate Commerce Commission to

enforceenforce

Sherman Anti-Trust Act (1890Sherman Anti-Trust Act (1890)) To restore competition in all businesses in the To restore competition in all businesses in the

form of a trust in restraint of tradeform of a trust in restraint of trade

Rise of Labor UnionsRise of Labor Unions

Attempts to Organize Attempts to Organize UnionsUnions Knights of Labor (Powderly)-Skilled & Unskilled in same unionKnights of Labor (Powderly)-Skilled & Unskilled in same union American Federation of Labor (Gompers) – craft unions, “bread American Federation of Labor (Gompers) – craft unions, “bread

& butter unionism”, closed shop& butter unionism”, closed shop

Early Strikes – UnsuccessfulEarly Strikes – Unsuccessful Haymarket AffairHaymarket Affair Homestead Steel StrikeHomestead Steel Strike Pullman StrikePullman Strike

Government Actions – Anti-LaborGovernment Actions – Anti-Labor Use of federal troopsUse of federal troops Use of injunctionsUse of injunctions Use of Anti-trust laws against unions in restraint of tradeUse of Anti-trust laws against unions in restraint of trade

PopulismPopulism

Problems of the FarmersProblems of the Farmers OverproductionOverproduction High operating costs (machinery, technology)High operating costs (machinery, technology) Cycle of debt (mortgages, repay loans)Cycle of debt (mortgages, repay loans)

Granger LawsGranger Laws States attempted to regulate railroadsStates attempted to regulate railroads Supreme Court casesSupreme Court cases

Munn v. IllinoisMunn v. Illinois Wabash v. IllinoisWabash v. Illinois

Federal government passed Interstate Commerce ActFederal government passed Interstate Commerce Act

Populist PartyPopulist Party

PlatformPlatform Unlimited coinage of Unlimited coinage of silversilver Direct election Direct election of US Senatorsof US Senators Graduated Income TaxGraduated Income Tax Government ownership of Railroads, telephone, & Government ownership of Railroads, telephone, &

telegraph systemstelegraph systems

Election of 1896Election of 1896 McKinley v. BryanMcKinley v. Bryan ““Cross of Gold” speechCross of Gold” speech Significance of election?Significance of election?

Progressive Era ReformsProgressive Era Reforms(1900 – 1920)(1900 – 1920)

TrustbustingTrustbusting To restore competitionTo restore competition TRooseveltTRoosevelt made it popular made it popular

Graduated Income TaxGraduated Income Tax Fair – based on ability to payFair – based on ability to pay

Federal Reserve ActFederal Reserve Act Manage nation’s money supply (interest rates, reserve Manage nation’s money supply (interest rates, reserve

requirement)requirement)

Conservation Conservation of Natural Resourcesof Natural Resources TRoosevelt – national concern to protectTRoosevelt – national concern to protect

Propsperity of the 1920’sPropsperity of the 1920’s

Mass Production Mass Production (Age of the Automobile)(Age of the Automobile) Radio and Advertising Radio and Advertising →more uniform →more uniform

cultureculture Buying on Credit Buying on Credit – installment plan– installment plan Supply-side Economics – “Trickle-down”Supply-side Economics – “Trickle-down” Speculation in stocks & real estateSpeculation in stocks & real estate

Causes of the Great DepressionCauses of the Great Depression

OverproductionOverproduction UnderconsumptionUnderconsumption High tariffsHigh tariffs Buying stocks on marginBuying stocks on margin Unsound banking practicesUnsound banking practices World-wide depressionWorld-wide depression Crash of the stock marketCrash of the stock market

Effects of the Great DepressionEffects of the Great Depression

↑ ↑ unemployment (25% +)unemployment (25% +) Businesses closedBusinesses closed People lost homesPeople lost homes Hoovervilles, Hoover blankets, breadlines, Hoovervilles, Hoover blankets, breadlines,

soup kitchenssoup kitchens President Hoover’s policies associated President Hoover’s policies associated

with worsening conditions (with worsening conditions (Bonus ArmyBonus Army, , lack of direct gov’t relief)lack of direct gov’t relief)

The New DealThe New Deal

The The 3 R’s3 R’s ReliefRelief – to provide immediate help to stop – to provide immediate help to stop

sufferingsuffering RecoveryRecovery – to get economy moving in the – to get economy moving in the

right directionright direction ReformReform – lasting changes so this would never – lasting changes so this would never

happen againhappen again

Lasting Effects of the New DealLasting Effects of the New Deal

Government responsible for “economic well-Government responsible for “economic well-being” of U.S.being” of U.S.

Safety Net programs to prevent economy from Safety Net programs to prevent economy from total collapsetotal collapse Social SecuritySocial Security Tennessee Valley AuthorityTennessee Valley Authority Federal Deposit Insurance Corporation (FDIC)Federal Deposit Insurance Corporation (FDIC) Securities & Exchange Commission (SEC) to regulate Securities & Exchange Commission (SEC) to regulate

the stock marketthe stock market

World War II and the Post-War World War II and the Post-War ProsperityProsperity

War-time EconomyWar-time Economy US – US – “Arsenal of Democracy”“Arsenal of Democracy” Rosie the Riveter – role of women & minoritiesRosie the Riveter – role of women & minorities RationingRationing

Post-War ProsperityPost-War Prosperity Consumerism/MaterialismConsumerism/Materialism The Marshall Plan The Marshall Plan – economic recovery of Europe– economic recovery of Europe Move to the Move to the suburbssuburbs

The Great SocietyThe Great Society(LBJ – 1960’s)(LBJ – 1960’s)

War on PovertyWar on Poverty MedicareMedicare Federal Aid to EducationFederal Aid to Education Job Corps/On-the-Job TrainingJob Corps/On-the-Job Training

ReaganomicsReaganomics(1980’s)(1980’s)

Supply-side economics – Supply-side economics – “Trickle down”“Trickle down” Deficit spendingDeficit spending ↓ ↓ government regulationgovernment regulation ↑ ↑ military spendingmilitary spending ↑ ↑ national debtnational debt

Shift to Service-Oriented EconomyShift to Service-Oriented Economy

Fewer Fewer ManufacturingManufacturing Jobs Jobs Closing of steel plantsClosing of steel plants Robotics on the assembly lineRobotics on the assembly line Need for educated, flexible workforceNeed for educated, flexible workforce

Computer RevolutionComputer Revolution Improved manufacturing techniquesImproved manufacturing techniques Access to databasesAccess to databases Internet accessInternet access

Free Trade AgreementsFree Trade Agreements

NAFTANAFTA (North American Free Trade Agreement)(North American Free Trade Agreement) US-Canada-MexicoUS-Canada-Mexico

GATT GATT (General Agreement on Tariffs & Trade)(General Agreement on Tariffs & Trade) Attempt to reduce tariffs and promote trade on world-wide basisAttempt to reduce tariffs and promote trade on world-wide basis