Economic history of US: The Role of Colonial Economy Inheritance in the United States

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Economic History of the U.S
PART I
A: The Role of Colonial Economy Inheritance in the United States
The colonial economy of the U.S is linked to the British and other European settlers in North America from 16th to 18th centuries for economic gains. Before then, the entire North American continent was occupied by Native Americans who were indigenous. Native Americans, known as red Indians, migrated to America approximately 15,000 years ago from Asia. Although the discovery of North America by Europeans is linked to the Vikings in the 11th century, the activities of the natives went unnoticed. The main reason is that the European economy was based on land ownership, and agriculture and commerce had not gained its importance (Heilbroner &Aaron, 46). However, in the 14th century, trade assumed its importance, which provided Europe a need for further exploration. After Christopher Columbus discovered a ''New World' later in the 14th century, the Portuguese, Spanish, English, French, and Dutch explorers sailed towards the west in search of the then famous ''New World.'' For the next 100 years, all these explorers had set foot in North America, settled, and later settled as early colonies.
The colonial economy refers to the systems of the economy that was formed by the British to get the resources belonged to Indian subcontinents. Before the colonial economic inheritance, the economy of the United States was primarily farming and pre-industrial. Households majorly engaged in the production of goods for home consumption and only a few were sold. Colonial economic inheritance in the US leads to increased demand for labor and thus the production of goods. Cash crops such as tobacco which are considered to be New World cash crops made Europeans increasingly rely on Africans. In the United States, there were several economic impacts as a result of being colonized by the British people. The American land was rich in natural resources, but the labor was scarce. As a result, the British colonialists had to seek labor from other parts of the world, such as Africa. The United States’ economy greatly relied on subsistence farming. The British demanded labor for growing the new world cash crops, such as tobacco and sugar in the 1600s. The British brought changes in America as a result of their ideas and goods. The Americans inherited the slaves to propagate and improve their agricultural economy (Kirk). Slavery was profitable in the United States economy and facilitated economic developments. It was profitable because Americans were provided with free labor for growing their cash crops.
Although the English Puritans had already settled in Massachusetts, they were mainly pious and self-disciplined. Their main reason for setting up these new homelands was to escape the religious persecution that was going on in Britain at that time. However, by the 17th century, other settlers were not mainly motivated by piety; their main concern was commerce and new business ventures. Later on, the initial puritan colonists could no longer ignore the economic opportunity, especially after establishing the Plymouth Plantation. The formation of charted companies like the Jamestown colony was mainly composed of wealthy landowners, merchants, and other important stakeholders. All these stakeholders were inspired by their economic gains and probably wanted to quench their nationalism goals (Heilbroner &Aaron, 60). Through this economic approach, England became one of the most successful European countries in colonizing North America and more so the United States. Therefore, it is no doubt that the British colonial settlement and its development in the United States are what shaped the subsequent evolution of the economy after independence.
Most of the economic historians in the U.S have always viewed the whole issue of the colonial economy in two approaches. The first approach is based on the high land ration to labor that colonialists from Europe encountered in North America. Therefore, this approach is concerned with abundant natural resources, which led to increased productivity in agriculture. The rapid economic growth and high living standards for the colonialists led to rapid economic growth through unchecked natural increase and migration. The second approach focuses on the key exports' role as economic growth drivers in colonial America. The European demand for tobacco, indigo, rice, and other exports played a big role in the structure of the colonial economy in the U.S. since other models come along, the truth lies between these two scenarios. Qualitatively, the land was abundant in North America, making it easier for the Europeans to successfully establish agricultural lands, which eventually led to heightened marital fertility rates. From a quantitative perspective, the availability of food and fuel for local consumption had nominated the colonial economy of the United States.
According to Heilbroner &Aaron (51), colonial exports had amounted to roughly 10% of the economic activity in the 18th century. Therefore, this means that exports were needed for the colonial economies to survive. The most important aspect was that it allowed the British to expand their population and increase their commercial involvement with colonial America. By 1700, the colonial population had grown, which allowed for increased immigration and natural growth. Moreover, there was an increase in both exports and imports. To ensure that this mutual engagement between the British and colonial America lasted long, the British established several colonial institutions (Heilbronn &Aaron 107). However, the British colonies' social and economic structures brought inequalities in economic productivity due to the unequal distribution of the slave population. The establishment of these colonies alongside colonial companies ensured a long-lasting financial gain for the British both in overseas and in colonial America.
Initially, colonies used to be purely agricultural economies with little or no trading relationships. However, after the settlements by Europeans, the American colonial economy started to grow. This led to the development of more complex financial transactions, which meant that the financial system had to evolve. Therefore, the British colonists introduced gold and silver coins as the basic monetary system from their mother country. However, the colonies were not allowed to print or mint their coins. They were only allowed to acquire them through buying and selling of goods. The foreign exchange earnings were used to pay imports, and only a little money circulated within the colonies in America. Furthermore, the British merchants provided credit used to finance international trade since there were no financial institutions. However, by the 1750s, these merchants complained about the possibility of depreciation in colonial currencies compared to sterling pounds.
However, by the 18th century, there were notable regional developments across colonial America. For instance, the emergence of shipbuilders in New England while in Maryland, Virginia, and New Jersey produced staple food crops through plantation farming. In all these colonies, living standards improved more than in England; this made colonial investors leave, thus opening up the American economy to local investors. By 1770, colonial America was both politically and economically stable to establish its government. Disputes over taxation, oppression, among other factors, led to a few Americans believe that these wrangles would lead to independence (Heilbroner &Aaron 121). Although the American Revolution was political, economic advancements in their colonies played a bigger part. The majority of the emerging middle class were also advocating for the right to life and liberty. The American War of independence between which lasted up to 1783, led to the signing of a peace treaty between the British and Americans. The pact led to the declaration of freedom of the U.S. Although there were many challenges during the initial stages, the colonial economic inheritance was based on lessons learned from colonial dominance years.
B: The Impact of the U.S Government on the Economy 1789-1860
In 1787, the U.S adopted a new constitution, which is still used today. The constitution unified the entire country into a common market. Therefore, there were no taxes or tariffs on any economic activities that involved interstates. Furthermore, the same constitution mandated the federal government to regulate national and international trade, mint money, and establish bankruptcy laws, among other roles. The founding fathers of the nation like Alexander Hamiliton and George Washington advocated for economic development. Their views emphasized upholding the federal government in nurturing local industries by establishing protective tariffs. Additionally, these founding fathers urged the governable establishment to assume the public debts incurred during the colonial period. Therefore, through the leadership of visionary founding fathers, America successfully transitioned its economic prosperity. For an instant, Thomas Jefferson’s philosophy transition it transitioned from prosperity and political tyranny (Heilbroner &Aaron 107). Therefore, his main focus was on the common man rather than the rich people who had gained their wealth during the colonial era.
The United States’ economy was greatly expanding in the 19th century. This was attributed to immigration, industrialization, territorial expansion, and new innovations. The United States government adopted the laissez-faire approach, which restricts government intervention in the economy. This approach gave businesses flexibility and autonomy that kept them away from government rules and regulations that make business activities difficult to proceed. Some of these rules and regulation included protectionism and antitrust laws. Protectionism is a policy of the government that limits international trade (CFI). The approach helped American businesses to carry out international growth, which influenced the expansion of the economy. During the 1780s, the American economy was highly affected by the war and therefore most lives were touched. There was also a high debt level taken by the American government to fund the war and these huge debts. There was an extension of payment terms and the law indicating conviction of law defaulters was lifted also added to the economic crisis. To curb the crisis, the American legislators passed laws that would allow farmers to settle their
The U.S. economy started to expand after the 1812 war and there was a creation of center for grains and pork. Manufacturing, especially in the textile industry, also led to the industrial revolution. There was an establishment of the U.S. first bank in the year 1791 which also expanded the financial system. Antitrust laws of the laissez-faire approach aimed at opposing monopolies in the economy (CFI). These laws encouraged and fostered competition in the market, hence improving the performance of the market. The competition also lead to industrial growth and created more job opportunities in society. Laissez-faire approach facilitated inventions and innovations in the United States’ market. This led to the production of new goods as companies sought to be competitive in the market.
The economic problems that the U.S government faced in the 1780s touched on most Americans' lives. The revolutionary war that brought independence had disrupted the economy. For instance, the British Navy had destroyed American ships, thus disrupting her trade overseas. Furthermore, both sides' armies were rooted from local farmers, leading to a food shortage (Egnal 155). Thus, the economic crisis became a threat to individuals and the stability of the new U.S republic. Therefore, the U.S. government had to make tough decisions to respond to this economic challenge. The state governments developed and passed laws that would eventually help farmers deal with high debt levels. Thus, the period of debt repayment was extended. However, these laws outraged those that were expected to be paid by the debtors and other political conservatives. Therefore, it meant that the crisis threatened and kept the U.S economy's future in jeopardy (Heilbroner & Aaron 114). By 1800, the country had already been divided on political grounds and an economic imbalance created by the new laws.
However, the U.S government established commercial agriculture and domestic manufacturing as the American sector's foundation in 1793. For instance, Eli Whitney’s cotton gin had already taken control of the southern region's entire cotton industry. Furthermore, the antebellum era marked the emergence of cotton, rice, and tobacco as the South's main crops (Egnal 160). The acceptance of slave labor by the U.S government enhanced further advancements in the agricultural and manufacturing sectors, which were pivotal to its economic growth. Moreover, the government strengthened their economic development by allowing inventions like the horse-pulled plows, which replaced the wooden oxen-pulled plows. The introduction of the American System by Congressman Henry Clay led to the opening of the national bank. Furthermore, in corroboration with the private investors, the Federal and State governments invested in railroads, canals, and roads (Egnal 161). For instance, the Erie Canal's completion in 1825 opened trade between the western and the eastern regions of the U.S. the government was more concerned about establishing a productive economy that would eventually boost the social and political lives of its citizens.
C: The American Civil War
From the 1790s to the 1800s, America was marked by an era of ideological differences that came to be known as the era of mixed feelings. Economic hardships triggered the aftermath of all these mixed feelings. Furthermore, the vision of Thomas Jefferson became a nightmare. Before the war, there was a serious conflict of interests between the northern and the southern states due to the antebellum era (Heilbroner &Aaron 149). However, the American economy had grown at a very high rate before the civil war. The reason was the new agricultural specialization resulting from the industrial revolution between the northern and southern states. The U.S civil war marked a very important milestone in the past of America. Furthermore, it led to the unification of the country and eventually led to the freeing of slaves. However, the four years of civil war in the U.S changed the county's economic milestone while maintaining some similar aspects of the same economy before and after the war.
Firstly, the American civil war was expensive; the main evidence lies in the U.S. national debt before and after the civil war. In 1789 when George Washington got into power, the national debt had amounted to $65 million instead of $77 million when he took office. Therefore, it means that the U.S was handling two wars and still reduced its national debt (Heilbroner &Aaron 151). Secondly, more than 4 million slaves' emancipation led to approximately 2 billion dollars in the southern plantation farmers. This led to the decline of cotton production as an outcome of the expiration of slavery. Furthermore, the Civil War contributed to the destruction of the banking system in the southern approach, leading to eliminating the antebellum capital stock (Heilbroner &Aaron 155). Therefore, the sudden disappearance of both labor and capital destroyed the southern agricultural sector. The following tables illustrate the economic costs incurred as a result of the civil war in the U.S.
Furthermore, the pensions of the Civil War shaped the political life of the U.S. for many years. For instance, the Northern states hugely profited from pension dollars at the expense of the Southern states. Thus, this continued to keep the tensions high even after the war. Additionally, the republicans were blaming the democrats for more than 620,000 lives lost during the war. The pension system was termed as corrupt due to the conflict of interests from various congressmen. However, the economic impacts of the Civil War went beyond the pensions. President Lincoln signed a bill that established federal subsidies for the establishment of transcontinental roads (Heilbroner &Aaron 180). Lincoln also helped in subsidizing the railroads that later connected all the cities in Illinois. Apart from transportation, the Morrill Act of 1862 was enforced by the government. Through this Act, the government gave 17 acres of national land to the states to establish agricultural and science colleges.
D: The Gilded Age
The Gilded Age, a period in the 19th century, stretching from the early 1970s to 1900s, was characterized with political scandals, tensions and massive corruption. It was also a period of rapid economic growth, and the United States almost doubled its Growth Domestic Product. Small scale businesses grew larger, and by the end of the century, the economy was being dominated by a bunch of very powerful businessmen. Business competition became ruthless, which saw some merchants driven into bankruptcy or were forced to sell their businesses to the successful industrialists.
The chief political disputes of the Gilded Age involved currency reforms, tariffs, and civil service improvements. Economic issues during this period of the late 19th century (Gilded Age) were unemployment, poverty, and corruption. During this period, there was a rapid growth in the industrialization sector which led to rapid economic growth. American wages thus grew much higher compared to that of Europe causing European immigration. Conversely, increased poverty rates also facilitated immigration. The Gilded Age issues were resolved when the Republican Party decided to support industries and businesses through imposing hard monetary policies. The party of Democrats opposed the new rules but eventually adopted a free silver platform. The changes made in tax rules created an instrument for the reform. Rules of politics also changed and required the elected officials to rely on wealthy donors in order to survive politically. The massive economic growth was characterized by unhealthy and dangerous working conditions for the employees. Most industrialists were profit-driven and took little or no concern for the welfare of their employees. What resulted were terrible work accidents which forced the employees to form unions to combat and confront the challenges and difficulties they faced. The unions, however, won few cases.
In addition, there were many instances of corruption by the government as political leaders took huge bribes from corporations and also claimed kickbacks. Railroads were at the forefront of political corruption. For example, the Union Pacific Railroad was a company that submitted bills double the cost for the construction of the Transcontinental Railroad. The leaders used the remainder of the money for their benefit. Most public officials did not depend on wages but on cut off taxes and fees they collected from different corporations. This made them highly susceptible to corruption. The Whiskey Ring scandal was another example of a corruption case during this era. The federal agents underreported sales to dupe the administration of excise tax revenue. It was not until the 20th century that bureaucracy brought justice which saw decline to the Gilded Age corruption. Political corruption as reported by Muckraking paved way for enforcement of reforms by the President Theodore Roosevelt. These reforms were supposed to cut across tax, election modifications, and limitations on corporate power.
Economic Issues
The Gilded Age, also known as the period of reconstruction, is when America's economy grew at the fastest speed ever in the country's history. The period was evident with the economic, technological, government, and social transformation of America. The Gilded Period followed after the civil war that had been fought for four years. By the conclusion of the Gilded Age, America was at the top of the world with one of the strongest economies and leading the industrialized nations. One of the notable transformations was the unprecedented expansion of major cities across the globe (Heilbroner &Aaron 191). Furthermore, there was an increase in population; for instance, Chicago's people increased tenfold from 1870-1900. Some of the major technological advancements included skyscraper, car, linotype, machine, electric motors, and telephone. These innovations became the foundation for modern industrial production. Furthermore, the period saw many new corporations that gave rise to multi-millionaires and ultra-rich individuals.
The rapid expansion of industrialization led to approximately 60% of wages between 1863 and 1890. Furthermore, the average annual salary per industrial worker improved from $380 in 1880 to $564 in 1894. However, the Gilded Age was also an era with inequality and abject poverty because many impoverished Europeans migrated to the U.S. The same immigration led to the rapid growth of the mining, ranching, and farming sectors (Heilbroner &Aaron 193). Furthermore, more labor unions came into existence due to the rapid growth of industrial cities. During the 1873 and 1893 national wide depressions, there were interruptions in the social and political set up. For instance, the South had remained devastated following the impacts of the Civil War. The southern economy was only tied to tobacco and cotton production, which had suffered from low prices.
The United States’ economy transformed in several ways after the Civil War. The civil war resulted in the abolition of slavery and firm redefinition of the United States as one nation that was indivisible (Hummel). Abolition of slavery led to increased labour stock on per capita basis. This led to an increase in production in the economy, hence making the United States rich. The Civil War led to the construction of roads and towns, which resulted in the improvement of the commercial activities (Arrington). Here, the farm products could easily be transported to the market. After the Civil War, America transformed from an agricultural economy to an industrial economy. This was brought by the introduction of power-driven machinery and other energy sources. There was also the introduction of the steam engines, large-scale equipment, and the textile mills. Also, by the completion of the Civic War, the United States was no longer classified as a third-world country.
Nevertheless, there were also several things that remained the same, even after the Civil war. The rich and poor remained the same even after the Civil War. This meant that there was no change in economic mobility. Economic mobility refers to the ability of a person or a group of people to change their economic status, especially based on the level of income. Economic mobility implicates the movement of income in the economy. Also, income and wealth inequality remained the same after the Civil War. There were cases of lower wages, which resulted in less productivity as it was before the Civil War. The income and wealth inequality was as a result of differences in education, unemployment, ownership of financial assets, inheritance, experience, and type of job. These differences existed before the Civil war and could not be solved.
After the civil War, the livelihoods of the slaves and planters were transformed. There was increased production of farm products due to the mechanization of farming. Also, the improvement of commercial opportunities, as well as town construction along the road emerged. Industries began to expand due to a good road network connecting the industry and the farmer. Consequently, financial bills passed by congress had a major impact on the monetary systems of the Americans. The industrialization that emerged led to urbanization and immigration which was not the case before.
Political issues
Apart from economic implications, some significant political issues took place during the Gilded Age. For instance, there were very stiff contests between the Republicans and the Democrats across the nation. Moreover, there was the rise of the Third Party political campaigns that rose from labor unions and the farmers. Congress was famous for being very ineffective, and its members were preoccupied with extra-governmental affairs. Furthermore, during this period Republicans like Abraham Lincoln and Franklin Roosevelt controlled the Whitehouse in 1860 and 1933. The Republicans continued to blame the Democrats to have caused the Civil War. The Republican Party was known as the party of business because it supported money policy and transportation improvements. The Republicans formed the northern parts of the U.S though they were divided into the Stalwarts and the Half Breeds, they only despised each other; they never differed on issues.
On the other hand, the Democrats were known as a southern party even before the Civil War. By 1900 the Democrats had taken control of the southern states. However, they did not manage to elect a candidate to the White House. The only presidential candidate they managed to elect was Grover Cleveland, who was elected in 1884 and 1892. During the same age, neither the Democrats nor the Republicans were willing to take strong stands on important voters (Heilbroner & Aaron 200). The main political concerns during the Gilded Age were currency reforms, tariff, and civil service reform. The currency and tariff reforms were the businessmen's interests who lobbied to gain support for favorable tariff registration freely. On the other hand, the Civil service reform was an extensive national response to the proliferating corruption during the Gilded Age. The main purpose of the protective tariffs was to support American industries and businesses. The currency reforms ensured that the money that was in circulation determined its value.
PART 2: Essay
Introduction
The economic history of the U.S has undergone one of the roughest and challenging journey compared to other countries. During the 1780s, the American economy was highly affected by the war and therefore most lives were touched. The colonial economy became the basis of the economic development of colonial America. One of the most long-term debates of American economic history revolves around the private and public sectors' relative roles. Furthermore, the free enterprise system of America stresses on reserved possession of property, whereby private companies and businesses produce a bigger percentage of goods and services in the economy. Almost two-thirds of the economic production is mainly channeled to individual use (Heilbroner &Aaron 200). Currently, the United States economy generates approximately 15 trillion dollars a year in goods and services, making it one of the world's largest economies. The term market economy is used to describe an economy that applies forces of demand and supply to dictate how resources are allocated while a planned economy is a type of economy where the government defines what is to be produced and at what price. 
In a market economy, producers expect that whatever is in the market is what they want; thus, they decide on the products' prices. Market economies encourage competition, which leads to reduced costs for goods and services. However, in a planned...