Transcript The US Economy

The US Economy
A brief analysis of the world’s largest
economy
by John Birchall
Bishops Stortford College
A brief economic history
• For 100 years after
Columbus traders
journeyed to New
World
• Pilgrims arrived in
Massachusetts and
more business minded
people made their
home in Virginia
• Charter companies
began to exploit the
resources of East US
• Settlers developed
own interests and
structures
• Industry began with
farming, some
plantations and
exports of rice,
tobacco and dyes
Brief history - 2
• Supportive industries
then appeared e.g saw
mills, ship
building,iron forges.
• Plantations, using
slave labour started
• Living standards
began to be better than
in UK
• By 1770 selfgovernment wanted
• War of Independence
won and New Nation
emerged in 1787
• Adopts new
constitution. New
nation from Maine to
Georgia - a common
market
Brief history - 3
• Federal government
provided the legal
framework and States
developed within this
• Intellectual property
recognised
• tariffs imposed to
protect infant
industries
• First National Bank
started in 1791
• With invention of
cotton gin the trade
boomed
• Moved economy south
and westwards
• National roads and
waterways created at
start of nineteenth
century
Brief history - 4
• Steam boats start to
run over larger
distances
• railroads arrive
• foreign capital
attracted and
industrialisation
begins
• By 1860 16% of
population living in
cities
• one third of national
wealth created by
manufacturing
• Immigrants start to
arrive in large
numbers
Brief history - 5
• South remained more
rural
• Northern victory in
civil war determined
future direction of
economy
• end of slave labour
• planter power
diminishes
• Industrialists begin to
control economy
• discoveries, such as oil
drive new nation on
• typewriter invented,
telephone,
phonograph, electric
light bulb,
refrigeration on
railroads
Brief history - 6
• Industrial
• Rich business men
infrastructure develops
became national
e.g coal, iron mines,
heroes
copper, silver lead and • fierce competition and
cement factories
some questionable
emerge
tactics
• mass production starts • government begins to
• scientific management
react to business
Brief history - 7
• Gospel of work and
thrift
• philanthropic gifts to
universities etc
• risk and excitement
deliver increases in
living standards
• corporations emerge
• New management elite
start to appear
• the Gilded Age moves
into twentieth century
• largest economy in
world
• little foreign
involvement
The role of government
• In early years Federal
government only in
transport
• laissez-faire economy
• begins to change in
latter part of
nineteenth century
• farmers start to ask for
help
• Fear of corruption in
government starts new
political movements
• Railroad Act in 1887
and government
begins to create
Federal Agencies e.g
Food and Drug
Administration
The role of government - 2
• The New Deal of
1930’s deepens
government
involvement
• Federal authority
extended into banking,
agriculture and public
welfare
• minimum wage
established
• Securities and
Exchange
Commission started
• Social Security system
introduced
• More central control
introduced throughout
1930’s and during war
The post war economy - 1
• Consumer boom
followed peace
• Not depression some
feared when war
spending ended
• GNP up from
$200000m in 1940 to
$300000m in 1950 to
$500000m in 1960
• Military spending
continued as Iron
Curtain emerged
• Marshall Plan
• Employment Act 1946
‘ promote maximum
employment,
production and
purchasing power.’
Post war economy - 2
• Consolidation in
business communications,
hotels, insurance, car
rentals
• by 1956 majority of
workers in whitecollar jobs
• unions win good terms
of employment
• Agriculture faces
tougher times
• By 1998 just 3.4 m in
agriculture had been
7.9m at end of war
• suburban migration
grows
• air conditioning
becomes popular
Post war economy - 3
• ‘Sun belts’ e.g
Houston grow in
popularity
• shopping malls begin
to flourish
• industry begins to
move ‘out of town’
• New, powerful states
emerge in place such
as Florida, Georgia,
Arizona and Texas
Post war economy - 4
• 1960/70’s times of
considerable change
• new nations, insurgent
groups, challenges to
US supremacy
• Kennedy era - New
Frontier.
• Space, Peace Corps,
help for elderly
• Post Kennedy Johnson
wanted a Great
Society
• Medicare, Food
Stamps, increased
military
expenditure/Vietnam
• But government
revenues do not rise
Post war economy - 5
• Rising inflation,
OPEC problems, rises
in unemployment,
Federal deficits up,
foreign competition
increases, stock
market sags
• Fear that nation is
losing control. Nixon
goes
• Imports up, trade
deficit grows.
• Stagflation becomes
the new problem
• expectations push up
prices, higher wages
follow, labour
contracts have ‘cost of
living’ clauses
Post war economy - 6
• Government spending
rises to protect
vulnerable
• economy sees prices
rise and
unemployment
• Carter tries to break
spiral
• De-regulation starts
e.g airlines
• Federal Reserve Board
clamps down on
inflationary trends
• control of money
supply
• interest rates rise,
recession follows
Post war economy - 7
• Recession deepened
into 1982
• Cycle broken by early
1983-prices fall,
growth returns
• Reagan bases polices
on supply-side
doctrine
• Lower taxes, more
savings, more
investment, more
output, overall
economic growth
• Federal government
too big - Reagan
• Increase military
spending
Post war economy - 8
• Federal budget swells
to -$221000m in 1986.
• But not all winning farmers lose,
especially in drought
areas, banking crisis,
some fear it will all
end in pain
• External push in
policy - communism
falls
• Asia - beginning to
hurt US supremacy
• ‘Corporate raiders’
strike in US, as stock
prices are low
Post war economy - 9
• !990’s see Clinton
elected
• declares end of big
government and fails
with Medicare reforms
• opens -up markets e.g
local telephone
services
• Reduces welfare
benefits
• Fall of USSR and
satellite states open up
new business
• Dow Jones end decade
on 11000, had been
1000 in 1979
Post war economy - 10
• Framing continues to
decline
• service sector expands
• deficit peaks in 92 and
falls
• New Economy? Low
inflation, high
employment, high
growth?
• US grows in its
interdependence with
global economy
• NAFTA formed. Look
to EU as base for
sourcing markets
• Decade ends with new
feeling of confidence
Conclusion
• Economy grew from
February 91 till end of
decade - longest in
peacetime
• unemployment just
4.1% of workforce lowest for 30 years
• inflation low
• Growth high
• global presence
expanding
• Asian markets suffer
downturn
• US in good shape and
confident
• Major locomotive
economy in world