Explain the difference from 1776 until present times in terms of structure and the institutional side of things. Essay
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Explain the difference from 1776 until present times in terms of structure and the institutional side of things. Discuss the positive influences and effects that structure in accordance to the rule of law and contracts have brought to the American economic society?
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The economic history of US has roots in early European settlements of 16th and 17th centuries. The American colonies progressed from small and successful colonies to an independent economy in 1776; which became United States of America. The US Constitution of 1787 provided a common market for the nation stretching from Maine to Georgia and Atlantic Ocean. Alexander Hamilton was the first secretary of treasury who advocated a strategy, where federal government created a strong national credit system.
He proposed many measures, such as protective tariff to pay the cost of government along with tax on whiskey. He was also able to create the First Bank of United States in 1791. Thomas Jefferson instead sought to protect the common man from rising economic tyranny and on becoming president he decentralized the economy in early 1800s. President Andrew Jackson (1829-1837) opposed the renewing Second Bank Charter.
In 1793 Whitney’s invention allowed to separate raw cotton from seeds and other waste; which allowed greater plantations supported by large slave kind of labour. Millions moved to fertile West and US government created national roads and waterways including the Cumberland Pike and the Erie Canal (1825) that helped the new settlers to move products to the market easily.
The new inventions and capital invention led to the creation of new industries. The improved transportation improved the new markets especially the railroads linked the markets and companies efficiently.
In 1861 Abraham Lincoln pushed for the adaptation of a protective tariff and in 1863, establishing first national banking system. The Congress enacted the Interstate Commerce Act in 1887 to prevent large firms from controlling a single industry. Another such Act was the Sherman Antitrust Act in 1890. Many of US regulatory agencies, such as the Interstate Commerce Commission and Federal Trade Commission were created during early 1900s. The federal government also enforced new regulatory reforms in Food and Drug Administration to breakup monopoly in business.
As the US economy grew larger, new methods of mass productions were developed. Taylor pioneered the field of scientific management and created a system of efficient working. The development of electricity allowed the factories to switch from stem to electricity; which improved efficiency and reduced energy loss and higher productivity.
In 1913, Sixteenth Amendment was ratified .The income tax was instituted in US; which gave rise to higher public spending. President Wilson created the Federal Reserve, which is a complex business –government partnership for the development of US economy. President Harding cut the high wartime taxes and used large surplus to reduce the federal debt in 1920s and 1930s that helped in regulation of businesses. During 1929 and 1941, US was in economic depression. President Hoover passed massive tax increase to boost the sagging federal revenue but it did not help. It was only the WWII that helped to pull back economy on feet. After WWII, The Council of Economic Advisors was established. The basic intention of this council was to analyse and implement domestic and international economic policy issues. The council made five advances in policymaking and recommended, a cyclical model of economy compared to a growth model. It also set quantitative targets for economy; use of theories and flexibility in taxation and treated unemployment as supply and demand issue rather than a structural problem.
The deregulation movement started; when President Nixon left office. There was bipartisan operation under Ford, Carter and Reagan to boost the US economic structure. The important changes during these times were removal of the News Deal regulations from energy, communication transportation and banking. In 1982 Reagan cut federal income rate by 25 percent that helped in reducing inflation from 13 percent to 3 percent annually. The Clinton Administration introduced welfare reforms with increased domestic spending. From 1994 to 2000, the real GDP increased with higher employment as well. After 9/11 US economy has been in quite recession. Due to war on terror the present US government has been focusing less on economic issues.
G. D. H. Cole, (1952). Introduction to Economic History. Macmillan & Co. Ltd.
Douglass C. North, (1981). Structure and Change in Economic History. Norton.