America’s economic development can be traced over several centuries ago. Economic historians in the United States have established America’s development to the 16th, 17th, and 18th centuries during the period of intense colonization by the Europeans (Gilje 3). The earliest economic activity involved independent regions which were mostly engaged in farming.
These small regions in the North American continent came together to form a block in 1776 which later acquired the name, the United States of America(Headlee 12). This merger saw the region register a significant growth in their collective economy and the subsequent quest for political unity through constitution making in 1787.
For the over two centuries, the United Sates States of America has grown through ups and downs to its present industrialized economy which represents more than a quarter of the entire world’s collective economy (MacNally 10). The research paper seeks to provide an overview of America’s economy, particularly the free market. It will also focus on the rise of capitalism, especially through industrial development, government policies, and American values.
II. The Free Market Economy
It was in the late 18th century that the present North America began to experience the need for some political and economic freedom. This was also motivated by the urge to gain independence from the colonialist, England. The agitation was fueled by the then high taxation rates by English powers among other emerging issues (Rhodes 2).
Their demands for self-governance was furiously objected by the British and it only worsened the tension leading to the American Revolution in 1775 that saw fighting of all British masters and the ultimate independence of the then thirteen States of America (MacNally 210). The war could not end until eight years later when the tension eased out and the challenge for reconstruction emerged.
In 1787, the American constitution was adopted and it governed all the states as a union with a shared market where interstate trade was not to bear any taxes or any form of tariffs (Gilje 37). The constitution also established that the unified states would be ruled by the federal government.
The pioneer government leaders forged an economic formula for economic growth in the United States. The first ever secretary of the treasury, Alexander Hamilton, proposed that economic progress would be achieved through the diversification of manufacturing, banking system, as well as shipping (Headlee 35). The new policies by Hamilton did last for about a decade despite the strong opposition from other government officials (MacNally 225).
Subsequent changes at the helm of political leadership had direct impact on economy following the changing and the introduction of new economic policies. Economic reforms since the 18th century through the 20th century have seen America undergo significant economic transformations (Rhodes 43). Most economists have proposed that the establishment of free market helped in the economic achievements.
Free market is defined by economists as a system where the buyers as well as the sellers are independently responsible for the choices they make as far as business is concerned (Rhodes 7). This implies that the government does not interfere with pricing of different commodities, but instead, the demand and supply of the commodity is left to determine the price. According to Rhodes, the beginning of free trade in the United States was during the time when it became a unified nation under one constitution in 1787 (8).
It was marked by the interstate trade with no tax or tariff imposition by the government. In a free trade, the government is expected to maintain the national law and order for business to thrive and also to shield the buyers from excessive pricing by the sellers (MacNally 213). However, it is common that in a free economy, commodities are priced very highly living such engagements to those endowed with resources and wealth.
Another significant role of the government in a free economy, just as in America, is that it monitors the pace of purchasing people’s power. For instance, in times of depression and financial crises, the government regulates taxes by enacting the addition of credits to tax in a given financial year, and creating job opportunities for the people in order to empower them economically (Gilje 65).
One of the greatest advocates of a free market in America was Adam Smith, a renowned economist. Throughout America’s history, free market has been associated with the rise of capitalism, especially during the second half of 20th century and beyond (Rhodes 23).
III. Rise of Capitalism
Capitalism is defined in economics as a system where individuals are able to control the tools or means of production (Noble 71). This implies that the means of production like land, capital, and other non-labor factors are owned privately. On the other hand, goods, resources, and labor are availed for trade in the markets where the profits gained after taxation is shared among the private owners.
Part of the profit can also be used in developing newer technologies as well as industries. In the United States, economic historians have established that capitalism tendencies started just the same period as the introduction of free market economy (Gilje 3). Three major areas have been identified as having contributed significantly to the rise of capitalism in America and shall be discussed here; industrial development, government policies, and American values.
a. Industrial development
Prior to industrial development as from 1790s, the United States was predominantly an agricultural economy (Headlee 2). During the late 18th century and early 19th century, industrial revolution had not taken root as much as in Europe.
The introduction of sophisticated means of production in the US, however, brought a new dawn since people were excited by the machine-made products since they transformed their living standards (Noble 74). The use of hand-made goods and services was starting to be the thing of the past.
Means of communication also improved significantly through the invention of the telegraph by Samuel Morse in 1844. This followed the invention of the rail road as a reliable means of transport in the US. According to Noble, industrial revolution became more advanced in the late 19th century through the early 20th century as the American people sought to make life easier while at the same time increasing their rate of production (77).
By mid-20th century, people worked in industries and this helped in transforming America into a modern industrialized country. This development in the industrial sector impacted directly on the labor productivity since those who owned capital controlled the means of production as well.
Rise of Large Corporations
The industrial revolution played a central role in the rise of large corporations in the United States (Noble 67). A corporation can be defined as an institution that is given a charter acknowledging it as a separate legal entity with its own privileges, as well as liabilities different from those of the members (Rhodes 84), also known as limited liability. The process of registering a corporation with the respective state government is referred to as incorporation.
The relationships among all the stakeholders are governed by corporate laws under which the corporations are established. In America, large corporations did not emerge until the early years of the 19th century (Noble 70). The government had realized that it could collect more revenue through registration of corporations.
Hence, according to economic historians, more acceptable corporate laws were introduced (Gilje 79). Full recognition of corporations was achieved in 1819 when the government provided that corporate charters were to be respected and treated as separate entities.
The US government made much other legislation through the 19th century, especially the non-state interference of free markets and other forces of limited liability. This trend continued to the 1980s when the United States started privatizing the state-owned corporations (Noble 73).
At this particular time, the government embraced the laissez-faire principle where the state did not regulate the activities of the corporations. This era also saw the emergence of mergers where smaller corporations were swallowed up by larger ones (Noble 80).
The government of the United States of America played a major role in the rise of capitalism. The government allowed the demise of feudalism which subsequently opened way for the advancement of capitalism (MacNally 17). As have been discussed above, the government started withdrawing its influence and regulation of trade, and instead paving way for free economy. In fact, according to MacNally, the government’s role in promoting capitalism became more pronounced in the 1970s to the present (18).
c. American Values
As America grew with immigrants coming from most parts of Europe who came with diverse cultural values which would then merge to form what would be the US values. Calvinism originated from Europe and spread to the United States in the 16th century (Gilje 94).
The value system under Calvinism stressed the importance of an individual and God’s definite plan for everyone. It advocated the need for self-reliance and independence.
The pattern with which the immigrants explored the new land promoted independent struggle for survival. Each family had to search on their own. The value of self-reliance and independence has taken root in the US and is at the core of the present capitalistic economy (Rhodes 91).
The research paper has explored the emergence of capitalism in the United Sates of America since the 16th century through the 20th century. It has offered an overview of the economy, particularly the development of the free markets. It has also focused on how industrial revolution, government policies, and the American values have helped in the rise of capitalism.
Gilje, Paul A. Wages of independence: capitalism in the early American republic. Rowman & Littlefield. (1997): 1-123
Headlee, Sue E. The political economy of the family farming: the agrarian roots of American capitalism. Greenwood Plc. (1991): 1-76
MacNally, David. Political economy and the rise of capitalism: a reinterpretation (3rd ed.). University of California Press. (2000): 1-21, 209-268
Noble, David F. America by design: science, technology, and the rise of corporate capitalism. Oxford University Press, US. (1979): 67-110
Rhodes, Sybil. Social movements and free-market capitalism in America (4th ed.). SUNNY Press. (2006): 1-106