History of American Economics - Report Example

Topic: History of American Economics Introduction The roots of economic history of the United s are in European settlements in the 16th, 17th,and 18th centuries. The American colonies advanced from slightly successful colonial economies to a small, but independent economy of farming, which in 1776 became the United States of America. In 230 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), and an entrepreneurial spirit and commitment to investing in material and human capital. The US economy has overthrown all other economies since then and is ever-growing with the passage of time. A brief chart is given below for further understanding. Table 1: RAILROAD MILEAGE INCREASE BY GROUPS OF STATES 1850 1860 1870 1880 1890 New England 2,507 3,660 4,494 5,982 6,831 Middle States 3,202 6,705 10,964 15,872 21,536 Southern States 2,036 8,838 11,192 14,778 29,209 Western States and Territories 1,276 11,400 24,587 52,589 62,394 Pacific States and Territories 23 1,677 4,080 9,804 TOTAL USA 9,021 30,626 52,914 93,301 129,774 SOURCE: Chauncey M. Depew (ed.), One Hundred Years of American Commerce 1795-1895 p 111 (Source Wikipedia) Historical background The independent yeoman farmer continued to exist, particularly in New England and the middle colonies, but most settled land in North America by 1750 was devoted to the cultivation of a cash crop. New England turned its land over to the raising of meat products for export. The middle colonies were the principal producers of grains. By 1700 Philadelphia exported more than 350,000 bushels of wheat and more than 18,000 tons of flour annually. The Southern colonies were, of course, even more closely tied to the cash crop system. South Carolina, aided by British incentives, turned to the production of rice and indigo. North Carolina, although less oriented toward the market economy than South Carolina, was nevertheless one of the principal suppliers of naval stores. Virginia and Maryland steadily increased their economic dependence on tobacco and on the London merchants who purchased that tobacco; and for the most part they ignored those who recommended that they diversify their economies by turning part of their land over to the cultivation of wheat. Their near-total dependence upon the world tobacco price would ultimately prove disastrous, but for most of the 18th century Virginia and Maryland soil remained productive enough to make a single-crop system reasonably useful. As America evolved from subsistence to commercial agriculture, an influential commercial class increased its power in nearly every colony. Boston was the centre of the merchant elite of New England, who not only dominated economic life but also wielded social and political power as well.. And it is clear that the commercial importance of the colonies was increasing. During the years 1700-10, approximately 265,000 sterling was exported annually to Great Britain from the colonies, with roughly the same amount being imported by the Americans from Great Britain. By the decade 1760-70, that figure had risen to more than 1,000,000 sterling of goods exported annually to Great Britain and 1,760,000 annually imported from Great Britain. (Source Britannica encyclopedia) Situation now days The United States of America holds the honor of world's greatest economic power in terms of gross national product (GNP) and is among the greatest powers in terms of GNP per capita. The nation's wealth is partly a reflection of its rich natural resources. With only 5 percent of the world's population, the United States produces nearly one-fifth of the world's output of coal, copper, and crude petroleum. The agricultural sector produces nearly one-half of the world's corn (maize); nearly one-fifth of its beef, pork, mutton, and lamb; and more than one-tenth of its wheat. The United States owes its economic position more to its highly developed industry, however, than to its natural resources or agricultural output. Table 2; (Source: http://www.bea.gov/national/nipaweb/TableView.aspSelectedTable=5&FirstYear=2007&LastYear=2008&Freq=Qtr) Line 2007 I 2007 II 2007 III 2007 IV 2008 I 1 Grossdomesticproduct 13,551.9 13,768.8 13,970.5 14,074.2 14,185.2 2 Personalconsumptionexpenditures 9,540.5 9,674.0 9,785.7 9,936.6 10,046.9 3 Durablegoods 1,074.0 1,074.7 1,081.6 1,082.5 1,065.1 4 Nondurablegoods 2,759.4 2,822.7 2,846.3 2,904.5 2,941.6 5 Services 5,707.1 5,776.5 5,857.8 5,949.7 6,040.2 6 Grossprivatedomesticinvestment 2,117.3 2,139.1 2,162.9 2,082.1 2,050.8 7 Fixedinvestment 2,118.9 2,133.9 2,127.5 2,109.5 2,052.6 8 Nonresidential 1,431.4 1,469.1 1,500.1 1,526.5 1,516.3 9 Structures 439.6 464.5 483.1 501.3 495.0 10 Equipmentandsoftware 991.8 1,004.5 1,017.1 1,025.3 1,021.2 11 Residential 687.5 664.8 627.3 582.9 536.4 12 Changeinprivateinventories -1.6 5.1 35.4 -27.4 -1.8 13 Netexportsofgoodsandservices -714.2 -714.2 -694.7 -708.9 -737.3 14 Exports 1,549.9 1,598.7 1,685.7 1,737.7 1,799.2 15 Goods 1,084.0 1,115.2 1,191.3 1,221.1 1,267.4 16 Services 465.9 483.5 494.4 516.5 531.9 17 Imports 2,264.0 2,312.9 2,380.4 2,446.6 2,536.5 18 Goods 1,902.7 1,947.2 2,007.3 2,060.5 2,140.5 19 Services 361.4 365.7 373.2 386.0 396.0 20 Governmentconsumptionexpenditures andgrossinvestment 2,608.3 2,670.0 2,716.5 2,764.4 2,824.7 21 Federal 946.6 969.5 990.3 997.7 1,023.8 22 Nationaldefense 634.8 654.5 673.5 677.7 697.3 23 Nondefense 311.7 315.0 316.8 320.0 326.5 24 Stateandlocal 1,661.7 1,700.5 1,726.2 1,766.7 1,801.0 Mass production Prior to the introduction of mass production techniques, goods were produced by highly skilled craftsmen who often prepared their basic raw materials, carried the product through each of the stages of manufacture, and ended with the finished product. Typically, the craftsman spent several years at apprenticeship learning each aspect of his trade; often he designed and made his own tools. He was identified with his product and his craft, enjoyed a close association with his customers with a luxurious understanding in society. On the contrary, the division of labor, the specialization of narrow skills, the detailed engineering specification of how each task is to be carried out, and the assemblage of large numbers of employees in great manufacturing plants have greatly diluted the identification of employees with their productive functions and with their employers. Many surveys in the United States and in the industrialized countries of Europe have shown that workers do not fully understand and appreciate their roles and positions in society. The repeating operations are usually the most easily automated. Thus, as technology advances, that part of the production operation that is most fatiguing, is least satisfying, and takes minimum advantage of the mental and physical flexibility of human effort is replaced by automatic machinery. Not only is productivity improved, but the remaining functions that require human effort can provide a more satisfying experience. Ford and the assembly line The mass-produced automobile is generally and correctly attributed to Henry Ford, but he was not alone in seeing the possibilities in a mass market. Ransom E. Olds made the first major bid for the mass market with a famous curved-dash Oldsmobile buggy in 1901. Although the first Oldsmobile was a popular car, it was too lightly built to withstand rough usage. The same defect applied to Olds's imitators. Ford, more successful in realizing his dream of "a car for the great multitude," designed his car first and then considered the problem of producing it cheaply. The car was the so-called Model T, the best-known motor vehicle in history. It was built to be durable for service on the rough American country roads of that period, economical to operate, and easy to maintain and repair. It was first put on the market in 1908, and more than 15 million were built before it was discontinued in 1927. When the design of the Model T proved successful, Ford and his associates turned to the problem of producing the car in large volume and at a low unit cost. The solution was found in the moving assembly line, a method first tested in assembling magnetos. After more experimentation, in 1913 the Ford Motor Company displayed to the world the complete assembly-line mass production of motor vehicles. The technique consisted of two basic elements: a conveyor system and the limitation of each worker to a single repetitive task. Despite its deceptive simplicity, the technique required elaborate planning and synchronization. The first Ford assembly line permitted only very minor variations in the basic model, a limitation that was compensated for by the low cost. The price of the Model T touring car dropped from $950 in 1909 to $360 in 1916and still lower to an incredible $290 in 1926. By that time Ford was producing half of all the motor vehicles in the world. (Source Britannica encyclopedia) Economic effects Mass production depends upon mechanized facilities and high levels of production volume, presents great challenges for industrial leadership. The importance of advanced planning and the coordinated control of the large human and capital resources associated with mass production have been described. The day-to-day problems of monitoring the status of a major manufacturing complex are also immense. Up-to-the-minute knowledge of status is essential to effective response when difficulties such as the breakdown of a machine, the shortage of required materials or components, or the absence of important employees occur. In fact, the increasing use of mainframe and personal computers as business tools is rapidly making the management of mass production operations a quantitative technology in its individual rights. As capital needs have grown, the nature of ownership and investment in industry has changed dramatically. Economies of scale favor large, high-volume operations that require capital investment levels often well beyond the means of an individual owner. This has been the prime stimulant for corporate ownership of major manufacturing firms. Furthermore, the direct managers of the manufacturing enterprise seldom possess ownership control of the enterprise. This has created a new spectrum of relationships between the owners, the managers, and the employees of large manufacturing firms. Frequently the owners are principally concerned with the profits on their investments and leave the planning and managerial operations to professional managers. Conclusion: It can be safely concluded Mass production is indeed future of business with form and method. Recent history has proved that as we saw in table2. Although it's relative self-sufficiency, the United States is the most important single factor in world trade by virtue of the sheer size of its economy .The expansion of mass production is expansion of new business vision and America is benefiting from it by all means possible. Works cited (1)Wikipedia. economic history of the united states. April 25, 2008. wikimedia foundation inc. May 6, 2008. http://en.wikipedia.org/wiki/Economic_history_of_the_United_States (2)Britannica encyclopedia. history of american economy. 2008. (3)bureau of economic analysis. national economic accounts. april 30, 2008. u.s department of commerce. May 6, 2008. http://www.bea.gov/national/nipaweb/TableView.aspSelectedTable=5&FirstYear=2007&LastYear=2008&Freq=Qtr Ilj,j Read More