Notes on the History of the United
States of America
United States of America
was born of a violent revolution against colonial rule in 1776. It was not, however, a revolution by
indigenous peoples against a conquering colonial power. Instead, the American revolution
was carried out by British subjects, the settlers of the colonies, against
their nation of origin. The American
colonists rebelled against the domination of their British government, which
often adopted economic and political policies that ran against their interests. The new nation of the United
States of America was formally recognized in
the Treaty of Paris signed in 1783.
Revolutionary War was a classic insurgency, succeeding only because of strong
grassroots support from the colonial subject population. Farmers, artisans, merchants, and others
joined in either direct action or indirect support for the
revolutionaries. The extraordinary need
for strategic planning and cooperation between colonial merchants, who supplied
needed materiel for the war effort, and the revolutionary army helped to
establish the foundation for post-war economic policies. Many of the merchants who worked with the
revolutionary army rose to prominence in the post-war economy of the new nation. Furthermore, led by the efforts of treasury
secretary Alexander Hamilton, the government played an activist role in
promoting a pro-growth business climate that favored these entrepreneurs. Hamilton
was also a critical figure in developing the American strategy for
important precondition for economic growth in the new nation was to destroy the
economic power of the loyalist aristocracy, wealthy landowners who had
supported the continuation of British rule, and to redistribute resources to
supporters of the new government. The
post-revolutionary state governments, under the encouragement of the
Continental Congress, confiscated the properties of loyalists and used revenues
raised from the sale of such properties to supplement other sources of state
funding. Some of the land confiscated from loyalists was redistributed to
former soldiers returning from the war.
This land redistribution, coupled with laws voiding obligations of
farmers to pay feudal rents to the loyalist aristocracy, helped in the expansion
of family farming in the states. The
expansion of family farming contributed to the growth in the domestic market in
the United States,
providing the basis for the aforementioned growth in manufacturing.
post-war political leadership recognized the contradictions between building a
nation founded on principles of democracy and yet also grounded in the
maintenance of slavery. In many ways,
the early course of American politics was shaped by this contradiction. In particular, the United
States was epitomized by relatively
decentralized governance. This
decentralization provided a solution, albeit a temporary one, to the radically
different governance requirements of the states dependent on free labor vis-a-vis those dependent upon slave labor. It provided systemic flexibility. Decentralized federalism recognized that
slavery, even if considered abhorent by many citizens
of the new nation, was a critically important source of value available for
investment in the U.S. Economy. There
were, therefore, a number of compromises.
Slavery was not abolished, but the slave trade was abolished by a number of
states. The New England states, New York, and Pennsylvania committed themselves to the
gradual abolition of slavery. The
southern states, dependent as they were on slave-based production, went in
exactly the opposite direction, reinforcing laws that guaranteed the
continuation of slavery and protected the rights of the slave masters over
their human chattel. Only in an
environment of political decentralization could such a sharp contradiction be
maintained as long as it was in the United States.
tension is reflected quite dramatically in agriculture. The early republic was a largely agrarian
nation. Most agricultural direct
producers were either self-employed farmers or slaves. This presents a difficult environment for the
making of national public policies.
Policies supportive of free labor might interfere with the objectives of
slave masters dependent on unfree labor. Ironically, in his writings Thomas Jefferson
would idealize a politically decentralized agrarian democracy populated by
self-employed farmers, although he lived his adult life as a slave master and
plantation owner in Virginia. Being a skillful political leader, he managed
to merge these contradictory aspects of American society into a political
philosophy which has come to be called "Jeffersonian" and which
created the foundation for decentralized federalism. Such arguments had a resonance for the
self-employed farmers and artisans throughout the nation. This was particularly the case because
memories of the loyalist aristocracy were still fresh in many minds. The feudalism of the colonial period had been
largely abolished, significantly enhancing the equality of landownership in the
Northeast, where rural life most resembled the Jeffersonian ideal. The size of the land area available for
settlement was such that it encouraged the expansion of self-employment and
placed severe constraints on the development of capitalist wage labor
markets. If abundant cheap land worked
in favor of independent labor in the northeast and west, the presence of
slavery in the south worked in the opposite direction. The availability of a pool of forced labor
provided an impetus to technological changes, such as the invention and innovation
of the cotton gin, that would further expand unfree labor, particularly in the agricultural sector.
took root in manufacturing, encouraged by the cooperative hand of the national
and, in some cases, state governments.
It was the textile manufacturers who saw the greatest early successes,
fueled by relatively cheap slave produced cotton. Another early success story was firearms
manufacturing. The rapid expansion in
firearms manufacturing was, to a significant extent, the product of
governmental policy and procurement. It
is not difficult to understand how the government of a new nation formed of a
violent revolution would find it important to build armaments. Indeed, the government subsidized early
manufacturers, partly by means of “bounties.”
Funds collected from foreign firms via high protective tariffs were
gifted to domestic manufacturers of the same goods that had been taxed. This was part of an overall strategy of import substitution industrialization that would prove critical to the growth of
capitalism in the new nation.
import substitution industrialization strategy of the Washington
administration (brainchild of Treasury secretary Hamilton) was abandoned under
the presidency of Thomas Jefferson. Jefferson
ended the Hamiltonian experiment in activist federal involvement in the economy
and elevated the importance of "state's rights." This is consistent with the ideal of
Jeffersonian democracy. However, the United
States was only partly a nation of
self-employed farmers and artisans, as envisioned by Jeffersonian
democracy. In reality, "state's
rights" meant shifting political power from a federal government that was
not controlled by any single elite to states, which in some cases, were very
much under the control of such elites.
Indeed, in many ways the core support for the Jeffersonian approach came
from Jefferson’s peers, the slave masters of the
southern states, who Charles Beard described as an “aristocracy.” Decentralized federalism was an important
concept to the slave masters of the ante-bellum south. Since slave masters were the governors of
their plantations and largely in control of state governments, any increase in
the powers of the federal government created a potential rival power
center. Thus, decentralized power was
critical to maintaining slave master power.
Nonetheless, the basic tensions between the interventionist
(Hamiltonian) approach to economic growth and development, and the Jeffersonian
“laissez faire” approach would come to epitomize political struggles throughout
the history of the United States of America,
extending well beyond the period of the Civil War when slavery ceased to be an
important factor in the economy.
Self-employment and American Culture
the ante-bellum period, agriculture remained the primary source of income for
most Americans. Capitalist industrialism
was a relatively less visible part of the American economic landscape,
particularly outside of the largest cities.
And even in the largest cities, such as New York
Boston, and Baltimore
self-employment and small scale merchanting (mom and
pop stores) remained prevalent over their larger-scale rivals for many
years. In the southern states, whose
political economy was dominated by large-scale slave production, thousands of
self-employed farmers and artisans and small-scale merchants played critical
roles in the day-to-day economic life of most citizens. Thus, America
was, in its early history, not so much a land of capitalism and slavery, but a
land of the industrious, self-employed farmer and artisan. This became an important force in shaping the
American character and much that has been mythologized about American culture.
very expanse of American territory served to promote self-employment, as
thousands of American citizens took advantage of the "frontier" to
migrate West and to make their living as independent
producers, either on the land, in their own workshops, or from small-scale merchanting. It was,
therefore, difficult to develop a capitalist labor market when the potential
pool of laborers could so easily pull up their roots, so to speak, and move
elsewhere. The concept of the
"frontier" and of the freedom associated with the frontier was
another factor shaping the character of the American citizenry in complex ways.
rapid growth of small businesses in the United
States and the expansion of free enterprise
to the frontier areas was supported by a highly
decentralized banking system. Relatively
small and autonomous state banks provided the financing for many family farms,
as well as for the slave plantation system of the southern states. Bigger banks in the urban areas helped to
finance industrialization but were relatively less powerful influences on
economic activity in the hinterland, where most Americans lived and
worked. Today the banking system in the United
States remains among the most decentralized
in the world.
family farming remained relatively healthy throughout the United
States in the ante-bellum period, expansion
in slave-based production displaced many self-employed farmers from the most
fertile land in the southern states.
This was more than compensated for, in the nation as a whole, by the
rapid growth of family farming during the westward migration of Americans.
relatively rapid growth in population and the positive income effects of a
decentralized economy were among the many positive factors driving development
of the domestic market for agricultural and industrial goods. Another important factor in generating growth
in income and domestic demand for goods and services was the export
sector. Export-led growth created business
opportunities and generated more revenues for existing businesses. Export-led growth was coupled with the import
substitution industrialization strategy to generate rapid, even if uneven,
growth in both manufacturing and agriculture during ante-bellum period.
slave plantations, in particular, focused on the production of exportable cash
crops, such as cotton and tobacco. The
invention and innovation of the cotton gin was a key technological catalyst for
the growth in low-cost, slave-based cotton production that allowed U.S.
planters to dramatically expand their markets, both domestic and foreign. Indeed, when one considers intra-regional
export, in addition to export to foreign markets, it seems likely that most of
the crops generated from the slave plantations was
destined for markets outside of the region of origin. This generated sizable cash flow for the
slave masters, but tended not to have quite as dramatic an impact on income
growth in the region because of the sharp income inequality associated with
slave-based production. On the other
hand, rapid growth in exports from family farms, whether international exports
or production for the growing urban areas, generated income growth that was
more egalitarian and had a more dramatic immediate impact in creating domestic
demand for manufactured consumer goods.
Creative Destruction in Ante-bellum America
ante-bellum period of unparalleled U.S.
economic growth was broken temporarily by several small recessions and a
devastating period of deep recession, perhaps more accurately called a
depression in the years from 1839-1843.
This period of economic decline, preceded by the bursting of a
speculative bubble in land prices in 1837, represented one in a series of such
negative waves to hit the U.S.
economy. Joseph Schumpeter described the
economic devastation (bankruptcies, ruined businessmen, lost jobs) caused by
recessionary periods "creative destruction" and such periods as
essential to the advance of capitalism.
The causes of the economic decline are complex and many, but one of the
factors was certainly a fall in export prices brought on by overinvestment and
overproduction during the boom period.
Agriculture and industry were on a growth trajectory that turned out to
be unsustainable. There is no way to
know that a growth path is unsustainable until excess supplies force a sharp
revaluation in prices, as was the case at the end of the 1830s. The deflationary crisis resulted in
bankruptcies and worsening credit conditions.
Banks responded by cutting back on loans. The credit crunch tended to hurt even
profitable firms and result in a drop in investment. Generally, smaller firms were more
vulnerable. Thus, crisis periods tended
to result in greater centralization of market power. However, large scale firms were not immune
and many large enterprises also ceased to operate. This was also the case in slave-based
production in the south where some large-scale slave plantations were hit by the
crisis because of their reliance on export crops. Unprofitable plantations responded by selling
assets, including slaves, to more prosperous plantations.
economic depression of 1839-1843 acted as a catalyst for economic and political
reform in the United States. Banking reforms, reforms in state financing
of infrastructure, and a new focus by enterprises, both industrial and
agricultural, on efficiency and diversification helped to make the
post-depression era an important period of economic transformation. In addition, in the immediate aftermath of
the economic depression, the federal government turned to imperialism to forge
a new nationalistic spirit among the diverse citizenry. In the period from 1845-1853, the United
States annexed territory from Mexico,
acquired the Oregon territory
and initialed the Gadsen Purchase. The new "frontier" provided further
space for migratory movements, as well as rich sources of raw materials, and
new land for self-employed farmers.
Expansion of the American Infrastructure
and Uneven Regional Development
an effort to integrate the growing American territory, the railroads and
telegraph were expanded, ports were improved, and other infrastructure projects
were carried out. Government intervention,
suppressed demand, a renewal in export growth, and other such factors generated
economic growth rates after the 1839-1843 depression that were phenomenal and a
new sense of prosperity and optimism spread throughout the young nation.
the activist measures taken by the U.S.
government was the 1850 passage of the Land Grant Act. The Act provided a grant of land to any
corporation that agreed to lay track in the Westward extension of the U.S.
railroad system. The government gave
away nearly 4 million acres of land to private corporations during this period,
achieving the expected result. The railroad
system was dramatically expanded which helped to create a more cohesive
domestic market, to open up new territory in the West for migration,
agriculture and animal husbandry, and allowing for the sale of goods produced
in the factories of the East.
government further guaranteed the success of the new railroads by contracting
with them to carry federal cargo, including mail deliveries and gold
shipments. This guaranteed market for
freight helped to lower the risk of investing in the railroads, making it
easier to raise capital, and pushing projects into development that might
otherwise have languished.
expansion of the nation's transportation backbone provided the basis for a
dramatic upward surge in agricultural production and income, as family farms
were able to find markets for their output, often markets that were quite a
distance from the family farm. The
increased agricultural incomes were critical to expanding the domestic market
in the United States,
which created demand for industrial goods.
The increased demand for the output from factories and the increased
quantity and lower cost of agricultural raw materials, especially slave
produced cotton, and food helped to spur the boom in manufacturing. As manufacturing expanded, this also had a
positive income effect, creating further demand for both agricultural and
regional development was reinforced during this period of economic growth. The northern states led the way in
manufacturing, while the southern states were locked into a slave plantation-based
economy. The short-term income gains to
the plantations from a rise in export sales and in sales of cotton to the
textile mills of the northeast created the illusion of prosperity. In the long-term the southern states would
significantly lag behind the northern states in income producing potential and
in the development of the southern infrastructure. The existence of slavery essentially retarded
the industrialization of the South, hampered the building of critical infrastructure,
and cost the southern states precious developmental time. The transformation of the southern economic
base would have to wait until after the Civil War and, even then, move forward
at a much slower pace than development in the north and west as the the plantation system, forced to replace slavery with a
form of feudalism, remained in place.
Post-bellum Hamiltonianism and the Ascendency
the Civil War, the federal government continued to play an activist role in
shaping the American economy. The
federal government supported the expansion of self-employed farmers and
ranchers with the Homestead Act of 1862, continued to subsidize the railroads
and other large business enterprises with the Timber Culture Act in 1873, the Desert
Land Act in 1877, and the Timber Stone Act of 1878.
Government spending, both during and after the Civil War,
stimulated growth in manufacturing industries such as coal, iron, and steel,
gradually shifting the U.S. economy from an agrarian-base to a more industrial one. The steel industry was particularly important
during this period. Steel was a key
input in both the construction of the railroads and other infrastructure, and
in the development of the machine-goods industry. The innovation of new steel-making techniques
helped to lower the tonnage cost of steel and had knock-on effects throughout
the manufacturing economy.
was not only being transformed from an agrarian one but was also shifting away
from self-employment and small scale enterprises towards capitalism. Government spending and subsidies aided the
rapid growth in the railroads and in manufacturing, which were organized as
capitalist corporations. The corporate
form of business organization, which limits the liability of owners, provided
an important mechanism for raising extraordinary amounts of capital
investment. The capitalist organization
of work meant that it was possible to employ thousands of wage laborers within
a single corporation. The legal benefits
of the corporate form and the productive efficiency that came with wage
labor-based production combined with the already mentioned government
subsidies, lower cost inputs, and expanded markets generated huge revenues for
American corporations. As corporate
revenues grew it became easier to raise such funds for furhter
business expansion. A handful of
financial and industrial empires were built around this growth, led by
legendary business leaders, such as Gould, Fisk, Drew, Vanderbilt, and
Rockefeller, who were able to marshall
capital investment for their own businesses and often used aggressive
strategies for eliminating potential competitors. These early capitalist
leaders have been called the robber barons because of their tactics and
brought a transformation in the types of jobs available to Americans. A new "middle-class" of "white
collar workers" grew up around the bureaucratic work required in
large-scale corporations. The large wage
labor forces employed in manufacturing enterprises resulted in the creation of
new management jobs. The growing demand
for wage labor to work in the sweat shops of New York
and slaughterhouses of Chicago
attracted rural people, many of whom had been self-employed, to migrate to the
cities for these new jobs. This
rural-urban migration created urban metropolises where laborers and their
families lived in tenement residences.
These residences were often delapidated and
unhealthy places to live. In this case,
decentralized policy making meant that the rules that determined
"safe" were highly localized and greatly variable. Ghettos developed in the urban cities where
laborers came for jobs and affordable shelter.
wage labor was increasingly specialized to the extent that a worker might never
see the final product of his labor but only a small part of it. This meant that workers who had worked for
themselves, or otherwise participated in the entire production process, lost
their skills over time. The resulting dissatifaction that came with this new situation and
unsatisfactory work conditions, which were often deadly in the iron and steel
industries and rarely sufficient to support families, led to a push for
unionization among many though not all workers.
The union movement, therefore, arose out of and is an important aspect
of capitalism. U.S.
capitalism, in its early history, was epitomized both by strong efforts to
unionize and by severe resistance from corporate boards and managers to such efforts,
including enlisting the support of the government in the suppression of
unionization campaigns and strikes. In
some cases, state governments sent national guard
troops to assist corporate management in putting down strikes or other work actions,
sometimes resulting in bloodshed.
so-called "Gilded Age" from 1873 to 1897 was an ambivalent time
economically, beset by recessions and depressions. It was a period of corporate takeovers and
the rise of firms with monopolistic and oligopolistic
market power. It was a particularly
difficult time for smaller firms, self-employed farmers, and others who neither
weilded much market power or had much influence
within the halls of government. The development of these massive industrial
empires had a significant impact on the character of American society. A new industrial and financial aristocracy
came to prominence and celebrities, of a sort, in American society. These aristocrats also adopted the same
political philosophy, the Jeffersonian ideal of decentralized federalism, as
their political creed, although many of them continued to benefit from
government policies and subsidies, including tax breaks targeted specifically
at large scale corporate enterprises and not available to smaller businesses or
backlash against the growth of big corporate capitalist firms with
extraordinary market power came in the form of government antitrust
legislation, including the Sherman Act, which declared monopolistic behavior
illegal. The passage of the Interstate
Commerce Act of 1887 formed the first regulatory agency in the federal
government, the Interstate Commerce Commission, which was charged with the
responsibility of regulating railroad rates.
steady growth in the demand for cheap labor followed the advance of
capitalism. Technological advances in
transportation made it easier for immigrants to come to America
and the new corporate aristocracy supported relatively liberal immigration
laws. Immigrant workers contributed to
not only the quantity of labor for the growing economy but also to the
creativity that went into the production of new industrial machines and new
methods of organization and also into the culture of American society.
severe decline in influence of the southern aristocracy after the Civil War
left the capitalist aristocracy without any powerful rivals in setting national
economic policy. Small businesses, with
the possible exception of self-employed farmers, generally had little influence
on national policies. Consequently,
capitalism grew quickly during the years from the close of the Civil War to
World War I. It was, in many ways, a
turning point for American society, in economic, political, and cultural
terms. Capitalism was dominant and would
continue to be dominant, setting the course of economic life in post-Civil War U.S.
The New Deal
World War I, the United States
had unprecedented economic power in the world.
Government was pro-business, technological changes had lessened the
domestic workload in many households, and increasing productivity meant more
lax work schedules for those outside of the house. Furthermore, scientific advances led to
better health and a higher average life expectancy and children were going to
school and staying for more years than they had ever been able to before,
relieved from the some of the pressure to join the labor force as soon as
possible and help support the family.
For all of these reasons and others, there was a considerable amount of
optimism about the economy.
Nevertheless, in agriculture, where a significant fraction of the
population still earned their living, economic conditions for the self-employed
farmer continued to deteriorate. Many
self-employed farmers lost their farms, unable to compete in a period of falling
farm prices and mechanization of agriculture.
Some of these formerly independent farmers became migrant laborers,
further reflecting the continual drift away from self-employment and towards
optimism that had followed the end of World War I was shattered by the sharp
decline in the stock market in 1929 marking the end of a speculative bubble in
equity prices. The stock market decline
was followed by a decline in the output and employment in the "real
economy." In this new economic
landscape, the correct plan of behavior was not at all clear. Previously, the large scale industrial and financial
corporations had encouraged the government to play a limited role in the
maintained this policy in the mistaken belief that the economy would fix
itself, but economic recession turned into a deep economic depression. Millions were unemployed. Without a social safety net high levels of
unemployment quickly turned into homelessness and starvation for many
Americans. The nation was in crisis and Hoover's
unwavering faith in the markets did nothing to alleviate the growing
despair. Franklin Delano Roosevelt
(FDR), promising a more activist approach to solving the economic woes of America
and with strong support from labor unions, was elected in an
landslide in 1932.
Roosevelt administration inaugurated a new chapter in
American culture. Activist government
came to be associated, perhaps for the first time, with policies designed to
benefit capitalist wage laborers. In the
past, the Hamiltonian brand of activism had been designed to foster the growth
of capitalist industrial and financial firms.
Roosevelt's policies were called the New Deal. FDR's New Deal began with legislation
establishing federal institutions to regulate the banks, the stock exchange,
and utilities. The hope was that such
legislation would restore confidence in America's financial institutions. The New Deal continued with the passage of
the National Industrial Recovery Act which stipulated a federal minimum wage,
banned most child labor, and gave the federal government tools for combatting the unemployment problem. The Wagner act of 1935 was designed to
protect the rights of capitalist wage laborers to unionize. Social security was passed, despite strong
opposition from the Republican Party. It
would be a mistake to assume that New Deal legislation was simply a pro-labor
set of policies. The New Deal had its Hamiltonian
overtones, as well. There was, for
example, legislation to grant businesses the right to set prices for their
industries. The New Deal also included
the Tennessee Valley Authority (TVA) to develop a system that could provide
cheap electricity to the nation's rural landscape and under the Agricultural
Adjustment Act, the New Deal paid farmers to control prices of their crops by
limiting productions and initially destroying "excess" crops and livestock,
driving up prices and helping both small and large farmers to generate higher
of these policies were sufficient to pull the U.S.
economy of its most serious economic decline.
As long as the directors and top managers of capitalist firms did not
expect revenues and profits to grow, they were unwilling to approve new
investment. The pessimism of these top
leaders in the business was only exacerbated by the perception of the Roosevelt
administration as leaning too far in favor of labor unions, which were seen as
promoting higher cost wage labor. In the
early years of his administration, FDR made matters worse by following Hoover's
example and trying to balance the federal budget in a time of declining tax
FDR administration did eventually see the light and raise government spending
in an effort to boost aggregate demand, but it was still not enough to restore
business confidence. It was, in fact,
World War II that would push government spending to the point that the
depression was ended. Unemployment fell,
business revenues rose, and confidence was restored during the war.
Post-World War II Boom
came out of World War II even more powerful than it had been after World War
I. The result was another long period of
optimism. War-time rationing had
suppressed consumer spending for several years and with the growth in optimism
and a booming economy, consumer spending compensated for the fall in military
spending. Furthermore, the new Truman
government would use federal funding for infrastructure improvement and
spending on education, health care, and welfare including medicare,
medicaid, and the GI bill, which provided loans to
veterans to start their own businesses or continue their education. Soon, even the military was increasing their
spending again. Thus, government became
an increasingly important, and relatively predictable, component of aggregate
demand, which reduced the degree of business uncertainty about future revenues.
position as superpower was reinforced by such programs as the Marshall Plan, in
which the U.S.
led the way in financing the rebuilding of the war-torn economies of Europe
and Japan and,
in turn, opening up these recovering markets to the goods produced by American
firms. It was a time in which the large
American firms became increasingly transnational in their operations and
American foreign policy followed suit by becoming more consistently extroverted
than at any time in the history of the nation.
1950s was an important period of transformation in American society. The McCarthy period served as a sort of cultural revolution against the radical politics that had
grown during the Roosevelt years. Americans associated with the Communist Party
of the U.S.A.
were, in particular, targeted. In Hollywood,
many writers, directors, and other screen artists were blacklisted, meaning
they could not find work with the studios or financing for independent
projects. The Korean War represented a
hot version of the growing Cold War between the United
States and its allies and the Soviet
and their respective allies. These
conflicts only reinforced the effects of the McCarthy Period, even after
McCarthy was discredited. America
was also being physically transformed.
Urbanization continued but the Eisenhower administration also funded,
through the Interstate Highway Act of 1956, a dramatic increase in the highway
system connecting cities and towns. The
building of the highways spawned the suburbanization of the nation and helped
to boost revenues for the automobile companies as car sales boomed.
Kennedy and Johnson administrations continued the post-war transformation of America
both in terms of activist foreign policy and innovative domestic policies. The Cold War heated up again with the U.S.
military intervention in the Vietnamese Civil War. The Johnson administration adopted the
supply-side tax cuts that Kennedy had drafted and attempted, under a barage of criticism, to pass in order to increase
consumption and stimulate the economy.
Johnson's government became even more involved in the economy by passing
legislation such as the Economic Opportunity Act of 1964 which included the Job
Corps and the Head Start Program for children and increased government spending
by almost ten billion dollars. These
programs helped decrease the income gap in the United
States and specifically decrease the number
of Americans living in poverty. The
Johnson administration was probably the most activist government since the Roosevelt
administration, and continued in the Roosevelt tradition
of using this activism to support both pro-labor and pro-business objectives.
The Rise of Inflation
unfortunate result of the extended boom in the economy experienced after World
War II was a rise in price inflation throughout the 1950s, 1960s, and 1970s,
peaking in the early 1980s. Perhaps the
most difficult period occurred in the 1970s when the nation experienced
stagflation, an economic slowdown and rise in the general level of prices
caused, in part, by a sudden rise in oil prices. The Vietnam war
effort is also considered to be responsible for some of the economic problems
of this period.
was a serious concern throughout the Eisenhower, Kennedy, and Johnson administrations
but not a major political issue until Nixon's presidency. Nixon attempted to stall inflation by implementing
a series of price controls on goods, wages, and rents. The subsequent inflation surge when controls
were lifted discredited price controls as a tool for the federal government. During the Ford administration and every
administration since, inflation has become the province of the American central
bank, the Federal Reserve. The Fed used
monetary policies to battle inflation, a less aggressive and often more
successful tool than price controls.
the Fed had only limited success. Inflation fell somewhat but the most dramatic
effect was on unemployment. The problems
of trying to moderate inflation without throwing the economy into recession
became a major problem for the Fed and a key political issue. This became even more problematic with the
growing power of OPEC and the Arab oil boycott of the USA. The Carter administration faced stagflation
and later a crisis in Iran
after the fall of the American supported regime of the Shah.
A Superpower Rises Again
Iran Hostage Crisis had a transformative effect on American politics, helping
to elect Ronald Reagan to the presidency in 1980. The Reagan presidency was marked by
aggressive foreign policy actions and rhetoric.
In many ways, the Reagan presidency represented a return to the
"big stick" policies that have epitomized American foreign policy
since the earliest days. The unprovoked
invasion of the tiny island of Grenada,
although not significant in military terms, demonstrated that the United
States had emerged from the malaise that had
followed the lost war in Vietnam. The Grenada
invasion, interventions in Central America, and a
general perception that the Reagan administration was willing to use force in
order to achieve its objectives played a key symbolic role in the resurrection
of American superpower clout. The
administrations of George Bush, William Clinton, and George W. Bush continued
this approach, employing U.S.
troops in Panama,
the Persian Gulf, Kosovo, and other venues. George W. Bush took this a step beyond what
his predecessors had done when he used U.S.
troops to conquer the strategically important Persian Gulf
nation of Iraq
in 2003. The invasion of Iraq
is similar to the Reagan-era invasion of Grenada
only in being unprovoked. Otherwise,
there is little comparison. The Iraq
invasion was strongly opposed by many nations and, most significantly, by other
permanent members of the U.N. Security Council.
Thus, the Iraq
invasion marked a clear move away from multilateralism in a conflict beyond the
In many ways, the G. W. Bush approach represented a return to a more
19th century American foreign policy of unilaterally using the U.S.
military for imperial purposes, such as was the case, for example, in the
annexation of territory from Mexico,
the occupation of Haiti,
and the seizing of territories from Spain.
Copyright © 2003,
Satyananda J. Gabriel, Mount Holyoke College.