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Historical Development of the U.S. Economy

Instructor: Nate Sullivan

Nate Sullivan holds a M.A. in History and a M.Ed. He is an adjunct history professor, middle school history teacher, and freelance writer.

In this lesson we will trace the development of the American economy, from Colonial American commerce and the Industrial Revolution to the rise of big business, the 1929 stock market crash and the rebooting of the economy after World War II.

The American Revolution to the 1880s

By the time the United States had won the Revolutionary War and become an independent nation, it had at its disposal all the resources and economic structures in place to become a great power. Think about it: miles upon miles of forest and farmland, a hard-working and industrious people, ocean outlets for international trade, advanced urban centers capable of production and manufacturing, and more. It was all right there; it just needed to be organized and put to good use. This task fell to our 'Founding Fathers.' One man in particular was especially important in this task. Alexander Hamilton was the first Secretary of the Treasury. He played an essential role in building national credit by consolidating debt from the 13 original colonies. He was also instrumental in the creation of a federal bank, the First Bank of the United States, founded in 1791.

Hamilton got himself on the 10-dollar bill
hamilton

In 1803 President Thomas Jefferson authorized the Louisiana Purchase from France for the cheap price of $15 million dollars. This land transaction doubled the size of the United States, opening up additional space for economic development. Exportation of natural resources and manufactured goods was an important component of the American economy prior to the Industrial Revolution.

Advances in transportation, like the steamship and the railroad, were made throughout the mid 19th century, lifting the United States to the level of a global industrial power. In New England, mechanized textile manufacturing boomed, thanks to Samuel Slater, who imported textile technology from Great Britain. Factories began popping up; roads and canals were being built at an alarming rate; and steam power made things possible that previously had never been imagined. All of this was part of the American Industrial Revolution, an ill-defined movement in which industry and mechanized technology proceeded at an unprecedented pace. The Industrial Revolution hit Europe earlier than it did America, but the American Industrial Revolution was in full swing between the 1820s-1880s.

The Industrial Revolution ramped up the U.S. economy in the mid-19th century
industrial revolution

The 1880s to World War II

The railroad continued to expand into the 1870s and 1880s, by this time connecting both coasts. Big business rose during the late 19th century as industrialists like John D. Rockefeller, Andrew Carnegie, and Cornelius Vanderbilt accumulated unbelievable amounts of wealth. Rockefeller is best known for his role in the oil industry as the founder of Standard Oil Company. Standard Oil Company achieved legendary fame as the largest oil refiner in the world until it was ruled an illegal monopoly by the Supreme Court and dissolved.

As the 20th century loomed, the American economy continued to soar. In urban areas skyscrapers popped up all over the place. Electric lights lit up the urban skyline. Things were bustling. The 1920s was a period of unprecedented prosperity until the Stock Market Crash of 1929 brought everything to a halt. Speculative and risky spending fueled the crash, resulting in entire fortunes being wiped out almost over night. This crash plunged the nation into the Great Depression, the worst economic downturn in American history. The Great Depression lasted until the outbreak of World War II.

The 1929 stock market crash propelled the country into the Depression era
depression

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