Back to ECONOMICS STUDY PAGE

Back to ACHIEVE Home Page

Go to ECONOMICS TERMS

This lesson on the economic history of the United States to 1861 is divided into three main areas:

The Colonial Period to the end of the Revolutionary War from 1607 to 1781;

The new nation from 1781 to 1820;

The National Period from 1820 to 1861.

Please keep in mind that American economic history was written by the labors, contributions and efforts of many people.

The first people were the Native American tribes, who had economies based on many activities including hunting and gathering, farming and trade.

Later, other people and groups came to the United States from the Old World of Europe, Africa, Asia and South America.

All of these individuals and groups made outstanding contributions to the economic success of our nation.

Before we begin our study of U.S. economic history, we must conduct an examination the two forces that have shaped our economy throughout our history.

Can you guess these two forces?

The first force is political.

This includes all levels of government, especially the United States federal government located in Washington D. C. Other levels of government include the city, county and state. Can you name the governor of your state? Can you name the two U. S. Senators from your state? Can you name the mayor of your city? Can you name any of the elected leaders of your county?

The second force is economic, (the market economy or capitalism) which includes all aspects of the American economy. It is important to note that these two forces, the federal government and capitalism, began at approximately the same time, over two hundred years ago.

A review the origins of capitalism will assist us in our understanding of the American economic system.

Remember, you are viewing all of these lessons through the eyes of a social scientist.

You must be ready to look at every aspect of a historical event in order to arrive at the most informed social science analysis possible.

In lessons 8 and 9 we will study the Classical and Modern Economists who either supported or refuted the principles and benefits of a capitalist system.

A capitalist system has three basic characteristics: private property, a market system and worker freedom.

Throughout history, the right to the ownership of private property was not legally protected under the law.

It was true that in all of history, people and organizations did hold private lands and possessions.

This property or possessions could be lost if they could not be protected.

The only way to legally get your property back was to take it back by force.

Today, we have many laws and safeguards that protect the property rights of individuals, companies and groups.

In the Declaration of Independence, Thomas Jefferson wrote about the "The right to life, liberty and the pursuit of happiness."

A century earlier, the English political writer John Locke wrote about an individual's "right to life, liberty and property."

The ancient and medieval societies that we studied in lessons 4 and 5 did not have a market system that was driven by the demand of the consumers.

Most production and most distribution took place either through tradition, from royalty, or the orders of the lord of the manor.

A farmer in Egypt, a Roman slave or a medieval peasant did not have a choice as to what they wanted to buy or sell.

There were no organized markets to hire people to work, to buy or sell land, or even to lend money.

Markets were controlled by the forces of tradition that we studied in lesson three.

In addition, people did not have the freedom to choose the type of job they wanted to perform.

A worker in a capitalist economy has the freedom of choice, a legal right to work or not work for a particular individual or company.

The farmer in Egypt, the Roman slave and the medieval peasant did not have the legal right to these choices.

All of this information brings us to the beginning of our discussion of the American economy.

ECONOMIC APPLICATION TOOLS

The three basic characteristics of a capitalist society (private property, a market system and worker freedom) are new ECONOMIC APPLICATION TOOLS for your workshop.

We will use these tools in the examination of the influence that the levels of government (local, state and federal) exert over the daily economic activities of every U.S. citizen.

The Colonial period began in 1607 with the founding of Jamestown and continued to the end of the Revolutionary War in 1781.

It was during this time period that the United States was an integral part of the English mercantile system.

Under this mercantile system the colonies (13 original colonies) were supposed to produce only what the mother country needed, and to buy everything from the mother country (England).

The colonies in America had to develop products and the raw materials that could be traded to Great Britain.

The southern colonies, especially Virginia, developed the staple crop of tobacco that provided a firm economic base.

Other southern colonies provided the timber that was needed to build ships for the British navy.

The New England colonies turned to the Atlantic Ocean for their livelihood, supplying the fish that was an important part of the European diet.

The New England colonies had many small farms that were an important part of the economy of this region.

Most of the farm land in the New England colonies was not very fertile.

The Middle Colonies had the best balance of trade with the mother country.

A large variety of farm products came from these colonies that were shipped to the major ports of New York and Philadelphia.

These colonies did not depend on one crop like the tobacco farmers of the south.

There had been a number of wars fought in Europe that had spilled over into the American colonies.

The British government had sent troops to America to fight the French.

This latest conflict called the French and Indian War was fought from 1754 to 1763.

Following this war, the British government made a momentous economic decision. The British passed a series of laws that levied taxes on the colonists.

These problems led to the fighting of the Revolutionary War from 1775 to 1781, in which the American colonies won their independence from Great Britain.

After the war the new nation had to create a stable governmental framework that would support an effective economic system.

The new 13 states were reluctant to give power to a strong central government.

The first government, called the Articles of Confederation, did not even allow the central government to levy taxes against the states.

In addition, each state could print its own money and negotiate commercial treaties with foreign nations.

The government created under the Articles of Confederation was replaced by a government established by the U. S. Constitution.

This Constitution has served the American people for over 200 hundred years.

Under the Constitution, the federal government was given specific economic duties that it could perform (printing money, regulating commerce between states) and specific things that the federal government was not allowed to do (take away the property of citizens without following the law).

The period from 1781 to 1820 witnessed a tremendous expansion of the territory of the United States.

As a result of the Revolutionary War, America received all the territory shown in yellow on the map.

Only Florida, controlled by the Spanish, remained in foreign hands.

In 1803, the French government headed by Napoleon Bonaparte sold America the land that came to be known as the Louisiana Purchase, which doubled the area of the United States.

Americans were busy from 1781 to 1820, settling these new lands while dealing with foreign affairs that would have a profound effect on the economy of our nation.

We had fought a war with the British from 1812 to 1814.

In 1816, American manufacturers called for a tariff on foreign goods that would protect the growing American industries.

America was expanding rapidly, and the nation had grown from the original 13 states to 24 in 1820.

The period from 1820 to 1861 was dominated by the constitutional question of the relationship of the federal government and the southern states over two related issues (states rights and slavery).

The southerners wanted to protect their right to own slaves.

These two issues had affected all aspects of society, that a social scientist of your expertise would readily recognize.

The Missouri Compromise of 1820 brought Missouri into the union as a slave state and Maine as a free state.

The Missouri Compromise maintained the balance of free and slave states from 1820 to 1850.

The admission of California to the union in 1850 opened up a decade of political debate over states rights and slavery that culminated in the beginning of the Civil War in 1861.

The United States made many internal improvements including the building of canals, railroads and roads that provided a boost to the economy of the nation.

The Erie Canal across the state of New York opened up the Great Lakes and especially the cities of Chicago and Milwaukee to the international port of New York City.

These canals, railroads and improved roads were used to move farm products to markets around the country.

New farm equipment had been developed that increased production while using fewer farm workers.

At the time of the American Revolution, 90% of the labor force was engaged in farming. By 1820, this figure had fallen to 72% and 69% in 1840.

The railroad industry experienced a tremendous growth in the next two decades from 1830-1850. By 1850 there were 50,000 miles of track in the United States. These railroads connected the east to cities such as Chicago, Milwaukee, St. Louis, Cleveland and Cincinnati in the West. (The term West is used to describe the area between the Appalachian mountains and the Mississippi River).

The West and South had the advantage of a far-reaching river system that was used to ship products to New Orleans.

The invention of the telegraph by Samuel Morse in 1848 united the communication system of the nation and increased the efficiency of our economic system.

Other important inventions included the following:

Passenger elevator (Elisha Otis, 1852)

Bessemer process to improve steel making (Henry Bessemer, 1859) Sewing machine for sewing shoes together (Gordon McKay, 1858)

Ice machine (Thaddeus Lowe, 1865)

Air brake for trains (George Westinghouse, 1868)

Telephone (Alexander Graham Bell, 1876)

Phonograph (Thomas Alva Edison, 1876)

Electric light bulb (Thomas Alva Edison, 1879)

Electric welding machine (Elihu Thomas, 1886)

Electric sewing machine (Singer Manufacturing Company, 1889)

Gasoline powered car (Charles and J. Frank Duryea, 1893)

Motor-driven vacuum cleaner (John Thurman, 1899)

These improvements were influenced by the Industrial Revolution in Europe.

By 1850, most manufacturing was being done in factories replacing the old system of household manufacturing.

Household manufacturing meant that people made the items they needed in their homes.

Consumer goods were now being mass produced in factories by machines.

These goods would be available to anyone who wanted to buy them.

The local and regional economies had been replaced by a new national economy.

In this national economy, the different regions of the country of the North, South and West would begin to specialize in their economic products.

The two sections of the West and the North would fight against the South during the Civil War.

The states in the northeast and the middle states produced finished goods in their factories.

The West produced farm products including corn and wheat.

The South grew cotton, tobacco, rice and sugar.

These products flowed from one region of the country to another at the eve of the Civil War.

All of these industrial activities and advances made the United States a very strong competitor in the world marketplace.

The face of American business and industry would change dramatically as a result of the Civil War, which we will discuss in the next lesson. The United States was about to enter the second century of its existence (1776-1876) as one of the leading nations in the world.