US Economy

• text 67-71 Industrial Revolution• The United States was being created at around

the same time as The Wealth of Nations was published, during the Industrial Revolution.

• Factories were taking over as the way things were made.

• To begin with, US business was mostly farming, but the first Sec. of the Treasury convinced Congress to approve a tariff.

• The first US factories involved cotton production, and then guns.

• Larger businesses started to be run as corporations.

• Railroad building improved transport and encouraged heavy industry.

• Until the 1880s, most US income was from farming, but after that it was industry.

• The two world wars did not damage US infrastructure, in fact industry increased to meet the new demands.

• These days high tech industry is very important to the US economy

• Tariffs are used to protect local businesses from cheaply made imports. Do you think this is unfair to other countries?

• Adam Smith believed that there should be no tariffs, and that everyone would benefit because each country would end up making only what it was best at. Do you think that this would work in real life?

• The US economy is the largest for a single country anywhere in the world.

• The US has a lot of natural advantages which combine to make it successful.

• The stable political system and the laws about ownership and contracts provide an environment suitable for successful businesses.

• The businesses which made the US strong in the past are still important, but less than in the past, and some continue to decline despite government attempts to help them.

• The US car industry is an example of this sort of industry.

• In recent years the US-owned car makers have had increasing difficulty competing with car makers from countries like Japan.

• The US car makers had for many years concentrated on large cars, which were not very fuel efficient, such as sports utility vehicles and pick-up trucks.

• When fuel prices started to rise, and environmental issues became more important, people started to prefer smaller, fuel efficient cars.

• When the global economic crisis hit, the 3 largest US car companies were all severely effected.

• General Motors, Ford and Chrysler all began to struggle compared with foreign companies.

• Their workers were all in unions, and their businesses were inefficient, and so their cars were more expensive and not what people wanted.

• The US government tried to save the companies by giving them huge loans, but in the end both GM and Chrysler went bankrupt (ran out of money).

• The global financial crisis was one of the reasons for these failures, and that was caused by problems in another area of the US economy.

• In the years before the crisis, the US real estate market was very successful, and the prices of properties in the US were extremely high.

• But the high prices could not last forever, so when the prices dropped, many people lost money.

• The problem was that many companies in the US and around the world had invested money in finance companies who used housing loans make money.

• When the price of houses dropped, people could not pay back the loans, and the problem grew.

• Because the US government didn’t have very strict regulations on the financial companies, people who had invested in them from around the world lost huge amounts of money, starting a chain reaction.

• While some parts of the US economy are failing, other parts get even stronger every year.

• Good examples of this are the huge technology companies, such as Microsoft, Apple and Google.

• These sorts of companies in some ways stand for what Americans are so proud of about their society, the ability of anyone to become wealthy and powerful.

• The people who started these companies all started their own companies, and from small beginnings used their own talents to build huge businesses.

• Both Bill Gates and Steve Jobs dropped out of their university studies before they finished to concentrate on their work.

• Now Bill Gates is retired from Microsoft and is ranked as the richest man in the world.

• Why do software (computer program) designers have an advantage in starting their own businesses compared with companies that make or build things?

• American workers are paid much more than workers in poorer countries, how is this a disadvantage to the US economy?

• Why do you think the US government wanted to save the car companies, even though they were losing money and making bad decisions?

• text 71-73 Free Enterprise• Most Americans believe in free enterprise.• Lending money for investment in business

benefited stockholders and business owners.• Large immigrant populations were exploited

by early factory owners.• Is a country better off with low wages and

very rich companies, or high wages and less successful companies?

• text 73-74 Roots of affluence• The success of the US was made possible by a

combination of things: population, size, natural resources.

• The government did not try to impose too much control over the economy.

• Individual effort was part of the religion.

• text 74-77 Agriculture