The economic history of the United States begins with British immigration and settlement along the east coast of present-day America in the 17thand 18th centuries. These migrations and settlements formed the colonies of Britain in the US, also known as the Thirteen Colonies. These colonies gained their independence from the British Empire in the late 18th century and rapidly developed from a colonial economy to an economy centered on agricultural production.
1.2.2. 19thCentury
In the 180 years, in the 19th century, the American economy had grown into a massively integrated industrialized economy that accounted for one-fifth of the global economy's output.
As a result, GDP per capita income levels that were previously lower have now surpassed those of the UK and other countries. The policy of maintaining very high wages helps the economy to attract millions of immigrants from all over the world. During the early 1800s, America was primarily agrarian with more than 80% of the population farming. Most of the new production sectors are in the early stages of primary processing of raw materials with wood products, textiles and footwear. During the 19thcentury, recessions often followed financial crises.
The Depression of 1837 was followed by a five-year recession, with a series of bank closures and high unemployment (W. J. Rorabaugh et al., 2004). Because of the great changes in the economy over the centuries, the magnitude of the economic downturn in the modern era is hardly comparable to that of previous recessions (Moore et al., 1986). The recession after World War II seems less severe than before, but the cause is not clear.
1.2.3. 20thCentury
The inventions and technical improvements of the turn of the century opened the door to raising the standard of living of the American people. Many companies have grown enormously by taking advantage of economies of scale and the growth of communications to expand their networks across the country. Many classes of wage workers have benefited directly from these development companies, in particular enjoying some of the highest wages in the world (Jửrg Baten, 2016).
The United States has been the world's largest economy by GDP since the 1920s (Steven Mintz, 2003). In the years following the Great Depression of 1930, when the effects of the recession were most severe, the government took steps to correct the economy, by increasing government spending or cutting taxes to stimulate people to increase consumer spending. By increasing the money supply, the government also succeeds in encouraging spending. Ideas about the best tool for stabilizing the economy changed dramatically between the 1930s and 1980s. From the New Deal of President Franklin D. in 1933 to the initiative In the great society of President Lyndon B. Johnson in 1960, policymakers relied mainly on fiscal policy to influence the economy.
During the world wars of the 20thcentury, the United States made the wiser moves of all the rest of the nations as there were no wars of World War I and a fraction of the Second World War II took place in the United States. During the height of World War II, nearly 40% of US GDP contributed to the war. A period of high inflation, interest rates, and unemployment after 1973
reduced confidence in the use of fiscal policies to adjust the overall pace of the economy (Buchanan & James M., 1977) ). The US economy grew at an average rate of 3.8% a year from 1946 to 1973, while median household income increased 74% (or 2.1% a year) (Current Population Reports: Money Income of Households and Persons in the United States, 1987)
During the 1970s and 1980s, many Americans believed that the Japanese economy would overtake the US, but this did not happen. Since the 1970s, several emerging economies have begun to close the gap with the US economy. In most cases, this is caused by the relocation of manufacturing plants that were formerly located in the US to these countries, where production can be done at a lower cost enough to guarantee the shipping cost and bring higher profit. In other cases, some countries have gradually learned to produce goods and services similar to those previously produced only in the United States and a few other countries. Growth in US real income has slowed.
1.2.4. 21thCentury
The US economy experienced the 2001 crisis with an unprecedented slow recovery as employment did not return to February 2001 levels until January 2005 ( FRED, 2005). This crisis was accompanied by a real estate bubble and a debt bubble that is said to be increasing as the ratio of household debt to GDP has risen to a record from 70% in the first quarter of 2001 to 99%
in the first quarter of 2008. Real GDP as of 2011, household net worth before Q2 2012, nonfarm payrolls before May 2014 and unemployment rate before September 2015 all achieved the most positive numbers in the pre-crisis period.
In 2017, the nominal GDP of the United States reached $19.5 trillion. Nominal GDP for the first quarter of 2018 after adjusting for the year was $20.1 trillion and this was the first time in history that US nominal GDP surpassed the $20 trillion mark. Of which about 70% of GDP comes from people's spending while business investments account for 18% and government spending accounts for 17% (including federal, state and local governments but not including wire transfers, such as Social Security being consumed). Net exports dropped to -3% due to the US trade deficit (BEA News Release – GDP Second Quarter 2018, 2018).
Figure 4.1. Cumulative Real GDP Growth Rate (adjusted for inflation) over US Presidents
Source: Bureau of Economic Analysis, 2018 US GDP growth as reported by the World Bank is US real GDP growth of 1.7% a year from 2000 to the first half of 2014, and this is half the average growth rate in the previous period until 2000 (Bureau of Economic Analysis, 2014).