How does early economic history explain America's success?

America has had many economic modernizations. Modernization refers to radical changes in the sectoral structure of the economy, medium and long-term fiscal policy, and, less frequently, changes in export and/or import policy. These modernizations have been controversial, and not perfect, but generally effective. The problem here is that these successes are largely forgotten by the economic community let alone the general public.

Given modern neoliberalism and the urgent need for a new modernization of the economy, there will inevitably be debates about the role of the state in this process, namely whether it should be involved, or whether business can do everything itself, and the state should not interfere. A compromise is also possible. 

 

Supporters of the active role of the state vs supporters of non-interference

 

The arguments of supporters of non-interference are obvious. Naturally, they will be Republicans of predominantly libertarian persuasion, to a lesser extent representatives of the neoconservative wing of the Republican Party and others. They will appeal to the fact that government has never done anything good, only bad, while business built America. It is to be expected that they will actively publicize the achievements of Alexander Hamilton. 

At the same time, the Republicans will not remember or will not want to talk about their prominent classmate President Dwight Eisenhower. Here we will not examine in detail his economic policy and the activities of other great presidents in terms of economic achievements. It is only worth saying that Eisenhower, being a Republican, initiated many large-scale economic programs and his administration intervened in the economy even more than Franklin Roosevelt, whose New Deal is a symbol of very high intervention in the economy.

Nor will supporters of non-interventionism recall Theodore and Franklin Roosevelt, Reagan, Lincoln. All of them favored the maximum permissible degree of intervention in the economy and our mention of Reagan is not a mistake. Contrary to popular belief, he favored deregulation of only part of the economy. 

In general, a characteristic of all economic policy debates that have produced successful policies has been a focus on effort rather than process. 

But proponents of non-intervention do not realize that state intervention is necessary because there are tasks that only the state can do. If the state does not act, or acts incorrectly, the economy either does not develop at all. Or it does it weaker than it could. 

 

Alexander Hamilton's contribution

 

Alexander Hamilton, one of the founding fathers of the United States and the first Secretary of the Treasury, began reforming the American economy because the British Empire was building an agrarian economy in its American colonies. America was ideally suited for this economic model. A country with a large amount of territory, medium population density and fertile land. Also, the future states had a fairly diverse climate, which made it possible to grow a variety of crops. The British Empire exported cotton, tobacco, timber, tobacco, and precious metals from the colonies. 

 

 

Of course that Britain purposely kept the American economy primitive and dependent on the metropolis. Banking, shipping, and transportation were British monopolies with high prices. Any value-added goods were created by Britain.

Thus after independence America's relative advantages in trade with Europe were small. The country did not have any unique goods or capabilities that made it a desirable partner. All the goods that America exported lacked uniqueness or for example relative cheapness compared to competitors. Moreover, South America was first discovered and colonized, from where all of the above goods began to come. In other words, the niche was already occupied, although not completely, so America still had markets.

Hamilton, as one of the architects of the American economic system, set the intellectual and political course of thought by promoting measures to support industry, trade and banking. Central to his vision of restructuring the American economy was the need to protect newborn American industries from more competitive British manufacturers. However, things were not smooth and there was a need to constantly introduce adjustments. Hamilton introduced a number of harsh protectionist measures despite protests both at home and from the British.

Hamilton belonged to the Federalist party, after him came to power representatives of the now defunct Democratic-Republicans Jefferson and Madison continued to support industry. Industry actively subsidize, eternity railroads, canals, etc. Even before the Civil War, America was protected from foreign invasion and directed Defense Department money to develop promising high-tech industries at Springfield Arsenal and other places. 

 

Selecting promising industries for long-term development

 

The government chose several big promising projects. One was a way to assemble weapons from standardized parts using relatively unskilled labor because America lacked skilled gunsmiths. This innovation created much more than America's gun industry. 

It became the basis of a powerful approach to manufacturing called the American system. Duties remained high and because steel ships greatly reduced the cost of transatlantic transportation, America raised them even higher to offset the effects of British efficiency gains. 

 

 

Alexander Hamilton, one of the principal creators of the U.S. economic system, set the political and intellectual direction by actively promoting measures to support industry, commerce, and banks. A crucial element of his economic program was to protect new American industries from more competitive British manufacturers. 

Nevertheless, many complexities arose that required constant adjustments. Hamilton introduced a number of strict protectionist measures despite domestic objections and protests from Britain.

Hamilton was a member of the Federalist Party, and after his departure, the now-defunct Democratic-Republican Party, led by Jefferson and Madison, came to power and continued to support industrial development. Industry was generously subsidized, and infrastructure projects such as railroads and canals were developed. Up until the 

Civil War, America successfully defended its borders against foreign influence by directing Defense Department funds to the development of promising high-tech industries, including the Springfield Arsenal and other ventures.

The government focused on several major innovative projects. One of these was a method of manufacturing weapons from standardized parts using unskilled labor, as the country lacked skilled gunsmiths. This innovation affected not only the arms industry, but also became the basis for the so-called “American System” in industry.

The high duties were maintained, and with the cheapening of transatlantic transportation due to steel ships, the US raised them even more to compensate for the increased efficiency of British manufacturers.

 

Conclusion

 

The early economic history of the United States demonstrates the crucial role of protectionist measures and government support in establishing the country's industrial strength. The Founding Fathers, including Alexander Hamilton, recognized the need to protect nascent industries from foreign competition and to introduce innovative production methods. The measures they adopted, such as high duties and subsidies for key infrastructure projects, laid the foundation for sustained economic growth.

 

 

U.S. industry grew through not only domestic support, but also through the strategic channeling of funds into technologically advanced projects, which allowed the U.S. to create a unique production system known as the “American System.” This approach to standardization and mass production, as well as heavy subsidization of industry, proved to be important factors contributing to the country's rapid economic progress.

Protectionism and subsidies in the early decades of American history proved to be a successful strategy that allowed the U.S. economy to break free from dependence on foreign producers and establish an independent industrial base, an important step toward future economic leadership on the world stage.