Unit 3: American Economy

The Roots of Affluence

Business Meeting

No single factor is responsible for the successes of American business and industry. Bountiful resources, the geographical size of the country and population trends have all contributed to these successes. Religious, social and political traditions; the institutional structures of government and business; and the courage, hard work and determination of countless entrepreneurs and workers have also played a part.

The vast dimensions and ample natural resources of the United States proved from the first to be a major advantage for national economic development. With the fourth largest area and population in the world, the United States still benefits greatly from the size of its internal market. The Constitution of the United States bars all kinds of internal tariffs, so manufacturers do not have to worry about tariff barriers when shipping goods from one part of the country to another.

Holiday Makers

A population of more than 250 million people provide both workers and consumers for American businesses. Thanks to several waves of immigration, the United States gained population rapidly throughout the 19th and early 20th centuries, when business and industry were expanding. Population grew fast enough to supply a steady stream of workers, but not so fast as to overwhelm the capacity of the economy.

Rapid growth helped to promote a remarkable mobility in the American population—a mobility that contributes a useful flexibility to business life. Census figures show that, over a five-year period, about one family in ten moves to a new state (the United States contains 50 states in all.) Mobility has been not only geographical but also social and economic. Lacking the rigid social classes of many European nations, the early United States provided many opportunities for advancement, although mainly for those who were Caucasian. Racial barriers that long blocked advancement for darker-skinned peoples, however, have largely disappeared in the past three decades. Class structure today is quite fluid.

The American people have possessed to an unusual degree the entrepreneurial spirit that finds its outlet in such business activities as manufacturing, transporting, buying and selling. Some have traced this entrepreneurial drive to religious sources. They have said, for example, that a “Puritan ethic” or “Protestant ethic” imbues many Americans with the belief that devotion to one's work is a way of pleasing God, and that success in business can be an onward sign of God's blessing. Others have put forward a contrary view. They have argued that capitalist enterprise often is characterized by a material acquisitiveness that could develop only in the absence of deep religious feeling.

A variety of institutional factors have favored the success of American business and industry. Mindful of the potential for abuse that lay in a powerful government, the founders of America's political institutions sought to limit governmental powers while widening opportunities for individual initiative. The relative reluctance of American political leaders to intervene in economic activities gave great freedom to market forces. By channeling economic initiative into activities that promised the greatest return on investment, free-market institutions fostered dynamic growth and rapid change. One result was a rapid accumulation of capital, which could then be used to produce further growth.

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