AMERICAN CIVILIZATION THE AMERICAN ECONOMY

THE FOUNDATIONS 1776. The Wealth of Nations-Adam Smith Liberal Economy-laissez faire 1788-1792 Alexander Hamilton Economic plan: Bank of the United States, Uniform national currency: dollar Protective tariff First Supreme Court decisions strengthening interstate commerce, power of the federal govt.

CONGRESS AND THE ECONOMY Raising taxes Coining money Establishing postal service Tax bills must originate from the House Power of the purse: establishes how much money the federal government can spend Budgetary committee controls the federal budget

BASIC LAWS OF THE ECONOMY The invisible hand Supply: the available goods and services Demand: buying power Business cycles: boom and bust periods Boom: demand high, supply low Bust: supply high, demand low

STIMULATING THE ECONOMY Bust periods: 1819, 1857, 1873, to be followed by boom, but 1929: Depression Causes of the Depression: speculating on the stock market, overproduction, underconsumption, unequal distribution of wealth Depression: long term economic downturn

DEMAND SIDE ECONOMICS Government stimulated demand by injecting money into the economy John Maynard Keynes Government creates jobs, example: FDR’s New Deal Civilian Conservation Corps Work Progress Administration

SUPPLY SIDE ECONOMICS Trickle down theory Cutting taxes of the wealthy, of corporatons Extra money will be invested in the economy No extra taxes are needed, government does not interfere directly in the economy

MAJOR MILESTONES IN ECONOMIC HISTORY Until Civil War: rural economy 20% live in city American Industrial Revolution 1865-1915 Urbanization 1920’s: economic superpower 1932: end of laissez faire economy 1945: World War Two: Government mobilizes the economy. 1970’s: oil shortage, stagflation 1980: Reagan revolution, deregulation, supply side economics

TYPES OF BUSINESS ORGANIZATION Corporation: legally a person, protection of investor assets, corporate veil, forerunner: joint stock company, piercing the corporate veil Partnership: partners are responsible financially for business losses Sole proprietor: individual owner

STRENGTHS OF THE ECONOMY Natural resources Highly trained labor force Protestant work ethic Business mindset „America’s business is business” Spirit of the entrepreneur, Carnegie—Bill Gates Flagship industries: information and communication technology, automobile industry, chemical industry-oligopolies

WEAKNESSES OF THE ECONOMY Reliance on foreign energy sources High budget deficit Crisis of the farms High indebtedness Environmental perspective is not on the long run, but on the short run