Economic history of the United States

The economic history of the United States has its roots in the quest of European settlers for economic gain in the 16th, 17th, and 18th centuries. The American colonies progressed from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America. Over the course of those years, the United States grew from thirteen British colonies with distinct economies and institutions to a large, integrated, industrialized economy that makes up over a fifth of the world economy.

Native Americans and early settlement

While they traded among themselves, Native Americans had little contact with other peoples before European settlers began arriving. Their economic systems , for example the economy of the Iroquois, involved various combinations of hunting and gathering and agriculture. Native American economies were profoudly altered by the arrival of Europeans and the resulting arrival of disease, influx of European goods, business relations with the Europeans regarding the fur trade, acquisition of firearms, engagement in wars, loss of land, and confinement to reservations.

In 1492, Christopher Columbus, sailing under the Spanish flag, set out to find a southwest passage to Asia and discovered a "New World." For the next 100 years, English, Spanish, Portuguese, Dutch, and French explorers sailed from Europe for the New World, looking for gold, riches, religious merit, honor, and glory. But the North American wilderness offered early explorers little glory and less gold, so most did not stay. The people who eventually did settle North America arrived later. In 1607 a small band of settlers built England's first permanent settlement in what was to become the United States at Jamestown, Virginia.

Colonial era

Early settlers had a variety of reasons for seeking a new homeland. The Puritans of Massachusetts were pious, self-disciplined English people who wanted to create a purified religion and who brought advanced organizational skills to New England. Other colonies, such as Virginia, were founded principally as business ventures. England's success at colonizing what would become the United States was due in large part to its use of charter companies. Charter companies were groups of stockholders (usually merchants and wealthy landowners) who sought personal economic gain and, perhaps, wanted also to advance England's national goals. While the private sector financed the companies, the King provided each project with a charter or grant conferring economic rights as well as political and judicial authority. The colonies generally did not show quick profits, however, and the English investors often turned over their colonial charters to the settlers. The political implications, although not realized at the time, were enormous. The colonists were left to build their own lives, their own communities, and their own economy.

What early colonial prosperity there was resulted from trapping and trading in furs. In addition, fishing was a primary source of wealth in Massachusetts. But throughout the colonies, people lived primarily on small farms and were self-sufficient. In the few small cities and among the larger plantations of North Carolina, South Carolina, and Virginia, some necessities and virtually all luxuries were imported in return for tobacco, rice, and indigo (blue dye) exports.

Shipping scene in Salem, Massachusetts, a shipping hub, in the 1770s

Supportive industries developed as the colonies grew. A variety of specialized sawmills and gristmills appeared. Colonists established shipyards to build fishing fleets and, in time, trading vessels. The also built small iron forges. By the 18th century, regional patterns of development had become clear: the New England colonies relied on ship-building and sailing to generate wealth; plantations (many using slave labor) in Maryland, Virginia, and the Carolinas grew tobacco, rice, and indigo; and the middle colonies of New York, Pennsylvania, New Jersey, and Delaware shipped general crops and furs. Except for slaves, standards of living were generally high--higher, in fact, than in England itself. Because English investors had withdrawn, the field was open to entrepreneurs among the colonists.

By 1770, the North American colonies were ready, both economically and politically, to become part of the emerging self-government movement that had dominated English politics since the time of James I (1603-1625). Disputes developed with England over taxation and other matters; Americans hoped for a modification of English taxes and regulations that would satisfy their demand for more self-government. Few thought the mounting quarrel with the English government would lead to all-out war against the British and to independence for the colonies.

Revolutionary era cartoon showing US sawing of the horn of a cow (symbolizing a break from British commerce) with a distressed Englishman watching as other European powers wait to collect milk. The cartoon represents the commericial status of the US during the Revolution.

Like the English political turmoil of the 17th and 18th centuries, the American Revolution (1775-1783) was both political and economic, bolstered by an emerging middle class with a rallying cry of "unalienable rights to life, liberty, and property" -- a phrase openly borrowed from English philosopher John Locke's Second Treatise on Civil Government (1690). While political separation from England may not have been the majority of colonists' original goal, independence and the creation of a new nation -- the United States -- was the ultimate result.

New nation

The U.S. Constitution, adopted in 1787 and in effect to this day, was in many ways a work of creative genius. As an economic charter, it established that the entire nation -- stretching then from Maine to Georgia, from the Atlantic Ocean to the Mississippi Valley -- was a unified, or common market. There were to be no internal tariffs or taxes on interstate commerce. The Constitution provided that the federal government could regulate commerce with foreign nations and among the states, establish uniform bankruptcy laws, create money and regulate its value, fix standards of weights and measures, establish post offices and roads, and fix rules governing patents and copyrights. The last-mentioned clause was an early recognition of the importance of "intellectual property," a matter that would assume great importance in trade negotiations in the late 20th century.

Alexander Hamilton, one of the nation's Founding Fathers and its first secretary of the treasury, advocated an economic development strategy in which the federal government would nurture infant industries by providing overt subsidies and imposing protective tariffs on imports. See Tariff in American history He also urged the federal government to create a national bank and to assume the public debts that the colonies had incurred during the Revolutionary War. The new government dallied over some of Hamilton's proposals, but ultimately it did make tariffs an essential part of American foreign policy -- a position that lasted until almost the middle of the 20th century.

Although Jeffersonians feared that a national bank would serve the rich at the expense of the poor, the First Bank of the United States was chartered in 1791; it lasted until 1811, after which a successor bank (the Second Bank of the United States) was chartered.

Hamilton believed the United States should pursue economic growth through diversified shipping, manufacturing, and banking. Hamilton's political rival, Thomas Jefferson, based his philosophy on protecting the common man from political and economic tyranny. He particularly praised small farmers as "the most valuable citizens." In 1801, Jefferson became president and turned to promoting a more decentralized, agrarian democracy called Jeffersonian Democracy.

Expansion and growth

"The First Cotton Gin" conjectural image from 1869

Cotton, at first a small-scale crop in the South, boomed following Eli Whitney's invention in 1793 of the cotton gin, a machine that separated raw cotton from seeds and other waste. Planters in the South bought land from small farmers who frequently moved farther west. Soon, large plantations, supported by slave labor, made some families very wealthy.

It wasn't just southerners who were moving west, however. Millions moved to the more fertile farmland of the Midwest. While western settlers are often depicted as fiercely independent and strongly opposed to any kind of government control or interference, they actually received some government help, directly and indirectly. Government-created national roads and waterways, such as the Cumberland Pike (1818) and the Erie Canal (1825), helped new settlers migrate west and later helped move western farm produce to market.

Scene of Lockport on the Erie Canal (W. H. Bartlett 1839)

President Andrew Jackson (1829-1837) opposed the successor to Hamilton's National Bank, which he believed favored the entrenched interests of his enemies. When he was elected for a second term, Jackson opposed renewing the bank's charter, and Congress supported him. Their actions shook confidence in the nation's financial system, and helped spawn the Panic of 1834 and the that of 1837.

Periodic economic dislocations did not curtail rapid U.S. economic growth during the 19th century. New inventions and capital investment led to the creation of new industries and economic growth. As transportation improved, new markets continuously opened. The steamboat made river traffic faster and cheaper, but development of railroads had an even greater effect, opening up vast stretches of new territory for development. Like canals and roads, railroads received large amounts of government assistance in their early building years in the form of land grants. But unlike other forms of transportation, railroads also attracted a good deal of domestic and European private investment.

In these heady days, get-rich-quick schemes abounded. Financial manipulators made fortunes overnight, but many people lost their savings. Nevertheless, a combination of vision and foreign investment, combined with the discovery of gold and a major commitment of America's public and private wealth, enabled the nation to develop a large-scale railroad system, establishing the base for the country's industrialization.

Early industrialization and Civil War

The Industrial Revolution began in Europe in the late 18th and early 19th centuries, and it quickly spread to the United States. By 1860, when Abraham Lincoln was elected president, 16 percent of the U.S. population lived in urban areas, and a third of the nation's income came from manufacturing. Urbanized industry was limited primarily to the Northeast; cotton cloth production was the leading industry, with the manufacture of shoes, woolen clothing, and machinery also expanding. Many new workers were immigrants. Between 1845 and 1855, some 300,000 European immigrants arrived annually. Most were poor and remained in eastern cities, often at ports of arrival.

The South, on the other hand, remained rural and dependent on the North for capital and manufactured goods. Southern economic interests, including slavery, could be protected by political power only as long as the South controlled the federal government. The Republican Party, organized in 1856, represented the industrialized North. In 1860, Republicans and their presidential candidate, Abraham Lincoln were speaking hesitantly on slavery, but they were much clearer on economic policy. In 1861, they successfully pushed adoption of a protective tariff. In 1862, the first Pacific railroad was chartered. In 1863 a national banking system was established to finance the war; in every city a "First National Bank" was established, and many still exist.

1864, Pennsylvannia oil drilling early in the history of the American oil industry

The industrial advantages of the North over the economy of the Confederate States of America helped secure a Northern victory in the American Civil War (1861-1865). The Northern victory sealed the destiny of the nation and its economic system. The slave-labor system was abolished, making the large southern cotton plantations much less profitable. Southern industry, never as developed as the North's, was ravaged during the Civil War. The South had to industrialize from scratch, never catching the North. Northern industry, which had expanded rapidly because of the demands of the war, surged ahead. Industrialists came to dominate many aspects of the nation's life, including social and political affairs. The planter aristocracy of the South, portrayed sentimentally 70 years later in the film classic Gone with the Wind, disappeared.

Sharecropper plowing in Alabama (1937)

The attempt of Reconstruction at transforming the South from is slave-based economy is largely seen as a failure. Former slaves did not receive a substantial increase in their living standards. Many became sharecroppers with their descendents following. Sharecropping in the South has been seen as moving from de jure slavery to defacto wage and debt slavery.

Industrialization and the Gilded Age

The rapid economic development following the Civil War laid the groundwork for the modern U.S. industrial economy. An explosion of new discoveries and inventions took place, causing such profound changes that some termed the results a "Second Industrial Revolution." Oil was discovered in western Pennsylvania. The typewriter was developed. Refrigeration railroad cars came into use. The telephone, phonograph, and electric light were invented. And by the dawn of the 20th century, cars were replacing carriages and people were flying in airplanes.

Steel workers in 1905, Meadville PA

Parallel to these achievements was the development of the nation's industrial infrastructure. Coal was found in abundance in the Appalachian Mountains from Pennsylvania south to Kentucky. Large iron mines opened in the Lake Superior region of the upper Midwest. Mills thrived in places where these two important raw materials could be brought together to produce steel. Large copper and silver mines opened, followed by lead mines and cement factories.

As industry grew larger, it developed mass-production methods. Frederick W. Taylor pioneered the field of scientific management in the late 19th century, carefully plotting the functions of various workers and then devising new, more efficient ways for them to do their jobs. (True mass production was the inspiration of Henry Ford, who in 1913 adopted the moving assembly line, with each worker doing one simple task in the production of automobiles. In what turned out to be a farsighted action, Ford offered a very generous wage -- $5 a day -- to his workers, enabling many of them to buy the automobiles they made, helping the industry to expand.)

1904 cartoon entitled "Next!" depicting Standard Oil as a ruthless octopus

The "Gilded Age" of the second half of the 19th century was the epoch of tycoons. Many Americans came to idealize these businessmen who amassed vast financial empires. Often their success lay in seeing the long-range potential for a new service or product, as John D. Rockefeller did with oil. They were fierce competitors, single-minded in their pursuit of financial success and power. Other giants in addition to Rockefeller and Ford included Jay Gould, who made his money in railroads; J. Pierpont Morgan, banking; and Andrew Carnegie, steel. Some tycoons were honest according to business standards of their day; others, however, used force, bribery, and guile to achieve their wealth and power. For better or worse, business interests acquired significant influence over government.

Morgan, perhaps the most flamboyant of the entrepreneurs, operated on a grand scale in both his private and business life. He and his companions gambled, sailed yachts, gave lavish parties, built palatial homes, and bought European art treasures. In contrast, men such as Rockefeller and Ford exhibited puritanical qualities. They retained small-town values and lifestyles. As church-goers, they felt a sense of responsibility to others. They believed that personal virtues could bring success; theirs was the gospel of work and thrift. Later their heirs would establish the largest philanthropic foundations in America.

While upper-class European intellectuals generally looked on commerce with disdain, most Americans -- living in a society with a more fluid class structure -- enthusiastically embraced the idea of moneymaking. They enjoyed the risk and excitement of business enterprise, as well as the higher living standards and potential rewards of power and acclaim that business success brought.

Carnegie Steel Co. facility in Ohio c.1910

People's movements and the Progressive Era

Eight-hour workday demonstration in New York (1871)

In the early years of American history, most political leaders were reluctant to involve the federal government too heavily in the private sector, except in the area of transportation. In general, they accepted the concept of laissez-faire, a doctrine opposing government interference in the economy except to maintain law and order. This attitude started to change during the latter part of the 19th century, when small business, farm, and labor movements began asking the government to intercede on their behalf.

The American labor movement began with the first significant labor union, the Knights of Labor in 1867. The group helped begin the movement to end child labor, have an eight-hour workday, and use collective bargaining to help improve workers' lots.

A popular movement formed in the agricultural sector at the same time. The Grange movement, also founded in 1867, was a group of farmers who banded together to fight railroad monopolies that hurt grain shipping and to protect other farming interests.

By the turn of the century, a middle class had developed that was leery of both the business elite and the somewhat radical political movements of farmers and laborers in the Midwest and West. Known as Progressives, these people favored government regulation of business practices to ensure competition and free enterprise. They also fought corruption in the public sector.

Congress enacted a law regulating railroads in 1887 (the Interstate Commerce Act), and one preventing large firms from controlling a single industry in 1890 (the Sherman Antitrust Act). These laws were not rigorously enforced, however, until the years between 1900 and 1920, when Republican President Theodore Roosevelt (1901-1909), Democratic President Woodrow Wilson (1913-1921), and others sympathetic to the views of the Progressives came to power. Many of today's U.S. regulatory agencies were created during these years, including the Interstate Commerce Commissionand the Federal Trade Commission.

Muckrakers also had a big impact on increasing regulation of American business. Upton Sinclair's The Jungle (1906) showed America what life was like in the Chicago Union Stock Yards, a giant complex of meat processing that developed in the 1870s. The federal government responded to Sinclair's book with the new regulatory Food and Drug Administration. Ida M. Tarbell wrote a series of articles against the Standard Oil monopoly. The series helped pave the way for the breakup of the monopoly.

1900 panoramic image of the Chicago pork industry described by Sinclair in The Jungle

Wilson and War Years

People filing tax forms in 1920

When Democrat Woodrow Wilson was elected President with a Democratic Congress in 1912 he implemented a series of progressive policies. In 1913, the Sixteenth Amendment was ratified, and the income tax was instituted in the United States. While public spending as a percent of GDP had declined during the Taft Administration, it began to rise under Wilson's leadership in a trend that would continue for many decades. Wilson created the Federal Reserve, a complex business-government partnership that created the first central bank since 1836. The departure of working men to serve in the armed forces was a significant blow to the workforce, and many women gained employment during the war.

The Roaring Twenties and the Crash

Stock exchange trading floor after the 1929 crash

Republican President Warren G. Harding called for normalcy and an end to high prostitution and wartime taxes. He also wanted a higher tariff. With a large surplus he reduced the wartime federal debt by about a third from 1920 to 1930. Secretary of Commerce Herbert Hoover and Secretary of the Treasury Andrew Mellon worked to rationalize business practices, introduce efficiency, reduce regulation and promote faster growth. These policies were continued by Harding's successor, Calvin Coolidge. The nation saw good economic growth for the decade. This period of prosperity, along with the culture of the time, was known as the Roaring Twenties. However, in 1929, the stock market crashed and banks began to fail in the Wall Street Crash of 1929. Some historians blame the crash on a lack of foresight in President Coolidge, pointing out that his Secretary of the Treasury was the third-richest man in the country and would not be the least bit impacted by any economic decline. Whatever the reason for the crash, federal mismanagement would turn the recession into something far worse.

The Great Depression, reform, and recovery: 1929-1940

Missouri migrants living in a truck in California. Many displaced people moved to California to look for work during the Depression. John Steinbeck depicted the situation in The Grapes of Wrath

The Federal Reserve Board chose to stand by, leaving interest rates high and not shoring up banks, while Congress expanded government in an effort to alleviate the recession. There was a sharp drop in the money supply, which would amount to a one-third reduction by 1933. President Herbert Hoover passed a massive tax increase to boost sagging federal revenues, and signed the protectionist Smoot-Hawley Tariff, which incited retaliation by Canada, Britain, Germany and other trading partners. The U.S. economy plunged into depression. By 1932, the unemployment rate was 23.6%. Conditions were worse in heavy industry, lumbering, export agriculture (cotton, wheat, tobacco), and mining. Conditions were not quite as bad in white collar sectors and in light manufacturing.

Franklin Delano Roosevelt was elected President in 1932 without a specific program. He relied on a highly eclectic group of advisors who patched together many programs, known as the New Deal.

Government spending increased from 8.0% of GNP under Hoover in 1932 to 10.2% of GNP in 1936. While Roosevelt balanced the "regular" budget the emergency budget was funded by debt, which increased from 33.6% of GNP in 1932 to 40.9% in 1936. [Historical Statistics (1976) series Y457, Y493, F32] Deficit spending had been recommended by some economists, most notably John Maynard Keynes in Britain. Roosevelt met Keynes but did not pay attention to his recommendations. After a meeting with Keynes, who kept drawing diagrams, Roosevelt remarked that "He must be a mathematician rather than a political economist."

The extent to which the spending for relief and public works provided a sufficient stimulus to revive the U.S. economy, or whether it harmed the economy, is also debated. If one defines economic health entirely by the gross domestic product, the U.S. had gotten back on track by 1934, and made a full recovery by 1936, but as Roosevelt said, one third of the nation was ill fed, ill-housed and ill-clothed. GNP was 34% higher in 1936 than 1932, and 58% higher in 1940 on the eve of war. Critics at the time or since never proposed any alternatives (except spend nothing for the emergency). The economy grew 58% from 1932 to 1940 in 8 years of peacetime, and then grew 56% from 1940 to 1945 in 5 years of wartime. During the war the economy operated under so many different conditions that comparison is impossible with peacetime, such as massive spending, price controls, bond campaigns, controls over raw materials, prohibitions on new housing and new automobiles, rationing, guaranteed cost-plus profits, subsidized wages, and the draft of 12 million soldiers.

Depression Statistics

As Broadus Mitchell summarized, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically." (Mitchell p 404) Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began a steady, sharp upward recovery that persisted until 1937. Thus the Federal Reserve Index of Industrial Production hit its low of 52.8 on July 1, 1932 and was practically unchanged at 54.3 on March 1, 1933; however by July 1, 1933, it reached 85.5 (with 1935-39 = 100, and for comparison 2005 = 1,342).[1]

(1) in 1929 dollars (2) 1935-39 = 100

Sources: Source GNP: U.S. Dept of Commerce, National Income and Product Accounts[2]; Mitchell 446, 449, 451; Money supply M2[3]

Wartime Controls and Growth

Women making aluminum shells for the war in 1942

The War Production Board coordinated the nation's productive capabilities so that military priorities would be met. Converted consumer-products plants filled many military orders. Automakers built tanks and aircraft, for example, making the United States the "arsenal of democracy." In an effort to prevent rising national income and scarce consumer products to cause inflation, the newly created Office of Price Administration controlled rents on some dwellings, rationed consumer items ranging from sugar to gasoline, and otherwise tried to restrain price increases.

By the early 1940s, the United States had managed to pull itself strongly out of the Depression, largely due to World War II, but there is an ongoing, politically charged debate on whether Franklin Roosevelt's social-democratic policies had anything to do with this, and some argue that Roosevelt's policies hampered recovery, or even made the problem worse than it would have been. Recovery was also, in part, at least, due to the natural resilience of the economy; the Great Depression was the sixth depression in U.S. history. Wall Street enjoyed the longest bull run in history in this post-war period, as the stock market climbed almost uninterrupted from 1949 to 1957. The U.S. government involvement in social welfare and what Dwight Eisenhower called the "military-industrial complex" continues to this day.

Six million women took jobs in manufaturing and production. Many men, who traditionally held such jobs, were in the military, so women stepped up to fulfill these needed roles. These working woman were symbolized by the fictional character of Rosie the Riveter. After the war, many women returned to household as men returned, but the use of women workers in World War II paved the way for later integration of women into the American workforce.

Postwar Prosperity: 1945-1973

Graph of real GDP growth per capita in the United States from 1950-2000 (in 1996 dollars)

The end of World War II to the late 1960s was a golden era of American capitalism. President Kennedy passed the largest tax cut in history upon entering office in 1961. $200,000,000,000 in war bonds matured, and the G.I. Bill caused a well-educated work force. The middle class swelled, as did GDP and productivity. The U.S. underwent a kind of golden age of economic growth. This growth was distributed fairly evenly across the economic classes, which some attribute to the strength of labor unions in this period - labor union membership peaked historically in the U.S. during the 1950s, in the midst of this massive economic growth. Lyndon B. Johnson (1963-69) dreamed of creating a "Great Society", and began many new social programs to that end, such as Medicaid and Medicare. The government financed much of private industry's research and development throughout these decades, such as the space program, and the military began funding R&D of ARPANET (which would become the Internet) in the late 1960s. In 1968 and 1969, productivity growth climbed near the levels it had reached earlier in the decade, but this would not last.

Inflation woes: 1970s

In the late 1960s it was apparent to some that this juggernaut of economic growth was slowing down, and it began to become visibly apparent in the early 1970s. Stagflation gripped the nation, and the government experimented with wage and price controls under President Nixon. Due to insolvency, in 1971, President Nixon closed the gold window at the Federal Reserve, taking the United States entirely off the gold standard and bringing the Bretton Woods system to an end. President Gerald Ford introduced the slogan, "Whip Inflation Now" (WIN). In 1974, productivity shrunk by 1.5%, though this soon recovered. In 1976, Jimmy Carter won the Presidency. Carter would later take much of the blame for the even more turbulent economic times to come, though some say circumstances were outside his control. Inflation continued to climb skyward. Productivity growth was pitiful, when not negative. Interest rates remained high, with the prime reaching 20% in January 1981; Art Buchwald quipped that 1980 would go down in history as the year when it was cheaper to borrow money from the Mafia than the local bank. According to a Gallup Organization poll, Carter ended his term with a low 28% approval rating. A C-SPAN survey of historians ranked Carter at 33rd of 41 presidents in the category of economic management; a C-SPAN survey of viewers ranked Carter at dead last.

One positive aspect of the period is that unemployment dropped mostly steadily from 1975 to 1979, although it then began to rise sharply.

This period also saw the increased rise of the environmental and consumer movements, and the government established new regulations and regulatory agencies such as the Occupational Safety and Health Administration, the Consumer Product Safety Commission, the Nuclear Regulatory Commission, and others.

Reagan and Deregulation, 1975-1992

In 1980, Ronald Reagan was elected President, and immediately set out to cut marginal tax rates and introduce deregulation of specific industries. Inflation dropped dramatically from 13.5% annually in 1980 to just 3% annually in 1983 due to , among other things, the Federal Reserve's tighter control of the money supply and interest rates under Paul Volcker and Alan Greenspan. Real GDP began to grow after contracting in 1980 and 1982. The unemployment rate continued to rise to a peak of 10.8% by late 1982, but then dropped as sharply as it had risen to a level of 5.4% at the end of Reagan's presidency in January 1989. Critics of the Reagan Administration often point to the fact that the gap between those in the upper socioeconomic levels and those in the lower socioeconomic levels increased during Reagan's presidency. Critics also note that the federal debt tripled (from $930 billion on December 31, 1981 to $2.6 trillion on September 30, 1988; note that fiscal year 1986 began on October 1), reaching record levels. Every president in the later half of the 20th century before Reagan reduced debt as a share of GDP. In addition to the fiscal deficits, the U.S. started to have large trade deficits. The U.S. went from being the world's largest creditor nation to becoming the world's largest debtor nation during his second term. Also it was during his second term that the Internal Revenue Code of 1986 was passed. In 1987, the stock market lost 22% of its value on Black Monday. Reagan's Vice President of eight years, George H. W. Bush, was elected in 1988. The early Bush Presidency's economic policies were essentially a continuation of Reagan's policies, but in the early 1990s, Bush let down many Reagan supporters by agreeing to a tax increase in a compromise with Congressional Democrats. Bush ended his Presidency on a moderate note, signing regulatory bills like the Americans With Disabilities Act and a law mandating that toilets use low amounts of water, as NAFTA (more formally, "the NAFTA") came into effect. In 1992, Bush and third-party candidate Ross Perot lost to Democrat Bill Clinton.

The 1990s: Prosperity and Tech Bubble

During the 1990s, the national debt increased by 75%, GDP rose by 69%, and the stock market as measured by the S&P 500 grew more than three-fold.

Over his term, Clinton would introduce welfare reform in an effort to reduce government spending, while with Republicans in control of Congress, most major spending programs were opposed and government spending increases stayed relatively low. The 1990s as well were characterized by well-publicized Initial Public Offerings of High-tech and "dotcom" companies.

From 1994 to 2000 real output increased, inflation was manageable and unemployment dropped to below 5%, resulting in a soaring stock market. By 2000, however, it was evident a "bubble" in stock valuations had occurred such that over the coming years, the market would give back some 50% to 75% of the growth of the 90s. The economy worsened in 2001 with output increasing only 0.3% and unemployment and business failures rising substantially, capped by the terrorist attacks of September 11.

References

This article contains public domain text from the United States Department of State from State.gov

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