United States of America - Economy

The economic history of the United States is a story of economic growth that began with marginally successful colonial economies and progressed to the largest industrial economy in the world in the the 20th and early 21st century.

The economic system of the United States can be described as a capitalist mixed economy, in which corporations, other private firms, and individuals make most microeconomic decisions, and governments prefer to take a smaller role in the domestic economy, although the combined role of all levels of government is relatively large, at 36% of the GDP. The U.S. has a small social safety net, and regulation of businesses is slightly below the average of developed countries. The United States' median household income in 2005 was $43,318.

Economic activity varies greatly across the country. For example, New York City is the center of the American financial, publishing, broadcasting, and advertising industries, while Los Angeles is the most important center for film and television production. The San Francisco Bay Area and the Pacific Northwest are major centers for technology. The Midwest is known for its reliance on manufacturing and heavy industry, with Detroit serving as the historic center of the American automotive industry, and Chicago serving as the business and financial capital of the region. The Southeast is a major area for agriculture, tourism, and the lumber industry, and, because of wages and costs below the national average, it continues to attract manufacturing.

The largest sector in the United States economy is services, which employs roughly three quarters of the work force. The economy is fueled by an abundance in natural resources such as coal, petroleum, and precious metals. However, the country still depends for much of its energy on foreign countries. In agriculture, the country is a top producer of corn, soy beans, rice, and wheat, with the Great Plains labeled as the "breadbasket of the world" for their tremendous agricultural output. The U.S. has a large tourist industry, ranking third in the world, and is also a major exporter in goods such as airplanes, steel, weapons, and electronics. Canada accounts for 19% (more than any other nation) of the United States' foreign trade, followed by China, Mexico, and Japan.

While the per capita income of the United States is among the highest in the world, the wealth is comparatively concentrated, with approximately 40% of the population earning less than an average resident of western Europe and the top 20% earning substantially more. Since 1975, it has had what can be called a "two-tier" labor market, in which virtually all the real income gains have gone to the top 20% of households. This polarization is the result of a relatively high level of economic freedom.

The social mobility (like social class, a vague and abstract concept) of U.S. residents relative to that of other countries is the subject of much debate. Some analysts have found that social mobility in the United States is low relative to other OECD states, specifically compared to Western Europe, Scandinavia and Canada, using their particular definitions and models. Low social mobility may stem in part from the U.S. educational system. Public education in the United States is funded mainly by local property taxes supplemented by state revenues. This frequently results in a wide difference in funding between poor districts or poor states and more affluent jurisdictions. In addition, the practice of legacy preference at elite universities gives preference to the children of alumni, who are often wealthy. This practice reduces available spaces for better-qualified lower income students. Some analysts argue that relative social mobility in the U.S. peaked in the 1960s and declined rapidly beginning in the 1980s. Former Federal Reserve Board Chairman Alan Greenspan has also suggested that that the growing income inequality and low class mobility of the U.S. economy may eventually threaten the entire system in the near future.

Conversely, some analysts, such as those writing for the Cato Institute, Fraser Institute, and Timbro, argue that U.S. social mobility is greater than numbers indicate, pointing to the absence of class hierarchy (e.g., European class model, Indian caste system, etc.), and broader economic freedom. They also highlight the existence of universal access to post-secondary education (the only barrier to which is the inability to afford tuition costs, rather than lack of connections or class). These analysts suggest that the absence of state intervention in the U.S., along with the resulting high economic competition, allows individuals greater opportunity to improve their conditions than welfare states.

The United States is an influential country in scientific and technological research and the production of innovative technological products. During World War II, the U.S. was the first to develop the atomic bomb, ushering in the atomic age. Beginning early the Cold War, the U.S. achieved successes in space science and technology, leading to a space race, which led to rapid advances in rocketry, weaponry, material science, computers, and many other areas. This technological progress was epitomized by the first visit of a man to the moon, when Neil Armstrong stepped off of Apollo 11 in July 1969. The U.S. was also perhaps the most instrumental nation in the development of the Internet, through the funding of its predecessor, Arpanet, and the actual physical presence of much of the Internet.

In the sciences, Americans have a large share of Nobel Prizes, especially in the fields of physiology and medicine. The National Institutes of Health, a focal point for biomedical research in the United States, has contributed to the completion of the Human Genome Project. The main governmental organization for aviation and space research is the National Aeronautics and Space Administration. Major corporations, such as Boeing and Lockheed Martin, also play an important role.

The automobile industry developed earlier and more rapidly in the United States than in most other countries. The backbone of the nation's transportation infrastructure is a network of high-capacity highways. From data taken in 2004, there are about 3,981,521 miles (6,407,637 km) of roadways in the U.S., the most in the world.

Mass transit systems exist in large cities, such as New York, which operates one of the busiest subway systems in the world. With a few exceptions, American cities are less dense than those in other parts of the world. Low density partly results from and largely necessitates automobile ownership by most households.

Whereas the freight rail network is among the world's best (and most congested), the passenger rail network is underdeveloped by European and Japanese standards. This is partly due to the longer distances travelled in the U.S.; a destination two thousand miles away is reached more quickly by air than by rail. Government subsidies of air travel played a role in the bankruptcy of passenger-rail corporations in the 1970s. The U.S. had been unique in its high number of private passenger railroads. During the 1970s, government intervention reorganized freight railroads, and consolidated passenger service under the government-backed corporation Amtrak. No other country has more miles of rail than the U.S.

Air travel is the preferred means of travel for long distances. In terms of passengers, seventeen of the world's thirty busiest airports in 2004 were in the U.S., including the world's busiest, Hartsfield-Jackson Atlanta International Airport (ATL). In terms of cargo, in the same year, twelve of the world's thirty busiest airports were in the U.S., including the world's busiest, Memphis International Airport. In the first half of 2006, Chicago's O'Hare International Airport, often close behind Hartsfield-Jackson, processed more passengers than the Atlanta airport.

Several major seaports are in the United States; the three busiest are California's Port of Los Angeles and Port of Long Beach, and the Port of New York and New Jersey, all among the world's busiest. The Great Lakes also carry shipping traffic, the lakes being extensively connected to one another, the Mississippi River system, and the Atlantic Ocean. The first water link between the Great Lakes and the Atlantic, the Erie Canal, allowed the rapid expansion of agriculture and industry in the Midwest, and made New York City the economic center of the U.S.

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