Why did the USA become the worlds strongest economy?

Mudassir Ali
Apr 15, 2020 08:17 AM 0 Answers
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Why did the USA become the worlds strongest economy?

Mudassir Ali
- Apr 15, 2020 08:17 AM

It’s actually a fascinating combination of historical factors.

First of all, America is a large and rich land. It has lots of arable land, lots of mineral resources, lots of water resources, and lots of space, as well as being well situated for defense. When European diseases wiped out most of the native population, settlers found themselves in a land that already had quite a bit of infrastructure built, and was pretty easy to colonize. The remaining natives had neither the numbers nor the technology to meaningfully hold them back, and thus were displaced or eliminated at a relatively low cost (financially speaking, of course). The deliberate decision of the fledgling United States to expand the country from coast to coast by colonization, financial maneuvering, and outright invasion was a surprisingly successful one, leaving us with a great deal of waterway access (which is a critical component for economic growth) and only two neighbors, the sparsely populated north and the relatively poor south. Neither of them has ever presented a serious military threat.

The timing of American colonization and independence was very fortunate. The vast lands needed settling, which made for very liberal immigration policies, and the high availability of resources and lightly governed frontiers attracted huge numbers of immigrants who were both ambitious and individualistic. At the same time, American independence occurred right around the time of the first Industrial Revolution. While it started in Europe, America jumped on board in a serious way. There’s a strong argument that America actually profited from it’s relatively sparse population at the time. Most industries in Europe were large employers and often dominated by professional guilds that resisted automation which reduced the number of needed employees. America was short of laborers, and so embraced anything that reduced labor needs, making for cheaper goods.

In the early days, the agrarian south used vast amounts of slave labor to produce agricultural goods in large quantities for relatively little money. When slavery was abolished, mechanization and continued pools of cheap labor allowed for inexpensive goods to be produced, contributing to both economic and industrial growth.

These impacts were only accelerated during the 20th centuries, when Europe was ravaged by two world wars. Much of the industrial capacity of the continent was destroyed or degraded, while America was pretty much totally spared. That meant that American industry could continue to grow and find markets, while Europe was still rebuilding. During the poverty, chaos and rise of fascism in Europe, the best and brightest of the continent flocked to America as the safest and wealthiest country still standing, bringing with them a flood of knowledge, experience and capabilities. Einstein, Von Neumann, Godel, Fermi, Pauli, Teller. All of these transformative scientists wound up in the United States, because their homes in Europe either limited their opportunities, or were straight-up dangerous to them. America profited greatly from being a stable and free economy that was separated from all of that destruction.

Post-WWII, America profits from having a robust system of higher education, a generally free and open system of trade, overall decent infrastructure and stable financial, governmental and legal systems (specific failures notwithstanding). Whether this will be enough to ensure continued economic growth in the future is an open question. A lot of effort and foresighted decisions were necessary to bring us to this point, but also a lot of luck. So there are no guarantees as to what will happen in the future.

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