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United States Financial History  

Christy Ford Chapin

The history of US finance—spanning from the republic’s founding through the 2007–2008 financial crisis—exhibits two primary themes. The first theme is that Americans have frequently expressed suspicion of financiers and bankers. This abiding distrust has generated ferocious political debates through which voters either have opposed government policies that empower financial interests or have advocated proposals to steer financial institutions toward serving the public. A second, related theme that emerges from this history is that government policy—both state and federal—has shaped and reshaped financial markets. This feature follows the pattern of American capitalism, which rather than appearing as laissez-faire market competition, instead materializes as interactions between government and private enterprise structuring each economic sector in a distinctive manner. International comparison illustrates this premise. Because state and federal policies produced a highly splintered commercial banking sector that discouraged the development of large, consolidated banks, American big business has frequently had to rely on securities financing. This shareholder model creates a different corporate form than a commercial-bank model. In Germany, for example, large banks often provide firms with financing as well as business consulting and management strategy services. In this commercial-bank model, German business executives cede some autonomy to bankers but also have more ability to engage in long-term planning than do American executives who tend to cater to short-term stock market demands. Under the banner of the public–private financial system two subthemes appear: fragmented institutional arrangements and welfare programming. Because of government policy, the United States, compared to other western nations, has an unusually fragmented financial system. Adding to this complexity, some of these institutions can be either state or federally chartered; meanwhile, the commercial banking sector has traditionally hosted thousands of banks, ranging from urban, money-center institutions to small unit banks. Space constraints exclude examination of numerous additional organizations, such as venture capital firms, hedge funds, securities brokers, mutual funds, real estate investment trusts, and mortgage brokers. The US regulatory framework reflects this fragmentation, as a bevy of federal and state agencies supervise the financial sector. Since policymakers passed deregulatory measures during the 1980s and 1990s, the sector has moved toward consolidation and universal banking, which permits a large assortment of financial services to coexist under one institutional umbrella. Nevertheless, the US financial sector continues to be more fragmented than other industrialized countries. The public–private financial system has also delivered many government benefits, revealing that the American welfare state is perhaps more robust than scholars often claim. Welfare programming through financial policy tends be “hidden,” frequently because significant portions of benefits provision reside “off the books,” either as government-sponsored enterprises that are nominally private or as government guarantees in the place of direct spending. Yet these programs have heavily affected both their beneficiaries and the nation’s economy. The government, for example, has directed significant resources toward the construction and maintenance of a massive farm credit system. Moreover, policymakers established mortgage insurance and residential financing programs, creating an economy and consumer culture that revolve around home ownership. While both agricultural and mortgage programs have helped low-income beneficiaries, they have dispensed more aid to middle-class and corporate recipients. These programs, along with the institutional configuration of the banking and credit system, demonstrate just how important US financial policy has been to the nation’s unfolding history.

Article

Business Social Responsibility  

Gavin Benke

“Corporate social responsibility” is a term that first began to circulate widely in the late 1960s and early 1970s. Though it may seem to be a straightforward concept, the phrase can imply a range of activities, from minority hiring initiatives and environmentally sound operations, to funding local nonprofits and cultural institutions. The idea appeared to have developed amid increasing demands made of corporations by a number of different groups, such as the consumer movement. However, American business managers engaged in many of these practices well before that phrase was coined. As far back as the early 19th century, merchants and business owners envisioned a larger societal role. However, broader political, social, and economic developments, from the rise of Gilded Age corporations to the onset of the Cold War, significantly influenced understandings of business social responsibility. Likewise, different managers and corporations have had different motives for embracing social responsibility initiatives. Some embraced social responsibility rhetoric as a public relations tool. Others saw the concept as a way to prevent government regulation. Still others undertook social responsibility efforts because they fit well with their own socially progressive ethos. Though the terms and understandings of a business’s social responsibilities have shifted over time, the basic idea has been a perennial feature of commercial life in the United States.

Article

Women, Gender, and the Economies of Colonial North America  

Ellen Hartigan-O'Connor

North American women were at the center of trade, exchange, economic production, and reproduction, from early encounters in the 16th century through the development of colonies, confederations, and nations by the end of the 18th century. They worked for the daily survival of their communities; they provided the material basis for economic and political expansion. There were no economies without them and no economy existed outside of a gender system that shaped and supported it. Connections of family, household, and community embedded the market economies in each region of North America. Gender acted through credit networks, control over others’ labor, and legal patterns of property ownership. Colonialism, by which Europeans sought to acquire land, extract resources, grow profitable crops, and create a base of consumers for European manufactured goods, transformed local and transatlantic economies. Women’s labor in agriculture, trade, and reproduction changed in the context of expanding international economies, created by the transatlantic slave trade, new financial tools for long-distance investment, and an increasing demand for tropical groceries (tea, coffee, and sugar) and dry goods. Women adjusted their work to earn the money or goods that allowed them to participate in these circuits of exchange. Captive women themselves became exchangeable goods. By the end of the 18th century, people living across North America and the Caribbean had adopted revised and blended ideas about gender and commerce. Some came to redefine the economy itself as a force operating independently of women’s daily subsistence, a symbolic realm that divided as much as connected people.

Article

Economic Thought and Practice in America  

Christopher W. Calvo

The conspicuous timing of the publication of Adam Smith’s The Wealth of Nations and America’s Declaration of Independence, separated by only a few months in 1776, has attracted a great deal of historical attention. America’s revolution was in large part motivated by the desire to break free from British mercantilism and engage the principles, both material and ideological, found in Smith’s work. From 1776 to the present day, the preponderance of capitalism in American economic history and the influence of The Wealth of Nations in American intellectual culture have contributed to the conventional wisdom that America and Smith enjoy a special relationship. After all, no nation has consistently pursued the tenets of Smithian-inspired capitalism, mainly free and competitive markets, a commitment to private property, and the pursuit of self-interests and profits, more than the United States. The shadow of Smith’s The Wealth of Nations looms large over America. But a closer look at American economic thought and practice demonstrates that Smith’s authority was not as dominant as the popular history assumes. Although most Americans accepted Smith’s work as the foundational text in political economy and extracted from it the cardinal principles of intellectual capitalism, its core values were twisted, turned, and fused together in contorted, sometimes contradictory fashions. American economic thought also reflects the widespread belief that the nation would trace an exceptional course, distinct from the Old World, and therefore necessitating a political economy suited to American traditions and expectations. Hybrid capitalist ideologies, although rooted in Smithian-inspired liberalism, developed within a dynamic domestic discourse that embraced ideological diversity and competing paradigms, exactly the kind expected from a new nation trying to understand its economic past, establish its present, and project its future. Likewise, American policymakers crafted legislation that brought the national economy both closer to and further from the Smithian ideal. Hybrid intellectual capitalism—a compounded ideological approach that antebellum American economic thinkers deployed to help rationalize the nation’s economic development—imitated the nation’s emergent hybrid material capitalism. Labor, commodity, and capital markets assumed amalgamated forms, combining, for instance, slave and free labor, private and public enterprises, and open and protected markets. Americans constructed different types of capitalism, reflecting a preference for mixtures of practical thought and policy that rarely conformed to strict ideological models. Historians of American economic thought and practice study capitalism as an evolutionary, dynamic institution with manifestations in traditional, expected corners, but historians also find capitalism demonstrated in unorthodox ways and practiced in obscure corners of market society that blended capitalist with non-capitalist experiences. In the 21st century, the benefits of incorporating conventional economic analysis with political, social, and cultural narratives are widely recognized. This has helped broaden scholars’ understanding of what exactly constitutes capitalism. And in doing so, the malleability of American economic thought and practice is put on full display, improving scholars’ appreciation for what remains the most significant material development in world history.

Article

Indian Gaming  

Laurie Arnold

Indian gaming, also called Native American casino gaming or tribal gaming, is tribal government gaming. It is government gaming built on sovereignty and consequently is a corollary to state gambling such as lotteries rather than a corollary to corporate gaming. While the types of games offered in casinos might differ in format from ancestral indigenous games, gaming itself is a cultural tradition in many tribes, including those who operate casino gambling. Native American casino gaming is a $33.7 billion industry operated by nearly 250 distinct tribes in twenty-nine states in the United States. The Indian Gaming Regulatory Act (IGRA) of 1988 provides the framework for tribal gaming and the most important case law in Indian gaming remains Seminole Tribe of Florida v. Butterworth, in the US Fifth Circuit Court of Appeals, and the US Supreme Court decision over California v. Cabazon Band of Mission Indians.

Article

The Rise of the Sunbelt South  

Katherine R. Jewell

The term “Sunbelt” connotes a region defined by its environment. “Belt” suggests the broad swath of states from the Atlantic coast, stretching across Texas and Oklahoma, the Southwest, to southern California. “Sun” suggests its temperate—even hot—climate. Yet in contrast to the industrial northeastern and midwestern Rust Belt, or perhaps, “Frost” Belt, the term’s emergence at the end of the 1960s evoked an optimistic, opportunistic brand. Free from snowy winters, with spaces cooled by air conditioners, and Florida’s sandy beaches or California’s surfing beckoning, it is true that more Americans moved to the Sunbelt states in the 1950s and 1960s than to the deindustrializing centers of the North and East. But the term “Sunbelt” also captures an emerging political culture that defies regional boundaries. The term originates more from the diagnosis of this political climate, rather than an environmental one, associated with the new patterns of migration in the mid-20th century. The term defined a new regional identity: politically, economically, in policy, demographically, and socially, as well as environmentally. The Sunbelt received federal money in an unprecedented manner, particularly because of rising Cold War defense spending in research and military bases, and its urban centers grew in patterns unlike those in the old Northeast and Midwest, thanks to the policy innovations wrought by local boosters, business leaders, and politicians, which defined politics associated with the region after the 1970s. Yet from its origin, scholars debate whether the Sunbelt’s emergence reflects a new regional identity, or something else.

Article

Latinx Business and Entrepreneurship  

Pedro A. Regalado

Entrepreneurship has been a basic element of Latinx life in the United States since long before the nation’s founding, varying in scale and cutting across race, class, and gender to different degrees. Indigenous forms of commerce pre-dated Spanish contact in the Americas and continued thereafter. Beginning in the 16th century, the raising, trading, and production of cattle and cattle-related products became foundational to Spanish, Mexican, and later American Southwest society and culture. By the 19th century, Latinxs in US metropolitan areas began to establish enterprises in the form of storefronts, warehouses, factories, as well as smaller ventures including peddling. At times, they succeeded previous ethnic owners; in other moments, they established new businesses that shaped everyday life and politics of their respective communities. Whatever the scale of their ventures, Latinx business owners continued to capitalize on the migration of Latinx people to the United States from Latin America and the Caribbean during the 20th century. These entrepreneurs entered business for different reasons, often responding to restricted or constrained labor options, though many sought the flexibility that entrepreneurship offered. Despite an increasing association between Latinx people and entrepreneurship, profits from Latinx ventures produced uneven results during the second half of the 20th century. For some, finance and business ownership has generated immense wealth and political influence. For others at the margins of society, it has remained a tool for achieving sustenance amid the variability of a racially stratified labor market. No monolithic account can wholly capture the vastness and complexity of Latinx economic activity. Latinx business and entrepreneurship remains a vital piece of the place-making and politics of the US Latinx population. This article provides an overview of major trends and pivotal moments in its rich history.

Article

The Economy Since 1970  

Judge Glock

Despite almost three decades of strong and stable growth after World War II, the US economy, like the economies of many developed nations, faced new headwinds and challenges after 1970. Although the United States eventually overcame many of them, and continues to be one of the most dynamic in the world, it could not recover its mid-century economic miracle of rapid and broad-based economic growth. There are three major ways the US economy changed in this period. First, the US economy endured and eventually conquered the problem of high inflation, even as it instituted new policies that prioritized price stability over the so-called “Keynesian” goal of full employment. Although these new policies led to over two decades of moderate inflation and stable growth, the 2008 financial crisis challenged the post-Keynesian consensus and led to new demands for government intervention in downturns. Second, the government’s overall influence on the economy increased dramatically. Although the government deregulated several sectors in the 1970s and 1980s, such as transportation and banking, it also created new types of social and environmental regulation that were more pervasive. And although it occasionally cut spending, on the whole government spending increased substantially in this period, until it reached about 35 percent of the economy. Third, the US economy became more open to the world, and it imported more manufactured goods, even as it became more based on “intangible” products and on services rather than on manufacturing. These shifts created new economic winners and losers. Some institutions that thrived in the older economy, such as unions, which once compromised over a third of the workforce, became shadows of their former selves. The new service economy also created more gains for highly educated workers and for investors in quickly growing businesses, while blue-collar workers’ wages stagnated, at least in relative terms. Most of the trends that affected the US economy in this period were long-standing and continued over decades. Major national and international crises in this period, from the end of the Cold War, to the first Gulf War in 1991, to the September 11 attacks of 2001, seemed to have only a mild or transient impact on the economy. Two events that were of lasting importance were, first, the United States leaving the gold standard in 1971, which led to high inflation in the short term and more stable monetary policy over the long term; and second, the 2008 financial crisis, which seemed to permanently decrease American economic output even while it increased political battles about the involvement of government in the economy. The US economy at the beginning of the third decade of the 21st century was richer than it had ever been, and remained in many respects the envy of the world. But widening income gaps meant many Americans felt left behind in this new economy, and led some to worry that the stability and predictability of the old economy had been lost.

Article

Postbellum Banking  

Robert Wright

Between passage of the National Banking Acts near the end of the US Civil War and the outbreak of the Great War and implementation of the Federal Reserve System in 1914, a large, vibrant financial system based on the gold standard and composed of markets and intermediaries supported the rapid growth and development of the American economy. Markets included over-the-counter markets and formal exchanges for financial securities, including bills of exchange (foreign currencies), cash (short-term debt), debt (corporate and government bonds), and equities (ownership shares in corporations), initial issuance of which increasingly fell to investment banks. Intermediaries included various types of insurers (marine, fire, and life, plus myriad specialists like accident and wind insurers) and true depository institutions, which included trust companies, mutual and stock savings banks, and state- and federally-chartered commercial banks. Nominal depository institutions also operated, and included building and loan associations and, eventually, credit unions and Morris Plan and other industrial banks. Non-depository lenders included finance and mortgage companies, provident loan societies, pawn brokers, and sundry other small loan brokers. Each type of “bank,” broadly construed, catered to customers differentiated by their credit characteristics, gender, race/ethnicity, country of birth, religion, and/or socioeconomic class, had distinctive balance sheets and loan application and other operating procedures, and reacted differently to the three major postbellum financial crises in 1873, 1892, and 1907.

Article

Piracy in Colonial North America  

Mark G. Hanna

Historians of colonial British North America have largely relegated piracy to the marginalia of the broad historical narrative from settlement to revolution. However, piracy and unregulated privateering played a pivotal role in the development of every English community along the eastern seaboard from the Carolinas to New England. Although many pirates originated in the British North American colonies and represented a diverse social spectrum, they were not supported and protected in these port communities by some underclass or proto-proletariat but by the highest echelons of colonial society, especially by colonial governors, merchants, and even ministers. Sea marauding in its multiple forms helped shape the economic, legal, political, religious, and cultural worlds of colonial America. The illicit market that brought longed-for bullion, slaves, and luxury goods integrated British North American communities with the Caribbean, West Africa, and the Pacific and Indian Oceans throughout the 17th century. Attempts to curb the support of sea marauding at the turn of the 18th century exposed sometimes violent divisions between local merchant interests and royal officials currying favor back in England, leading to debates over the protection of English liberties across the Atlantic. When the North American colonies finally closed their ports to English pirates during the years following the Treaty of Utrecht (1713), it sparked a brief yet dramatic turn of events where English marauders preyed upon the shipping belonging to their former “nests.” During the 18th century, colonial communities began to actively support a more regulated form of privateering against agreed upon enemies that would become a hallmark of patriot maritime warfare during the American Revolution.