Practice Essay Questions
Slavery and Regional Conflict
The first U.S constraints of slavery came in 1787 after an increase in the slave populations over 7 years. In 1780, the slave population was at 575,000 slaves, most of whom resided in the South of the U.S. The first constraint came as one of the great constitutional compromises of the time. The constraint permitted the existence of slavery but prohibited slave owners from importing more slaves from 1807 onwards. The implication was that slave owners were prohibited from foreign slave trade, effective after 20 years from the date of enactment. The declaration made by the Massachusetts constitution in 1780 that all men are equal by birth followed by a 1783 judicial decision, confirmed the state’s willingness to abolish slave trade. The state of Pennsylvania also followed suit with a law that provided for children born of slaves from 1980 to be released after their 28th birthday. Each of these was reassuring I the fight against slavery.
Besides the fact that the Northern and the Southern states were different in terms of their emancipation timelines, there are other significant differences between the Northern emancipation and the Southern emancipation. For instance, slavery was almost universally prohibited in the North by the 1800s while it was an economic cornerstone in the South in the same period. This key difference was the major cause of the civil war. Secondly, the slave based economy in the South supported agriculture while the free worker based economy in the North was a driving factor for industrialization. Industrialization opportunities in the North attracted European immigrants who established various cities in the North. Moreover, more than 80% of Southerners were employed in agriculture unlike in the North where only 20% of the population was employed in agriculture.
During the emancipation of slaves, there were significant economic differences between the North and the South courtesy of the differences in the characteristics of the labor force occasioned by differences in the constitutions on slavery. In the North for instance, there was further economic boost as a result of expanding industrialization and immigration of skilled personnel to work in the industrial sector. On the other hand, the Southern economy, depending on slaves, made their living off the land resulting in lower probabilities of economic boost. There was also an increasing shift from unskilled works to more skilled and semi-skilled labor in the North, unlike the south that stuck to unskilled labor due to agricultural focus. Products were made cheaper and faster due to newer technologies in the North, contrary to the South where increased productivity resulted in increased exportation of agricultural products such as cotton.
War, Recovery and Regional Divergence
The civil war, just like any other war, disrupted economic progress in both the south and the north. The civil war majorly refined key technologies that defined America’s industrial status. Technologies such as the telegraph, the steam boat and the railroad improved cross- boundary trade, enhancing cotton export in the south and resulting in improved outcomes in trade across the nation. The North in particular, was well recognized as a dealer in most of the processed materials, while the South proved to be highly dependent on the sale of staple agricultural products as exports. The south supplied two thirds of the world’s cotton while the North focused on a manufacturing and commercial economy.
The impacts of slavery on the South included deterrence of trade and economic growth. Slavery worked in various ways to deter industrialization. For instance, Europeans who provided skilled labor for industrial systems avoided the south due to the fear of competition from the slaves. This deprived the region of sufficient workers who could reclaim the lands after the abolition of slave trade, hence limiting land re-development. Moreover, the south remained colonized by both the North and Europeans, hence failed to enjoy economic independence. A combination of the dependence on agriculture, lack of skilled labor and inability to reclaim the land for other productive purposes resulted in the low rate of industrialization in the South relative to the North. Moreover, the slavery legacy in the South also led to overuse of the agricultural lands, which hampered their productivity.
Money, Prices and Finances in the Postbellum Era
The postbellum era was recognized by the reconstruction efforts that occurred across both the North and the South. With this era, came various changes in the economic and trade patterns across the nation. For instance, the biggest change in trade was the adoption of new forms of currency such as the greenback currency, national bank reserves, gold and silver which acted as the money supply base. The most significant growth came as a result of bank deposits. Greenbacks in particular, helped the nation to solve two key economic problems namely addressing immediate need for additional funding by the government and the establishment of a starting monetary policy. Most economic growth came as a result of bank deposits and savings which were created using loans.
The gold standard used as a form of currency in the 18th and 19th century was recognized as a result of the availability of gold and its consideration of value, which was common across nations. Prior to the civil war, the gold standard proved to be an efficient monetary value as most of the trade was done locally. However, the postbellum era came with expansion of trade boundaries, through factors such as export. In such an environment, the inflexibility of the god standard proved to be a challenge in its use as a currency. This was addressed through the introduction of greenbacks, for which gold coins could be substituted. The introduction of paper money in the late 20th century was also a significant step towards overcoming the challenges of the gold standard.
The crime of ’73 is a term used to describe the action of congress to discontinue minting of silver coins. The intention of the congress at the time was to eliminate the bimetallic standard currency which had been in use over the civil war period. However, stopping the minting of silver coins proved to be an economic crime as evidenced by the escalated depression of 1873. Following the deepening depression, inflationists implored congress, through campaigns, to resume silver coin usage and hence redeem the economy from the impacts of gold greenbacks. To avert the impacts of this crime, the congress passed a regulation to renew the coinage of silver and also instructed the treasury to purchase silver bullions at the market price as long as they were available within stimulated amounts. The motion was passed in spite of a presidential veto.
The New Deal
The New Deal is described as a series of measures and projects implemented during the first few days of president Franklin D. Roosevelt with an objective of restoring prosperity to the Americans. President Roosevelt acted swiftly in his first 100 days in office with the objective of stabilizing the economy and providing jobs to the unemployed and providing relief to the suffering. Through 8 years following his election, the government continued to put up projects and programs aimed at restoring prosperity and dignity to the American population. Some of these programs included the CCC, TVA and SEC among others. These programs changed the relationship between the federal government and the American citizens significantly. There were several economic impacts of the New Deal throughout the lifetime of the programs and beyond.
Through the New Deal, financial systems in America were reformed to a great extent. The introduction of policies to regulate business performance by banks and financial institutions was the first major driver of financial reform in the U.S. Banks were prohibited from engaging in insurance and stock trade, which had been used by banks to engage in risky businesses by investing in shaky companies in which bank leaders had interests. This helped to control also the level of lending to risky ventures and thus reduced the potential risks of saving in a bank. The emergency banking act also helped to control financial institutions by reopening only sound banking institutions and keeping them under the oversight of the US treasury. These two reforms provided long term stability to the banking industry, which resulted in significant change in the financial systems of the country.
With the establishment of new labor policies under the New Deal, labor relations changed through the country. Organized labor improved as more people recognized employment rights. The National Labor Relations (NRA/ Wagner) Act was established in the wake of the New Deal, in a bid to increased employee rights to unionization. The National Labor Relations Board (NLRB), which was established under the Wagner Act allowed the government to government to intervene in cases of workers’ strikes which affected the health of the nation. The act also set minimum wages for workers and the corresponding maximum working hours per day. Furthermore, child labor was abolished while the right of workers to organize was established, allowing for workers to engage in collective bargaining. After the NRA was declared unconstitutional, the hour standards and the setting wage continued to be implemented. In 1938, the Fair Labor Standards Act declared the maximum work hours per week at 40, and also gave the minimum wages.
Monetary and Fiscal Policy
Adopting Keynesian economic models led to the imposition of tariffs and policies which helped governments to recover from the economic depression and to regain stability over the next few years. With its focus on the circular flow of money in the economy, the model provided governments with the opportunity to control fiscal systems. The Keynesian era has been described as one in which solutions to the existing fiscal challenges were obtained. Moreover, the era’s focus on capitalism continued the systems that had been in place previously while at the same time driving transformations towards making the systems more efficient.
The monetary era and the Keynesian era provided varying perspectives to the economic outlook. While both aimed at preventing a recurrence of the great depression, each of them was founded on a unique principle and theory. The Keynesian era was characterized by emphasis on the role of fiscal policy on economic stabilization. In particular, the Keynesian theory, which was the economic foundation of the era, suggested that heightened government spending during a recession can drive stronger and faster economic recovery. The basis of the Keynesian argument is that waiting for markets to clear is a mistake. On the other hand, the monetarist era was characterized by increased importance of monetary control as a strategy for controlling inflation. This was based on the argument that expansionary fiscal policy can cause crowding out hence has no significant help in alleviating the impacts of recession.
The 2008 panic has been attributed to several factors. Some of the most prevalent reasons include availability of cheap money; provision of subprime loans; the real estate bubble burst; and inability of the government to steady the already shaky financial boat. None of these factors can be solely blamed for the 2008 recession. However, each contributed to large extent to the panic. For instance, availability of cheap money as a result of lower interest rates by the banks led to high speculation. Moreover, mortgage companies and financial institutions provided subprime loans, creating the a high demand for the money even by those who could not afford loans. Subsequently, bad debt across the financial sector resulted in challenges to the fiscal systems. To address these issues, the government enacted the Dodd-Frank Act in 2010 to protect consumers against such economic crises and to foster economic stability in the U.S. Countries across the world also adopted various capital and liquidity standards described as the Bassel III.