“The business of America”, President Calvin Coolidge said in 1925, “is business”. This formulation is actually cannier than it may appear. Substitute “preoccupation” for the first “business,” and you have a capsule summary of the entrepreneurial spirit behind America’s prosperity.

A NATION OF FARMERS

Agriculture in the United States has changed dramatically over the last 200 years. At the time of the American Revolution (1775-83), 95 percent of the population was engaged in farming. Today that figure is less than 2 percent. Although individuals or families own 85 percent of all farms in the United States, they own only 64 percent of the farmland. The remainder is owned by corporations, large and small, and farming and its related industries have become big business — “agribusiness.” Yet for all the changes, agriculture is a constant in American life, and the food produced is safe, abundant, and affordable.

As settlement advanced from east to west, U.S. agriculture attained a richness and variety unmatched in most other parts of the world. This is true still today, in large part owing to the quantity of land and the generosity of nature. Only in a relatively small portion of the western United States is rainfall so limited that deserts exist. Elsewhere, rainfall ranges from modest to abundant, and rivers and underground water allow for irrigation where needed. Large stretches of level or gently rolling land, especially in the Midwest, provide ideal conditions for large-scale agriculture.

Overall, American agriculture has been a notable success story. American consumers pay less for their food than those in many other industrial countries, and one-third of the cropland in the United States produces crops destined for export. In 1995 agricultural exports exceeded imports by nearly two to one.

But agricultural success has had its price. Conservationists assert that American farmers have damaged the environment by excessive use of artificial fertilizers and chemicals to kill weeds and pests. Toxic farm chemicals have at times found their way into the nation’s water, food, and air, although government officials at the state and federal levels are vigilant in their efforts to protect these resources.

In the meantime, scientists at research centers across the United States search for long-term solutions. Employing such innovative techniques as gene-splicing, they hope to develop crops that grow rapidly and resist pests without the use of toxic chemicals.

THE AMERICAN STYLE OF MASS PRODUCTION

When U.S. automaker Henry Ford published his autobiography, My Life and Work, in 1922, he used his chapter headings to frame a series of questions: “How Cheaply Can Things Be Made?” “Money — Master or Servant?” “Why Be Poor?”

These are the very questions that have fascinated generations of American business and industrial leaders. In their drive to find answers, business people have sought to make and distribute more goods for less money and at greater profit.

In the late 18th century, American manufacturers adopted the factory system, which gathered many workers together in one place. To this was added something new, the “American system” of mass production, which originated in the firearms industry about 1800. The new system used precision engineering to transform manufacturing into the assembly of interchangeable parts. This, in turn, allowed the final product to be made in stages, with each worker specializing in a discrete task.

The construction of railroads, beginning in the 1830s, marked the start of a new era for the United States. The pace of building accelerated after 1862, when Congress set aside public land for the first transcontinental railroad. The railroads linked far-flung sections of the country into the world’s first transcontinental market and facilitated the spread of settlements. Railroad construction also generated a demand for coal, iron, and steel — heavy industries that expanded rapidly after the Civil War.

A POSTINDUSTRIAL ECONOMY

It was America’s good fortune to be spared the devastation suffered by other nations during the 20th century’s two world wars. By the end of World War II in 1945, the United States had the greatest productive capacity of any country in the world, and the words “Made in the U.S.A.” were a seal of high quality.

The 20th century has seen the rise and decline of several industries in the United States. The auto industry, long the mainstay of the American economy, has struggled to meet the challenge of foreign competition. The garment industry has declined in the face of competition from countries where labor is cheaper. But other manufacturing industries have appeared and flourished, including airplanes and cellular telephones, microchips and space satellites, microwave ovens and high-speed computers.

Many of the currently rising industries tend to be highly automated and thus need fewer workers than traditional industries. As high-tech industries have grown and older industries have declined, the proportion of American workers employed in manufacturing has dropped. Service industries now dominate the economy, leading some observers to call America a “postindustrial” society. Selling a service rather than making a product, these industries include entertainment and recreation, hotels and restaurants, communications and education, office administration, and banking and finance.

Although there have been times in its history when the United States pursued an isolationist foreign policy, in business affairs it has generally been strongly internationalist. The presence of American business has drawn a mixed response in the rest of the world. People in some countries resent the Americanization of their cultures; others accuse American firms of pressuring foreign governments to serve U.S. political and economic interests rather than local interests. On the other hand, many foreigners welcome American products and investment as a means of raising their own standards of living.

By injecting new capital into other economies, American investors can set in motion forces impossible to predict. Some Americans are concerned that by investing abroad, American business is nurturing future competitors. They note that U.S. government policies fostered Japan’s economic resurgence after World War II and that American corporations shared technology and sent experts to teach the Japanese such practices as quality control — practices that the Japanese have since carried to new and highly profitable heights. The ratification of the North American Free Trade Agreement in 1993, however, confirmed the continuing American commitment to robust international trade.

THE AMERICAN ECONOMIC SYSTEM

The United States declared its independence in the same year, 1776, that Scottish economist Adam Smith wrote The Wealth of Nations, a book that has had an enormous influence on American economic development. Like many other thinkers, Smith believed that in a capitalist system people are naturally selfish and are moved to engage in manufacturing and trade in order to gain wealth and power. Smith’s originality was to argue that such activity is beneficial because it leads to increased production and sharpens competition. As a result, goods circulate more widely and at lower prices, jobs are created, and wealth is spread. Though people may act from the narrow desire to enrich themselves, Smith argued, “an invisible hand” guides them to enrich and improve all of society.

Most Americans believe that the rise of their nation as a great economic power could not have occurred under any system except capitalism, also known as free enterprise after a corollary to Smith’s thinking: that government should interfere in commerce as little as possible.

THE STOCK MARKET

Very early in America’s history, people saw that they could make money by lending it to those who wanted to start or expand a business. To this day, small American entrepreneurs usually borrow the money they need from friends, relatives, or banks. Larger businesses, however, are more likely to acquire cash by selling stocks or bonds to unrelated parties. These transactions usually take place through a stock exchange, or stock market.

Europeans established the first stock exchange in Antwerp, Belgium, in 1531. Brought to the United States in 1792, the institution of the stock market flourished, especially at the New York Stock Exchange, located in the Wall Street area of New York City, the nation’s financial hub.

Except for weekends and holidays, the stock exchanges are very busy every day. In general, prices for shares of stock are rather low, and even Americans of modest means buy and sell shares in hopes of making profits in the form of periodic stock dividends. They also hope that the price of the stock will go up over time, so that in selling their shares they will make an additional profit. There is no guarantee, of course, that the business behind the stock will perform well. If it does not, dividends may be low or nonexistent, and the stock’s price may go down.

THE SYSTEM MODIFIED

Adam Smith would easily recognize the foregoing aspects of American business, but other aspects he would not. As we have seen, American industrial development in the 19th century took a toll on working men and women. Factory owners often required them to put in long hours for low wages, provided them with unsafe and unhealthy workplaces, and hired the children of poor families. There was discrimination in hiring: Black Americans and members of some immigrant groups were rejected or forced to work under highly unfavorable conditions.
Entrepreneurs took full advantage of the lack of government oversight to enrich themselves by forming monopolies, eliminating competition, setting high prices for products, and selling shoddy goods.

In response to these evils and at the insistence of labor unions and the Progressive Movement, in the late 19th century Americans began to modify their faith in unfettered capitalism. In 1890, the Sherman Antitrust Act took the first steps toward breaking up monopolies. During the Great Depression, President Roosevelt and Congress enacted laws designed to ease the economic crisis. Among these were laws regulating the sale of stock, setting rules for wages and hours in various industries, and putting stricter controls on the manufacture and sale of food, drugs, and cosmetics.

The sum total of these laws and regulations has changed American capitalism, in the words of one writer, from a “freely running horse to one that is bridled and saddled”.

Political conservatives believe there is too much government regulation of business. They argue that some of the rules that firms must follow are unnecessary and costly. In response to such complaints, the government has tried to reduce the paperwork required of businesses and to set overall goals or standards for businesses to reach, as opposed to dictating detailed rules of operation.

If sometimes cumbersome, the rules and regulations governing business conduct today do not seem to prevent ambitious Americans from realizing their dreams — and occasionally of surpassing them. One such entrepreneur is Bill Gates. Gates started a computer software company called Microsoft in 1975, when he was 20 years old. Just two decades later, Microsoft was the world’s largest software company, with 20,000 employees worldwide and annual net income of more than $2 thousand million a year.

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