The Emergence of Market Economy in the US in 18th-19th centuries and its Influence on the Politics


Similar to the political tension in England in the 17th-18th centuries, the US revolution of 1775-1783 was aimed at reaching some political and economic goals and was supported by the emerging middle class. The latter struggled for the idea of "inalienable rights of life, liberty, and property", which was based on the Second Treatise on Civil Government, written by the English philosopher John Locke. This revolution, the separation from Great Britain, and the civil war that united the North and the South of the country, resulted in the emergence of the US market economy, which affected the US political system. The aim of the following essay is to study this impact as well as to understand the stages and the peculiarities of dynamics of the US development in order to make conclusions about the causal relations. The process of market economy formation is very complex and is related with gaining of independence and integrity. However, as a start point of its appearance, the introduction of the Constitution of 1789 can be assumed, since it provided the legitimacy of the developing market relations in the country.

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The emergence of the market economy in the USA is connected with the sequence of wrong decisions, made by the British colonial government, which led to the rebellion and the proclamation of the USA as an independent country with free economic relations and specific interaction between the government, colonists, and slaves. Proceeding from the politics of mercantilism that was widespread in the 18th century, the British authorities over-exaggerated the taxes on the imported products and goods. In 1764, the government went one-step further, infringing on the rights of the colonists by introducing the "Money Law." According to it, paper money could not be used in the colonies (Washington & Army, 2014, pp. 56-59). Therefore, the discriminatory policies implemented in North America were doomed as the feudalism could not be "planted" in the colonies, and because in Great Britain itself, feudalism as a system had already parted. Bypassing the prohibitions of the English crown and their emissaries, squatting developed, which was manifested in the unauthorized occupation of free lands by settlers in the North America. Thus, the British policy regarding American colonies was rather strict and limiting, suppressing the development of the colonies and accumulating aggression from the colonists toward government. These events resulted in the American Revolutionary War, which was also the war for free economy and market relations.

The Results of the American Revolutionary War

The Revolutionary War of the North American colonies in 1775-1783 acquired the goal of not only to liberate the colonies from British dictates, but also to reach the freedom of entrepreneurship and to shift to a market path of development. A significant result of this revolution was the "Declaration of Independence", adopted on July 4, 1776, according to which a new state emerged - the United States of America. A peace treaty with Great Britain in September 1783 secured the independence of the US. In September 17, 1787, the Constitution of the new country came in force, which is still effective, stating the republican form of government with broad powers to solve various problems in all states (Raphael, 2016, p.113). With the amendments of 1789, the US Congress as the highest legislative body in the country was prohibited from issuing the laws restricting the freedom of speech, press, meetings, and religion, while the Constitution of the USA legitimized slavery (Washington & Army, 2014, p. 120). Moreover, it increased the pace of industrial development of the country, the movement of goods and, their exchange. Additionally, no tariffs or taxes in interstate commerce were allowed, and, according to the Constitution, the federal government could supervise the trade with other countries, state the laws on bankruptcy, control the money and regulate their value, establish standards for measures and weights, create post offices, build roads and formulate the rules regarding the issuance of patents and copyrights. Therefore, The American Revolutionary War formed the new system of relations, providing the economy with governmental support.

The Slaves Revolt

The first changes that came with the emergence of the market economy are related with the decreased efficiency of the slave working power. The changes in the labor market provoked the slave uprising in 1800 with Gabriel Prosser in chief. It was initiated in Virginia as a response to the victory of the slave rebellion on Haiti and was supported by the Jefferson's Democratic-Republican Party (Egerton, 2000, pp. 24-25). Therefore, it is possible to assume that Gabriels Revolt had both the commercial and political background, anticipating the further conflict between the industrial North and the agricultural South (Egerton, 2000, p. 13). Evidently, the rebellion had deep social and political roots, representing the first attempts to abolish slavery. It can be claimed that Prosser held constructive views on the development of the US economy in the direction of the market economy. He was supported by Methodists, Quakers, and Frenchmen, and his revolt ended with no victims accept the captured rebels. The result of this uprising reflected in the introduction of more strict policy regarding slaves, such as the limitation of their freedom, the prohibition of the attempts to educate blacks, their unification, and employment in certain industries (Wright, 2017, p. 66). The true aim of these actions was to minimize the chances of successful revolution.

Hamiltons Reforms

Another change associated with the emergence of market economy concerned the economic policy, which was changed under the social pressure of the arising market. Alexander Hamilton, the first Minister of Finance of the country, also known as one of the Founding Fathers, suggested the strategy of economic development, according to which the federal government was required to support the nascent industry through open subsidies and the introduction of protectionist tariffs on imports. He also insisted that the federal government introduced the national bank and assumed that the national debt created by the colonies during the Civil War should be under its responsibility. Even though the new government did not hurry to accept some of the proposals Hamilton made, the tariffs had finally become an integral element of the US foreign policy and had been effective almost until the middle of the 20th century. Despite the existing worries that the national bank would support the rich at the expense of the poor, the first National Bank of the United States was still established in 1791 and existed up until 1811. Hamilton believed that the economic growth of the country should be achieved through diversification of transportation, manufacturing, and banking system (Tindall & Shi, 2016, pp. 39-41). Thus, it evident that the policy Hamilton introduced supported the formation of the market economy and was based on the ideas, which were new for that historical period.

The Civil War

One more change in politics related with the emergence of market economy was the initiation of the Civil War aimed at achieving the increased efficiency of the industrial economy in contrast to plantations, the introduction of the changes in the labor market, and the development of the intellectual elite of the North. Additionally, in late 18th and early 19th centuries, there was an industrial revolution in Europe, which quickly spread to the United States. By 1860, when Abraham Lincoln was elected as a president, 16% of the US population inhabited urban areas and manufacturing accounted for one-third of the public income (Randall & Donald, 2016, p. 47). Urban industry was mainly concentrated in the Northeast with the cotton, footwear, woolen clothing, and machinery industries being the leading businesses. From 1845 to 1855, each year about 300,000 immigrants from Europe arrived in the US, in such a way influencing the political situation, because the immigrants were spreading the new ideas and values of their origin (Watson, 2006, pp. 28-32).

On the contrary, the South remained agrarian and depended on capital and industrial products of the North. The economic interests of the South including slavery could be defended exclusively by political methods as long as this part of the country controlled the federal government. Organized in 1856, the Republican Party represented the industrial North, which was the turning point of the market economy's impact on the politics. In 1860, the Republicans and their presidential candidate, Abraham Lincoln, were hesitant about slavery and had much more clear views on the economic policy. Therefore, in 1861, they secured the adoption of a protectionist tariff; in 1862, they introduced the agreement on first Pacific Railway; in 1863 and 1864, they developed the charter of the National Bank (Hainsworth, 2016, p. 44). Therefore, the accumulated braking of the economic and political development of the country led to the Civil War, and the fate of the country as well as its economic system was decided by the victory of the northerners (1861-1865). The slavery system was abolished, resulting in large cotton plantations in the South becoming less profitable. However, the most important changes lied in the formation of the new political consciousness, based on the equal economic capabilities and rights.

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The impact of the market economy on politics was manifested in the formation of the legal background of this economic system upon the American Revolutionary War and the introduction of the Constitution. Moreover, since that standpoint, the market economy initiated the social changes, forming the new system of social relations and leading to the unexpected outcomes, such as Gabriels Rebellion and its influence on the system of slavery, which was in the losing position in contrast to the constantly developing industrial changes of the North states. Therefore, the conflict of the existing economies had to be faced. As a result, the clash of the Northern market economy with its industrial background and the Southern mercantilism with the plantations initiated the Civil War and facilitated the coming of the Republic Party in force.

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