American economic growth in historical perspective - What were the drivers of US economic growth in the long run ?

Résumé du document

If one could describe the American economy in a phrase, it would be ?The modern American economy'. This is the popular terminology that will be used to describe the American economy. This status achieved by America is the result of a process that started a long time ago. In the 16th, 17th and 18th centuries, settlers not only came into the New World for economic gains (gold) but also for achieving honor and glory. Initially, the New World was regarded as the marginally successful colonial economy. Since this stage, it has grown amazingly into a small and independent economy and has eventually progressed to become a highly complex industrial economy. Today, all credit is given to economic growth and the standard of living in the United States has improved nearly five times from what it was towards the end of the 19th century. Economic growth is a positive change. In other words, there is a comparative increase in the level of production of goods and services by a country and the responsibility and accountability arises for a growing standard of living over a certain period of time. It occurs especially when there is a rise in the per capita real GDP. In the long run, economic growth is a product of increasing quantity and increasing quality in the factors of production in the economy. This is possible due to the four main drivers i.e. geography, culture, productivity and institutions.

Extraits

[...] As labor and land rates of growth declined, economic growth kept on going on. Indeed, output per unit of input grew. The growth thus arising is called intensive growth. It occurs when technology changes, when the composition of output changes, or when productivity increases for some other reason. Productivity is the amount of goods and services produced by each hour of a worker's time. Differences in productivity leads to differences in incomes and standards of living, as a country's standard of living depend on its ability to produce goods and services. [...]

[...] Institutions If productivity has become the dominant source of growth in the US, this has to be linked to institutions. Institutions are organizations that persist over time. There is a strong link between economic development and institutions. If economic growth and development are two different things, economic development (which involves fundamental changes in economic and social institutions and attitudes) often accompany growth and may even stimulate it. As a new country, the US looked at the institutions that already existed in Great Britain and in France before creating its own ones. [...]

[...] In contrary to some countries were land is there could be a big population because there was still free land left. The economic growth in the early times of America that is to say from the colonial period to the Revolution was an extensive growth, as both land and labor increased. Until 1840, the main driver of the US economic growth was the expansion of labor. Land and labor rates of growth then declined from 1840 to 1990. That of land declined sharply because there was less and less free land left as the expansion reached the west coast. [...]

[...] This defined and protected property rights. Without property rights, US individuals would not have had the incentive to invest in physical or human capital or adopt more efficient technologies. Thus, the four main drivers of economic growth, that is to say geography and initial endowments (what is given), culture, productivity and institutions helped to raise the income per capita in the US. Indeed, if the US did better than other former European colonies, it is because of those four drivers altogether. [...]

[...] An increase in these inputs characterizes extensive growth: This occurs when the labor force grows, when the acres in cultivation grow or when more machines are used. It describes the size of the economy: it is bigger. Initial endowments in labor, land and capital are important, but for them to grow, there must also be adequate geography, climate and weather conditions. Climate may be an important determinant of work effort, incentives, or even productivity. Indeed the heat can be so excessive that people cannot work. There were, at the early times of America, when the first colonists came, very favorable initial conditions. [...]