The Performance of the American Economy Before 1860
AN ECON0MY may be judged by its performance--its record in utilizing the resources at its disposal in the satisfaction of material wants. A critical examination of the performance of the American economy can throw valuable light on the factors that have governed its past behavior and may assist in understanding and solving current problems.
The performance of an economic system is to some extent a consequence of the positive steps that the authorities take in creating or neutralizing disruptive forces. It is not necessary to believe that the Government should, or could, prevent peacetime fluctuations in business activity. But it is not to be denied that the Government can influence such activity for better or for worse. In wartime, moreover, the Government by unanimous consent is entrusted with the task of mobilizing and then demobilizing resources; by appropriate action it can maximize the war effort and mitigate wartime and post-war adjustments. A study of the performance of the American economy will indicate how effective it has been in satisfying both wartime and peacetime needs.1
In trying to gauge and evaluate its performance, it is necessary to examine the system's record of behavior under ordinary and extraordinary conditions and under the impact of both internal and external shocks; to study the extent to which it has shown wide fluctuations in its ability to satisfy material wants; and to examine its resilience in the face of disruptive forces. It is necessary to go deeper, and try to disentangle the transient adjustments from the permanent, thus disclosing underlying tendencies of long-term development indicative of its ability to perform its functions.
A study of the performance of the American economy may therefore conveniently be broken up into three parts: (1) A consideration of how it has behaved under peacetime conditions--the fluctuations in the national income during prosperity and depression. (2) An analysis of how it has withstood the impact of war--the mobilization of a large part of the national income for military purposes and then reversion to peacetime conditions. (3) An investigation of the trends that have____________________