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United
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Britain's American colonies broke with the mother country
in 1776 and were recognized as the new nation of the United
States of America following the Treaty of Paris in 1783.
During the 19th and 20th centuries, 37 new states were
added to the original 13 as the nation expanded across
the North American continent and acquired a number of
overseas possessions. The two most traumatic experiences
in the nation's history were the Civil War (1861-65),
in which a northern Union of states defeated a secessionist
Confederacy of 11 southern slave states, and the Great
Depression of the 1930s, an economic downturn during which
about a quarter of the labor force lost its jobs. Buoyed
by victories in World Wars I and II and the end of the
Cold War in 1991, the US remains the world's most powerful
nation state. The economy is marked by steady growth,
low unemployment and inflation, and rapid advances in
technology.
The US has the largest and most technologically powerful
economy in the world, with a per capita GDP of $48,000.
In this market-oriented economy, private individuals and
business firms make most of the decisions, and the federal
and state governments buy needed goods and services predominantly
in the private marketplace. US business firms enjoy greater
flexibility than their counterparts in Western Europe
and Japan in decisions to expand capital plant, to lay
off surplus workers, and to develop new products. At the
same time, they face higher barriers to enter their rivals'
home markets than foreign firms face entering US markets.
US firms are at or near the forefront in technological
advances, especially in computers and in medical, aerospace,
and military equipment; their advantage has narrowed since
the end of World War II. The onrush of technology largely
explains the gradual development of a "two-tier labor
market" in which those at the bottom lack the education
and the professional/technical skills of those at the
top and, more and more, fail to get comparable pay raises,
health insurance coverage, and other benefits. Since 1975,
practically all the gains in household income have gone
to the top 20% of households. The war in March-April 2003
between a US-led coalition and Iraq, and the subsequent
occupation of Iraq, required major shifts in national
resources to the military. Hurricane Katrina caused extensive
damage in the Gulf Coast region in August 2005, but had
a small impact on overall GDP growth for the year. Soaring
oil prices between 2005 and the first half of 2008 threatened
inflation and unemployment, as higher gasoline prices
ate into consumers' budgets. Imported oil accounts for
about two-thirds of US consumption. Long-term problems
include inadequate investment in economic infrastructure,
rapidly rising medical and pension costs of an aging population,
sizable trade and budget deficits, and stagnation of family
income in the lower economic groups. The merchandise trade
deficit reached a record $847 billion in 2007, but declined
to $810 billion in 2008, as a depreciating exchange rate
for the dollar against most major currencies discouraged
US imports and made US exports more competitive abroad.
The global economic downturn, the sub-prime mortgage crisis,
investment bank failures, falling home prices, and tight
credit pushed the United States into a recession by mid-2008.
To help stabilize financial markets, the US Congress established
a $700 billion Troubled Asset Relief Program (TARP) in
October 2008. The government used some of these funds
to purchase equity in US banks and other industrial corporations.
In January 2009 the US Congress passed and President Barack
OBAMA signed a bill providing an additional $787 billion
fiscal stimulus - two-thirds on additional spending and
one-third on tax cuts - to create jobs and to help the
economy recover.
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