History of United States Business

I

Introduction

History of United States Business, history of business in the United States from the colonial period to the present day. During this period, U.S. businesses grew from small, family-owned farms and merchant trading to global corporations employing hundreds of thousands of workers in industries and services.

United States businesses created the highest standard of living in world history. At the same time U.S. business came under government regulation in response to popular concern about workers’ rights and safety, environmental damage, fair competition, honest accounting, and discrimination against minorities, women, and others. Although it has been credited with creating a high standard of living, it has also been blamed for widening the income gap between the rich and the poor in the United States and exploiting low-wage labor in developing countries.

Throughout its history business in the United States has drawn contrasting views. In 1925 Calvin Coolidge, the president of the United States, declared that “the chief business of the American people is business.” Yet in American motion pictures, literature, and television programs the villains are often businesspeople. The relentless growth in the scale of business has led to more government regulation of business. But at the same time the ability of business lobbyists to influence laws and governmental policy in ways favorable to business has been well documented. If a single narrative runs through the history of American business, it is the story of how government regulation of business has waxed or waned depending on the performance of the economy.

Regardless of how it is viewed, business in the United States plays a key economic, social, and cultural role. Corporations organize most economic activity in the United States today. As part of doing business, these firms undertake the search for new technologies and products. New technologies, in turn, tend to lead to greater productivity and efficiency, which tends to create more wealth and more leisure time. The goods and services produced by American businesses and the method by which these goods and services are advertised shape the culture not only of the United States but also of countries around the world. American business has produced the wealthiest and most powerful nation in the world. Yet, as the 21st century begins, the ethical behavior of American business is also viewed with increasing skepticism. 

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II

European Foundations of U.S. Business

A

Chartered Companies

Business enterprise played a significant role in the European settlement of the North American continent that began in the 1500s. The London Company and the Plymouth Company, for example, received charters from the English crown (monarchy), recruited settlers, and paid the costs of settlement for their American colonies. These chartered companies inherited centuries of innovation in business organization and technique.

One of the most important innovations was the concept of a business enterprise separate from family ownership. With the chartered companies investors who were not necessarily related by family ties pooled their money in anticipation of earning a profit. But to do so required the development of new forms of ownership such as partnerships or corporations. It also depended upon the creation of accounting techniques, notably double-entry bookkeeping, so that business debts and credits could be calculated.

European businesses of the early modern era also had to develop a “spirit of capitalism,” a moral code that permitted parties to enter contracts with some confidence that agreements would be honored. In short, businesspeople needed to create a complex system of rules to undertake large, risky, and long-lived enterprises.

B

Mercantilism

Business in the American colonies developed under the system of political economy known as mercantilism. Mercantilism was based on the theory that the purpose of economic activity was to increase the rising power of a nation-state. In order to build up gold and silver reserves that could be used to pay for soldiers and weapons in time of war, nations sought to export more goods than they imported. To achieve this more favorable balance of trade, government had the right to exercise control over industry and trade. In the case of the American colonies, this meant that business existed to serve the needs of the English crown.

Under the English mercantile system, the monarchy determined who could enter many businesses by giving monopolies to guilds and chartered companies. The crown often taxed these businesses heavily so that it could raise money for armies and navies, especially in the 1600s and 1700s, a period of near constant war. European nation-states promoted certain enterprises so that they could increase their ability to export goods and decrease their dependence upon other European nations. For example, monopolies for shipbuilding assured nations that they would have vessels for their navies, which were also used to protect their trade.

English colonies in the New World offered both a chance to extend national power to new territories and to tap sources of vital raw materials so that the crown did not have to rely upon other potentially hostile nations. Mercantilism encouraged business based upon private ownership of property, but it was not capitalism because the purpose of the activity was to strengthen the crown, not to enrich an individual.

Church authorities also limited free enterprise in the American colonies. For example, following European traditions, Puritans in the early years of the Massachusetts Bay Company placed communal needs before individual profit by setting the prices of goods and wages and prohibiting usury (charging of interest).

III

Colonial Period to the American Revolution

A

Family-run Businesses

Most businesses in the colonial era were small family-run farms or shops. Today we tend to think of households as units of consumption, but in the colonial era they were also units of production. Husbands, wives, and children labored to produce goods for their own consumption and for trade. Even the largest businesses in America at that time—the tobacco, rice, and indigo plantations of the South—were family owned. Profits from the sale of these goods in international markets enabled planters to buy up more land and to staff it with indentured servants and slaves. These businesses, which could include thousands of hectares (thousands of acres) of land scattered across several counties and hundreds of slaves, were often owned by one family.

Those who lived in the Northern colonies did not have such a clear route to wealth and power. The most successful Northern colonists were merchants, which in the colonial era meant that they engaged in international trade. They located markets for the colonists’ exports and imported the textiles, hardware, tea, and other goods that enriched colonial life. These merchants were classic middlemen, arranging financing and shipping services so that the goods could go from sellers to buyers.

Colonial trade involved extraordinary risk. Wars, frequent economic depressions, and intense competition made international trade hazardous, especially for American colonial merchants who lacked sufficient wealth to buffer themselves from misfortune. Just about all merchants went bankrupt or flirted with bankruptcy sometime in their lives. But the rewards were worth it; a few lucrative voyages and a merchant could buy a townhouse, a carriage, perhaps a summer retreat. The merchant could climb the social ladder and circulate among the powerful in this highly materialistic society. This prospect of riches and the honor that accompanied them made American colonists willing to engage in highly speculative enterprises, such as shipping flour to the West Indies or importing goods from England by the thousands without being certain of their ability to resell those goods.

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