12 - Experimental Federalism: the Economics of American Government, 1789–1914

Summary

The United States has such a complex system of government that a chapter can only begin to describe its nature and relationship to the American economy. Fortunately, the system itself was stable, holding throughout the 125 years from 1789 to 1914 to an essentially republican form at the federal, state, and local levels, a form that continues. Even the Civil War, great as it was on the scale of wars and bound up as it was with the moral issue of slavery, was waged to decide what history might regard as a minor issue – whether there would be two republics of American states or one. Larger issues of monarchy versus republic or of dictatorship versus democracy did not arise. These were settled by 1789, perhaps even earlier. Such stability, provided it is purchased at not too high a cost in money or freedom, may well be one of the greatest services any government can render its economy and its people. If so, Americans during their “long” nineteenth century were, with the exception of 1861–1865, indeed fortunate.

Because this long-term stability of governmental arrangements in the United States had favorable implications for economic activity, some attention ought to be given to how those arrangements came to be in place by 1789. This is done in the following section. Next is a section contending that, besides providing stability in governmental and political institutions, the federal system from its inception operated to promote a high rate of economic growth by augmenting the economic resources – the land, labor, and capital – available to the economy.