Economic development in Europe and the United States

Similar in format to Chapters 2 and 3, this chapter begins with a short comparative history of Western economic development and how economists’ understanding of that history changed over time. In order to understand the nature of a thriving market economy (and its need for the technological project and the rule of law), it is helpful to understand how and why it developed in England and then how it exploded in the United States, in contrast to the developments on the continent. While the United States began with the mercantilist ideas of the time, both the Founders and the public were influenced by England’s expansion into a commercial powerhouse and economic studies such as Adam Smith’s Wealth of Nations. Alexander Hamilton played a significant role in turning the country into a commercial republic; while the South’s slavery-based feudalistic economy led inexorably to economic disaster. A discussion follows of how the problems brought by the post-Civil War’s heavy industrialization, urbanization, and the Great Depression combined with changing economic theories and fed into the modern conflict between free market/rule of law and economic engineering/rechtsstaat.