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Reviewing the American Economic System

Reviewing the American Economic System

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As the various chapters of this book explain, labor, agriculture, small businesses, large corporations, financial markets, the Federal Reserve System, and government all interact in complex ways to make America's economic system work.

It is a system united by a philosophical commitment to the idea of free markets. But, as noted, the simple market model greatly oversimplifes the actual American experience. In practice, the United States has always relied on government to regulate private business, address needs that are not met by free enterprise, serve as a creative economic agent, and ensure some measure of stability to the overall economy.

This book also demonstrates that the American economic system has been marked by almost continuous change. Its dynamism often has been accompanied by some pain and dislocation -- from the consolidation of the agricultural sector that pushed many farmers off the land to the massive restructuring of the manufacturing sector that saw the number of traditional factory jobs fall sharply in the 1970s and 1980s. As Americans see it, however, the pain also brings substantial gains. Economist Joseph A. Schumpeter said capitalism reinvigorates itself through "creative destruction." After restructuring, companies -- even entire industries -- may be smaller or different, but Americans believe they will be stronger and better equipped to endure the rigors of global competition. Jobs may be lost, but they can be replaced by new ones in industries with greater potential. The decline in jobs in traditional manufacturing industries, for instance, has been offset by rapidly rising employment in high-technology industries such as computers and biotechnology and in rapidly expanding service industries such as health care and computer software.

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This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.

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