Lesson 4: Shaping America's Economy

Key Idea

Before the United States, the British king controlled the colonies' economy. This system was designed to make Britain rich, not the colonists. The government told people what they could make and who they could trade with.

A thinker named Adam Smith introduced a new idea called a free market economy. In this system, individuals and private businesses make their own economic choices. They decide what to produce and what to buy, not the government.

Key Idea

After the Revolutionary War, America’s first government under the Articles of Confederation was too weak to manage the country's economy. The national government could not tax the states, so it had no money to pay its debts or soldiers and was nearly bankrupt.

This weakness caused economic chaos. Each state acted like its own small country, printing different money and charging fees on goods from other states. This made trade difficult and showed leaders that the nation needed a stronger government to create a healthy economy.

Key Idea

Under the Articles of Confederation, states acted like separate countries. They had their own money and taxed goods from other states. This made trade difficult and hurt the new nation’s economy.

To fix this, the writers of the U.S. Constitution gave the federal government new economic powers. It could create a single national currency for all states. The government could also collect taxes to pay for things the whole country needed.

Key Idea

Two of President Washington's key advisors had very different plans for America's economy.

Alexander Hamilton wanted a strong central government to guide the economy. He pushed for a national bank to manage the country's money and for taxes to help pay debts and support new businesses.