The United States became the world's first modern democracy after its break with Great Britain (1776) and the adoption of a constitution (1789). During the 19th century, many new states were added to the original 13 as the nation expanded across the North American continent and acquired a number of overseas possessions. The two most traumatic experiences in the nation's history were the Civil War (1861-65) and the Great Depression of the 1930s. Buoyed by victories in World Wars I and II and the end of the Cold War in 1991, the US remains the world's most powerful nation-state. The economy is marked by steady growth, low unemployment and inflation, and rapid advances in technology.
The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $36,200. In this market-oriented economy, private individuals and business firms make most of the decisions, and government buys needed goods and services predominantly in the private marketplace. US business firms enjoy considerably greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, lay off surplus workers, and develop new products. At the same time, they face higher barriers to entry in their rivals' home markets than the barriers to entry of foreign firms in US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment, although their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a two-tier labor market in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. The years 1994-2000 witnessed solid increases in real output, low inflation rates, and a drop in unemployment to below 5%. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical costs of an aging population, sizable trade deficits, and stagnation of family income in the lower economic groups. Growth weakened in the fourth quarter of 2000; growth for the year 2001 almost certainly will be substantially lower than the strong 5% of 2000. The outlook for 2001 is further clouded by the continued economic problems of Japan, Russia, Indonesia, Brazil, and many other countries.