United States Background:
Britain's American colonies broke with the mother country in 1776 and were recognized as the new nation of the United States of America following the Treaty of Paris in 1783. During the 19th and 20th centuries, 37 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.

United States Economy Overview:
The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $37,800. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy 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, to lay off surplus workers, and to 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; 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%. The year 2001 saw the end of boom psychology and performance, with output increasing only 0.3% and unemployment and business failures rising substantially. The response to the terrorist attacks of 11 September 2001 showed the remarkable resilience of the economy. Moderate recovery took place in 2002 with the GDP growth rate rising to 2.4%. A major short-term problem in first half 2002 was a sharp decline in the stock market, fueled in part by the exposure of dubious accounting practices in some major corporations. The war in March/April 2003 between a US-led coalition and Iraq shifted resources to the military. In 2003, growth in output and productivity and the recovery of the stock market to above 10,000 for the Dow Jones Industrial Average were promising signs. Unemployment stayed at the 6% level, however, and began to decline only at the end of the year. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups.

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