Trade, Domestic

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TRADE, DOMESTIC. Trade can be defined as engaging in an exchange for goods and services. For trade to take place, there must be at least two parties with different wants and needs. These people may not be able to produce the goods or services alone and seek others who can do so.

People need the basics to survive such as food, clothing, and shelter. They may want large houses, fashion clothing, and exotic food. Specialization is extremely important to trade. Each worker or company focuses on producing a type of service or product, creating interdependency. Whether they are consumers, workers, producers, or the government itself, everyone benefits from trade in various ways.

Workers benefit from securing jobs with companies that are expanding and desire labor. A producer or company can grow as a result of the demand for its product or service. Consumers are able to make better choices because they create the demand for products and services and indirectly create competition among producers. The government benefits because of the taxes on producers, workers, and consumers. Since colonial times, trade has contributed greatly to the standard of living of the United States, which is among the highest in the world.

Early Trade, 14921783

The people who came to America did so to seek freedom of religion, freedom of political views, and economic opportunity. Great Britain still had control over the colonies. As the American colonies were being settled, trade became a means of survival. The Native Americans assisted the colonists in growing food. They introduced them to potatoes, corn, and tobacco, which the colonists in turn traded for goods from Europe.

Indigenous people had their settlements either near waterways or near trails they had created. The colonists used both the waterways and the trails as transportation routes to conduct trade. As America was being explored, trade was evolving.

To make trade easier, trading posts were set up in towns. A popular one, called the Aptucxet Trading Post, was founded by the Pilgrims in 1627. It has often been referred to as "the cradle of American commerce." Fur, lumber, luxury goods, and food were just a few things that were traded. The Native Americans as well as the Pilgrims used the trading post, exchanging beaver skins for blankets, guns, hatchets, and rum. As the colonial trade grew, hostilities developed with Britain and also among the colonists themselves over trade issues. As the colonists were prospering, Britain was losing money as a result of its war with France over territories in North America. Britain's unsuccessful efforts to tax the colonists helped spark the Revolution. During the war, little trade took place outside the colonies. People became more self-sufficient and interdependent, or they just did without things that they were used to having.

By 1762 merchants had been complaining that there was no central bank in the colonies. A central bank was starting to evolve by the end of the Revolution. The signing of the Constitution in 1787 created a strong government that supported Americans who were trying very hard to maintain an economy based on domestic trade, with an emphasis on agriculture.

A New Nation, 17831860

In the late 1700s, the newly discovered Ohio Valley waterways made inland trade easier for New England and the middle and southern colonies. The steamboat made a successful appearance in the Ohio Valley in 1811. It was mainly used to get crops to market areas. The "river cities," including Cincinnati, Louisville, Saint Louis, and New Orleans, became trading hubs as manufacturing developed along the waterways. By the 1820s there was a central bank and a national currency. In almost every large town and new cities, banks were being built.

The opening of the Erie Canal in 1825, connecting Lake Erie to the Hudson River, also furnished a new outlet for the Northwest traffic. New York City wasn't just a market anymore but also a commercial center for trade.

Waterways continue to be important, but the landlocked towns began to prosper from trade as a result of the railroads. They spread quickly from Baltimore to Wisconsin. Most of the northern Atlantic Coast turned to manufacturing as the railroad continued to grow.

Civil War, 18611865

At the time of the Civil War, the South was producing mostly agricultural products, with an emphasis on cotton and tobacco as major commodities for trade. The North cut off the South's markets when the war started, and its trade was almost at a standstill. Also, with so many men in the army, it was impossible for the women left behind to operate the transportation systems to get the products to markets. The South was mostly self-sufficient and poor once again.

By 1863, the North was seeking profits on goods related to the war, such as the high demand for army uniforms. The North was thriving economically and making quick money.

Reconstruction, 18651889

The two decades from 1870 to 1890 marked the development of railroads connecting the Middle West and the South to the West. People migrated to the West in search of a profitable economic future. New settlements sprang up quickly along with the manufacturing and agricultural trade. With the development of a more sophisticated transportation system came a demand for material possessions. The Great Lakes were transformed to provide the needs and wants of commerce between the East and the Middle West.

The Progressive Era, 18901914

The Progressive Movement started in about 1890 as a protest against the excesses of the preceding century and the corruption in government at the time.

One result of this movement was more effective regulation on business and trade. Journalists (some of whom became known as muckrakers) exposed the sins of corporate giants like Standard Oil Corporation to the socially conscious public.

The turn of the century saw the establishment of large corporations and trusts, which attempted to control both supply and demand of their product category and to exercise authority over newly organized labor unions. These new corporations controlled vast amounts of money and resources, which they used for expansion, competition with foreign business, political influence, control of large blocks of stock, and the pooling of patents. The creation of the Federal Trade Commission under President Woodrow Wilson brought control and regulation to interstate trade.

Cities were growing explosively because of their role as centers for great industrial corporations. Cities had the money and the employment, and to them came the vast armies of workers, the expanding railway systems, and the crowded and often unhealthy factories. Department stores flourished and became centers of shopping, enabled by improvements in transportation, such as tramways and motorcars. For the first time in United States history, there were more people employed by industry than working on farms.

In spite of the move to the cities, agricultural trade also grew. The shift on the farm from manual labor to machines allowed for the expansion in commercial farming. The expanding population in the cities provided a large market for the farmers' products, but there was still enough left to sell to foreign countries. The number of farms in the United States tripled between 1860 and 1910, from 2 million to 6 million.

At the turn of the century, America was a land of abundance. Supplies of many natural resources surpassed those of the rest of the world. By this time, there was a well-established trade both domestically and internationally in iron, steel, coal, cotton, corn, and wheat.

World War I and The Jazz Age, 19141928

In 1917 the United States entered World War I, and from that experience first became a major world power. During the brief period that the country was involved in the war, the shortage of men at home meant that there were plenty of jobs available and full employment. Lucrative government contracts meant a full workload.

Immediately following the war, there was a glut of returning veterans seeking work. The end of wartime contracts meant fewer jobs, business owners attempted to drive down wages and to break unions in an effort to maintain profits, and the unions began to revolt. Scarcity of available money stalled the shift to a consumer goods economy.

In 1919 the Eighteenth Amendment was ratified, prohibiting the manufacture of alcoholic beverages for sale. It spawned an illegal cottage industry that resulted in an active trade in wines and liquors. In addition, the period gave rise to a new industry: the underworld. Trading in alcohol and the demand for union busters gave illegal activity new strongholds.

During the 1920s, America enjoyed an era of prosperity, and big business regained control. New wealth brought more leisure time and the growth of the entertainment business: organized sports, silent films, radio, mass-oriented magazines, and recorded music. Corporations issued stock publicly on a wide scale, and millions of Americans were able to buy stock in these giant companies.

The Great Depression, 19291939

All of this affluence came to a crashing end when the stock market collapsed in October 1929. Just prior to the crash in 1929, the Gross National Product was $87 billion; four

years later, it had shrunk to $41 billion. Every day, factories closed and banks and businesses failed. In 1930 the jobless numbered 7 million; by 1932 the number had risen to 15 million out of a total workforce of 45 million.

Farmers were also hurt, as thousands lost their land and homes through foreclosure. In the South, the collapse of the export market for cotton and tobacco and problems with overproduction led to looting and riots in 1931. American businessmen found that the overseas markets for their goods were drying up because the depression was becoming global.

In 1933 President Franklin Delano Roosevelt led Congress to enact a wide variety of emergency economic and social legislation called the New Deal, which brought some relief to the ailing country. The Securities and Exchange Commission was created in 1934. Its purpose was to police corporations that were issuing new securities. The National Recovery Administration was created in 1933 to establish codes for fair competition and to guarantee workers the right to form unions. Minimum wages and maximum work hours were established, and the Social Security system was created to provide relief to the elderly and infirm.

During this decade, Hollywood became the movie capital of the world. With the sensational boom in "talking" movies, an industry was born that would supply entertainment to the country and abroad.

Isolationism was the U.S. foreign policy in Roosevelt's first term in office, a policy in opposition to America's efforts to regulate international currency and trade.

World War II, 19411945

All of this changed on 7 December 1941 when Japan bombed American ships in Pearl Harbor and America entered World War II. Some say that this marked the end of the depression. World War II saw the beginning of what came to be called the military industrial complex. This alliance between government and big business led to unprecedented production records; manufacturing production in 1943 doubled over the year before, as thousands of previously civilian businesses shifted into manufacturing items for war. With so many men in the armed forces, there were new job opportunities for women.

Farmers were also affected, as the increasing mechanization of equipment led to a 35 percent rise in output in those yearsenough food for civilians, American armed forces, and allies like England and the Soviet Union. At home, Americans moved to cities to find work and to consolidate families whose men had gone to war. Manufacturing plants in the north brought African Americans from the south to work. Job opportunities existed for this group of workers but the results were crowded working conditions, inadequate housing and transportation, and urban blight. Volatile racial tensions occurred with the result in Detroit, Michigan, being one of the bloodiest riots in history.

The Modern Era, 1945 to the Present

At the close of World War II, the United States was the most powerful nation in the world, both politically and economically. The GI bill provided $15 billion for veterans' college educations and low-cost mortgages for new homes in the suburbs. Factories and businesses sprang up in record numbers, and women in the workforce added to the new affluence of families. America entered the consumer culture in the 1950s, and this trend continued throughout the rest of the century.

The 1960s were a period of revolt and change in America. The 1970s continued this radical movement, as the baby boom generation (born just after World War II) came of age and provided new areas of consumer demand for punk rock music, drugs, hippie fashion, and vegetarian cuisine.

The late 1970s saw massive inflation, and the Arab oil embargo had a profound effect on the cost of living as oil prices soared for business, home, and auto. The American automobile business lost its domestic position dominance, as more fuel-efficient cars from Japan became popular. This business suffered badly until the end of the 1980s, when cooperative deals between American and Japanese automobile manufacturers resulted in Japanese auto plants being built in the United States.

Shortly after the end of World War II, the General Agreement on Tariffs and Trade (GATT) was established, reducing world tariffs and allowing for increased imports. Revisions to GATT in December 1993 provided for the elimination of all quotas on clothing and textiles on 1 January 2005. Also in 1993, the North American Free Trade Agreement (NAFTA) was signed. This agreement set new guidelines for cooperative trade between the United States, Mexico, and Canada.

Since the 1970s a sharp rise in low-cost imports has led to the decline of industry in America, and the United States has lost its place as a world leader in manufacturing.

Between 1980 and 1991, the number of workers in the manufacturing sector fell by 2 million. At the same time, United States workers were increasingly finding employment in the service sector in areas like health care, computer programming, insurance, food service, banking and finance, and entertainment. Multinational companies became the vogue, and mergers and acquisitions and joint ventures defined the business landscape.

Domestic trade in the last decades of the twentieth century was strong in the areas of automobiles, housing, computers, and environmental and health-related products. The computer business was the fastest-growing industry in the United States between 1973 and the late 1990s, and the cellular telephone business boomed.

As manufacturing in the United States declined and large corporations suffered, there was a sharp increase in small businesses (those with 500 or fewer employees). At the turn of the twenty-first century, 95 percent of all businesses in the United States were classified as small businesses.


Badger, Anthony J. The New Deal: The Depression Years 193340. New York: Hill and Wang, 1989.

Batra, Ravi. The Myth of Free Trade: A Plan for America's Economic Revival. New York: Scribners, 1993.

Boyer, Paul S., ed. The Oxford Companion to United States History. New York: Scribners, 1993.

"Doubtless as Good": Growing Pains. Available at

Nash, Gerald D. The Great Depression and World War II: Organizing America, 19331945. New York: St. Martin's Press, 1979.

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Donna W. Reamy

Rosalie Jackson Regni

Highlights of the Development of Domestic Trade, 14922002

14921607, The New World Evolves

The Old World (Europe) and the New World begin to blend together as the pioneers bring livestock andother necessities for survival. Fishing starts a dominant industry in the North.

16071783, The Colonial Era

Native Americans taught the colonists to raise new crops, including corn, squash, potatoes, and tobacco. Ships were sent from Europe full of luxuries to trade. The first permanent trading post was established.

17841860, A New Nation

The Constitution was adopted. A national currency and a banking system were developed.

18611865, The Civil War

The North was thriving economically as a result of war expenditures. The South was just barely surviving. Its agricultural lands had been turned into battlefields, and what little was produced was not being marketed because the North blockaded the Southern ports.

18651889, Reconstruction

The development of the railroads connecting the Middle West and the South to the West made trading much faster and more profitable. Also, the Great Lakes became a hub of commerce between the East and the Middle West.

18901913, The Progressive Era

The creation of the Federal Trade Commission brought control and regulation to interstate trade. For the first time, more people were employed by industry than working on farms.

19141928, World War I and the Jazz Age

The Eighteenth Amendment was ratified, prohibiting the manufacture of alcoholic beverages for sale. Illegal industries evolved in active trade in wines and liquor. America enjoyed prosperity, along with demanding more goods and services.

19291939, The Great Depression

The stock market crashed in October 1929. A domino effect occurred in the nation's economy, and consumer spending collapsed. Trade was nearly at a standstill.

19411945, World War II

Demand for goods and services was once again placed on need only, although government spending on the war effort helped bring the country out of the Great Depression. Production for consumer goods declined, and production for war necessities increased.

1945Present, The Modern Era

Since World War II, goods increasingly have been mass-produced to meet the needs and wants of consumers. Companies seek lower production costs and less time in the production process. America has seen a shift from domestic production to foreign production. Some American companies have bought land in foreign countries, built factories there, and used their labor because it is cheaper. America is helping the underdeveloped countries to develop as a result of trade.

The technological revolution beginning in the mid-1980s has brought even faster production methods and a new set of industries. Consumer spending is at an all-time high. Trade is evolving on a worldwide basis.