A look inside the political economy of early America | Penn Today
Archived: 2026-04-23 17:18
A look inside the political economy of early America | Penn Today
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The modern U.S. economy is a complex machine, made up of imports and exports, gross domestic product and tariffs, interest rates and manufacturing, AI and unemployment, construction and chips. But it grew from basic roots, based in farms and cities scattered around a small series of British settlements on the East Coast of what would grow into a new country.
View large image
To learn more about the early American economy,
Penn Today
spoke with
Fernando Arteaga
, academic director of the
Penn Initiative for the Study of Markets
and a senior fellow in the
Department of Economics
, who is teaching the course
The Political Economy of Early America
this semester.
“Whatever we learn in economics can and should be applied to understanding the real world,” Arteaga says. “Understanding the origins of the U.S. economy is relevant, because the country's later development can only be properly explained in light of its underlying foundations.”
Here are Arteaga’s top five takeaways on the political economy of early America:
Native Americans
remained the dominant population and crucial economic partners well into the colonial period.
“Their nomadic nature played a big role in their future relations with the Europeans, making them easier to displace as settlements expanded,” Arteaga says. Intertribal competition also shaped these dynamics, as rivalries led many Native American nations to seek European partnerships as a counterweight against Indigenous rivals. “That dynamic made the French and Indian War, and the road to independence, inseparable from the Native American story,” he says.
There was no unified, national economy in the way we think of it today. Instead, it was a series of regional economies.
“If you were to live in the 17th century in either New England or Virginia, you would never think that this set of colonies would someday be considered a country,” Arteaga says. “In fact, if there was something tying the colonies together, it was their relationship with the Caribbean—Barbados, Jamaica. Virginia was a tobacco-based economy, increasingly dependent on enslaved African labor, and New England had fishing, a little bit of lumber, and that would lead to the incentive to create cities and ports.”
The economic push for independence was driven by Virginia and New England.
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“The clash was not simply about taxes or trade but about where legitimate authority resided—in London or in Virginia,” Arteaga explains. “New England was competing for manufactures with England, and the Virginia planter class had grown accustomed to governing itself through the colonial assemblies.”
By contrast, Pennsylvania and New York were more hesitant. “New York in particular had more to lose from breaking with Britain. It aligned with the independence movement but not without significant internal debate,” Arteaga says.
After the Revolution, the new government under the
Articles of Confederation
was fairly weak.
“This created a classic free-rider problem: Each state could benefit from the existence of a central government without contributing to it, since their individual contribution made little difference to the collective outcome,” Arteaga says. “The central government remained starved of resources and authority.” There was also both inflation and deflation: inflation of Continental dollars, because they were worth nothing, and deflation because of the shortage of physical silver and gold, Arteaga says.
The
Constitution
created institutions that were critical to strengthening the new nation’s economy—and growing it to the largest in the world.
Under the new Constitutional government, the legitimizing presence of
George Washington
and the principle of
judicial review
from the
Supreme Court
helped stabilize the country, says Arteaga. “What matters in long-term economic growth is that you grow steadily, without disturbance,” he says. “What makes a society wealthy is the ability to cooperate and set correct incentives towards human development. That’s why institutions are so important; they create cooperation among peoples that are very different.”
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Skip to Content
Skip to Content
News from
University of Pennsylvania
Try Advanced Search
The modern U.S. economy is a complex machine, made up of imports and exports, gross domestic product and tariffs, interest rates and manufacturing, AI and unemployment, construction and chips. But it grew from basic roots, based in farms and cities scattered around a small series of British settlements on the East Coast of what would grow into a new country.
View large image
To learn more about the early American economy,
Penn Today
spoke with
Fernando Arteaga
, academic director of the
Penn Initiative for the Study of Markets
and a senior fellow in the
Department of Economics
, who is teaching the course
The Political Economy of Early America
this semester.
“Whatever we learn in economics can and should be applied to understanding the real world,” Arteaga says. “Understanding the origins of the U.S. economy is relevant, because the country's later development can only be properly explained in light of its underlying foundations.”
Here are Arteaga’s top five takeaways on the political economy of early America:
Native Americans
remained the dominant population and crucial economic partners well into the colonial period.
“Their nomadic nature played a big role in their future relations with the Europeans, making them easier to displace as settlements expanded,” Arteaga says. Intertribal competition also shaped these dynamics, as rivalries led many Native American nations to seek European partnerships as a counterweight against Indigenous rivals. “That dynamic made the French and Indian War, and the road to independence, inseparable from the Native American story,” he says.
There was no unified, national economy in the way we think of it today. Instead, it was a series of regional economies.
“If you were to live in the 17th century in either New England or Virginia, you would never think that this set of colonies would someday be considered a country,” Arteaga says. “In fact, if there was something tying the colonies together, it was their relationship with the Caribbean—Barbados, Jamaica. Virginia was a tobacco-based economy, increasingly dependent on enslaved African labor, and New England had fishing, a little bit of lumber, and that would lead to the incentive to create cities and ports.”
The economic push for independence was driven by Virginia and New England.
RELATED
Connecting with America’s 250th anniversary
A look at Revolutionary War nursing
Bringing the US Navy’s 250-year history to life
“The clash was not simply about taxes or trade but about where legitimate authority resided—in London or in Virginia,” Arteaga explains. “New England was competing for manufactures with England, and the Virginia planter class had grown accustomed to governing itself through the colonial assemblies.”
By contrast, Pennsylvania and New York were more hesitant. “New York in particular had more to lose from breaking with Britain. It aligned with the independence movement but not without significant internal debate,” Arteaga says.
After the Revolution, the new government under the
Articles of Confederation
was fairly weak.
“This created a classic free-rider problem: Each state could benefit from the existence of a central government without contributing to it, since their individual contribution made little difference to the collective outcome,” Arteaga says. “The central government remained starved of resources and authority.” There was also both inflation and deflation: inflation of Continental dollars, because they were worth nothing, and deflation because of the shortage of physical silver and gold, Arteaga says.
The
Constitution
created institutions that were critical to strengthening the new nation’s economy—and growing it to the largest in the world.
Under the new Constitutional government, the legitimizing presence of
George Washington
and the principle of
judicial review
from the
Supreme Court
helped stabilize the country, says Arteaga. “What matters in long-term economic growth is that you grow steadily, without disturbance,” he says. “What makes a society wealthy is the ability to cooperate and set correct incentives towards human development. That’s why institutions are so important; they create cooperation among peoples that are very different.”
Share this article
Threads
Credits
Writer
Dan Shortridge
More from
School of Arts & Sciences
Economics
History
America 250
Novel plant-based approach to a better, cheaper GLP-1 delivery system
Health & Medicine
Novel plant-based approach to a better, cheaper GLP-1 delivery system
Research led by Penn Dental’s Henry Daniell investigates the use of a lettuce-based, plant-encapsulated delivery platform as a new oral delivery of two GLP-1 drugs previously approved by the FDA in injectable form.
No brain, no gain: Neuronal activity enhances benefits of exercise
Image: Sciepro/Science Photo Library via Getty Images
Natural Sciences
No brain, no gain: Neuronal activity enhances benefits of exercise
Research led by Penn neuroscientist J. Nicholas Betley and collaborators finds that hypothalamic neurons are essential for translating physical exertion into endurance, potentially opening the door to exercise-mimicking therapies.
Studying Shakespeare through the lens of love
In honor of Valentine's Day, and as a way of fostering community in her Shakespeare in Love course, Becky Friedman took her students to the University Club for lunch one class period. They talked about the movie "Shakespeare in Love," as part of a broader conversation on how Shakespeare's works are adapted.
nocred
Arts & Humanities
Studying Shakespeare through the lens of love
In Becky Friedman’s English course Shakespeare in Love, undergraduate students analyze language, genre, and adaptation in the Bard’s plays through the lens of love.
Beating the heat: Designing cooling for bodies in motion
nocred
Technology
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Dorit Aviv, director of Weitzman’s Thermal Architecture Lab, studies how humans, technology, and design intersect, paving the way for the development of novel approaches to cooling people efficiently.