A review of the development of literacy in American national life provides both a picture of two centuries during which the strong association of literacy with mainstream cultural values was largely unexamined and unchallenged, and a realization that illiteracy is inextricably related to problems of discrimination and alienation in the workplace, in commercial media, in persistent popular attitudes, and in various youth subcultures. Literacy can be studied historically in at least three different ways: by establishing trends in crude literacy; by moving beyond crude literacy to functional literacy; and by asking related questions about the purposes of literacy--its cultural content and its economic functions. Crude literacy statistics reveal that the relationship of schooling and literacy in America is not a simple cause and effect relationship, that literacy reflects social stratification and educational opportunity, and that the national illiteracy rate shrank from 20% in 1870 to less than 3% in 1940, with major population divergences appearing in white/black, native/immigrant, and North/South figures. There is a need for additional study of the extent, quality, and content of popular literacy and of the historical purposes of literacy as applied to its liberating or constraining effects on intellectual enrichment, political efficacy, and economic improvement. (AEA)