Unit5 American Economy.doc

American Economy When we first talked about America economy, most of us have a general overview that the United States enjoys one of the most developed economies for the reason that its GDP for year 2006 is over$13 trillion, the highest GDP in the world,surpassing countries like Japan, Germany and UK.The US also enjoys a high import and export volume.One of the factors that greatly contributes to this is the size of the country itself. Also the US economy is the largest trade partner of many countries,such as Mexico, Canada, Japan and many others. The modern American economy traces its roots to the quest of European settlers for economic gain in the 16th,17th and 18th centuries.The New World then progressed from a marginally successful colonial economy to a small,independent farming economy and,eventually,to a high complex industrial economy.During this evolution,the United States developed ever more complex institutions to match its growth.And government involvement in the economy has been a consistent theme,the extent of that involvement generally has increased.The New Nations Economy The U.S Constitution,adopted in 1787 and in effect to this day,was in many ways a work of creative genius.As an economic charter,it established that the entire nation-stretching then from Marine to Georgia,from the Atlantic Ocean to Mississippi Valley-was a unified,or “common”,market.There were to be no tariffs or taxes on interstate commerce.The Constitution provided that the federal government could regulate commerce with foreign nations and among the stated,establish uniform bankruptcy laws,create money and regulate its value,fix standards of weights and measures,establish post offices and road,and fix rules governing patents and copyrights.The last-mentioned clause was an early recognition of the importance of “intellectual property”,a matter that would assume great importance in trade negotiations in the late 20th century.Industrial Growth The Industrial Revolution began in Europe in the late 18th and early 19th centuries,and it quickly spread to the United States.By 1860,when Abraham Lincoln was elected president,16percent of the U.S population lived in urban areas,and a third of nations income came from manufacturing.Urbanized industry was limited primarily to the Northeast;cotton cloth production was the leading industry,with the manufacture of shoes,woolen clothing,and machinery also expanding.Many new workers were immigrants.Between 1845 and 1855,some 300,000 European immigrants and arrived annually.Most were poor and remained in eastern cities,often at ports of arrival. The rapid economic development following the Civil War laid the groundwork for the modern U.S industrial economy.Government Involvement In the early years of American history,most political leaders were reluctant to involve the federal government too heavily in the private sector,expect in the area of transportation.In the general,the accepted the concept of lasses-fair,a doctrine opposing government interference in the economy except to maintain law and order.This attitude started to change during the letter part of the 19th century,when small business,farm and labor movements began asking the government to intercede on their behalf. Government involvement in the economy increased most significantly during the New Deal of the 1930s.The 1929 stock market crash had initiated the most serious economic dislocation in the nations history,the Great Depression(1929-1940).President Franklin D. Roosevelt launched the New Deal to alleviate the emergency.The Postwar Economy:1945-1960 Many Americans feared that the end of World War II and the subsequent drop in military spending might bring back the hard times of the Great Depression.But instead,pent-up consumer demand fueled exceptionally strong economic growth in the postwar period.The Economy in 1980s The nation endured a deep recession throughout 1982.Business bankruptcies rose 50 percent over the pervious year.Farmers were especially hard hit,as agricultural exports declined,crop prices fell,and interest rater rose.But while the medicine of a sharp slowdown was hard to swallow,it did break the destructive cycle in which the economy had been caught.By 1983,inflation had eased,the economy had rebounded,and the United States began a substantial period of economic growth.The annual inflation rate remained under 5 percent throughout most of the 1980s and into the 1990s. Still,Americans ended the 1990s with a restored sense of confidence.By the end of the 1999,the economy had grown continuously since March 1991,the longest peacetime economic expansion. The United States entered the 21st century with an economy that was bigger,and by many measures more successful,than ever.Not only had it endured two world wars and a global depression in the first half of the 20th century,but it had surmounted challenges ranging from a 40-year Cold War with the Soviet Union to extended bouts of sharp inflation,high employment,and enormous government budget deficits in the second half of the century .The nation finally enjoyed a period of economic calm in the 1990s:prices were stable,unemployment dropped to its lowest level in almost 30 years,the government posted a budget surplus,and the stock market experienced an unprecedented. The economy also faced some continuing long-term challenges.Although many Americans had achieved economic security and some had accumulated great wealth,significant numbers-especially unmarried mothers and their children-continued to live in poverty.Disparities in wealth,while not as great as in some other countries,were larger than in many.Substantial numbers of Americans locked health insurance.The aging of the large post-World War II baby-room generation promised to tax the nations pension and health-care systems early in dislocation along with many advantages.In particular,traditional manufacturing industries had suffered setbacks,and the nation had a large and seemingly irreversible deficit in its trade with other countries. Throughout the continuing upheaval,the nation has adhered to some bedrock principles in its approach to economic affairs.Most important is,the United States remains a “market economy”.Americans continue to believe that an economy generally operates best when decisions about what to produce and what prices to charge for goods are made through the given-and-take of millions of independent buyers and sellers,not by government or by powerful private interests.How the U.S economy works Basic Ingredients of the U.S Economy The first ingredients of a nations economic system is its natural resources.The United States is rich in mineral resources and fertile farm soil,and it is blessed with a moderate climate.It also has extensive coastlines on both the Atlantic and Pacific oceans,as well as on the Gulf of Mexico.Rivers flow from far within the continent,and the Great Lakes-five large,inland lakes along the U.S border with Canada-provide additional shipping access.This extensive waterways have helped shape the countrys economic growth over the years and helped bind Americas 50 individual states together in a single economic unit. The second ingredient is labor,which converts natural resources into goods.The number of available workers and,more importantly,their productivity help determine the health of an economy.Throughout its history,the United States has experienced steady growth in the labor force,and that,in turn ,has helped fuel almost constant economic expansion.Until shortly after World War I,most workers were immigrants from Europe,their immediate descendants,or African Americans whose ancestors were brought to the Americas as slaves.In the early years of the 20th century,large numbers of Asians immigrated to the United States,while many Latin American immigrants came in later years.A Mired Economy:The Role of the Market The United States is said to have a mixed economy because privately owned businesses and government both play important roles.Indeed,some of the most enduring debates of American economic history focus on the relating roles of the public and private sectors. The American free enterprise system emphasizes private ownership.Private businesses produce most goods and services,and almost two-thirds of the nations total economic output goes to individuals for personal use(the remaining one third is bought by government and business).The consumer role is so great,in fact ,that the nation is sometimes characterized as having a “consumer economy”.The structure of the economy comprises private-owned business, state-owned business, non-profit organizations and so on.Structure of the employees: self-employed (75%); government workers (21%); employees of nonprofit organizations (4%) The US position in the world has been described as “Superpower” in world affairs paired with it dominant position of the dollar “Bretton Woods System”, a monetary management which established the rules for commercial and financial relations among the world major industrial states in the mid 20th century.it was held in 1945 at Bretton Woods in New Hampshire and attended by 45 countries. It has a historic significance of establishing formally the dominant position of the dollar in the Bretton Wood system. The conference also set up the IMF (International Monetary Fund), the World Bank, and GATT( the General Agreement on Tariffs and Trade), later known as WTO, it is a world trading system. The chief features of the Bretton Woods system is that it built an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed valueplus or minus one percentin terms of gold and the ability of the IMF to bridge temporary imbalances of payments. The decline of the Bretton Woods system: in the face of increasing financial strain, the system collapsed in 1971, after the United States unilaterally terminated convertibility of the dollars to gold. This action caused considerable financial stress in the world economy and created the unique situation whereby the United States dollar became the reserve currency for the states which had signed the agreement. General feature of US economy are that inflation; A general rise in the prices of goods ad services; a reduction of money value and the real purchasing power; deficit; American economy is deficit financing. Reasons: a. It is importing more goods and services than it is exporting. b. The US is dependent on capital flows, which results in the dollars sensitivity to any change in these capital flows. 1. $23 billion during WW; 2. $13 billion more during the 1930s; 3. $200 billion more during WW; 4. By 1998 the gross federal debt has reached $ 2 trillion; 5. interest on the federal debt is over $ 150 billion a year. Industries1. Manufacturing The US manufacturing industry is the largest in the world, almost 3 times the size of Japan. 1. one quarter of its GNP 2. one quarter of its national income 3. over 1/5 of the US work force2. High Technology 1. one of the world leaders in the high technology, in the areas of telecommunication, electronics, computer chip research and manufacturing and software development.2. US is the world major producer of high-speed computers , such as Apple Computer Corporation; International Business Machines (IBM) 3. Heavy IndustryHeavy industry around the Great Lakes depends heavily upon 3 resources.1. iron ore from the Lake Superior2. coal supply from Appalachia Mountains (western Pennsylvania and west Virginia)3. cheap water transportation provided by the Great Lakes and rivers.They constitute the base for the development of industry in the region.4. Aviation1. US has the largest aviation industry in the world.2. Major aircraft companies: Boeing, McDonald Douglas (in Seattle, Washington State)3. Space shuttles still lead the worlds space navigations. (in Houston, Texas)5. Car Industry1. “Big Three” motor vehicle companies “ Ford” “General Motors ( GM) ” and “ Chrysler” (in Detroit, Michigan)Features:large, spacious and high-powered; heavy fuel consuming and costly the influx of Japanese cars and spare parts is the main cause of Americas $60 billion trade deficit with Japan.6. Distribution of Industries1. Northeastern America , the most important industrial region. New England and Great Lakes 2. The South was traditionally an agricultural region because of its favorable climate for crops. The South developed its oil-refining and Petro-chemical industry. Meanwhile the textile industry and heavy industry also developed. Agriculture1. IntroductionOne of the most important enterprises of the U.S. enjoying an extolled virtues of the hardy, self-suffi