INTRODUCTION TO THE US ECONOMY

S. Rosen

http://stevenlrosen.yolasite.com

America is the richest nation in the world. But what does that mean?

- How rich is the U.S.?

- How is wealth distributed?

- Where does the wealth come from?

Overall national wealth is measured in GDP-

Ranking Nominal GDP in billions of dollars

World 72,689,734

1 United States 16,244,600

2 China 8,358,400

3 Japan 5,960,180

4 Germany 3,425,956

5 France 2,611,221

6 United Kingdom 2,417,600

7 Brazil 2,254,109

8 Russia 2,029,812

The U S h a s the largest and most technologically powerful economy in the world,

with a per capita GDP of $51,000.

- Japan~ $46,000

- Germany~ $41,863

- China~ $6,091

- Korea~ $22,500

It is a market-oriented economy: private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services mostly in the private marketplace.

Historical Background: and overview of U.S. Economic History

I. The American Industrial Revolution: 1865- 1920

Key words-

Industrial capitalism

Stockholding corporations

Monopoly capitalism

Economies of scale (cost advantages for companies due to

size) 規模のの経済

American entered a period of incredible economic growth.

It resulted in a total transformation of American society.

In this time the modern industrial corporation, was born, which was the source of this new wealth.

Also- a new labor pool- millions of poor immigrants came to the U.S. providing cheap labor

The two engines of economic growth:

New Technology:

1. transportation and communication (the two most important engines of growth)

- Electricity (based mainly on fossil fuels- coal and oil)

2. A new type of business organization: the limited liability multinational corporation

- Publically traded (stockholding)

- Protected by law (limited liability)

- Market control (monopolies, oligopolies, cartels)

II. The Jazz Age- the 1920’s….”The Roaring 20’s” – the height of capitalism, Fordism and the growth of a middle-class, and great wealth in America (see The Great Gatsby)

Key features:

Fordism

Consumerism

Modernism (literature and art)

Birth of Hollywood

Women get to vote (1919)

Radio

III. Crash! The Great Depression (1929-41)

Beginning- Oct. 1929, stock market crash, bank failures

End- Dec. 7, 1941, attack on naval base in Pearl Harbor, Oahu leads to full employment

Q: What is a depression?

A: Negative GDP growth with very high unemployment

A new economic policy/philosophy- The New Deal: President Franklin D. Roosevelt

IV. 1941-45 America at War

-full employment (ending the Great Depression)

- The Bretton Woods Agreement (1944) making the US the dominant global economic power

* Economic integration of global economy with America at the top.

V. Post-war Prosperity

Key features-

- Conglomerates

- Media giants and advertising

- Multinational corporations

Food and Beverage (General Mills, Coca-Cola)

Computers (IBM, Sperry Rand)

Big 3 Automakers (Ford, GM and Chrysler)

Heavy industry (GE, Westinghouse)

Chemicals (Dow)

Aerospace (Boeing)

Pharmaceuticals (J&J)

VI. The 1970’s- Stagnation: the end of Fordism and the Keynesian Welfare State; the end of Big Labor Unions

- 2 oil shocks

- The rise of Japan as major competitor

VII. Return to Free Market Ideology/Economic Policy: Reaganomics

Ronald Reagan (1981-89)

Key features:

deregulation

privatization

out-sourcing and

off-shoring (the end of America’s manufacturing base)

tax cuts for the wealthy

cuts in aid to the poor (welfare)

VIII. The 1990’s: the Rise of Silicon Valley and the Dot Com Bubble

Key features

The digital revolution: Apple, Microsoft, Intel, Amazon, Youtube, Yahoo, Google, Napster

IX. 2001- terrorism and the decline of America

The U.S. Economy Today

Today:

US firms lead in technological advances, especially in computers and in

medical, aerospace, and military equipment,….

…. but since the 1970’s, Japan and other countries have become

competitors in many other areas.

Modern technology helps to explain 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;

Middle-class and poor people, more and more, fail to get fair 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.

ECONOMIC CRISIS 2007~~~~

GDP contracted until the third quarter of 2009, making this the deepest

and longest downturn since the Great Depression.

To help stabilize financial markets, in October 2008 the US Congress

established a $700 billion Troubled Asset Relief Program (TARP). The government

used some of these funds to purchase equity in US banks and industrial

corporations, much of which had been returned to the government by early 2011.

In 2010 and 2011, the federal budget deficit reached nearly 9% of GDP. In

2012 the federal government reduced the growth of spending and the deficit shrank

to 7.6% of GDP.

Wars in Iraq and Afghanistan required major shifts in national resources

from civilian to military purposes and contributed to the growth of the budget

deficit and public debt.

*US revenues from taxes and other sources are lower, as a

percentage of GDP, than those of most other countries.

Total spending on health care - public plus private - rose from 9.0% of

GDP in 1980 to 17.9% in 2010.

GDP (purchasing power parity) $15.66 trillion (2012 est.)

GDP - real growth rate 2.2% (2012 est.)

1.8% (2011 est.)

2.4% (2010 est.)

GDP - per capita (PPP)

$49,800 (2012 est.)

GDP - composition by sector

agriculture: 1.2%

industry: 19.1%

services: 79.7% (2012 est.)

Population below poverty line 15.1% (2010 est.)

Labor force - by occupation farming, forestry, and fishing: 0.7%

manufacturing, extraction, transportation, and crafts: 20.3%

managerial, professional, and technical: 37.3%

sales and office: 24.2%

other services: 17.6%

note: figures exclude the unemployed (2009)

Unemployment rate 8.2% (2012 est.)

9% (2011 est.)

Unemployment, youth ages 15-24 total: 17.6%

male: 20.1%

female: 14.9% (2009)

Budget surplus (+) or deficit (-) -7.6% of GDP (2012 est.)

Public debt

73.6% of GDP (2012 est.)

Inflation rate (consumer prices)

2% (2012 est.)

3.1% (2011 est.)

Agriculture - products

wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy

products; fish; forest products

Industries highly diversified- world leading, high-technology innovator, second largest

industrial output in world; petroleum, steel, motor vehicles, aerospace,

telecommunications, chemicals, electronics, food processing, consumer goods,

lumber, mining

Current Account Balance -$487.2 billion (2012 est.)

Exports - commodities agricultural p r o d u c t s (soybeans, fruit, corn) 9.2%, industrial supplies

(organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts,

computers, telecommunications equipment) 49.0%, consumer goods (automobiles,

medicines) 15.0%

Exports - partners

Canada 19%, Mexico 13.3%, China 7%, Japan 4.5% (2011)

Imports - partners

China 18.4%, Canada 14.2%, Mexico 11.7%, Japan 5.8%, Germany 4.4% (2011)

Debt - external $14.71 trillion (30 June 2011)

Stock of direct foreign investment - abroad

$4.768 trillion (31 December 2012 est.)

$4.328 trillion (31 December 2011 est.)

Fiscal year 1 October - 30 September