Transcript The U.S. Economy

The U.S. Economy
Characteristics
Close to pure capitalism
Individualistic capitalism
Competitive market
Respect for wealth
Smaller role of government in the economy
(33% of GDP compared to 65% for
Sweden)
High income inequality
Facts
The largest economy in the world
Almost $10 billion current GDP in 2000
The highest living standard
The most competitive nation
(www.imd.ch)
High in economic freedom and political
freedom
Industry Structure
Service-oriented economy (1999 data)
Agriculture 2%
Mining, construction, and manufacturing 22%
Services 62%
Government services 14%
Declining union power with shrinking
manufacturing jobs
Many global corporations (multinational
corporations)
History of Government
Intervention
Microeconomic intervention: 1870-1930
Curbing monopoly power
Macroeconomic intervention: 1930-1964
Fiscal policy (New Deal policy of 1930s)
Regulations of many key industries
Social security Act of 1935
Labor and employment related acts
Social regulation; 1964-1975
Environment
Equal rights (Anti-discrimination)
Federal Government
Major revenues (1998)
Individual income taxes 41%
Social security taxes 33%
Corporate income taxes 11%
Borrowing 7%
Major expenditures (1998)
Mandatory 67%
Social security 23%, interest on debt 15%, medicare
and medicaid 18%, others 11%
Discretionary 33%
National defense 16%, others 17%
Strength of the U.S. Economy
The Wealth and Poverty of Nations by David
Landes
Favorable climate and endowments
Work ethics and incentives
The Competitive Advantage of Nations by
Michael Porter and The Competitive Edge by
Morgan Stanley Co.
Technological prowess
Labor cost advantage (American wages are high,
but also American workers are highly productive)
Weakness of the U.S.
Economy
High income inequality
Most unequal society among the advanced
countries
May cause disharmony and distort democratic
process
May cause debt-ridden society due to
demonstration effect
Poverty
32 million in poverty in 1999 (Data)
12% of population in poverty in 1999, but much
larger shares by ethnic minorities (Black and
Hispanic)