Question

Identify the 5 main sources of economic growth for the United States. Include a discussion of the recent revised International trade contracts with North America and Japan. Worth 20 points.

Answer 1

Introduction

Economic growth is defined as the increase in parameters such as living conditions of a country, health index and others such as Gross Domestic Product within a country. The United States, is seen as the power house of economic growth, the success or failure of which can move the markets at any given point of time.

If we look at the 2008 recession which kicked off in America, it led to a situation wherein the entire global economy took a hit because of the housing crisis. This tells us about the importance of the economy internationally as well.

When we look at the sources of development for the United States these are as follows: -

1) Physical Capital: -

The generation of Capital in a country is of prime importance for its economic growth. The United States has been led by the theory of capitalism due to which rapid expansion has taken place previously which has led to the growth of numerous institutions, malls, factories, motor vehicles etc.

The rise of capitalism in the country has been the core reason why the largest companies that one can imagine are in the United States. This phenomenon of capital generation and reinvestment is one of the core reasons, for the United States extending its growth.

2) Technological Advancements: -

The United States is seen as a spear head of technological advancements across the globe. It has used the capital generation in a manner that it is years ahead of competition in terms of the technology being used in production and designing. We have companies like Apple and Tesla which have revolutionized their industries due to technological advancements and the need and want which they have created is one of the prime reasons for the success of the United States.

Some of the top innovating firms in almost all sectors of the world economy, originate from the United States and are the core reasons for its economic growth.

3) Trade Agreements: -

The United States has always advocated for free trade among countries in which taxes are eliminated as much as possible. This has meant that the country exports to almost all parts of the world and has dominance in terms of its currency being used as the central currency for trade.

The United States has had several agreements two of which are as discussed due to the case study requirements.

The USMCA or the United States Mexico and Canada Trade Agreement, replaces the older agreement which was known as the N.A.F.T. A or North America Free Trade Agreement. Over the years, the American continent has been the pioneer of free trade and this has been one of the top reasons for the same. Transactions worth millions of dollars are conducted annually between the countries and has led to rapid growth of the United States. It has benefitted from the low cost of manufacturing in Mexico on one hand and on the other has been able to freely export in Canada and can extend its supply lines.

Further, with Japan as well, the country has been able to convince Japan of being able to reduce the tariffs on industrial as well as agricultural exports and imports alike. This came into effect in 2019 and is an extension to the policy of free trade being implemented by the United States. Some of the key areas where export is conducted include capital goods, machinery, agricultural produce such as plants, and others such as bicycles, musical instruments etc.

All these agreements provide United States the edge in development.

4) Labour Force: -

The labour force in the United States is seen as being the most skilled and highly competitive as a result, the type of innovation and productivity which they offer to the economy cannot be compared with others. The core reason for the existence of the best companies in the United States is the level of education, support and financial regulations in the country which have led to the development of a robust labour force which has extended the growth for the country.

5) Institutional Factors: -

All sectors such as Défense, Police, Finance & Banking, Health care & Education are so well built in the United States, that they are seen as role models across the globe for improving their standards. All these sectors and their relative strengths on providing and nurturing talent. While maintaining quality and delivery across the country has meant that the growth pattern has always been great.

Please feel free to ask your doubts in the comments section.