Question

In: Economics

Historically the United States has always enjoyed being the world's largest producer of goods and services....

Historically the United States has always enjoyed being the world's largest producer of goods and services. However, it appears that all of that will change shortly. According to The Independent, in an article dated February 1, 2007, by the 2030s China's GDP will become larger than the United States' GDP based on their current growth rate and by the 2040s India's GDP will also become larger than the United States' GDP as well. This means that the United States will only be the third largest economy in the world (China will be first and India will be second). How do you feel about that? How might that impact the U.S. economy? What kinds of political impacts will it have?

Solutions

Expert Solution

As an American, I feel sad about that because the American economic supremacy will be taken over. Economic supremacy gives a lot of power to America to influence the global order, trade policies, economic policies, political matters, etc. This is surely going to diminish the stature of American in the international sphere. America will lose its influence as it is enjoying currently.

The American economy may not be the center of attention of the world. The dollar might lose its stature as the most reliable international currency. Investors would like to invest in China and India. Higher growth and GDP would allow India and China to invest more in innovations, science, and technology. The treasury securities will not be as reliable as they are currently. Therefore, America's ability to borrow more and maintain a higher debt will be difficult. The government might be forced to reduce spending and raise taxes. This will further negatively affect American businesses and economy.

America will lose the crown of the global leader. Currently, America has an unquestionable influence on global political developments, foreign policies, international relations, etc. When India and China become richer, America's political influence will be reduced. America will still be a major global player but it will lose the leadership position. It might also lose many of its international allies who can align them with India or China.  


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