The dominance factor of USA in world economy
Question:
Discuss about the People Management and Work in a Global Context.
The USA boasts of the world’s biggest economy. The dominance factor of USA has been battered however by the cropping up of the European Union (EU) common marketplace, which has an equivalent GDP of over $ 13 trillion (Hall & Thelen, 2009). The brisk extension of the economies of BRIC (Brazil-Russia-India-China), particularly China, is all set to overhaul the USA in size within the span of thirty years. The current failure in the policy of US housing and the credit markets has led to the outcome of the slowdown of the US financial system. The US is often been referred to as the free market economy, though it is not been true, since the government of the country indulges themselves in protecting certain industries like the agriculture and energy. It can best be refereed as the consumer economy. In the period from 2009 to 2010, following the period of Great Recession, the rising problem of jobless upturn resulted in record intensity of unemployment of long-term with more than 5 million workers looking for jobs longer than the period of six months. This in particular had an impact on the older workers and in February 2010, the certified rate of unemployment was up at 9.7 per cent. This paper would take into account the fact that USA is one of those archetypal examples of LMEs that have been showing the signs of a free economy, though it is stated to be a mixed economy.
The government wanted to modernize their base industries for being able to compete in more efficient way in the global economy. It was an optic apposite for the periods of 1950s and 1960s when the high inter-war joblessness hung over the global economy along with the dilapidated barriers for trading bringing in stiffer opposition from the American multinationals. The most striking facet of the policy within the liberal states has been its prominence on the economic management of ‘arm’s length’. The same kind campaigned by John Maynard Keynes, whose principle are of the notion that governments have the ability in ensuring full employment, without exclusive interference through the manipulation of the rates of interest and the balance of budgets for justifying the fluctuations in economic movement. Many of the policy makers within the liberal economies have been doubtful about the economic planning’s value with the analysts judging the unpretentious efforts, providing control over the fund flow in the financial system providing them more authority over the decisions related to investments.
BRIC economies and the challenge to USA’s dominance
From the middle of 1970s, the popular concern in the democracies of developed nature like the USA shifted away from being economic transformation towards the inflation rates and rising unemployment in tandem after the disintegration of the monetary system of Bretton Woods and the shocks of commodity prices. Several analysts began focusing on the issue of the ways governments could lessen inflation without augmenting the factor of unemployment. The term, ‘neo-corporatism’ cropped up in this scenario, focusing on the association of the trade unions along with the employers on the premise that the factor of wage bargaining could be synchronized (Edwards et al., 2013). The same can be done through associating the encompassing for promoting the interests that were economically wide of the firms and the workers. The inflation rate could be subordinated without much of the profligate increment in the unemployment issue. In such a scenario, the state’s role was in promoting the group of producers, guaranteeing that the concessions made by the workers would surge into investment instead of the dividends, offering a macro-economic motivation or the social settlements in return for the wage concessions.
The constitution of US makes sure the three significant elements that generate a free market. They are in all probabilities possession of the private property, an aggressive market and the prices being of unregulated nature (Kochan & Riordan, 2016). The US thrives on the concept of capitalism for its free market nature. This signifies the fact that the law of demand along with the supply sets the factor pricing and distributes the services and goods. The whole thing fits appropriately with the American Dream. It is of the opinion that each person has the true need of pursuing his or her own idea for being happy. This quest drives the spirit of entrepreneurship that is much required by capitalism. The constitution also educates the federal government in promoting the welfare in general sense. This facilitates the federal government in using the central planning in the areas that is of key importance for the growth of the nation (Boschma & Capone, 2015). This takes into account telecommunications, defense and the factor of transportation.
The precedence has been on the well-being of the women, seniors and children, though Congress has unmitigated the clause of general welfare in many other areas (Lazarova, Morley & Tyson, 2014). If one focuses on the federal budget, the overall reflection would be on these factors. The biggest item of budget is the benefits of Social Security figuring at $967 billion. The second in line has been the defense at $773.5 million in FY 2017. The health sector is in next with Medicare costing $598 billion and Medicaid amounting to $386 billion. As a result of this, many have been worrying of the fact that America is either fetching a state of social welfare or it is gradually becoming the slave of a military-industrial compound (Greer & Doellgast, 2013).
USA as a consumer economy rather than a free market economy
But the United States has often been described as the mixed economy and has been suggested it is superior for it. A free market economy cannot synchronize a plan of the stature of national defense. It also foliages the susceptible society members without the much required safety net. The safety net generally safeguards the right of the child for having the prospect in pursuing happiness. US, a mixed economy merges the best facets of a free economy with those of a command economy. This is where government makes use of the central plan for managing the distribution and prices. Countries that have been following communism use the command economy. When people generally think of the economy that is centrally planned, they usually think of nations like China, Russia and Cuba. But even these command economies are espousing the traits of a free market economy (Fernandez & Aalbers, 2016). They are required to compete against the pricing existing in the free market economy across the globe. Only a market economy of free nature would provide them with suppleness for succeeding in a globalized economy. Gradually they are on the verge of becoming mixed economies.
The main issue is that Congress is being spending above its means. One of the other large budget items is the imbursement of interest on the issue of debt that is figured at $303 billion (Godard, 2014).. This is mostly for the fact federal revenue does not cover the spending. Each year the deficit has been adding to the debt factor. As a result of this, the spending of the Congress for promoting the general wellbeing is irresistible in the economy of free market. The national debt is more than the annual economic output of the country. The ratio of debt-to-GDP is more than 100 per cent. This is much beyond the tipping point of the World Bank at 77 per cent. As the world has been recovering from the effect of financial crisis, investors would be leaving the safe heaven, which is US. At one point, the rates of interest would be on the up. This would gradually be slowing down the economic growth and worsening the factor of debt-to-GDP ratio. Therefore, the key concern would not be, “whether America is no longer an economy of free market?” The main concern is that Congress has continued to expend ahead of its means on the whole lot. It is letting its accountability for the general benefit of the nation outweighing its duty for protecting the way capitalism works (Ahmadjian, 2016). It requires finding a way for restoring the balance predicted by the Founding Fathers of USA.
The history of economic management in the USA
One way of doing it is shifting the priorities of spending in putting the millions unemployed back on track of work. The spending on defense only has generated 8,500 jobs for every $1 billion being spent on it. It has not been that effective in generating jobs, since much has been spend on the factors of technology. Half of those funds ($3, 00,000) could be going into the public work constriction that has been creating 19,700 jobs per billion (Ferner et al., 2015). This would be thus using the benefits of a command economy through assembling quickly in solving the top issue the nation has been facing. It is required to put people back to working terms as it would be generating the demand required in letting the market of free nature grow quicker. If the spending is being kept same, the same would be restoring the ratio of debt-to-GDP at a level of sustainability (Walker, Brewster & Wood, 2014).
The existing relationship between the state and the economy varies in the coordinated and liberal market economies. To certain extent, these variations might obtain from the fact that many of the liberal states like USA have been electing the governments via the rule of majoritarian. Such rules have been giving the political parties stronger incentives for humanizing the median voters instead of making appeals in specific manner directed towards the labor or business, as many of the parties that have been designated by comparative representation accomplish. As a result of this, the USA governments often have relationships of weak nature with the prepared labor or capital. The multifaceted veto points of the fissiparous American political system supports foyers on behalf of the detailed interests instead of the bargains of peak-level with capital (Beyer, 2013). Partly because of the fact that the voice of the prearranged labor is weaker in those places as the firms tend to force their capabilities in shifting the resources around, liberal economies also provides low levels of social fortification than the neo-corporatist regions.
In some respects, the liberal states are moderately well-positioned in coping with the austerity politics: their lower levels of social spending are easier in sustaining than the most liberal wellbeing states of other administrations (Donaghey et al., 2014). However, the higher level of indebtedness to which the growth strategies that are being led by demand have given rise in making this issue more pressing one along with the related choices more tender. The efficient up-skilling of the personnel might depend on lessening of the inequalities at social level that are now important facets of such economies, via the programs of developing the early childhood (Coates, 2015).
The constitution and the mixed economy
United States boasts of a bigger financial services segment with global reach that would persist in making key contributions to the balance of payments, even though it has been encountering downsizing in the shorter term (Kaufman, 2016). The important question is whether US can lock more shares in the other industries. United States does enjoy the historic benefits in the segment of bio-technology along with information technology, associating to its capacities for fundamental innovation, but in certain other industries, like in sustainable energy, it has been susceptible to the competition in Asia. In USA, the destiny of knowledge-intensive industry has been in much doubt as their secondary education classification has been incapable to bestow higher level of skills in science and mathematics that are now being obtained by some of their rivals (Woodhall-Melnik & Matheson, 2016).
Thus it can be concluded that US is one of the typical LMEs across the globe. The issues for such a fact have been discussed in the above section where the spending of the government to put people back on work has been significant. America believes in putting the individuals on positions where they can generate the ability to pursue their happiness and well-being. It is one of those mixed economies that has shown the signs of free economy and is better off there.
References:
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Beyer, J. (2013, June). Varieties of Capitalism. In Lexikon der Arbeits-und Industriesoziologie (pp. 474-479). Nomos Verlagsgesellschaft mbH & Co. KG.
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