The American economy has been wobbling for
decades, thanks to economic policies which directly or indirectly affect it in
a number of ways. The following factors are what mostly contribute to the
threats faced by the US economy over a decade and still continue in today’s
modern economy.
Inflation- this is when the price of commodities soars high while the demand and supply remain the same, the effect of this is the fall in standard of living of the general populace. The current consumer prices in the United States increased by 0.2 percent in the month of august, same as July. The inflation rate stood at an average of 3.32 percent. Although a slow rise in the prices of commodities and or inflation can contribute positively to the economy, care must be taken because the bulk of consumers are what contribute to more than 70 percent of the country’s gross domestic product.
Deficit-the excess of expenditures over
revenue in a period of time is what is referred to as deficit, the US deficit
stood at $483 in 2014, it is estimated to be $474 for 2016. The implication of
this is the increased vulnerability to fiscal crisis, the state whereby
investors would be afraid to invest or borrow money to the economy. The
government would have to borrow at exorbitant rates putting the economy in a
negative state.
Globalization-the effect of this has
produced a growing of number of employees around the globe who put in more
hours at work on low wages, this made industries and companies shift their base
to places of cheap labor. This is notably present most of the over-populated
continents of Asia and Africa.
Technology-the effect of advancement in
global technology leads to machines replacing humans in many companies, this
reduce the number of employees in a company and in turn increase the rate of
unemployment in the US.
Tax policies-the bulk of tax policies favor
investors much more than middle class and average wage earners. The negative
effect of this to the US economy is the low patronage experienced by
businesses; some may not put off and may lead to them packing up. The
government keeps experiencing a decline in income tax revenues.
Shareholder value-companies tend to be
obsessed with shareholders at the expense of employees and customers. This
often leads to cut in employee cost.
Unemployment-the current unemployment rate
in the United States is at 5.10 percent, same as the month of August and
September. This translates to more than 7 million numbers of unemployed in the
US. The effect of this is that instead of having a population of 7 million
workers paying tax and increasing government revenue, the result will be 7
million people eligible for unemployment insurance, sucking the economy rather
than contributing to its growth.
Other threats to the US economy include the
rise in house prices and the debt crisis rocking Europe. The above factors put
the system out of balance by redistributing wealth. The assets and income
shifts largely to the richest of the society. The problem with that is, the
consumers which are to a large extent the real drivers of the economy end up
with little or no money to spend, businesses in turn suffer because making them
look for alternatives to cutting cost, the consumers are hurt again even more
this time around.
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Comments
How is it that China has embraced the Adam Smith model of capitalism while the USA has seems to abandon it in favor of the consumer economy, which means the consumption of goods made in China?
ReplyDeleteWe are a consumption and service industry based economy. If service workers do not make enough money to consume enough goods and services, our economy will suffer. It's not rocket science.
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