Wednesday 9 January 2013

How should one Assure Productivity and Growth in the US economy, Consistently with maintaining a strong international position?



Prior to the global financial crunch that brought most economies to their knees, United States of America was one economy that was experiencing a remarkable growth of labor productivity. In addition, the Gross Domestic Product (GDP) per worker was growing at a strong figure of 2% per annum. Despite this rate superseding that of the euro area by over a single digit, it fails to cope with the GDP growth associated with the Asian tigers and other emerging economies. China, one of the fast growing economies in the planet, has witnessed a magnificent growth rate of 6.4 % during the same period. China is an emerging economy that poses a real threat and subsequently gags the influence of the United States of America globally. Labor productivity plays a cardinal role in the quantification of economy levels of development. When the productivity growth associated with labor is strong, the wealth of a nation increases spectacularly and the standards of living improves relatively. A number of policy makers have expressed fear on the rapid growth and increased influence of China; they assert that the strong economic growth of China will potentially harm the Economy of United States of America. The analysts further assert that the rapid rise will trigger worker displacement and subsequently reduce the competitiveness of the United States producers globally (National Research Council 73). This essay seeks to dissect the issues related to the United States productivity and growth and how it will be able to maintain its position of influence globally. In addition, the essay will advance various ways the United States can utilize to gag the rising of China.
Productivity growth plays a cardinal role in the economic growth of an economy. Productivity growth is all about the relative increase in production levels courtesy of a given units of work and resources. The United States is able to address its impending challenges if its productivity is able to gather pace. Some myriad challenges facing the United States economy include the ever increasing global competition by china, an unstable middle class and federal deficits. To stamp its economic authority globally, the United States of America needs to increase its productivity growth. Products and services from the US are able to cope with global competition given the US corporations and other firms’ ability to produce quality and quantity products while utilizing the same units of inputs. In addition, the fragile nature of the United States middle class populace banks on the growth of the economy to boost their living standards. Breaking it down, economic growth tends to increase the availability of goods and services in the market. To realize the aforementioned results, quite a number of factors that will enhance the productivity growth of the United States need to be incorporated. These factors include increased levels of capital investments, increased investment in research and development, Access to skilled employees and increased levels of financing directed to new product innovation and idea incubations (Ark, Kuipers and Kuper 209).
The United States of America experienced a drastic economic improvement in the mid-1990s. It outdid its European competitors by posting sharp increases in its productivity. The magnificent economic growth in mid-1990s till 2007 can be associated with the effects of technology in two aspects. First, companies responsible for the production of information Technology accrued their benefits form a gradual progress in the technology industry, a fundamental progress that enabled them to produce powerful products at relatively low costs. This ability to develop and produce powerful information technology gadgets is viewed as a rapid growth of information technology related to small firms in the technology industry. Secondly, Companies and corporations in other sectors embraced Information technology during this period and made huge investments. In addition, they embraced latest technologies in their processes of production. The massive investment by unrelated companies translated to increased productivity by firms that embraced Information technology. The massive improvements in productivity courtesy of information technology lead to an increase in competitive products, flexibility in the labor market and enabled firms to cope well with changing market conditions. However, after the massive strides related to productivity growth, united States economy is dwindling fast (National Research Council 96).
According to Ark, Kuipers and Kuper, china economy rapid economic growth and rising global influence is attributable to the relevance of catch up process (321). Catch up phase is a stage whereby an economy is harnessing more from the presence opportunities that whose yield per investment is high and the benefits of technological advance are trickling down. The scholar further asserts that the United States of America passed the phase a while back and emerging economies i.e. China are utilizing it fully to showcase their economic prowess globally. One characteristic of this stage is the realization of increased levels of productivity growth. Indeed, the aforementioned assertion is backed by the fact that China and other emerging economies still lag behind the United States of America when it comes to productivity levels. A case in point is in 2005 where the Gross domestic product per employee in China was fifteen percent of that in the US (Ark, Kuipers and Kuper 342). The above assertion is true to some extent, however, its imprudent narrow down the rise of china to technologic advance and catch up process only. This is because several other factors play a cardinal role in enhancing its productivity growth and subsequent influence globally. Trade liberalization is one of the factors that often spur the productivity levels associated to a country.
Factors that spur productivity and growth rates of an economy interact in a complex manner; therefore it is catastrophic to single out one factor that has led to the growth of some economies while impeding the growth of others. For example, the strong emergence of china as an economic force to reckon with globally is attributed to large accumulation of capital and increased levels of efficiency in its production process. According to Triplett and Bosworth, rapid capital investment is responsible for about half of China labor productivity growth in the past decade (137). Whereas, increased level of efficiency in the utilization of production inputs is responsible for the other half. The government of china has played a major role in the formulation and subsequent implementation of sound policies that are keen on increasing its productivity growth. For example, a good number of Chinese firms have been privatized courtesy of these government policies. In addition, entering World Trade Organization in the year 2001 saw the liberalization of China trade. The aforementioned move catalyzed the influx of foreign companies into china. The liberalization of trade not only brought with it the relaxation of rules governing the injection of foreign direct investment in china but also encouraged the movement of labor i.e. from agriculture to other industries that offered better rewards on labor. The opening up of Chinese economy together with the availability of cheap labor led to increased levels of investment and subsequent relocation of United States firm. United States firms were keen to lower their costs of production by utilizing the cheap and easy accessible labor. In addition, they were keen to utilize the over a billion market in china. Chinas large population is giving it an edge from its competitors. This is so because the a billion heads provides a ready market for produced goods. Therefore, a sound market research together with a production biased towards the tastes and preferences of this populace will translate into higher margins of revenues.
Despite the high levels of benefits to the foreign economies, China is able to foster its economic standing globally by formulating policies that will relatively prevent the exploitation of its citizens. In addition, the benefits accrued by these firms often trickle down to Chinese economy and subsequently improve the living standards of its citizens.  However, it is a double tragedy to the United States Economy. This is because relocation of firms to China does not only slash employment opportunities but also leads to layoffs. This disadvantages the middle class who are fragile and rely in working in these companies to survive. Moreover, research and innovation are largely reduced in the United States. This is because the multinational corporates inject more of their research investment and innovation capital to Chinese economy i.e. where their production units are located. The aforementioned investment transforms Chinese workers from unskilled to skilled personnel. This is so because the firms have to train Chinese workers who work on a daily basis in production units. Trained Chinese workers pose a real threat to United States workers as they are well placed to compete for jobs globally (61). According to National Research Council, China has not only limited its prowess in the acquisition of new investment zones as it citizens are better placed to compete with their United States counterparts thanks to increased levels of research and innovation capital by United States Multinationals.
The economic system of the United States is largely capitalism. Capitalism has been praised by a number of scholars as one of the very successful wealth minting economic system in history. However, according to Triplett and Bosworth, capitalism is an economic system whose processes are often self-destructive as it creates losers and winners with the later exploiting the former (215). The winners are often the owners of the means of production while the losers are often the workers who exchange their labor for wage. Through this system, United States of America is never an equal society as wealth and power are controlled by capitalists who otherwise engage in economic activities that are detrimental to the wellbeing of workers. These capitalist are responsible for the daily running of business units. Capitalism triumphed after the end of the Cold war. During this same period, unemployment was about 4% while inflation rates were relatively low. During these people, the American populace was able to harness good rewards from their efforts. In addition, citizens were competing to improve their living standards, this lead them to dig deeper into their personal savings. The appetite for spending plunged the nation into debts. This is so because the United States Savings rate was relatively low. The declining levels of real wages, ever increasing foreign debts and a crippled education system have attracted competition from china.
A good portion of global wealth and industries are still in the hands of the United States of America. According to Ark, Kuipers and Kuper, the United States standing globally has relatively declined i.e. not in absolute terms while China has been able to showcase its prowess and relatively increase its global share and influence over the precepts of postwar period (398). Another notable aspect responsible for China global influence and economic growth is technology. The increased levels of technological innovations and subsequent change are one crucial factor that has relatively increased China global competitiveness.
The United States of America is arguably the world leading economy. For example, after the United States crushed the Soviet Union, its military has dominated the world as the largest and the most skilled. In addition, it has been asserted that it has the most dynamic companies that are related with technology. Moreover, its entrepreneurial climate is highly regarded as the most conducive in the entire planet. However, the above standing is poked holes by the rise of China, an emerging economy that is outshining the world largest in aspects appertaining growth. According to  National Research Council, the decisions that spurred United states growth and development i.e. in matters education and infrastructure were made seven decades ago i.e. in the early 1950s and 1960s (12). Given the aforementioned observation is true, the global standing of the United States of America is under threat. That is so despite the assumption by most Americans that their Economy will dominate the world forever and that china star could dim in the long run.
Stopping China global Economic prowess and countering its influence does not happen overnight, it calls for sustained formulation and monitoring of policies that are keen in enhancing both private and public investments. Any adopted policy needs to boost citizen income, employment opportunities and capital investment while budding a relatively Productive, progressive, competitive and an astute economy that is stable to withstand China advancements (Ark, Kuipers and Kuper 169). On the Capital investment parse, businesses and other firms that were affected by the global financial crisis need to reinvest their profits to raise their profitability growth instead of holding money only to use it in speculative avenues. Federal spending on  innovation has been on a decline over the past decade i.e. funds directed towards science and research are minimal, despite the field playing a cardinal role in revolutionizing technology in the past. Multinationals in China together with Chinese government has done remarkably well in boosting the skills of its workers. However, the United States has been reluctant despite it being very instrumental in the past. To keep up with China rising pace, America needs to train its workforce to be well aligned with changing matters of science and technology. This will enable them compete on an equal platform with Chinese workers.
Despite the rise of China, the United States of America is still in possession of machinery that can counter its global influence. Being a country that values democracy more than any economy in the world, United States government is a keen listener and responds swiftly to national interests.  Citizens need to be very instrumental in pushing the government to increase investment. Current interests being advocated for by economic and civil rights groups are more aligned towards the defense and preservation of past investments. To ensure that the United States of America stamps its authority globally and outdo its competitors i.e. china, there is need of these right groups to remind the government the need to invest more in the future of the nation. The aforementioned will discourage foreign aggression as more funds will be directed towards research and investment or funding new investments. Another rational move to counter china global influence is to cut down federal deficits. Federal deficits are brought about by increased amounts spending by either the citizens or the state. The United States government has increased its budgetary allocations towards wars i.e. the Iraq and afghan wars.  On the other hand, citizens are spending more than they earn i.e. they live by credit. This implies that despite good entrepreneurial environment, they have no capital to start or run an enterprise (Triplett and Bosworth 345). 
In conclusion, from the above discussion, it is apparent that the United States of America has sufficient mechanism to boost its economic standings globally and contain the ever rising Chinese economy. It is evident that the dwindling fortunes of the United States of America are largely attributable to policy choices. For example, the ever rising federal deficits can be traced to increased level of spending i.e. through the military. To bring down these deficits, the government policy makers need to prioritize policies and subsequently advice the government accordingly on matters that will boost the economic standing of the United States of America globally. In addition, there is need to change the attitude of citizens towards savings and investment. This will ensure that the good entrepreneurial environment is utilized for the betterment of not only the citizens but the nation at large.



Works Cited
Ark, Bart, Simon Kuipers and Gerard Kuper. Productivity, Technology and Economic Growth. New Mexico: Springer, 2000.
National Research Council, Committee on measuring and Sustaining New Economy. Enhancing productivity growth in the information age: Measuring and sustaining the new economy. Washington: National Academic Press, 2007.
Triplett, Jack and Barry Bosworth. Productivity in the U.S Services Sector. Washington: Brookings Institution Press, 2004.


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