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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