Economics Analyze the United States - Case Study Example

 Economics Analyze the United States United state economy review started in 16th century. Before then, America economy was weak but has managed to transform from a marginally successful economy to an industrial nation with a reputable economy in the global map. This transition was characterized by development of complex institutions. At a time of low economic growth, Native Americans inhabited Northern part. They practiced barter trade hence had no exposure to the rest of the world. However, after colonization, America started to experience economic fortunes. This was due to increased supportive industries such as sawmills, gristmills, and establishment of shipyards (LaFeber 1-10). American Revolution was also essential in America economic success as America middle class played a role in economic revival. They had experience and skills required at the time for a productive economy. Establishment of a common market followed this. In addition, new constitution allowed the federal government to regulate commerce with other nations, fix standard of weight and measures, and oversee the government patents and copyright (LaFeber 40). Later, in 19th century America economic prosperity increased significantly due to new inventions, and huge capital investments. This was boosted by industrial revolution that was imported from Europe. Government involvement in the economy took shape after the great depression. There was rapid policy shift to revive the ailing economy. Secondly, there was an economic fortune after Second World War. This was the time of economic revival as consumer demand rose exponentially. This period saw growth of nation’s gross national product from $200,000 million in 1940 to over $500,000 million in 1960 (LaFeber 420-430). Lastly, America economic stand continues to fluctuate due to various challenges such as recession, and increased spending. On the other hand, Japan economic history trace back to 1600. At this time, the economy was largely peasant dominated. This period saw the emergence of craft industries where food and raw materials were processed. Japan economic exposure began in the 1850’s. This was characterized by the emergence of mining industries, which employed more that 1,000 full-time laborers (LaFeber 320). The iron industries and sophisticated financial practices and market boosted Japan economy at this period. In contrast, Japan economic growth was slow in late 18th and early 19th century. At this period, Japan economic growth was averaging 2.8% annually (LaFeber 482). There was improved individual welfare compared to the state of the economy, economic fluctuation due to world war one and the Great Depression of 1930. After World War II, Japan economy growth declined, but it took off after the end of World War II. For example, the gross domestic product rose to double digits. Today, Japan per capita income is among the highest economy in the world and remains competitive. This paper seeks to focus on economic analysis of United States and Japan. Japan versus United States GDP United States annual GDP growth rate was less than 1.5% after the Great Depression. However, with rapid production during World War II, the growth rate was ten times more as compared to previous years. In the last decade, the annual growth rate averaged 1.82 %. This rate is expected not to change significantly in the next one decade. The annual growth rate is strained with recent figures, but this trend can change by tax cuts and spending reductions, and promotion of the private sector (Weiner 11-16). On the other hand, Japan rank third in the world economy. However, it has faced various challenges in the last decade that has led to GDP growth rate lagging behind United States. In 1990, Japan’s growth rate was at par with that of United States. However, this deteriorated after 1990. In the beginning of 21st century, per capita GDP was under one percent, while the rest of major countries such as United States on average were 1.5 percent (LaFeber 10-15). Healthy Growth Rate (Japan & US) America has dominated the world economy for a long time. For example, she has played a key role in determining tariffs and international trade. In America, healthy growth rate is projected to be between 2 to 3 percent (Dewan Web). In year 2011, total GDP stood at $14 billion (Dewan Web). Currently, America economy progress is due to increased confidence of the consumers. Economy expansion currently continues to rise above 1.9% (Dewan Web). However, this is not enough to reduce the rising level of unemployment. On the other hand, Japan continues to rival America in terms of economic growth and the economic performance. In fact, Japan rank third in the world economy. In Japan, the healthy growth rate is supposed to range between 1.5% to 2.5% (The Trading Economics Web). Exports (US VS Japan) Japan ranks amongst the countries with high export rate in the world. The high rate of export is due to increasing processing industries in Japan. Japan usually imports raw materials in which it adds value before exporting. However, the global financial crisis experienced in 2008 did not spare Japan. For example, exports declined by over 30% in 2009 from over $700 billion in 2008 to less than $ 600 billion in 2009 (The Trading Economics Web). Top export Partners (US VS Japan) International trade involves both export and import of goods and services. Most countries engage each other through export and import. This means no country can afford to stand on isolation. Various countries mutually depend on each other. United States and Japan are the countries that dominate the international trade. However, both countries have their top export partners. United States top export partners include Canada (19.1%), Mexico (14%), China (6.8%), Japan (4.5%), United Kingdom (3.7%), and Germany (3.2% (United States Department of Commerce Web). On the other hand, Japan top export partners include China (18.88%), United States (16.42%), South Korea (8.13%), Taiwan (6.27%), and Hong Kong (6.17%) (The Trading Economics Web). Imports (US VS Japan) America has engaged in imports of products from major economy, and this has led to America having a deficit in the economy. For example, in year 2008, the country imported goods worth over $2 trillion. Top five imports in America include crude oil that is over 155 of the total import, cars, medical equipments, automotive accessories, and household goods. The other commodities that make to top ten lists of America imports include computer accessories, petroleum products, cotton apparel, telecommunication equipments, and video equipments (United States department of commerce Web). On the other hand, Japan has a comparatively lower import level in relation to the United States (The National Bureau of Asian Research Web). According to the Trading Economics (Web), in the period between 1979 and 2012 Japan imports average was estimated to be $ 42.1178 billion with an all time high of $ 93.8017 billion in July 2008. Japan economy also relies heavily on imported goods. Most of the imported goods in Japan undergo the process of value addition. Major commodities that are imported into Japan include electrical and electrical products that are over 25%, chemical and chemical products, machineries, refined petroleum products, transport equipments, and crude petroleum. Top import Partners (US VS Japan) Both Japan and America have their major import partners. Most of the partners are already in the league of the developed nations while others are still developing countries. According to United States Department of Commerce (Web), major import partners of Japan include china, United States, Australia, Saudi Arabia, United Arab Emirates and South Korea. On the other hand, United States major import partners include china, Canada, Mexico, Japan, Germany, and Saudi Arabia (United States Department of Commerce Web). Unemployment rate – U S VS Japan Unemployment can be defined as the total number of people seeking for employment in relation to the total labor force in a given economy (Bureau of Labor Statistics Web). United States and Japan in the past years had an almost equal unemployment rate, but this has changed since 2008. Considering the health unemployment, Japan has had unhealthy unemployment rate of above 3% from 2001 up to 2005 while the United States had unhealthy unemployment rate from 2009 to 2012 (Yoshikawa and Takeuchi 25). Japan has experienced a low level of the unemployment rate since 2000 compared to the United States. This is due to the nature of Japans economy that is more industrialized, and a free market economy. On the other hand, the United States of America had unhealthy unemployment rate skyrocketing from 2008 to 2012. This is due to the housing bubble, and the global financial crisis. This caused people to be laid off while industries relocated to other countries that had cheap labor and raw materials (Weir 1). Source: Bureau of Labor statistics US Labor force and Japan Labor Force There is a notable difference in labor force between Japan and United States. Blank and freeman notes that compensation standards are set in Japan by the Government (3). In this system, wages are based on seniority that encourages workers loyalty. In addition, pay increase is done during Shunto (Blank and Freeman 4). In this period, large firms sets pattern that other small firms follow. Therefore, the coordinated wage adjustment help to prevent rigidity in the Japan labor force (Blank and Freeman Richard 3-5). United States labor force is characterized by rigidity in the labor force because of overlapping contracts. In summarizing the nature of labor force in both countries, it is worth noting that the differences in the labor market can further be explained by the difference in government labor force intervention. The US interventions tend to be limited and remedial compared to that of Japan (Bureau of Labor Statistics Web). Source: Bureau of Labor statistics Inflation Rate (Japan & US) Usually, there is a healthy inflation rate that allows proper growth of the economy. However, unhealthy inflation rate is detrimental to any economic growth and performance. In comparing Japan and the US, Japan has lower rates of inflation than the United States. Furthermore, it is worth noting that Japan experiences deflation when the inflation level is below zero. Inflation affects the purchasing power of individual wage gain if left unchecked or reduces the wage gains when there is deflation (Weiner 12-15). Though Japan has endured a period of deflation for a long period, its economy has signs of moving out of the situation as it has strong GDP growth. Future of Japan’s economy VS US According to the National Bureau of Asia Research, United States and Japan has gone through a period of major twist in the past few decades. In the 1980s and 1990s, Japan experienced a boom in its exports to the United States and thus strengthening its economy while that of the US lagged behind (Web). However, Japan has an aging population and less growing compared to that of the US. Both countries have a bright future though experiencing some challenges like high unemployment and inflation in the US while Japan is struggling with periods of deflation and natural disasters. The nature of industrialization and high level of skilled labor force keeps their economy above other countries of the world (“The National Bureau of Asian Research” 1). Conclusion Japan entry into the league of Great Powers is a boost to its economic strength. Japan also enjoys a huge population that allows it to have massive and skilled labor force (McCulloch 15-20). This means Japan does not spend resources outsourcing for skilled labor. Moreover, Japan geographical position ensures that the country is in close contact with vast masses of population hence enjoys profitable trading opportunities (McCulloch 1-5). However, Japan economy has its own limitation. First, her national income is relatively low as compared to those countries in the same league of great powers. Second, her per capita income is lower as compared to countries that want to maintain the status of a great power (McCulloch 20-30). Thirdly, Japan economy is prone to external pressures such as flooding, earthquakes amongst others and hence keeps on fluctuating. On the other hand, United States economy for a long time has been able to withstand pressure. However, some major weaknesses act as a setback to United States economy. Such weaknesses include trade deficits where imports outweigh the country values of goods and services exported to other countries (McCulloch 11-13). Secondly, the value of household incomes has failed to grow for over five decades, and this has led to a high rate of debts. Thirdly, it is difficult to do business in United States due to rising energy prices. Lastly, the country population largely comprises of the aging population hence a strain on public health spending and pension programs (McCulloch 17). Both Japan and United States economies have a lot to learn from each other. Firstly, for America to maintain its economic status, it has to adopt high level of technology that will ensure that the country is able to add value on raw materials and this will boost the amount of export. Secondly, America has to maintain a healthy population to avoid straining the health sector budget. On the other hand, Japan has to learn from America how to overcome calamities so as the economy stops to fluctuate. This will make the country economy progress. Works Cited Blank, Rebecca and Freeman, Richard. “Social Protection versus Economic Flexibility.” Patterns in Regional Labor Market Adjustment: The United State versus Japan. (1994): 1-23. Print Bureau of Labor Statistics. “Labor Force Statistics.” Bls. Web, 22 May 2012. http://data.bls.gov/timeseries/LNS14000000 Central Intelligence Agency. “The World Fact Book.” Cia.Gov. Web 24 November 2012. < https://www.cia.gov/library/publications/the-world-factbook/> Dewan, Shaila. “U.S. Growth Falls to 1.5%; a Recovery Seems Mired.” Nytimes. Web 22 May 2012. < http://www.nytimes.com/2012/07/28/business/economy/us-economy-expands-at-1-5-rate.html?pagewanted=all&_r=0 Federal Reserve. “What is inflation and how does the Federal Reserve evaluate changes in the rate of inflation?” Federal Reserve. Web 24 November 2012. . LaFeber, Walter. “The Clash: A History of U.S.-Japan Relations.” New York: Norton, 1997. Print McCulloch, Rachel. “Assessing U.S. Bilateral Trade Policy Disputes.” United States-Japan Economic Relations, (1988): 1-37. Print The National Bureau of Asian Research. “The future of U.S.-Japan Economic Relations.” Nbr.org. Web 25 November 2012. < http://www.nbr.org/publications> The Trading Economics. “Japan Imports.” Trading Economics. Web 24 November. < http://www.tradingeconomics.com/japan/inflation-cpi> United States department of commerce. “Top Trading Partners.” Gov. Web. 22 may. 2012. < http://www.census.gov/foreign-trade/statistics/highlights/top/>. Weiner, Stuart. “Why is Japan Unemployment Rate So Low and So Stable?” Economic Review. (1987): 1-16. Print Weir, M. “Politics of Jobs.” New York: Princeton University Press, 1992. Print Yoshikawa and Takeuchi Y. “Real Wages and Japanese Economy.” Bank of Japan Monetary and Economic Studies, (1984): 1-40. Print Read More