The U.S. Economy

Characteristics Close to pure capitalism Individualistic capitalism Competitive market Respect for wealth Smaller role of government in the economy (33% of GDP compared to 65% for Sweden) High income inequality

Facts The largest economy in the world Almost $10 billion current GDP in 2000 The highest living standard The most competitive nation ( High in economic freedom and political freedom

Industry Structure Service-oriented economy (1999 data)1999 data Agriculture 2% Mining, construction, and manufacturing 22% Services 62% Government services 14% Declining union power with shrinking manufacturing jobs Many global corporations (multinational corporations)

History of Government Intervention Microeconomic intervention: Curbing monopoly power Macroeconomic intervention: Fiscal policy (New Deal policy of 1930s) Regulations of many key industries Social security Act of 1935 Labor and employment related acts Social regulation; Environment Equal rights (Anti-discrimination)

Federal Government Major revenues (1998) Individual income taxes 41% Social security taxes 33% Corporate income taxes 11% Borrowing 7% Major expenditures (1998) Mandatory 67% Social security 23%, interest on debt 15%, medicare and medicaid 18%, others 11% Discretionary 33% National defense 16%, others 17%

Strength of the U.S. Economy The Wealth and Poverty of Nations by David Landes Favorable climate and endowments Work ethics and incentives The Competitive Advantage of Nations by Michael Porter and The Competitive Edge by Morgan Stanley Co. Technological prowess Labor cost advantage (American wages are high, but also American workers are highly productive)

Weakness of the U.S. Economy High income inequality Most unequal society among the advanced countries May cause disharmony and distort democratic process May cause debt-ridden society due to demonstration effect Poverty 32 million in poverty in 1999 (Data)Data 12% of population in poverty in 1999, but much larger shares by ethnic minorities (Black and Hispanic)