Despite the actual recession and financial crisis, the USA is currently the most competitive economy in the world. Competitive strengths like innovation and business sophistication next to well-functioning markets keep the USA highly productive. They outweigh the competitive weaknesses of great macroeconomic imbalances and improvable institutions. The financial market is just a part of the whole picture. Although the global economic landscape changed dramatically, the rise of emerging markets like China pose no general threat to U.S. competitiveness, because it is not a zerosum game. But the superior competitive position is eroding. Forces from within the U.S. economy put the future U.S. competitiveness at great risk. Inconsistencies like a decreasing percentage of R&D-spending, the ignorance of regional industry clusters by the federal government, the low-quality education system, and ineffective regulation of markets, display piecemeal, uncoordinated policy decisions and the lack of a coherent economic strategy.
The formulation and implementation of a longterm economic strategy is recommended, which addresses these inconsistencies in the short- to midterm, the enforcement of strengths and reduction of weaknesses in the long-term. Only if the USA is governed strategically, it could sustain its current superior competitive position.
Table of Contents
1. Executive summary
2. Introduction
3. The concept of national competitiveness
4. The current state of U.S. competitiveness
4.1 Competitive strengths of the U.S. economy
4.2 Competitive weaknesses of the U.S. economy
5. An outlook on the future state of U.S. competitiveness
6. Policy recommendations: A long-term economic strategy
7. Conclusion
8. Bibliography
9. Appendix
Objectives and Topics
This report evaluates the current competitive standing of the United States within the global economy and explores whether this position can be sustained in the long term. By analyzing specific economic determinants and identifying both structural strengths and critical weaknesses, the research seeks to determine why a comprehensive, coherent economic strategy is essential for the nation's future prosperity.
- Analysis of U.S. economic productivity and innovation capabilities.
- Evaluation of internal competitive strengths, including entrepreneurship and market flexibility.
- Identification of structural weaknesses, such as macroeconomic imbalances and educational gaps.
- Assessment of external pressures, including the rise of emerging market economies.
- Strategic policy recommendations to foster long-term national growth.
Excerpt from the Book
4.2 Competitive weaknesses of the U.S. economy
Competitive weaknesses or disadvantages of the U.S. economy are mainly located in the first cluster of the competitiveness determinants. In this cluster the U.S. ranks just 22nd.
One of the weakest spots of the U.S. economy is its macroeconomic instability. The USA has built up large imbalances over recent years and repeated fiscal deficits led to very high levels of public indebtedness which restrict policy freedom going into the future, because of large interest payments on liabilities. As shown in the appendix (app. 8), at the end of 2008 the federal debt accounted for 9,654 US$ bill., which represents 67,5% of the U.S. GDP, whereas in 1995 it accounted for only 4,920 US$ bill.. According the GCI 2008-2009 the USA ranks 97th on the issue “government surplus/deficit”, 107th on the issue “national saving rate”, 45th on the issue “inflation”, 17th on the issue “interest rate spread”, and 102nd on the issue “government debt”. In sum the USA ranks just 66th out of 134th nations on macroeconomic stability.
Other competitive disadvantages are part of the U.S. economy’s institutions. Among other single determinants wasteful government spending, cost of terrorism, crime and violence are the greatest weaknesses. A vivid example of wasteful government spending – an issue in which the USA is ranked 66th in the GCI 2008-2009 – is the U.S. healthcare system with the highest health care spending per capita (6,102 US$ mill. in 2004) in comparison to the other OECD countries. A comparison can be looked up in the appendix (app. 9). But the quality of U.S. healthcare is highly variable, and opportunities are routinely missed to prevent disease, disability, hospitalization, and mortality. Across 37 indicators of performance, the U.S. achieves an overall score of 65 out of a possible 100 when comparing national averages with benchmarks of best performance achieved internationally. This benchmarking was conducted by the Commonwealth Fund Commission in 2008.
Summary of Chapters
1. Executive summary: Provides an overview of the current U.S. competitive position, highlighting the paradox of high productivity alongside critical structural weaknesses and the need for a strategic shift.
2. Introduction: Contextualizes the report within the 2008 financial crisis and justifies the focus on long-term competitiveness as a matter of national importance.
3. The concept of national competitiveness: Defines competitiveness based on institutional frameworks and productivity, introducing the Global Competitiveness Index (GCI) as the primary analytical tool.
4. The current state of U.S. competitiveness: Examines the U.S. economic performance, identifying core strengths such as innovation and entrepreneurship, contrasted with weaknesses in macroeconomic stability and institutional efficiency.
5. An outlook on the future state of U.S. competitiveness: Analyzes global challenges, such as the rise of emerging economies, and explores how internal policy inconsistencies threaten future competitiveness.
6. Policy recommendations: A long-term economic strategy: Outlines specific proposals to address R&D spending, educational reform, and market regulation to maintain a long-term competitive edge.
7. Conclusion: Summarizes the necessity of moving from piecemeal policy decisions toward a unified, long-term economic vision for the United States.
8. Bibliography: Lists the academic, institutional, and statistical sources utilized throughout the report.
9. Appendix: Contains comprehensive data tables and charts supporting the analysis, including GCI rankings and various economic indicators.
Keywords
United States, Economy, Competitiveness, Productivity, Innovation, R&D-spending, Economic Strategy, Financial Crisis, Market Efficiency, Entrepreneurship, Macroeconomic Stability, Infrastructure, Education, Global Competitiveness Index, Policy Recommendations
Frequently Asked Questions
What is the primary focus of this report?
The report focuses on assessing the current competitive position of the United States economy, identifying its structural strengths and weaknesses, and arguing for the necessity of a coherent long-term economic strategy.
What are the central themes covered in the analysis?
Key themes include national productivity, the role of innovation-driven growth, the impact of the financial crisis, institutional effectiveness, and the importance of adapting to a changing global economic landscape.
What is the primary research objective?
The objective is to determine if the United States can sustain its superior competitive position globally given existing internal policy inconsistencies and emerging external challenges.
Which scientific methodology is utilized?
The study utilizes the Global Competitiveness Index (GCI) framework established by the World Economic Forum to evaluate the U.S. economy across various determinants of productivity.
What topics are discussed in the main body?
The main body details the current competitive state of the U.S., including its ranking, industrial clusters, labor market flexibility, and specific problem areas like public indebtedness and educational quality.
Which keywords best describe this research?
Key terms include national competitiveness, productivity, innovation-driven economy, economic strategy, market regulation, and institutional reform.
How does the report categorize the factors affecting competitiveness?
The report uses the World Economic Forum's three-cluster approach: basic requirements (institutions/infrastructure), efficiency enhancers (education/market size), and innovation/sophistication factors.
Why does the author consider the current approach of the U.S. government inadequate?
The author argues that policymakers currently act in a piecemeal, uncoordinated manner, lacking the strategic foresight required to address long-term structural issues effectively.
What is the proposed solution regarding the 'Strategic Planning Commission'?
The report suggests creating a bipartisan institution to coordinate priorities and develop legislative policies that are aligned with a unified, long-term economic vision.
How does the author view the rise of emerging economies like China?
The author argues that the rise of these economies is not a zero-sum threat to the U.S., but rather a catalyst for the U.S. to focus on reinforcing its own competitive advantages through strategic planning.
- Quote paper
- Sebastian Gerlach (Author), 2009, The competitiveness of the U.S. economy and the need for a long-term economic strategy, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/123982
