U.S. Economy

U. S. Economy

The United States has the largest national economy in the world with a Gross Domestic Product (GDP) for 2005 of 12.41 trillion dollars. In this capitalistic, free market-oriented mixed economy, corporations and other private firms make the vast majority of microeconomic decisions and government prefers to take a minimal role in the domestic economy. Because of this, the U.S. has a small social safety net and business firms in the U.S. face considerably less regulation than firms in many other nations. (A social safety net is a collection of services provided by the state that prevent an individual from falling into poverty beyond a certain level.)

Basic Ingredients

The first ingredient of a nation’s economic system is its natural resources. The United States is rich in mineral resources and fertile farm soil. It is also fortunate to have a moderate climate. It has an extensive coastline on the Atlantic and Pacific Oceans, as well as the Gulf of Mexico. Rivers flow from far within the continent and the Great Lakes, five large inland lakes along the border with Canada, provide additional shipping access. These extensive waterways have helped shape the country’s economic growth over the years and helped bind America’s 50 individual states together in a single economic unit.

The second ingredient is labor. The number of available workers and, more importantly, their productivity help determine the health of an economy. Throughout its history, The United States has experienced steady growth in the labor force, and that, in turn, has helped fuel almost constant economic expansion. Today the promise of high wages brings many highly skilled workers from around the world to the United States.

Third, there is manufacturing and investment. In the United States, the corporation has emerged as an association of owners, known as stockholders, who form a business enterprise governed by a complex set of rules and customs. Brought on by the process of mass production, corporations have been instrumental in shaping the U.S. economy. Through the stock market, American banks and investors have grown their economy by investing and withdrawing capital from profitable corporations. Today in the era of globalization, American investors and corporations have influence all over the world. The American government has also been instrumental in investing in the economy in such areas as providing cheap electricity through such projects as the building of the Hoover Dam.

Mixed Economy

The United States is said to have a mixed economy because privately owned businesses and government both play important roles. Indeed, some of the most enduring debates of American economic history focus on the relative roles of the public and private sectors.

The American free enterprise system emphasizes private ownership. Private businesses produce most goods and services. Almost two-thirds of the nation’s total economic output goes to individuals for personal use with the remainder purchased by government and business. The role of the consumer in the economy is so great that the nation is sometimes characterized as having a “consumer economy”.

However, like in all modern economies, there are limits to free enterprise and private ownership. Americans generally agree that some services are better performed by public rather than private enterprise. For instance, in the United States, government is primarily responsible for the administration of justice, education, the road system and national defense. In addition, the government often is asked to intervene in the economy to correct situations in which the price system does not work. It regulates “natural monopolies” for example and it uses antitrust laws to control or break up other business combinations that it claims have become so powerful that they can surmount market forces.

In this mixed economy, individuals can help guide the economy not only through the choices they make as consumers but through the votes they cast for officials who shape economic policy. In recent years, consumers have voiced concerns about product safety, environmental threats posed by certain industrial practices and potential health risks citizens may face; government has responded by creating agencies that aim to protect consumer interests and promote the general public welfare.

The U.S. economy has changed in other ways as well. The population and the labor force have shifted dramatically away from farms to cities, from fields to factories, and, above all, to service industries. In today's economy, the providers of personal and public services far outnumber producers of agricultural and manufactured goods. As the economy has grown more complex, statistics also reveal over the last century a sharp long-term trend away from self-employment toward working for others.