By: Student Name: - Arun aaisshh

Presented to The Faculty of the Department of Business Submitted: October 31st, 2012 Word Count: 1587

Table of Contents

Introduction

Analysis of US economy

Measures to be taken to improve jobs

Statistical data

Recommendations

INTRODUCTION Economies around the world are going through a great transformation, some countries have been able to adapt to the same, and some are catching up and some lacking due to lack of resources and technology. While all this happening around us , Macro economics plays an very vital and a crucial role in this scenario as it is related to the countries GPD , Inflation , investment etc. In

the following case study we shall be focusing more on why does a super developed country like the United States of America which has been a world leader in any given field is not actually manufacturing its products and commodities. Given Stats have gone ahead and shown a drastic change on how America imports majority of its products. So why Does United States of America need to import more than it exports , why does America outsources majority of its business is what we are going to focus keeping few factors such as employment rate and GPD in consideration. Keeping also in mind would be that being the world third largest exporter in the world after China and European Union why does America being a Super Power is dependent on other countries for its resources

Its been decades since the world war came to an end there were fears in the American establishment and the people that the country would need to cut cost on military spending which would send the great country into Great Depression. What followed is history as the White House with great planning and execution was able to turn the tables around and create a great environment for industry such as automobiles which started producing back to back cars , another industry which benefited was aviation , electronics grew by leaps and bounds with changing time. This change could be seen as the gross national product rose from $200,000 million in 1940 to $300,000 million in 1950 and grew up to $500,000 million by 1960s.After introducing the Employment Act of 1946 which promoted more employment, production and purchasing power . There has been a drastic change on how things have been working in America. Since the introduction of this act which enabled them of Purchasing Power things have changed and there have been a lot more import than export. Every year which passes by sees United States of America importing more than it exports, as the production level keeping falling deep in negative and they start selling their large companies to foreign interest which has left them with more and more less American companies are left to generate wealth and generates taxes. To make things worse now the American government already in foreign debt has to keep borrowing more and more to keep paying its bills.

The following figures represent the balance of trade deficits per year from 2000-2009.

2000 $446.2 = $848,997 per minute 2001 $421.9 = $802,854 per minute 2002 $475.3 = $904,385 per minute 2003 $541.5 = $1,030,335 per minute 2004 $665.6 = $1,266,421 per minute 2005 $783.8 = $1,491,250 per minute 2006 $839.4 = $1,597,139 per minute 2007 $823.1 = $1,566,195 per minute 2008 $834.6 = $1,587,998 per minute 2009 $506.9 = $964,505 per minute

One of the reasons being why America doesnt produce everything themselves is because of the labor cost , where countries like China , Bangladesh , Thailand and Indonesia provide much cheap labor with extra working hours it enables companies to produce more in those markets and sell more which in the end gives them a good reputation as well as good profits. In a meeting President Obama asked Late Steve Jobs about the jobs being outsourced to China located Foxconn, Jobs bluntly told the President that those jobs arent coming back. An average manufacturing wage in 2010 is about $2 in china and $34 in the United States of America, so by locating the same work forces and resources in USA Apple would end up spending a whooping $25 billion more into its labor cost which would at the end wipe of Apples profit in the year 2010 which was $14 billion. By paying highly skilled American designer and marketing people the cost would have been so high that Apple would have gone bankrupt long time back. So this gives a good picture on why Americans import more than they export , being the high labor cost which any smart and good company always likes to reduces at the best they can.

Foreign Trade has more of negative impact in America than positive. The following graph gives us a rough picture about the same.

AS the economy has had its ups and downs and Americans have wrestled with the economic implications of job outsourcing, illegal immigration, and the safety of many food and toy imports, those views have changed. Since 2005, Americans have become more likely to perceive foreign trade as a threat to the U.S. economy. That reached a high of 52% last February -- the only time a majority has held this perception -- before decreasing slightly this year. One of the largest differences by subgroup in views of foreign trade is by household income. Wealthier Americans hold a much more positive view than do Americans with more limited financial resources.

There has been an intense debate in the Congress about the same as both Democrats and Republicans share very different view on the same, but looking and studying about the same foreign trade should be under strict vigil and not at the cost of Americans jobs and People. India is one country presently which has caught eye of the whole world specially the west, as it looks to benefit more from its economic success and well as to control China. Lately there has been an intense lobbying in New Delhi for more and more investment from American and other major power to let them invest in India with new rules set for them. One of them being Foreign Direct Investment (FDI) which would enable giant companies like Wall mart invest and open stores in India with more easy rules set for them. If this happens India would also join in the ranks of countries which will be dependent on foreign imports rather than exporting their own products. The general feeling in the middle class Indian family is that if this is enforced it would steal jobs and earning from farmers and other small time retailers which would end up losing more jobs and create a scene of unemployment.

On the other hand there can also be a solution where as companies like Wall Mart decide to create more employment for the people who will lose their jobs by this investment and the

government should set rules where local suppliers are given upper hand than their foreign counter parts, this step would create trust which is very important for any government to survive. This step would also help the rich class people as it generate more business opportunity for them which would be over all good for the GDP for India in the Long run process.

There have also been intense cases where China and USA have come face to face over this issue a number of times, where the Chinese have been accused by the Americans of charging a very high tariff over the years. One such case has been the Solar Energy where cheap Solar Panels have flooded the American market which has caused deep concerns among the American elite and manufactures. Solar World, the largest U.S. solar-panel manufacturer, accused Chinese competitors such as Suntech Power Holdings and Trina Solar of selling solar cells and panels in the United States at unfairly low prices and receiving government subsidies.

On the other side of the story it is also important to protect its interest and thats what the Americans have been doing for past few years as they have introduced new laws which specifically protect the American company and their interest before anyone. This move has been endorsed both by the Democrats as well the Republicans. This is very important as America being one the major world power both economically and military is has to follow this as if not followed can cause them recession and high unemployment in the times to come

Recommendation Countries like America should look ways to create more jobs and opportunities for their own people instead of outsourcing jobs as this step would help them in long run as they are already in heavy debt and following the same cause wont help them either. At the same point of time they should set rules which wont burden companies investing in America which heavy taxes and very high labor cost as they are already losing jobs to countries like China.

References

http://economics.about.com/od/useconomichistory/a/post_war.htm

http://www.forbes.com/sites/forbesleadershipforum/2012/01/25/the-real-reason-the-u-s-doesntmake-iphones-we-wouldnt-want-to/

http://www.gallup.com/poll/115240/americans-negative-positive-foreign-trade.aspx

http://economyincrisis.org/content/perils-importing-more-we-export

&Itemid=27 http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=1663&chapter=37 570&layout=html

http://articles.chicagotribune.com/2012-11-10/news/sns-rt-china-usasolarl3e8ma0x520121109_1_solar-panels-solarworld-ag-solar-products