United States of America - Future trends



The fundamental structure of the American economy is very strong. All of the major sectors of the economy experienced growth through the 1990s. After declining for many years, agriculture and manufacturing have stabilized and undergone significant transformations that have made them more successful. Throughout the economy, company consolidation as a result of mergers and acquisitions continues. Large firms are increasingly common, but small companies still make up the majority of American businesses. These big American firms have also sought to acquire companies in foreign countries in order to broaden their business and to enter new markets. In 1996, some 364 foreign companies were acquired by U.S. firms, either through mergers or outright sales. The value of these acquisitions was $59 billion. As a result, American firms have become increasingly global, and this trend will continue. By expanding into other markets and countries, American companies have reduced their economic risks by diversifying and spreading their assets.

The main strengths of the U.S. economy are its adaptability and the workforce productivity. During the 1970s, the country underwent a traumatic transformation away from industry toward a service-oriented economy. By the mid-1980s, the main elements for the dramatic growth of the 1990s were in place. Increases in productivity and the development of new technologies, goods, and services combined with increased consumer demand to spur the growth of the 1990s. The United States leads the world in the development of IT and other high-tech goods and services. This area of the economy has been one of the main sources of new growth and it will continue. These factors will remain in place for the near future so that the economy should remain strong for the next decade.

The nation has a low tax burden, which attracts foreign investment and provides workers with more income for purchasing products. Recent government surpluses have fueled the incentives for tax reduction. A number of states have already reduced taxes, and in 2001, the Congress passed the president's massive tax rebate. Increased free trade arrangements have resulted in lower-cost imports and reduced both the cost of production for U.S. companies and the cost of many goods and services for U.S. consumers. Lower taxes and production costs for U.S. companies will continue to spur the economy.

There are several main weaknesses of the U.S. economy that will affect future growth. The nation's dependency on energy imports makes it vulnerable to increases in oil prices. Since the majority of oil imports come from the Middle East, an area of political instability, actions that affect the region also have an impact on the United States. Another major problem in the American economy is the growing gap between rich and poor. The resultant 2-tier economy may mean that a segment of the American population will untouched by future economic growth.

The aging of the American population is another of the most significant potential problems. This problem exists on 2 levels. First, as more Americans retire over the next 20 years, there will be fewer employees in the workforce to provide goods and services. Second, fewer workers mean that there will be less money going into the national retirement system, Social Security. Social Security is expected to begin having financial problems in 2035 as it has to pay more money out to retirees while it receives less money in revenues.

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