Introduction
International economics focuses on analyzing international trade, payments, and the movement of commodities and services between countries, as well as the policies to control this trade and their impact on national welfare. The United States has been and is going through significant economic reforms, starting from industrialization to modern financial deregulation; these changes have shaped the nation’s economic landscape. This paper will explore the context of economic reforms in the U.S.U.S. and its current economic growth rate while analyzing the effect of the 2007/2008 fiscal crisis, California’s comparative advantage in the technology industry, and making predictions about the U.S.U.S. economy by 2030.
Overview of the United States Economy
The United States’ economic history has undergone various changes due to growth and recession. Dating back to the 1790s during Hamilton’s era, which contains Hamilton’s financial plan to the Federal Reserve Act in 1913, the Great Depression of 1929, the Bretton Woods Agreement in 1944, and the tax reforms and the rise in globalization and technology have significantly contributed to the economic growth. Hamilton’s financial plan included reforms that focused on stabilizing the U.S.U.S. economy by creating a federal charter, more like the Bank of England; he wanted a national bank to create a stable paper currency. This plan was implemented in 1913 after the 1907 panic that led to bank runs and severely damaged the already precarious banking sector. The great depression created reforms such as social safety nets, financial regulations, and infrastructure projects that resulted in the Works Progress Administration (WPA) program, which employed millions of Americans under President Roosevelt’s administration. Some tax reforms, like the Tax Cuts and Jobs Act of 2017, aimed to boost economic growth by changing tax structures; for instance, the corporate tax rate was permanently reduced to 21%, and other individual deductions were also made. These tax changes and increased government spending contributed to the economy’s growth. All these events led to the fall of the US GDP growth, including the great recession of 2009, which happened since World War II. In 2020, during the pandemic, GDP growth fell again by 2.8% compared to the increase of 2.3% in the previous year (Salvatore, 2020). Factors such as policy changes and globalization activities, like trade relations and technological advancements, have greatly influenced the growth and fall of the U.S.U.S. economy.
The Effect of the 2007 / 2008 Fiscal Crisis on the United States
The 2007/2008 financial crisis in the U.S.U.S. had far-reaching effects on the country’s economy and the global financial system. The crisis was caused by the housing market downturn and bond bubbles, the collapse of financial institutions, unstable monetary policies, and dishonest practices in banking. The severe recession was the main cause; this resulted in a decline in GDP and widespread unemployment. According to Schoen (2017), unemployment remained at 7.8% or higher from 2008 to late 2009, when almost 8.8 million jobs were lost. The GDP declined by 4.7 percent, making this the deepest and longest-lasting recession since World War II. Most people lost their jobs, houses, and savings, and the poverty rate increased. $17 trillion for the household sector was lost and consumer spending, which makes up two-thirds of the GDP, fell at an annual rate of roughly 3.5 percent (Schoen, 2017). The credit freeze in the credit markets was caused by the banks’ reluctance to lend money due to uncertainty about financial health. This bank recession led to business shutdowns, which led to a slowdown in investment and economic activities (Salvatore, 2020). Many institutions collapsed due to the pressure they faced after being exposed to the weaknesses of global financial systems. The government had to intervene to stabilize key financial institutions to prevent a complete meltdown. To prevent such incidences in the future, after the financial market instability decreased, several reforms were made to the financial sector including leadership and policies (Schoen, 2017). The implementation of various policies has been to reduce the chances of the occurrence of other financial crises in future. For instance, the traditional banks total amount of capital has increased significantly, especially for those deemed systemically important.
Comparative Advantages of California in the United States
Impact on Wages and Jobs
The technology industry, including Apple, creates high-skilled jobs and increases job opportunities. The company attracts top talent from all over the world; with the presence of world-class universities and research institutions like Stanford University and the University of California (Hanin et al., 2023), there is always a supply of skilled individuals that Apple needs to stay at the competitive edge through continuous innovation. However, this has contributed to high wages in California due to the demand for highly skilled individuals such as software engineers, designers, and developers. Nevertheless, wage disparities have also played a role; skilled workers in the technology industry earn more than those in other sectors, which has led to income inequality.
Regional Issues and the Impact of Such Issues
Apple’s success in creating gadgets with high and unique features and other tech industries has increased housing demand. This has led to a high cost of living, resulting in housing shortages, affecting both the skilled and low-skilled workers and mostly the unemployed (Hanin et al., 2023). Concentrating on building and improving the tech industries can diversify the resources meant to improve sectors like transportation systems and other essential infrastructures, leading to strained local infrastructures. The increased competition for skilled labor has influenced the market wage; California is the home technology; therefore, many tech industries are competing for skilled individuals with the same skills Apple needs.
Internal Economies of Scale
Apple’s management team, including its workforce and production measures, allows it to minimize costs and improve its price competitiveness in the global markets. So, the massive production allows the company to benefit from cost benefits (Gerber, 2022). The larger production of devices helps spread fixed costs over more units; this reduces the average cost per unit. This helps the company maximize profits and offer competitive prices to consumers, thereby improving the economy of the state of California. California also benefits from Apple’s supply chain, from marketing, technical, and networking with its cluster of suppliers, manufacturers, and research facilities, and the increased number of users, the productivity increases and hence its revenue.
External Economies of Scale
Just like the internal economies of scale, external economies also have cost advantages, but those are due to external factors. For instance, with many skilled laborers, the company can benefit from increased productivity and innovation (Gerber, 2022). The company may get favorable financial options from external factors involving financial benefits, including low-interest rates on loans and better terms from suppliers. Moreover, the interconnectedness with tech companies like Silicon Valley creates a network effect. This means businesses can find partners, clients, and suppliers more easily through collaboration, enhancing industry efficiency and competitiveness (Hanin et al., 2023). Technology advancements have also greatly impacted California’s economy’s growth and placed it at the competitive edge in the global technology industry.
Policy
With companies like Apple and its iconic iPhone features and other tech gurus in Silicon Valley, the hub tech known for its innovation ecosystem, California’s economy has thrived and maintained a competitive edge in the global technology market. The state has also implemented policies to encourage innovation and research and development (R&D) to foster technological advancement and maintain the state’s leadership in the tech industry (Hanin et al., 2023). The state of California has implemented tax credit policies for incremental research spending, partly because it is thought that the advantages of spending on research outweigh the benefits to the specific company supporting the study. Investing in innovation also keeps local sectors from becoming obsolete, enabling economies to adjust and keep their job base intact even as technology advances.
Prediction of the United States Economy Between Now and 2030
Considering the expansion of technological advancements, the tech industry will keep growing in the U.S.U.S. in California and other states. These advancements and automation will impact the labor market, providing new opportunities in fields such as artificial intelligence, manufacturing, and renewable energy. When it comes to renewable energy and gas emission, nearly twenty percent of U.S.U.S. jobs, one-sixth of U.S.U.S. carbon footprints, and nearly 41% of global petroleum consumption are all related to the ground automotive sector (Szabó-Szentgróti et al., 2021). As big a technological transformation as the one implied by electric automobiles will bring about significant economic changes in the ground transportation sector, A.I.A.I. technology is likely to transform the productivity and GDP of the global economy; this transformation will impact the labor market, thereby improving the GDP. This will result from firms augmenting and automating certain tasks and roles. The emergence of cutting-edge technologies like machine learning, A.I.A.I., 5G, and the Internet of Things (IoT) contributes to a 15% decrease in global carbon emissions, which is about one-third of the 50 percent decrease that is planned for 2030 (Szabó-Szentgróti et al., 2021). Technology is about to take control of the labor market, which means jobs will be lost. Future changes in unemployment are hard to predict since they are highly cyclical and driven by several interrelated factors. According to the data, workers with lower levels of education continue to have high unemployment rates, and Industry 4.0 is likely to affect this vulnerable group of workers disproportionately. It is expected that Industry 4.0 solutions will continue to dominate the global economy in the future. However, technology is also expected to bring new jobs, considering sectors like manufacturing, construction, and operations generate new jobs. Among mechanics, petrol station attendants, and industry manufacturers of certain parts, the job increases exceed the projected job losses.
Conclusion
The U.S.U.S. economic history has been shaped by various reforms spanning from Hamilton’s financial plan to tax cuts and job acts of 2017, caused by various events, including the great depression and the 2007/2008 financial crisis. The 2007/2008 fiscal crisis resulted in a severe recession that led to a decline in the US GDP to 4.7%, an unemployment rate of approximately 7.8%, and low mortgages. Exemplified by companies like Apple, California’s comparative advantage in the tech industry has created highly skilled jobs and led to income inequality and housing problems. The technological transformation and evolution will drive the tech industry to reshape the labor market and renewable energy industry by 2030.
References
Gerber, J. (2022). International Economics. (8th ed.). Pearson.
Hanin, M., Henkin, J., & Rahman, S. (2023). Transforming Southern California into a Clean-Tech Hub. M-RCBG Associate Working Paper Series.
Salvatore, D. (2020). Growth and trade in the United States and the world economy: Overview. Journal of Policy Modeling, 42(4), 750-759. https://doi.org/10.1016/j.jpolmod.2020.03.001
Schoen, E. J. (2017). The 2007–2009 financial crisis: An erosion of ethics: A case study. Journal of Business Ethics, 146, 805-830. https://doi.org/10.1007/s10551-016-3052-7
Szabó-Szentgróti, G., Végvári, B., & Varga, J. (2021). Impact of Industry 4.0 and digitization on the labor market for 2030-verification of Keynes’ prediction. Sustainability, 13(14), 7703. https://dash.harvard.edu/handle/1/37376262
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