America's Ability To Produce Goods, Then And Now - Research Paper Example

? America’s Ability to Produce Goods, Then And Now AMERICA’S ABILITY TO PRODUCE GOODA NOW AND THEN The capa of America to produce goods is based upon several factors. Technology is considered an important factor and clearly defines an increase or decrease in a company’s capacity to produce goods. The concept of capacity of goods can be defined by defining five propositions. First of these proposition is the maximum attainable production. Second proposition is that production is needed to be maximized because of several economic factors and not on the basis of technological factor. Third proposition is that there are varieties of answers which can be given to the theory of “maximum attainable production”. The answer to this proposition can be defined on the basis of economical basis. The fourth proposition is that the investigator of the factors of capacity to produce may use certain economic factors to define this concept. The final proposition is that the estimation in the increase in output. The maximization of capacity can be studied on the basis of the technological factor as production maximization is strongly linked to capacity maximization. The plan of capacity maximization is based on the technological changes as well as the new capital investment in the manufacturing sector. American Production Capacity in Great Depression The great depression occurred in America, Europe in many other industrialized countries of the world from 1929 to 1939. The great depression affected the performance of the industries. It all started with the collapse of the New York stock exchange. The great depression began in America and then it moved towards Europe, affecting the economies of Europe as a result of the influence of the American economy on Europe. The great depression affected the export of America, as the production capacity of the country decreased causing the decrease in country’s export (About the Great Depression, 2013). America’s future seemed bright under the presidency of Herbert Hoover. However it was during the early years of his presidency that the American economy collapsed. New York stock market crashed in the year 1929, which was the initiation of the great depression. At the end of that year that it was determined by the government that the investors of the stock market lost about $ 40 billion from this collapse of the stock exchange. The performance of the American economy can be seen at the time of the great depression on the basis of the economic statistics. In 1933 (at the time of the great depression), the GNP of the country decreased to half of what it was in the year 1923. The production of the industry fell to half of its production in a decade before, and also the construction of new plants decreased in the country by 90 percent. The production of the automobile industry decreased to about half of its average production, whereas the steel industry, at the time of the great depression operated at 12 percent capacity (The Depression in the United States--An Overview, 2013). Under the presidency of Herbert Hoover about 13 million Americans in the labor force lost their jobs. Out of these unemployed people about 63 percent remained unemployed for almost a year, 43 percent were unemployed for almost two years and 24 percent and 11 percent were unemployed for over three years and four years, respectively (Economic Recovery, Part II: America's Capacity to Produce, 2011). Unemployment in America during the great depression was as high as 24.1 percent, in the year 1933. This rate did not drop to until the WWII, when the rate of unemployment dropped to 14.3 percent (Timeline of the Great Depression, 2010). Wall Street Great Crash initiated financial meltdown in the year 1929, where assets worth in billions was vanished into air. The wealthy Americans who owned most of the nation’s stock faced great loss due the fall in the value of the New York stock market by 80 percent. During the great depression, two out of every five banks collapsed from the year 1929 to 1933. This caused about 7 million of the customers’ assets with the bank to “evaporate” (The Great Depression: Economic Collapse, 2013). Great depression affected some of the sectors of economy more than others and also some the states of America were affected more than others. All the sectors of economy however, faced serious decrease in the level of output while the rate of unemployment was on the rise. The consequences of the great depression however affected the higher class more than anyone else, but the middle class as well as the farmers were also affected by this severe economic shock. The price of the output produced by farmers also decreased to half of its original price. Great depression followed a decade of massive economic growth. In the years from 1921 to 1929, the output production per worker increased by about 5.9 percent annually. This was double the average production which occurred in the twentieth century. The rate of unemployment as well as the rate of inflation was quite low during the above mentioned period. One of the major aspects of the great depression was that it caused the irregular distribution of income. There was seen a decline in the construction of houses as well as automobiles parts during this economical period. The automakers were depressed with the fact that the industry they are operating in is becoming saturated with companies, struggling to occupy the market share. The sales of autos began to decrease by spring 1929. The technical advancement which took place in the production sector was considered to be one of the major reasons of increase in the production capacity in the starting 1920’s. This increase in the production capacity however allowed the investors to invest in the production sector. The manufacturers invested in new plants and equipment to increase the production capacity of the manufacturing sector. There were various product innovations which took place during this time period. However, the year 1925 was worse in terms of product innovation as well as product invention. Although the great depression gave a severe shock to the American economy and was a cause of decrease in the production capacity of America, it is also important in the history of economics as new economic thinking as well as new economic policies developed after this period. The great depression was a worldwide phenomenon, but it was initiated from America and majorly affected most of the areas of the western world, in terms of production and various other factors. American Production Capacity Today America’s economy is struggling to overcome recession. America faces several other changes that challenge its ability to maintain the current living standard of its citizens. If the American government and the business leaders will not take any initiative to face the challenges of recession then the economy will be facing a long term loss (Rivkin, 2012). The US economists as well as the policy makers show their optimistic thinking regarding the recovery of America from the great recession. Manipulation of derivatives, short selling and inflated values of share are said to be the indicators of recession. The US government claimed to end the recession by July 2009 but has failed to do so. This has created distrust regarding the government in the minds of the general public. The public have started to realize that their demand about substances cannot be fulfilled by the government. The experts and politicians who still have faith in the public have disappointed their selves. The performance of the American economy was worse in the year 2000, when over 5.7 million workers working in manufacturing related fields lost their jobs due to decreased in production capacity of the country. The loss calculated in this year, exceeded the loss recorded at the time of the great depression. The percentage change in the lost in manufacturing jobs was about -30. 9% at the time of the great depression, whereas the percentage change recorded in the year 2000 was -33.1%. The trade economist of America however said that this loss of the manufacturing jobs is due to the increase in the manufacturing capacity of America. The trade pundits kept an optimistic approach and argued that the manufacturing labors which have been laid off were because the production capacity has increased causing the economy to perform very well. No serious buzz was created because of such a poor performance of economy because the country’s GDP seemed stable. Also in 2010 it was observed that 13 out of 19 production sector of America seemed to produce lower than the production in the year 2000 (ROBERT D. ATKINSON, 2012). The output of production calculated for the year 2000 seemed to have increased, this was because of the over estimation of the output in electronic and the computer sector. When the actual production was calculated, it was seen that the product decreased about 11 percent. Although there was a decrease in production since the last decade, there still was an increase in GDP. This scenario has not been seen since World War 2. The manufacturing capacity of US grew by 32%. This was far from the estimated capacity which was 72% as estimated by the Bureau of Economic Analysis Data. America would have achieved the estimated growth of 72% in the year 2000, if the US manufacturers would have been able to add more machinery in the industry as doing so would have increased the production capacity in the upcoming years. The US manufacturers have been able to add new machinery in every single decade, except the last one, since the World War 2. In 2000 it was seen the growth in capital stock of America was only 2 percent while compared to the other decades when it was between 20 to 30 percent. Superior capacity played a great role in the decrease of the manufacturing employment; there was decline in the rate of the manufacturing output. However the decline in output was same in the whole decade from 2000 to 2010 which declined by a striking rate. This decline was faced in the whole business sector. If this decline would have not occurred there would have 5 to 6 million more jobs in America. As the conventional wisdom indicates this loss in the manufacturing job was due productivity driven restructuring (comparing this loss to the agriculture sector in China which lost its job but is still healthy in terms of production). US manufacturing job decreased and the labors lost their jobs due to the decrease in the production capacity, this loss was due to the decrease of America to compete in the global market. Some of this ability of competing in the global market decreased. Some were manipulated by the egregious foreign policies which include much lower tax rates. Many of the Experts present in America accepted the fact that the America’s rate of growth has declined, but most of them comforted themselves by saying that this decline in growth rate was however inevitable. Most of them argued that this decline in growth rate has occurred in almost all the countries of the world including China. They however felt it wise to compare the decline in growth rate with the actual data. On doing the comparison with the actual data it was seen that the rate of GDP declined in some countries of the world such as Spain, Italy, America and United Kingdom, however it was stable in many countries such as Korea, Japan, Austria, Sweden, Finland and China. The loss in the U.S. production was not due to the shift in the post industrial economy, it was actually due to the failure of the policies made by America. These policies made by America fostered underinvestment in the manufacturing technologies and also implemented the tax rate which was not at all competitive in comparison to that which is being imposed globally. Many of the experts criticize that manufacturing industry is an old economy. It is said to be the reflection of failure rather than success, if a country has a manufacturing sector, then its growth rate is either stable or growing. Perhaps by old economy the expert means an industry which is represented in old news, movies, etc. where there is dirt everywhere. There is unskilled or moderate skilled labor force working in such an old economy, which is involved in the production of commodities. The experts who have such image of the manufacturing industry is advised to visit clean and IT driven manufacturing industry, which are operating in America, where the skilled labors are involved in the manufacturing of the commodities. Such advance manufacturing industries operating in America usually use advance technology and highly skilled labor is employed by them, which usually contribute in the production of high quality as well as advance products such as the manufacturing of jet aircrafts, computers, etc,. Such advance and highly skilled industry manufactures commodities from instruments used in vehicles to many complex biochemical compounds. It has been observed that various jobs have returned to the manufacturing industry in America. These jobs are not enough to cover the loss of growth which lately occurred in the American economy. The loss of manufacturing jobs in the American economy during the Great Recession was about two million out of which only 166,000 have been recovered, which only compensates about 8.2 percent of the loss. This return of job do not even covers half of the loss incurred. After analyzing the growth rate in the year 2011, it was analyzed that America would take another whole decade to match to the growth rate which was in the year 2007. There were many debates which occurred about the manufacturing performance of the United States. These debates however did not come to any conclusion as there were so many flaws in the data present. It was the demand of the time to design a debate based upon accurate data and a thorough analysis of the performance of the American economy. There is a need of designing a debate which may reveal the inaccuracy of the statements, such as “the loss of job in the manufacturing sector if due to the greater performance of the manufacturing industry” and “there is a loss of so many jobs in the manufacturing sector that it does not seems to be an important industry for the economy”. However the reality is that the loss of manufacturing job in America was the result of its inability to fight the global competition in the manufacturing industry. This loss is also the result of the failure of some of the major policies of America. The loss was not inevitable and it had a severe impact on the American economy. America must try to regain its state where its trade was balanced with that of the world. If America succeeds in regaining its original manufacturing competitiveness it would be able to produce many higher than average wage jobs and as a whole many new jobs will be introduced in the economy. American economy can easy regain its initial growth rate as well as its competitiveness in the manufacturing industry if it will make and implement correct policies. References About the Great Depression. (2013). Retrieved April 16, 2013, from Modern American Petry: http://www.english.illinois.edu/maps/depression/about.htm Economic Recovery, Part II: America's Capacity to Produce. (2011, June 2). Retrieved April 16, 2013, from A Blog of the Global Justice Movement: http://just3rdway.blogspot.com/2011/06/economic-recovery-part-ii-americas.html Rivkin, M. E. (2012, March 12). The Looming Challenge to U.S. Competitiveness. Heverd Business Review ROBERT D. ATKINSON, L. A. (2012, March 19). Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline. Retrieved April 16, 2013, from itif.org: http://www.itif.org/publications/worse-great-depression-what-experts-are-missing-about-american-manufacturing-decline The Depression in the United States--An Overview. (2013). Retrieved April 16, 2013, from Modern American Peotry: http://www.english.illinois.edu/maps/depression/overview.htm The Great Depression: Economic Collapse. (2013). Retrieved April 16, 2013, from shmoop: http://www.shmoop.com/great-depression/economy.html Timeline of the Great Depression. (2010). Retrieved April 16, 2013, from American Experience: http://www.pbs.org/wgbh/americanexperience/features/timeline/rails-timeline/ Read More