Comparative Economic Systems - Essay Example

? Comparative Economic Systems This paper intends to present a comparative study of the US economy, taking into account the economic components of China, UK and Russia. The paper thereafter illustrates the role of foreign trade relations, unemployment rates, inflationary rates and the population variations as major determinants to the GDP growth rate of the economies. Substantial variances were found in the economic performances of these nations, especially in the post-recessionary period, wherein the paper also intended to highlight the underlying reasons for such disparities. Introduction The economic growth pattern of trend of a country is determined depending on many factors such as the Gross Domestic Product (GDP) growth rate of the country, its foreign trades and its investment measures in response to budgetary fluctuations. The size of the population along with the role of the government in programming economic growth processes, all help to determine the stability of the country. The labor market, capital market, the agriculture, trade, healthcare together reflects the economic strength of the country. Emphasizing these aspects of economic growth dynamics, this paper will aim at assessing the economic components of the US in comparison to the performance of China, Russia and the UK. Prime focus will remain in studying the economic variability of these countries in the recent era. From a generalized point of view, as can be observed, the growth of the US economy as compared to the other nations has been more because of its industrialization benefits, which illustrates that the economy considerably depends on its micro and macro environment. Discussion Comparison between China and the US The US has remained one of the leading economies of the world since 1979. However, recent statistics comparing the US growth rate with that of China reveals that both the countries reside alongside with insignificant differences in their growth rates. As per the statistical reports of aThe World Bank (2013), China’s GDP growth rates have been consistently higher than the US since 2003 to 2012. Comparisons on the performances of the two economies further indicate that even though the GDP growth rate was higher for China, its GDP in the USD tends to be much lower in comparison to that of the US. For instance, the GDP USD recorded for China as on the fiscal year 2012 was estimated at $8.358 trillion, while the recorded GDP USD for the US in the same year amounted to $15.68 trillion. One of the possible reasons to such fluctuation may be caused due to their differences in terms of population and other socio-economic components. To be noted, China currently is recorded to host 1.351 billion nationals, where the total population of the US is recorded to be 313.9 million in comparison [refer to Table 1 in the Appendix] (aThe World Bank, 2013; bThe World Bank, 2013). This indicates that even though the Chinese economic growth may seem to be better than that of the US, an in-depth understanding to the issue exhibits a different scenario altogether, owing to their differences in terms of various other inherent economic factors. . As per the data, China is the second largest trade partner of America, since 1980 to 2012, the countries saw a growth of $5 billion to $536 billion (Morrison, 2013). This again makes the macro-economic components of trade largely interdependent among these two countries, where the economic prosperity of China may also influence the economic performance of the US to a substantial extent. It is worth mentioning in this context that as a developing nation, China possesses certain benefits, which the US lacks when performing in the global market. For instance, the GDP growth rate of China has shown a regular growth since 1979 to 2013, even when the world was facing an economic slowdown and the GDP growth rate in the US declined to zero [refer to Table 1 in the Appendix]. It was fundamentally owing to the flexibility enjoyed by a developing nation to amend and change the economic structure to a certain extent as per the needs that helped China to save itself from the inevitable effects of the recent global recessions in 2008-09. It was during this period that China’s exports to the US market and other international zones were declining sharply owing to recessionary effects and the nation diversified its economic policy measures, focusing more on its national resources to support its knowledge based industries such as tourism, other service industries and education (World Bank, 2012). Apart from its economic rigidity to change course and adopt a new, more effective economic structure, the US also had to face significant challenges in terms of its unemployment rate. As can be observed from the graphical presentation in Fig. 1 of the Appendix, unemployment rate in China has been stable within the past two years, but was massively fluctuating since 2003, as compared to the much stable unemployment rate of the US (aTrading Economics, 2013). Comparison between the UK and the US UK is heading to be the biggest economy of Europe on the basis of the country’s GDP growth rate. As can be observed from the Fig. 2 [refer to the Appendix], the GDP USD of the UK was recorded at 2,440 billion as on the fiscal year 2012-2013 (eTrading Economics, 2013). However, when comparing the US and the UK in terms of their GDP growth rates, both the economies can be observed to be performing almost equivalently, with minimum differences in their growth rates [refer to table 1 in the Appendix] (aThe World Bank, 2013; cThe World Bank, 2013). However, from a critical point of view, when considering the other economic components that tend to have a considerable impact on the economic growth rates of the country, it can be observed that US has been performing better than the UK owing to its population variances. For instance, the population of the UK was recorded at 61million as compared to the population of the US at 315 million approximately as on the year 2012. Moreover, the unemployment rate of both the economies also indicates reasons for the variances observed in the GDP USD. Illustratively, the US experienced a lower unemployment rate as compared to the UK during these years. However, unemployment rate fluctuations in these countries have been unignorable in the recent past [refer to Fig. 3 in the Appendix] (bTrading Economics, 2013). Taking the entire Euro Zone into context, the US shows a much better performance in rejuvenating its employment conditions in the post-recessionary era. As reported by the United Nations (2012), US was forecasted to show a rapid improvement in its employment situation [refer to Fig. 4 in the Appendix]. The obtained actual data also suffices the forecasted results where the unemployment rate of the US persists at a much lower rate as compared to the UK [refer to Fig. 3 in the Appendix] (bTrading Economics, 2013). On the whole, as argued by the Posen (2012), there were many reasons for the better performance of the US than the UK, especially in the post recessionary phase. These differences mainly lay in the context of corporate investments, household consumptions and inflationary fluctuations. Precisely, Posen (2012) reported that broader outlook and ability to adopt changes more flexibly than the economic structure practiced in the UK, assisted the US in recovering from the recessionary effects with greater rapidity. Additionally, reports published by The World Bank (2013) and Europa (2013) reveal that UK’s opening up to foreign trade investments took pace much later than that observed in the US. Nevertheless, the growth potentials deciphered by the UK in terms of Debt Stock was much better than the US [refer to table 2 in the Appendix] (The World Bank, 2013). Comparison between Russian Federation and the US Russian Federation (Russia) has experienced significant changes since the collapse of Soviet Union in 1991. The GDP of Russia was recorded with a growth rate of 1.5% year-on-year, as per the records of 2013. Russia saw a strong economic growth since 1998, with its average GDP growth rate of approximately 6.9% per annum (Cooper, 2009). Russia was also affected tremendously due to the global financial crisis in the year 2008-2009. Russia has been recently, especially since the post-recessionary phase, has been on a steady recovery. Notably, its recent GDP growth rate, as on 2012 was recorded at 3.4% (dThe World Bank Group, 2013). It is worth mentioning in this context that the governmental relation between the US and Russia, played a major role to increase the flow of trade and investment between countries, and thereby, improve the economic stability of both the economies. Correspondingly, with such aids from the US and other global unions, Russia showed a 1.3% growth in its US imports and 0.7% in its US exports by the year 2012. Subsequently, Russia was ranked the 28th major export market and 16th largest import market for the US in the year 2012 (Central Intelligence Agency, 2013). As could be observed from the reports of Consensus Economics by Nestmann (2009), the US-Russia investment relation could improve the business culture and government policies of Russia to a substantial extent, wherein the economic stability and growth of Russia is considered positive for the US. The export and import functions of Russia, with the support of the US have also depicted a considerable growth in the recent era [refer to Fig. 5 to the appendix] (Consensus Economics, 2013). From an in-depth understanding to the economic context of Russia, the real GDP of the economy, its purchasing power and the standard of living altogether depict stable improvement in the economy. It is also worth mentioning in this context that Russia joined World Trade Organization (WTO) in 2012, which aided them to shrink the trade barrier and open foreign market for the Russian goods, wherein, US being a prime nation in the WTO list, it became a major support to the economy. However, when comparing the performances of these two economies, it can be apparently witnessed that US has performed much better than Russia in various dimensions including employment rates and educational growth prospects. Russia has also been greatly affected by the US pressure. As per the ministry, Russia the unemployment rate is likely to increase and reach up to 6% unlike the forecast reports obtained for the US, where its unemployment rate is likely to decrease. Moreover, the inflation rate of Russia has also been recorded at 6.2%, which is much higher than that of the US at 3.34% on an average (cTrading Economics, 2013; dTrading Economics, 2013). Conclusion With reference to the above discussion, considerable differences were observable amid the performances of the four nations, viz. the US, the UK, Russian Federation and China. Where independency was observed to be a common factor among the growth prospects of the four economies in the global structure, determinants of economic growth reflected to be persisting at much higher variances. Notably, China and Russia, being developing nations enjoyed greater aid from flexibility of their economic structure, which assisted these nations to recover from the recessionary effects much rapidly in comparison to the developed nations like the US and the UK. Additionally, other underlying factors, such as unemployment rate, population, customer purchasing parity and governmental interventions to facilitate international trade played a vital role in determining the economic growth prospects of the respective economies. To rank the nations on the basis of their obtained economic growth, US can be ranked in the third position, before UK and after China and Russia. References Central Intelligence Agency. (2013). Russia. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html Central Intelligence Agency. (2013). China. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html Cooper, W. H. (2009). Russia’s Economic Performance and Policies and Their Implications for the United States. Congressional Research Service. Europa. (2013). European Economic Forecast. Retrieved from http://ec.europa.eu/economy_finance/publications/european_economy/2013/pdf/ee1_en.pdf Morrison, W. M. (2013). China-U.S. Trade Issues. Congressional Research Service. Nestmann, T. (2009). US-Russia Economic Relations. Consensus Economics. Posen, A. (2012). Why is their recovery better than ours? (Even though neither is good enough). National Institute of Economic and Social Research. aThe World Bank. (2013). United States. Retrieved from http://data.worldbank.org/country/united-states bThe World Bank. (2013). United States. Retrieved from http://data.worldbank.org/country/china cThe World Bank. (2013). United Kingdom. Retrieved from http://data.worldbank.org/country/united-kingdom dThe World Bank. (2013). Russian Federation. Retrieved from http://data.worldbank.org/country/russian-federation eThe World Bank. (2013). Russian Federation. Retrieved from http://www.worldbank.org/en/country/russia/overview The World Bank. (2013). International Debt Statistics 2013. International Bank for Reconstruction and Development, pp. 1-323. aTrading Economics. (2013). United States Unemployment Rate/ China Unemployment Rate. Retrieved from http://www.tradingeconomics.com/united-states/unemployment-rate bTrading Economics. (2013). United States Unemployment Rate/ United Kingdom Unemployment Rate. Retrieved from http://www.tradingeconomics.com/united-states/unemployment-rate cTrading Economics. (2013). Russia / Economic Indicators. Retrieved from http://www.tradingeconomics.com/russia/indicators dTrading Economics. (2013). United States / Economic Indicators. Retrieved from http://www.tradingeconomics.com/united-states/indicators eTrading Economics. (2013). United Kingdom GDP. Retrieved from http://www.tradingeconomics.com/united-kingdom/gdp United Nations. (2012). World Economic Situation and Prospects 2013. Global economic outlook. World Bank. (2012). China Quarterly Update: Sustaining Growth. World Bank Office. Appendix Table 1: Economic Growth Rates in Percentage (aThe World Bank, 2013; bThe World Bank, 2013; cThe World Bank, 2013; dThe World Bank, 2013) Table 2: External Debt Statistics for G7 Countries (The World Bank, 2013) Fig. 1: Comparison between the US and China’s Unemployment Rates (aTrading Economics, 2013) Fig. 2: UK GDP (eTrading Economics, 2013) Fig. 3: Comparison between the US and China’s Unemployment Rates (aTrading Economics, 2013) (bTrading Economics, 2013) Fig. 4: Post-recession employment recovery in the US, Euro area and developed economies (United Nations, 2012) Fig. 5: Russian Trade (Nestmann, 2009) Read More