American and Chinese economies - Research Paper Example

American and Chinese economies World economic growth has become increasingly reliant on the United States and China and India. These countries are responsible for over 80 percent growth globally in the first quarter of the year, 2015. The United States has the largest economy in the world with China in second place. In this research paper, we will review, compare, and contrast the economies of the United States and China about global, political, ethical, societal, and physical indicators. It is essential to understand the economies of these countries, to know if the size and growth of their economies have any relationship with democracy and capitalism. The paper also explores the impact of internet on both the United States and China economies, how these countries define capitalism with respect to national political policies and the relationship between personal freedom and economic growth with the two countries. Similarities and comparisons in China and the American Economies China and the United States economies are both the strongest economies in the world and despite the major differences they have, the major economic challenges they face are actually similar. Both countries have bifurcated economies with challenges in providing middle class employment with talent shortage at the top while middle class workers do not have jobs. China has 40percent unemployment rate while graduates in America are facing tough job markets. Another similarity is in education reforms, in America education programs to meet the high employment rate are not well structured, and China on the other hand has many engineers but they lack creative thinkers. The tax reforms in both economies create an imbalance the economy. The United States economy is the best national economy in the world. The United States dollar is the most utilized cash especially for universal exchange. It has an economy that is blended and it has managed to keep the gross domestic product steady for decades now (Jorgenson & Wessner, 2014). China on the other hand has a socialist market economy and it embraces predominance of an open market economy and a state possessed area. In China, the government possesses all property while in America private individuals own property. China outpaces America in population, while America has a long way to go in the extent of population. China has high level of inequality but it is concerned with poverty reduction, while America has worst poverty levels (Chen, Liu & Wang, 2011). The United States and China Economies: global, political, ethical, societal, and physical indicators In the global public eye, China has seen tremendous growth, which is evident with the strong economy and a steady increase in the military budget. Many countries now believe China either has surpassed or will surpass the United States as the global leading superpower in the future. According Chen, Liu & Wang (2011)global attitudes survey, majority still say that the United States is still the largest leading economy with China still behind in second place with regards to gross domestic product . According to the commerce department of the United States, the economy grew faster in the second quarter than it was previously estimated to grow and all this was due to residential construction, stronger consumer spending and business investment. Interest rates have been lower ever since the 2008 financial crisis that also affected China. The economy of China has very fundamental impact on the global economy, with the opening of the 21st century, economic power China transitioned into the western style economy from the Soviet Union style. The end of cold war and fall of communism , made way for a reformed and better economic structure which in turn offers development and growth opportunities. End of political threats in global scale and falling of communism enabled the initiation of economic reforms. Better and improved international peace relations and environment has ultimately made it possible for China to work closely with other global superpowers like the United States and concentrate on economic development (Miller, 2010). China has also achieved global growth because of the opportunistic view it has of the capitalist world. The peaceful external and global relations it has with other countries are more advanced because of the economic reforms it has implemented. China created an international environment that is smooth and an environment that enables expansion in domestic trading, while international trade growth offered China an opportunity to international industrial investments. China’s expansion in domestic trade grew especially in tourism and retail. China has the largest manufacturing and agricultural economy globally and as it continues to rebalance the economy, the focus is now more on exports. Does the size and growth of their economies have any relationship with democracy and capitalism? The size and growth of the United States economy has definitely been influenced by democratic capitalism, which is an American society cornerstone. The size of the American economy has grown doubled up in size with the democratic capitalism approach that involves a free market, which creates a connection of supply and demand relationships that ultimately fosters economic growth. The democratic political system allows and recognizes individuals with differing interests and opinions to associate freely to further interests and promotes economic equality, better labor conditions and thus economic growth (Miller, 2010). Capitalism encourages freedom of thought; it is based on economic justice, competition, and private property rights, while democracy is based on principles of political equality and consent and ultimately both capitalism and democracy co-exist and this ensures the United States economy grows and increases in size (Miller, 2010). China embraced communism in the early decades, but in recent years, China has increasingly adopted capitalism and the economy has grown tremendously and economists expect the success of capitalism to lead to democracy. The success of grass root capitalism encouraged leaders who lobbied for reforms to adopt capitalist methods that would ensure stimulation of economic growth. Recently in China, some democratic reforms have also progressively taken place and as time goes by, China will top as the largest world economy. It is evident that economies of both the United States and China embrace both democracy and capitalism and this has contributed to both being countries with the largest economies in the world (Lardy, 2012). Impact of internet on both the United States and China economies According to Nielsen data, Americans who accessed the internet in 2011 were 274.2 million, it is obvious that the numbers have increased over the years, with the milestones made in technology lately, with over 81 billion minutes spent on blogs and social networks. It is not a surprise that most Americans spent 256 billion dollar on online purchases that were travel related and on retail according to data released in February 2010 by comScore. Internet contributes highly to the growth domestic product of the United States; the internet economy is predicted to account for about 5.4percent of the estimated United States growth domestic product of 18.6 trillion dollars in the year 2016. A new study by Boston Consulting Group shows that the internet contributes to the American economy more than the entire federal government does (Jorgenson & Wessner, 2014). Online retail sales in China have grown in the last year and according to New York based Mckinsey and company July 2014 report; it is a sign that China embraces the benefits of the internet, which is expected to create more jobs estimated to be 46million by the year 2025. Social media platforms like Facebook and twitter have ignited a revolution in information and technology. However, endless challenges pose threats to the Chinese economy because the government has severely limited technology in the country. The government has put strict regulations on internet and this limitation in a country that is increasingly powerful is very unfortunate. The economic progress in China over several decades has put China as one of the thriving largest economies in the world, threatening to overtake the United States as a superpower, but the internet censorship policy may eventually harm the economic growth of China (Jorgenson & Wessner, 2014). Internet expansion in recent years has made technology a necessity in day-to-day lives of many people in China and throughout the world. Besides the establishment of firewalls to block many sites from being accessed, the government has also worked to prevent opposition on blogs and sites of social media and all this continues to hinder economic growth in China. Economic problems such as unemployment can be solved if only China encourages an open internet. Extensive firewalls prevent citizens from being creative and from making helpful economic contributions that might be of help in ensuring economic growth in China (Chen, Liu & Wang, 2011). How these countries define capitalism with respect to national political policies In the United States a free markets are fundamental drivers of the economy, which is encouraged by capitalism, and all this economic activities take place in a system that is regulated by policies, for instance, companies control their own affairs with the government creating policies to regulate these companies in the United States. Regulatory institutions are put in place to ensure a well functioning capitalist system that is modern (Jorgenson & Wessner, 2014). China has embraced capitalism for years now and this has been made possible because China has very massive industrial policies that are centrally directed. China has put in place state policies that have ultimately transformed the country into a powerhouse for exports, making the United States the main target and therefore capitalism plays out as result of political policies. Relationship between personal freedom and economic growth with the two countries The economy of China is dramatically changing and the economy is moving away from the past focus of investments and exports to a more consumption driven economic growth (Lardy, 2012). For the United State, it is fundamental to keep at par with these shifts. As the United States continues to ensure that it tightens policies and regulations to secure the personal freedom it enjoys especially with capitalism, China also does the same. Though the overall economic growth in China is gradually slowing down, spending by consumers in China is rapidly growing and this offers potential opportunities to companies in the United States. The focus of the United States is to ensure that they access this opportunities fully. The main driver of the china economy is the service sector and the United States should access these opportunities, but other sectors like telecommunications, entertainment, and finance should be left for China because they remain dominated by state firms as a strategy for personal freedom. If China is willing to liberalize access to some sectors, the United States should in turn relax tough approaches they have put as policies. Both the United States and China must ensure that they fulfill their commitments from all perspectives to ensure a mutual relationship and ensure economic growth for both. Both China and the U.S continue embracing capitalism approach. References Chen, J., Liu, S., & Wang, T. (2011). The China economy yearbook. Leiden: Brill. Jorgenson, D., & Wessner, C. (2014). Measuring and sustaining the new economy. Washington, D.C.: National Academies Press. Lardy, N. (2012). Integrating China into the global economy. Washington, D.C.: Brookings Institution Press. Miller, D. (2010). The U.S. economy. Farmington Hills, MI: Greenhaven Press/Gale Cengage Learning. Read More