Economic Comparative Analysis of Mexico and USA - Essay Example

Economic Comparative Research Paper Mexico and USA al Affiliation: Studies have suggested that various factors determine the growth of every country’s economy. Many countries have suffered in terms of economic growth because of numerous issues such as: GDP/GDP Per Capita, Exports/Imports, Trade Deficit or Trade Surplus, Currency Exchange Rates in the World Markets, Purchasing Power Parity, Unemployment Rate, Poverty Line/Household Income, Military Expenditures, Cost of Education/Level of Education/Literacy Rate; Cost of Health, National Debt, Budget Surplus or Budget Deficits, Tax System and how it affects Working Class, Inflation Rate, Economic Freedom among other factors. This paper focuses on highlighting how these factors have contributed or affected the economic growth of both the United States and Mexico. This paper will also analyze the above issues in terms of capital markets, which entail acquisition of financial assets with an aim of obtaining more capital for investment or funding daily operations of most firms in U.S. and Mexico. Economic Comparative Research Paper Mexico and USA Introduction Economy is a very essential and sensitive aspect of the social and organization structures of any country. Economy defines the epicenter of survival and existence of any country (Gordon, 2007). A country without an economy cannot enjoy independence but will remain to be dependent on others in every aspect of its operations. When this happens, the dependent country without an economy will seize to be country and become part of the helping or supporting countries. It is for mentioned reasons that economy becomes an essential part and the defining aspect of every country. Economy of a country controls its internal affairs. This paper provides a comparative analysis of the economy of U.S.A and Mexico in broader details by highlighting on various determinants. Some of these economical determinants include: GDP/GDP Per Capita, Exports/Imports, Trade Deficit or Trade Surplus, Currency Exchange Rates in the World Markets, Purchasing Power Parity, Unemployment Rate, Poverty Line/Household Income, Military Expenditures, Cost of Education/Level of Education/Literacy Rate, Cost of Health, National Debt, Budget Surplus or Budget Deficits, Tax System how does this affect Working Class; Inflation Rate, Economic Freedom among other factors. GDP/GDP Per Capita America is one of the countries considered to be developed despite being the cause of economic recession. Nonetheless, various economic measures have been put in place to enhance economic growth thereby reducing the effects of the current economic recession. Many countries such as the United States, Argentina, Venezuela, and Mexico received loans on low interest rates and this made them borrow massively from international banking institutions. This led to broadening of their debts coupled with the rise in global oil prices in 1979. Actually, it became difficult for the American countries to settle these debts (Gordon, 2007). To an extensive degree, the moderate recuperation of the work business reflects the moderate development in the interest for products and administrations.. CBO evaluates that GDP was 7½ percent more modest than potential (most extreme manageable) GDP toward the end of the subsidence. Before the end of the year 2013, a large portion of that crevice had been shut (Gordon, 2007). Mexico positions number eighteenth out of 20 Latin American nations in development of true GDP for every individual. This is the most essential financial measure of living models. From 1960-1980, Mexican GDP for every individual multiplied to 98.7 percent. By correlation, in the previous 20 years it has become 18.6 percent. Mexicos for every capita GDP development of 18.6 percent in the course of recent years is about 50% of the rate of development attained by whatever is left of Latin America. Currency Exchange Rates in the World Markets American economy has been pushed downwards due to increased inflations rates that make economic activities within the country very minimal. Price stabilization involves various economic measures such as the fiscal as well as the monetary policies. America’s high inflation rate is negatively affecting the economic performance of the country. Therefore, price stabilization within the country will enhance increased economic activities thereby achieving increased economic activities. Another macroeconomic principle applicable within the United States of America aimed at promoting and enhancing economic growth is the laissez-faire capitalism. This involves trickling down effect also known as the deregulation of markets. Markets are places of economic activities through which America is able to achieve main economic objectives. Market deregulations involve removal or simplification of regulations and rules established by the government constraining operations of various market forces. In simpler terms, market deregulation is the elimination or reduction of government interference in a market leading to free operations. Military Expenditure The United States spent the most on military programs; it amounts to roughly $682 billion (USD) while the Mexican annual defense budget is valued at US$6.9 billion in 2014. Unemployment Rate As of February 2013, the unemployment rate in the United States was 7.7% or 12.0 million individuals, while the administrations more extensive U-6 unemployment rate, which incorporates the low maintenance underemployed, was 14.3% or 22.2 million individuals. These figures were ascertained with a regular citizen work power of more or less 155 million individuals. This was also in respect to a U.S. populace of nearly 315 million individuals. Unemployment insurance and social security have also been macroeconomic principle that will affect America’s economic growth in the next decade. America has developed various economic principles and policies regarding insuring of unemployment. Unemployment is one of the biggest problems affecting economic growth negatively in America. It is important to reduce the rate of unemployment, which has been on the rise in the last decade. Unemployment Rate in Mexico reduced to 5.08 percent in September of 2014 from 5.18 percent in August of 2014 (Gordon, 2007). Unemployment Rate in Mexico arrived at the midpoint of 3.79 Percent from 1994 until 2014, arriving at a record-breaking high of 5.93 Percent in May of 2009 and a record low of 2.22 Percent in March of 1997 (Puyana & FLASCO-Mexico, 2011). Mexico’s unemployment rate is accounted for by the Instituto Nacional de Estadística y Geografía (INEGI). Purchasing power parity, Household Income, Inflation and Poverty rates America has established reforms through insuring of unemployment to reduce the level of unemployment in the country. As a result, many people are getting income despite the fact that they are unemployed. Social security measures within the country have been enhanced thereby increasing the purchasing power of citizens irrespective of unemployment status (Gordon, 2007). Increased purchasing power of citizens has the effect of increasing the propensity to consume hence increasing the consumption component of GDP. As the consumption component of GDP increases so does the economic growth. Unemployment insurance and social security has the positive effect on America’s rapid growth of economy. Despite the fact that unemployment insurance and social security have positive effect on America’s economic growth, there is a possibility that the two macroeconomic principles could also slow down the economic growth. Increasing the purchasing power through unemployment insurance would result into high amount of money supply chasing little goods thus causing inflations. Inflations within America have been a serious cause of economic downturn hence slowing down the rapid economic growth. Even though unemployment insurance and social security enhance rapid economic growth, the principle also leads to a slowdown in economic growth in America. Increased purchasing power also leads to inflations. Conversely, in the event that NAFTA had been fruitful in restoring Mexico’s pre-1980 development rate in line with monetary strategies, Mexico today would be a generally high salary nation, with wage for every individual higher than that of Portugal or Greece. It is unrealistic that migration change would be a major political issue in the U.S., as moderately few Mexicans would try to cross the fringe. As indicated by Mexican national facts, Mexico’s destitution rate of 52.3% in 2012 is just about indistinguishable to the neediness rate of 1994. Latin America experienced a drop in destitution that was more than two times as quick as that of Mexico (Puyana & FLASCO-Mexico, 2011). The Genuine (inflation-adjusted) compensation for Mexico were practically the same in 2012 and 1994. This was up by 2.3 percent in 18 years, and scarcely over their level of 1980. Unemployment in Mexico is 5.0 percent today, as contrasted with a normal of 3.1 percent for 1990-1994 and a low of 2.2 percent in the year 2000. These numbers genuinely downplay the genuine absence of occupations. However, they demonstrate a huge decay in the work business amid the NAFTA years (Gordon, 2007). Economic Freedom and Property Rights American banks have so far attempted to restore the adjustable rate mortgages back to the commonly known as ‘teaser rates’ with an aim of attracting investors. Investment is a component of GDP in a nation hence America majors on this component to enhance economic growth. Restoring the mortgage rates will make investment in such economic sectors cheaper thus ensuring that majority of people get their own mortgage. Consequently, there has been increased investment with regards to mortgage thereby enhancing the GDP (Gordon, 2007). With gradual growth of yield, payrolls have expanded rapidly and the slack in the work showcase that can be seen in the raised unemployment rate and some piece of the diminishment in the rate of work energy investment reflects the crevice in the middle of real and potential GDP. As the GDP increases within America, so does the economic growth rate. Moreover, in both America and Mexico, such restorations would make mortgages cheaper hence overcrowding this economic sector. As a result, there would be slowing down of the America’s economic growth rate (David, Lawrence & Melissa, 2005). Cost of Health/ National Debt Many associations are entitled to provision of health care services in the US. Offices are generally possessed and worked by private part organizations. Well-being protection for open area representatives is basically given by the legislature. 60–65% of health awareness procurement and using originates from projects, for example, Medicare, Medicaid, the Children’s Health Insurance Program, and the Veterans Health Administration. A large portion of the populace under 65 is safeguarded by them or relatives. Some purchase health protection alone while the rest are uninsured. On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) got to be law, accommodating real changes in welfare protection (Puyana& FLASCO-Mexico, 2011). Among the 17 high-wage nations considered by the National Institutes of Health in 2013, the United States positioned top in corpulence rate, recurrence of auto-utilization and mishaps, crimes, baby death rate, frequency of heart and lung sickness. In terms of national debt, the dollar’s status as the worlds reserve currency has turned into a facet of America power, permitting the United States to borrow a self-assured remote approach. In any case, the capital inflows connected with the dollar’s store money status have made it vulnerability. This opens the route to an outside offer off U.S. securities that could drive up U.S. investment rates. How the United States utilize these borrowed money will influence the country’s capacity for quite a long time, with wide ramifications for the practicality of a dynamic U.S. foreign approach. Health awareness in Mexico is given through open foundations, private substances, or private doctors. Social insurance conveyed through private health awareness associations works completely on the free-advertise framework (Thomas & Emmanuel, 2001). Health awareness in Mexico is depicted as great and amazing while being exceedingly reasonable, with each medium to expansive city in Mexico having no less than one top notch healing facility. Some California insurers sell their services to Mexico for medicinal services where expenses are 40% lower. Some of Mexicos top-rate doctor’s facilities are globally authorized. Inhabitants of USA, especially those living close to the Mexican fringe, now routinely cross the outskirt into Mexico for therapeutic consideration (Puyana & FLASCO-Mexico, 2011). Conclusion In the light of the analysis above, the U.S. has the biggest and most inventively effective economy on the planet with a capita GDP of $49,800. Macroeconomic objectives include; stabilization of prices, attaining full employment, achieving positive economic growth, sound government finances, rising living standards, fall in relative poverty, and higher levels of capital investments as well as labor productivity. However, to achieve these objectives there is need to employ either monetary or fiscal policies. Monetary policies include changes in interest rates within an economy, money supply and demand, as well as credit and exchange rate changes. Fiscal policies on a different perspective involve government taxation, spending, as well as borrowing. References David H., Lawrence F.K. & Melissa, S.K., (2005). “Trends in U.S. Wage Inequality: Re-Assessing the Revisionists,” NBER Working Papers 11627, National Bureau of Economic Research, Inc. Gordon, H.H., (2007). “Emigration, Labor Supply, and Earnings in Mexico,” NBER Chapters, in: Mexican Immigration to the United States, pages 289-328 National Bureau of Economic Research, Inc. Puyana, A. & FLASCO-Mexico, (2011). Economic growth, employment and poverty reduction: A comparative analysis of Chile and Mexico. Employment Working Paper No. 78. Thomas, K. & Emmanuel, S. (2001). “Income Inequality in the United States, 1913 to 1978”, National Bureau of Economic Research Working Paper 8467, USA, 2001, Accessed November 4, 2014, http://www.nber.org/papers/w8467.pdf Read More