The economy of United States


The economy of United States is one of the largest in the world to-day. According to the 2008 estimates the GDP of United States was $14.2 trillion .The GDP per capita stood at $ 48,000 in 2008 ranking the 4th in the world rising from $ 47,000 in 2007. GDP real growth rate grew by 1.3% in 2008 after registering 2.8 % and 2% in 2006 and 2007 respectively. The cultural and environmental factors have favored increased growth of United States economy over the decades. This paper will analyze various factors affecting economic performance in United States.

Background: United States economic performance

The economy has managed to keep maintain stable GDP growth rate, capital investment, and a low rate of unemployment (National Economic Accounts, 2009; BEA, 2009).

From the figure above, economy of United States has had a more or less stable level of growth in terms of GDP over the years though its has sometimes been vulnerable to the shocks in the market. From the recent data released, the rate of contraction of GDP has been slowing. The first quarter of 2009 saw a rise in consumer spending by 2.2%, thanks to the stimulus package. The US is a market oriented economy where business firms and private individuals make most market decisions. Most US firms have cutting edge innovative technological advances ranging from aerospace, computers, military and medical (Bureau of Economic Analysis, 2009)

The political, legal and economic environment, FDI, business ethics, corruption, and geography

Cultural Environment:

The Culture of United States had been informed by the domestic originality of the American people and the ideals of European who were former colonizers. The United States has one of the most complex and developed culture in areas ranging from dance, music, poetry, history, sports, cuisines, literature, cinema, architecture, holidaying and religion. The American culture encompasses beliefs, traditions, arts, innovations, ideals, customs and values that have been developed from ancient colonization, domestically and acquired through immigration.

The European ideals such as civil liberties, democracy, and Christianity are evident to this day while those developed domestically such as American sports, national holidays, military tradition, entertainment and arts and national pride are highly revered. The culture has elements of free expression, conservatism, morality and materialism. Religion play and fundamental role in the lives of American with approximately 78.5% being Christians, 21.1% are unaffiliated and the rest belonging to other religions. National holidays play a significant role in the life of Americans.

Thanks giving day that nowadays has become a family reunion day. Christian holidays such as St. Patrick's, Lent, and Easter and Christmas holidays are widely observed. The Independence Day is celebrated on July 4th as the day when the United States gained independence from Britain (Marsden, 1990)

Most culinary American arts are identical to those found in the western countries. The main cereal grain is wheat among the Americans. Traditional cuisines use a number of ingredients such as potatoes, corns, turkey, squash, deer venison, and maple syrup. Distinctive American foods are potato chips, beef barbecue, chocolate chip cookies, crab cakes and pork. Soul food is common among the African Americans and popular to the peoples on the south. Syncretic cuisines like Tex-Mex, Louisiana Creole and Cajun are adored regionally. There are iconic dishes such as pizza, apple pie, hamburgers, fried chicken and hot dogs. Mexican dishes including tacos and burritos, besides French fries and pasta are largely consumed (Klapthor, 2003)

Soccer is the most popular sport among the Americans and Baseball is among the oldest sport. Basketball is also a major sport and it's under the auspices of the National Basketball Association. Other sports like, ice hockey, Super Bowl and college football are played and watched extensively in American. A blue jeans culture has been cultivated in the United States from 1850s though initially worn by the teenagers; they are now common scenery across the social classes and ages. Theatre is interlaced with television, literature, music and film. America is the home of contemporary square dance, Lindy Hop and Rock and Roll (Marsden, 1990; Davis, 1992)

Political and Legal Environment:

The United States is headed by an elected president who is the head of state and the government. The federal government in Washington and state governments shares sovereignty. The state and federal elections normally take place on a two party system (The Democratic and the Republican Party). The president is the head executive. The power of legislature is vested in the Senate and House of Representatives. The Supreme Court of United States and federal courts have and do exercise judicial power. The judiciary interprets the constitution, regulations and federal laws United States. The federal government is a dominant feature of the government system.

The state governments do posses the prerogative to make family law, criminal law, contract law and laws relating to education within the areas of jurisdiction. The state government has the three levels: the legislature, executive and the judiciary. Apart from Nebraska which has a distinct unicameral legislature, other states have bi-cameral legislature with the Senate as the upper house and the House of Representative as the lower house. The local governments total 87,000 inclusive of 3,034 counties, and a whopping 16,500 municipalities. The constitutions differ remarkably from one state to another though they generally follow a pattern identical to the main federal constitution.

Suffrage is universal for Americans aged 18 years and older. Except the District of Columbia, all states participate in presidential elections. Voting rights may be withdrawn on accounts of felony but conviction will vary from state to state.

United States is one of the democratic states in the world to day. It has a free and transparent electoral system. All citizens are treated equally under the United States constitution with none having privilege over the other. It is a very liberal society with freedom religion with a clear separation between the state and the church. Other liberties like the freedom of speech are exercised in America. Liberalism has dominated American economic policy since the 1970s which is a market oriented economy (Laissez Faire) with little government interference in the market. But the origin and scale of the current global financial crisis has led economists and politicians to rethink the vulnerability of this approach to the market.

Economic Environment:

The United States employs numerous ways to regulate free market enterprises however the economic power is concentrated among the big enterprises. The big oil lobbyists have come under numerous accusations for attempts to control prices of gas. The government has been keen on preventing the exploitation of monopolies like the decentralization of electric utilities and controlling the prices charged for services so that they don't go beyond the ability of Americans to consume.

The government through appropriate monetary and fiscal policy has been instrumental in stabilizing prices and reducing fluctuations caused by the ever-changing demand and supply. Regulation capture used in trucking and airline industry has sought to limit harmful price cutting as a safety measure in stabilizing the industry. The anti-trust law strengthens the market forces and eliminates the need for direct regulation. Through the anti-trust law, business entities have managed to prohibit mergers and practices that limit competition. The government uses the monetary policy through money supply and interest rates. Fiscal policy is also exercised through influencing spending and taxes and maintains low unemployment and inflation rate and increase economic growth.

The Federal Reserve is in charge of monetary policy and stabilization of currency making the US dollar one of the most stable foreign exchange rates in the world. Money supply is available is available in form of M0, M1, M2, M3. The publishing of M3 stopped in March 2006.

The national debt has been rising over the years and had reached $ 10.627 trillion as of January 2009 making it the largest in the world. It represented 73% of the Gross Domestic Product, a value not experienced in the United States since the year 1955 (US Treasury, 2009)

Corruption in the United States:

Political corruption is one of the commonest scandals in the United States. Even the executive has been involved in some key corruption scandals. President Clinton excessively pardoned 396 individuals which were by far beyond the 74 pardons granted by Senior George Bush. HUD secretary, Alphonso Jackson resigned in 2008 as he was being investigated over allegations of revoking a vendor contract just because the vendor did not like the then president, George Bush.

The Bush administration started firing federal prosecutors because they were prosecuting Republicans instead of prosecuting Democrats. Senior officials who resigned included the White House Liaison, Monica Goodling; Director of the Executive Office of US Attorneys, Michael Battle and Chief of Staff to Paul McNulty, Michael Elston who were all republicans. The legislature has also been accused of a number of corruption scandals and some of the senior officials included Ted Stevens, a republican senator who was convicted on tax evasion and seven counts of corruption incidences.

The National Congressional Committee treasurer, Christopher Ward was accused for swindling $ 800,000 in a period not less than 6 years. Charles Rangel, Democrat from New York was accused of deliberately failing to disclose $ 75,000 rental income to the tax man (CREW, 2009)

Geography of the United States:

The United States is located in the Western Hemisphere with a total of 48 contagious states located in North America and besides Alaska and Hawaii. In geography, the term 'United States' includes continental US, Puerto Rico, Alaska, Virgin Islands, Guam and Hawaii. The United States borders Mexico to the south, Canada to the North and Russia to the west. The contagious states are bordered by Pacific Ocean to the west and Atlantic Ocean to the east. The country measures 3,717,813 square miles of which 3,536,294 sq. miles is land and 181,519 square miles is covered with water. This size is slightly larger than mainland China. It is located 38 degrees north and 97 degrees west.

The United States has almost every climate. Most areas are temperate but tropical in southern Florida and Hawaii while Alaska has a polar climate, the Great Plains is semi-arid, and the coastal California is Mediterranean while the Great Basin is arid.

The climate of the United States is influenced by the polar jet stream. Moisture from these pressure systems is picked by the Rocky Mountains, Cascade Range and Sierra Nevada. The United States is prone to natural disasters like hurricanes and tornadoes. In 2005, Hurricane Katrina caused fatalities and massively destroyed property. The Ring of Fire has made the regions of Alaska and California prone to earthquakes. Wild fires are another area of concern in the United States especially in the dry areas (National Atlas, 2009)

Potentiality as a trading partner

United States is one of the most attractive nations to invest in. The United States government has put in place foreign trade policies which are aimed at attracting investors including tax relief, special trading zones, and many others. This can be evidenced by a growing trend of foreign direct investments in the country.

Foreign Direct Investment abroad from the United States amounted to $ 2.751 trillion in 2008 rising from 2.1 trillion in 2007 while the stock of foreign direct investment at home amounted to $2.22 billion. Below is a graph demonstrating how the foreign direct investments have been growing over the years.

Participation in international and regional trade

The US government has always adopted a liberalization policy in trade and investment which has greatly sustained a rapid economic expansion of the country's GDP over the past few decades. The North American Free Trade Agreement (NAFTA) and Uruguay Round Agreements liberalization have provided the much needed impetus to international trade. The openness of the US economy to international investment has made it possible for more and better jobs to created and increased competitiveness in production.

The government is an active participant in international trade negotiations and organizations such as the WTO. The United States also developed the Trans-Atlantic Economic Partnership (TEP) and Free Trade of the Americas (FTAA). In 2007, the United States concluded a whopping 63 trade agreements in intellectual property rights and investment. The country grants special unilateral market access to some commodities from certain countries through schemes like the Generalized System of Preferences (GSP), Caribbean Basic Economic Recovery Act (CBERA), and Andean Trade Preferences Act (ATPA) (WTO, 2009)

Most imports enter the United States on a duty free status or are subjected to very low tariffs. About a third of the tariff lines are subjected to zero tariffs while the Most Favored Nation (MFN) rate was reduced to 5.7% in 1999 to 6.6% in 1996. This rate is expected to drop further after the ITA (Uruguay Round and Information Technology Agreement) cuts is tariff is put in force.

There is import prohibitions and licensing for reason of consumer health, environment and consumer health. Quotas are applicable to certain imports of clothing and textiles, with respect to the ATC (Textile and Clothing) WTO agreements. Contingency measures are less deployed such as safeguard measures, duties on anti-dumping and countervailing. Export licensing and controls mainly apply in encryption product and dual use products with the intention of maintaining and preserving no-proliferation, national security and enhance foreign policy. Export subsidies are granted for some products especially agricultural ones. The enforcement of anti-trust laws is taken seriously in dealing with price fixing and predatory pricing (WTO, 2009)

Trends affecting its standing on global business trade

There are current events that have affected the standing of the United States in the global trade. One of the current trends that are affecting the participation of the United States in international trade has been the current global economic crunch that has greatly slowed the rate of production in the country. What started as a crisis in the subprime mortgage sector has affected the whole of the United States economy pushing it to a recession. The country has witnessed increase job losses and bankruptcy of leading companies like General Motors has really affected its participation in global trade.

Another factor that has affected the participation of the country in international trade has been the rise of China. China has occupied most of the markets which were previously occupied by the United States and most companies are reducing their operation in United States and relocating to China where cost of production is low. This has affected the participation of United States in the international trade.


The United States economy is a complex with multiple trade policies aimed at keeping her at the top of international trade. The country has continued to register remarkable growth in terms of GDP and per capita income through a system that is has interlaced the market oriented economy and appropriate government controls. It a home to diverse cultures from all spheres and walks of life which has furthered and cultivated a very sophisticated culture. Overall, it made of individuals whose consumption partners are unrivalled while the population is growing by the day. The government has put in place policies to foster trade and investments through subsidies, monetary and fiscal policy. Therefore it is one of the best destinations in the world where investments can handsomely payoff besides discovering the culture and values of the peoples of this great country. In the face of the biting global financial crisis that emerged from a bubble in the US mortgage market, may not be very easy forecasting what this may portend in the general business climate. But one can guess for sure that the February stimulus package will go along in restoring consumer confidence in the market. It is prudent to learn that a free market economy without checks and balances will spell a death trap on the credibility and posterity of the whole market system. Policies need urgently be put in place to guard against such pitfalls in the Laissez faire economies.


  • BEA, (2009). Gross Domestic Product (GDP). Retrieved May 15, 2009 from
  • Bureau of Economic Analysis, (2009). US Economic Accounts Retrieved May 15, 2009 from
  • CREW, (2009). Citizens for Responsibility and Ethics in Washington. Political Corruption in the United States. Retrieved May 15, 2009 from""
  • Davis, F. (1992). Fashion, Culture, and Identity. Chicago: University of Chicago Press, p. 69.
  • Klapthor, J. N. (2003). What, When, and Where Americans Eat in 2003. Retrieved May 15, 2009 from
  • Marsden, G. (1990). Religion and American Culture. Orlando: Harcourt Brace Jovanovich, pp.45-46.
  • National Atlas, (2009). National Atlas of the United States of America Retrieved May 15, 2009 from
  • National Economic Accounts (2009). Gross Domestic Product Current-Dollar and Real GDP. Retrieved May 15, 2009 from
  • US Department of Commerce Economics Statistics (2009). The Trends in GDP. Retrieved May 15, 2009 from
  • US Treasury, 2009. Retrieved May 15, 2009 from
  • WTO, (2009). Trade Policy Reviews: United States. Retrieved May 15, 2009 from

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!