Economics US Economy 2009 Economy Had to Case Study

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Economics

US Economy 2009

economy had had to adapt and change over the years. The country has moved from a nation where there were significant differences between the economic conditions as well as different policies which impact on the economic conditions of the states. A general trend over the last 200 years has been a movement away from manufacturing and towards white collar jobs, including high tech industries and the knowledge industries (Cadieux, 2009). The movement away from the manufacturing sectors has been caused by increased access to lower cost imports, were exporting countries, such as Mexico and China, have the benefit of comparative advantage.

The economy has shown some adaptability, as the shift from one sector has seen new sectors emerge and develop. The deindustrialization in the Northeast, which took place between the 1950s and 1960s, was also accompanied by increased activity in other sectors, such as universities and research which would help with the development of the high tech sector in the area. Deindustrialization came to the Midwest later, between 1975 and 1985, when the comparative advantage of the imports reduced the demand for domestic goods and reduced the demand for labor; increasing unemployment. With firms under increasing pressure to reduce costs, many that did not leave the U.S. moved to the southern stated where labor costs were lower, partly due to lower welfare provision levels.

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Even the government leveraged the comparative advantage of the south with the placement of military expenditure. This period can be seen as the end of a business cycle, with the cycle with the depression or contraction stage, which then leads into expansion or growth stage.

The growth that followed was aided by the adaptability of the U.S. economy has been aided to a significant degree by the universities and the linkage between the universities and industry; where the former may develop innovations that can be leveraged by the latter. The government expenditure policies which supported low taxes and low expenditure placed the country in a strong position for growth; low taxes facilitated easier reinvestment and increased innovation lead to a boom period. Productivity in the 1990-2008 period may be attributed to the good growth conditions, and the creation of credit through a rapid cash flow cycle. The long-term growth also created a form of irrational optimism regarding the economic girth and length of the business cycle, during which the seeds of the next recession and depression were laid. The low level of government interference with business had also resulted in low levels of regulation in the financial services sector; which had been on of the services area that….....

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