Impacts of international interdependence on the US economy

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Impacts of international interdependence on the US economy

The term economic interdependence is used in global field of economics to refer to an economic system where many companies and industries in a given economy become depend on each other, Economic interdependence is also used in international trade to define the economic relationships that are developed between countries and do business with each other and their economies soon become reliant on each other. Economic interdependence is often a result of the continued labor specialization within the various sectors of the economy. Economic interdependence is pronounced in the developed economies where there is increased production activities making it possible for businesses to specialize in the production chain foe increased efficiency and convenience. Economic interdependence ensures that companies or countries focus on manufacturing what they are best at and rely on others to provide them with what they are not able to produce and this result in globalization of the economy. Globalization is used in international trade to refer to the interconnectedness of global economies as each economy relies on the other for certain products.

The global economy has changed over the years to become a complex system that is independent and interconnected in different spheres including the economic sector. The American economy has found itself in the receiving end as it has developed to become reliant on various international factors that impact on it. The international dependence of the world’s strongest economy is as a result of the various achievements that have been made is a result of the globalization of the American and global economies. The United States of America is the world’s largest economy and virtually every country of the world is dependent on it although the growth of the American economy also depends on the rest of the world for its continued expansion and growth. As the world economies become more interdependent on each other, the impacts on the American economy continue to be more pronounced.

Globalization of the American economy has made it possible for the country to work with other partners in addressing global issues that affect the country’s economy although they are externalities in nature. For instance, the issue of climate change has had adverse activities in the development of the American economy as sources of raw materials for American companies are diminishing threatening their collapse. As the economic interdependence continues to increase for the US economy, there has been tremendous achievements made in addressing global issues that affect global businesses including climate change, spread of communicable illness and global warming through global collaborations.

The first impact of the international interdependence on the US economy is that it has played a major role in promoting trade liberalization with the aim of creating a free market economy. The American economy is currently interdependent on other world economies such as China for various goods that they are not able to manufacture and in return exchange them with what they are able to produce. Many economists and international policy makers have outlined the importance of international economic interdependence as it promotes and sustains international trade as there is no economy that can survive on its own. Although the American economy is the world’s strongest economy, it depends on the emerging markets to act as the new markets for the surplus goods that are produced within the American economy. To ensure that the American multinationals continue to have market for their products, the Americans have to initiate trade agreements with other countries and this has led to the enactment of free market economies.

The international interdependence of the American economy has made it possible for the outsourcing of labor that is needed within the American economy. For many years now, the American population has remained stagnant and this has led to an aging workforce. Since the American economy is still thriving regardless of the aging population, it has become necessary for importation of human resources to keep the economy growing. A look at the American economy shows that it is one of the most preferred destinations for immigrants across the globe who are looking for economic opportunities away from their homes. As the American economy becomes dependent on the international economy, it has it easier for businesses to outsource human resource from all other the global to meet the local demands.

The economic interdependence globally has impacted positive the cost of goods and services across the country. The discovery of the internet as helped in creating a global village where people are able to engage each other virtually. Many Americans have a wide choice of goods and services from which to choose what they need due to market liberalization. For many years, many American multinationals had a monopoly in the market and this led to the high cost of goods and services for the American people. The economic interdependence that is currently being experienced within the American society has ensured that more goods are brought into the United States from other global business players hence increasing the competition for local companies. Many American businesses have also succeeded in outsourcing labor by establishing their manufacturing plants in developing countries such as Pakistan, India and China as it helps then minimize the production costs. The results of the competition and outsourcing of labor is a significant reduction in the costs of products available to the American people leading to improved living standards across the country.

International interdependence has ensured that the American economy is no longer autonomous as its growth and expansion is now dependent on other global economies. After the Second World War when the United States played a major role in bringing to an end the war, many European economies were on the verge of collapsing as they had experienced destruction during the war. During this time, the American economy was very strong and expanded rapidly without minimal connection to the global economy and the impacts were felt. The unemployment rate reduced significantly as industries were set up and provided many employment opportunities to the American people. The current international interdependence seems to work negatively on the growth of the American economy as it has become vulnerable to various global economic shocks. When the various European and the strong Asian economies such as Japan, China and Singapore experience a slowdown in the economies, the American economy slows down too. This means that the American economy is no longer autonomous and different socio-economic and political developments have the capacity to impact on the American economy significantly.

Another impact of the international interconnectedness is the increased export of jobs to other economies as more American multinationals are moving their manufacturing plants to developing nations where human resource is abundant. During the late 20th and early 21st century, the American economy has evolved greatly from the industrial economy of the 19th and 20th century to a service economy in the 21st century. More than half of the jobs that are being created within the American economy are in the service industry which are not adequate enough to meet the demand for jobs. As more industries are being relocated form the United States, there has been concern raised as many people are being rendered jobless and this impacts negatively the living standards within the country.

The impacts on the international interdependence on the United States economy are both beneficial and detrimental in nature. An analysis of both the benefits and limitations of globalization to the American economy clears indicates that the American economy cannot survive on its own and requires the contributions on the global economy for its continued growth and expansion in the coming years.

References

Cohen, Benjamin J. International political economy. Routledge, 2017.Cohn, Theodore H. Global political economy: Theory and practice. Routledge, 2016.Gilpin, Robert. The political economy of international relations. Princeton University Press, 2016.Nye Jr, Joseph S. Bound to lead: The changing nature of American power. Basic Books, 2016.Oneal, John R., and Bruce M. Russett. “The Kantian peace: The pacific benefits of democracy, interdependence, and international organizations, 1885–1992.” Bruce M. Russett: Pioneer in the Scientific and Normative Study of War, Peace, and Policy. Springer, Cham, 2015. 74-108.