The Economy of the United States of America
A. Pre-Reading Activities
TaskI. Make sure you know the following words and word combinations:
acquire (v) – приобретать, достигать
biofuel (n) – биотопливо
cereals (n) – хлебные злаки
consumption (n) – потребление
copper (n) – медь
corn (n) – зерно, (Am.) кукуруза, маис
costs (n) – затраты, издержки
crudeoil – неочищенная нефть
depreciate (v) – обесцениваться, падать в цене
discourage (v) – препятствовать, мешать
downturn (n) – уменьшение, спад
enterprise (n) – предпринимательство, промышленное предприятие, предприимчивость
entrepreneurship (n) – предпринимательство
erode (v) – разъедать, разрушать
extraction (n) – добывание, извлечение
grain (n) – зерно, хлебные злаки
layoff (n) – приостановка или прекращение производства; увольнение из-за отсутствия работы; приостановка производства
lead (n) – свинец
leasing service – лизинговаяуслуга
lumber (n) – (Am.) пиломатериалы, бревна
maize (n) – кукуруза, маис
mining (n) – горноедело
mortgage (n) – заклад, ипотека
overtake (v) – догонять, перегонять
petroleum (n) – нефть, бензин
pork (n) – свинина
poultry (n) – домашняяптица
profit (n) – польза, выгода; прибыль, доход
rapid (adj) – быстрый, скорый
soybeans (n) – соевые бобы
stagnation (n) – застой, застойность
threefold (adj) – утроенный, тройной
timber (n) – лесоматериалы, строевой лес
warehousing (n) – хранение, размещение на складе
wheat (n) – пшеница
Task II. Mind the following proper nouns and abbreviations:
BRIC – Brazil, Russia, India, China
CIA – central intelligence agency
Troubled Asset Relief Program – программавыкупапроблемныхактивов
B. Reading and Comprehension Activities
Task III. Go through the text and check your understanding by doing the tasks that follow:
The United States of America has the world’s largest and most technologically powerful economy in the world. According to the CIA World Factbook, 2008 GDP is believed to be $14.58 trillion. This is two times the size of the next largest economy, Japan.
US dominance has been eroded however by the creation of the European Union common market, which has an equivalent GDP of approximately $15 trillion, and by the rapid growth of the BRIC economies, in particular China, which is forecast to overtake the US in size within 30 years.
Despite the country’s position as the most powerful economy, it now faces many serious economic problems. Some of these are short-term, but some of them reflect an underlying weakness. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups. The merchandise trade deficit reached a record $847 billion in 2007, but declined to $810 billion in 2008, as a depreciating exchange rate for the dollar against most major currencies discouraged US imports and made US exports more competitive abroad. The global economic downturn, the sub-prime mortgage crisis, investment bank failures, falling home prices, and tight credit pushed the United States into a recession. To help to stabilize financial markets, the US Congress established a $700 billion Troubled Asset Relief Program (TARP) in October 2008. The Government used some of these funds to purchase equity in US banks and other industrial corporations. In January 2009 the US Congress passed and President Barack Obama signed a bill providing an additional $787 billion fiscal stimulus – two thirds on additional spending and one third on tax cuts – to create jobs and to help the economy recover.
The American economy is better described as a ‘mixed’ economy, with the Government playing an important role along with private enterprise. The American free enterprise system emphasizes private ownership. Private businesses produce most goods and services, and almost two thirds of the nation’s total economic output goes to individuals for personal use (the remaining one third is bought by the Government and business). The consumer role is so great, in fact, that the nation is sometimes characterized as having a ‘consumer economy’.
Producers decide which goods and services to make and sell, and how much to ask for those products. At the same time, consumers decide what they will purchase and how much money they are willing to pay for different goods and services. The interaction between competing producers, who attempt to make the highest possible profit, and consumers, who try to pay as little as possible to acquire what they want, ultimately determines the price of goods and services.
In a market economy, the Government plays a limited role in economic decision making. However, the United States does not have a pure market economy, and the Government plays an important role in the national economy. It provides services and goods that the market cannot provide effectively, such as national defence, assistance programs for low-income families, and interstate highways and airports. The Government also provides incentives to encourage the production and consumption of certain types of products, and discourage the production and consumption of others; sets general guidelines for doing business and makes policy decisions that affect the economy as a whole; establishes safety guidelines that regulate consumer products, working conditions, and environmental protection.
The factors of production, which in the United States are controlled by individuals, fall into four major categories: natural resources, labour, capital, and entrepreneurship.
The United States is rich in mineral resources and fertile farm soil, and it is blessed with a moderate climate. The country has reserves of coal, copper, lead, phosphates, potash, silver, zinc, petroleum, natural gas, timber, etc. The US has the world’s largest coal reserves with 491 billion short tons accounting for 27% of the world’s total. It also has extensive coastlines on both the Atlantic and PacificOceans, as well as on the Gulf of Mexico. Rivers flow from far within the continent and the Great Lakes provide additional shipping access. These extensive waterways have helped to shape the country’s economic growth over the years and helped to bind America’s 50 individual states together in a single economic unit.
Labour converts natural resources into goods. The number of available workers and their productivity help to determine the health of an economy. Of the 304 million people living in the US in 2008, nearly 155.2 million adults were working or actively looking for work. Of this total in 2008, 0.6% were employed in farming, forestry, and fishing, 22.6% in manufacturing, extraction, transportation, and crafts, 35.5% in managerial, professional, and technical services, 24.8% in sales and office, 16.5% in other services. Labour-force quality continues to be an important issue. Today, Americans consider ‘human capital’ a key to success in numerous modern, high-technology industries. As a result, government leaders and business officials increasingly stress the importance of education and training to develop workers with the kind of nimble minds and adaptable skills needed in new industries such as computers and telecommunications.
In February 2009 the number of unemployed persons increased to 12.5 million and the unemployment rate rose to 8.1%. In key industries – manufacturing, financial services and retail – layoffs have accelerated so quickly as to suggest that many companies are abandoning whole areas of business.
Capital includes buildings, equipment, and other intermediate products that businesses use to make other goods or services. Businesses have additional capital investments in their inventories of finished products, raw materials, and partially completed goods.
But natural resources, labour and capital account for only part of an economic system. These resources must be organized and directed as efficiently as possible. In the American economy, managers, responding to signals from markets, perform this function. The traditional managerial structure in America is based on a top-down chain of command; authority flows from the chief executive in the boardroom, who makes sure that the entire business runs efficiently, through various lower levels of management responsible for coordinating different parts of the enterprise, down to the foreman on the shop floor. Many enterprises nowadays continue to operate with this traditional structure, but others have taken changing views on management. Facing heightened global competition, American businesses are seeking more flexible organisation structures, especially in high-technology industries that employ skilled workers and must develop, modify, and even customize products rapidly. As a result, many companies have ‘flattened’ their organisational structures, reduced the number of managers, and delegated more authority to interdisciplinary teams of workers.
Sectors of Economy
The Agriculture, Forestry and Fishing sector comprises establishments primarily engaged in growing crops, raising animals, harvesting timber, and harvesting fish and other animals on a farm, ranch, or from their natural habitats.
In 2008 agriculture accounted for 1.2% of the US GDP. The American major crops and products are wheat, corn, other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy products; fish; forest products.
The US remains the leading world exporter of wheat, maize and soybeans and its meat exports grow steadily. The EU and the US are the world’s biggest cheese producers, accounting for almost 70% of production. The US is the largest producer and consumer of poultry and meat products. Grains and animal products account for two thirds of the export gains.
Asia continues to be an important growth market for US agricultural commodities.
Global biofuels production has expanded rapidly in recent years, playing an increasingly important role in the cereals, oils and sugar markets and appears set to continue on this growth path. The market is dominated by ethanol, which grew threefold from 2000 to 2007, mainly in the US (world leader with production of 30 billion litres) and Brazil (19 billion litres).
Manufacturing. The USA is the leading manufacturer in the world, highly diversified and technologically advanced. Main industries are petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining.
The US by far remains the world’s leading manufacturer by value of goods produced. It hit a record $1.6 trillion in 2007. In 2007 the US sold more than $200 billion worth of aircraft, missiles and space-related equipment, $80 billion worth of automobiles and auto parts. Deere & Co., best known for its bright green and yellow tractors, sold $16.5 billion worth of farming equipment, much of it to the rest of the world. There are also such energy products as gas turbines for power plants made by General Electric, computer chips from Intel and fighter jets from Lockheed Martin among leading US categories of products. Household names such as GE, General Motors, IBM, Boeing, Hewlett-Packard are among the largest manufacturers by revenue.
The private non-good producing industries account for approximately 70% of total economic activity in the US. These industries include financial services, retail trade, wholesale trade, and the service industries, government services, transportation, entertainment, tourism, etc.
The US service sector is the largest sector in the economy and accounts for an increasingly significant share of GDP. Both in the US, as well as in other industrialized nations, the service sector is a dynamic component of economic activity and growth. It includes a wide variety of businesses: Truck Transportation, Messenger Services and Warehousing; Securities, Commodities, and Other Financial Investments; Rental and Leasing Services; Professional, Scientific, and Technical Services; Health Care and Social Assistance, etc. Government services play a major role in the economy.
The United States is one of the most significant nations in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world.
The leading US exports include: agricultural products (soybeans, fruit, corn), industrial supplies (organic chemicals), capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment), consumer goods (automobiles, medicines). Exports-partners are Canada, Mexico, China, Japan, the UK and Germany.
Major imports are agricultural products, industrial supplies (crude oil), capital goods (computers, telecommunications equipment, motor vehicle parts, office machines), consumer goods (automobiles, clothing, medicines, furniture, toys). China, Canada, Mexico, Japan and Germany are chief trading partners.
It’s interesting to know…
ü The economic history of the United States has its roots in European settlements in the 16th, 17th, and 18th centuries. The American colonies progressed from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America. In 230 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), and an entrepreneurial spirit and commitment to investing in material and human capital. In addition, the US was able to exploit these resources due to a unique set of institutions designed to encourage exploration and extraction. As a result, the US’s GDP per capita converged on that of the UK, as well as other nations that it previously trailed economically. The economy has maintained high wages, attracting immigrants by the millions from all over the world.
ü Great Depression in the United States, worst and longest economic collapse in the history of the modern industrial world, lasting from the end of 1929 until the early 1940s. Beginning in the United States, the depression spread to most of the world’s industrial countries, which in the 20th century had become economically dependent on one another. The Great Depression saw rapid declines in the production and sale of goods and a sudden, severe rise in unemployment. Businesses and banks closed their doors, people lost their jobs, homes, and savings, and many depended on charity to survive. In 1933, at the worst point in the depression, more than 15 million Americans – one-quarter of the nation’s workforce – were unemployed.
ü The US dollar is the unit of currency of the United States and is defined by the Coinage Act of 1792 to be between 371 and 416 grains (27.0 gram) of silver (depending on purity). It is divided into 100 cents. Taken over by the Congress of the Confederation of the United States on July 6, 1785, the US dollar is the currency used in many international transactions. Although US dollar is a fiat currency, several countries use it as their official currency, and in many others it is the de facto currency.
ü The colloquialism buck is often used to refer to dollars of various nations, including the US dollar. This term, dating to the 18th century, may have originated with the colonial fur trade. Greenback is another nickname originally applied specifically to the 19th century Demand Note dollars created by Abraham Lincoln to finance the costs of the Civil War for the North. The original note was printed in black and green on the back side. It is still used to refer to the US dollar (but not to the dollars of other countries).
ü The first institution with responsibilities of a central bank in the US was the First Bank of the United States, chartered in 1791 by Alexander Hamilton. Its charter was not renewed in 1811. In 1816, the Second Bank of the United States was chartered. Early renewal of the bank’s charter became the primary issue in the re-election of President Andrew Jackson. After Jackson, who was opposed to the central bank, was re-elected, he pulled the government’s funds out of the bank. Nicholas Biddle, President of the Second Bank of the United States, responded by contracting the money supply to pressure Jackson to renew the bank’s charter. The country entered into a recession, and the bank blamed Jackson’s policies. The bank’s charter was not renewed in 1836. From 1837 to 1862, in the Free Banking Era there was no formal central bank. From 1862 to 1913, a system of national banks was instituted by the 1863 National Banking Act. A series of bank panics, in 1873, 1893, and 1907 provided strong demand for the creation of a centralized banking system.
ü The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act, it is a quasi-public (government entity with private components) banking system that comprises (1) the presidentially appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) twelve regional privately-owned Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the US Treasury, each with its own nine-member board of directors; (4) numerous other private US member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and (5) various advisory councils.
ü In its role as the central bank of the United States, the Fed serves as a banker’s bank and as the government’s bank. As the banker’s bank, it helps to assure the safety and efficiency of the payments system. As the government’s bank, or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars. Just as an individual might keep an account at a bank, the US Treasury keeps a checking account with the Federal Reserve through which incoming federal tax deposits and outgoing government payments are handled. As part of this service relationship, the Fed sells and redeems the US Government securities such as savings bonds and Treasury bills, notes and bonds. It also issues the nation’s coin and paper currency. The US Treasury, through its Bureau of the Mint and Bureau of Engraving and Printing, actually produces the nation’s cash supply and, in effect, sells it to the Federal Reserve Banks at manufacturing cost, currently about 4 cents per bill for paper currency. The Federal Reserve Banks then distribute it to other financial institutions in various ways.The Federal Reserve System’s role as a central bank is criticized for enabling the United States Federal Government to issue fiat currency.
Task IV. The words below are from the text. Fill the appropriate boxes with the words related to them:
| Noun | Verb | Adjective |
| dominance | ||
| managerial | ||
| decline | ||
| adaptable | ||
| acquire | ||
| reserve | ||
| organizational | ||
| account | ||
| product | ||
| private |
Task V. Look through the text and pick out the words that are equivalent in meaning to the following definitions. Complete the puzzle and find a key word in the centre boxes:
1. the price paid or required for acquiring, producing, or maintaining something, usually measured in money, time, or energy; expense or expenditure;
2. work or business of cultivating the soil, producing crops, and raising livestock;
3. an agreement under which a person borrows money to buy property, especially a house, and the lender may take possession of the property if the borrower fails to repay the money;
4. a plan or schedule adjusting expenses during a certain period to the estimated or fixed income for that period;
5. a person who buys goods or services for personal needs and not for resale or to use in the production of other goods for resale;
6. a gathering of people for buying and selling things, especially provisions or livestock;
7. a business venture or company;
8. the sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale;
9. productive work (especially physical work done for wages);
10. something that stimulates one to take action, work harder; encouragement.