Global Economic Leadership of the United States

Jul 10, 2009 Filed under:Term paper writing — admin @ 7:07 am

Global Economic Leadership of the United States

The security of the United States is closely tied to the global economy. Currently, the United States has no competitors on the global market in terms of military and economic power. The growing number of international corporations and marketing across borders contribute to increased power and influence of the economically-developed countries. However, the global economy is not inclusive with many poor nations excluded from participation. While the United States and other developed nations benefit from the global economy, the excluded states constitute security threat. Frustration, poverty, and unrest contribute to the destabilization of the global economy as well as security. Therefore, the global economy has the potential to spawn terrorism.& The attack on September 11, 2001, was against the symbol of American economic strength (World Trade Center) as well as the symbol of American military might (Pentagon). The economic and military leadership of the United States is not welcome by many countries. The United States has to reconsider the economic and foreign relations policies in order to maintain global leadership.

Literature Review

Tastes of consumers are becoming increasingly global.Moreover, consumers are increasingly turning to distant suppliers for their retail purchases. The growing use of credit cards and improving communication/transportation systems contribute to the growth of long-distance retail sales (Baker, 1995, p. 13). While only thirteen years ago national companies were reluctant to go global, today global operations are part of everyday business. According to the article “Global Prospects and Policy Issues” (2006), the US economy would grow 3.4 percent in 2006 with the corporate investment supported by high capacity use and strong profitability.The Japanese and European economies being based on solid domestic demand are expected to occupy significant global market share

The US financial system is attracting foreign savings in increasingly global capital markets (“Global Prospects and Policy Issues”, 2006). The liquidity and depth of the American financial markets, rapid innovation and development of the new products contribute to the increasing opportunities for effective risk management. As the result, the United States is an attractive destination for the global funds.  According to the study presented in the article “Global Prospects and Policy Issues” (2006), the fastest-growing global market segment is cellular telephones and personal computers.  The major drivers of global demand include digital cameras, television, MP3 players, and products using flash memory.

Ernst and Ozawa (2002) argue that the third type of economy has emerged – global economic system – that coexists with the national sovereign economy and global market economy. Multinational corporations historically coordinated world economy in the post World War I period. In 1950s, multinationals were synonymous with American corporations due to the domination of the US companies on the global market. However, today Europe and Japan challenge the US dominance. Japan, for example, focuses on the technological advances as a tool to gain economic advantage over the United States.

Zhou et al (2007) conducted a study to identify the factors shaping the current global market. The study revealed that market orientation, as an aspect of corporate culture, places the highest priority on creating and maintaining superior customer value profitability. Market orientation from American perspective consists of three components: customer orientation, competitor orientation, and interfunctional coordination.  The dominating presence of the United States on the global market is explained with the creation of superior customer value, understanding of target markets, knowledge on competitor’s strengths and weaknesses, and effective use of company resources throughout the organization.

Stegman and Turner (1996) predicted that the United States economy was increasingly a system of metropolitan-centered regional economies. The United States is not a Third World country where the poor are many; on the contrary, middle class in America are many and the poor are few. The United States has an ability to end the isolation of the poor countries’ participation in global economy. The American corporations have the power to shape the global economic landscape. However, the United States lacks the understanding of the global affairs. According to Martin Lewis (2000), a large portion of university students are destined for careers that are profoundly international in one way or another. Thus, if the United States wants to remain a leader on the global market, more emphasis should be made to educating students on global issues.

Milberg (1994) notes that in spite of the wide array of policies used by the United States, both domestic and international, there has been a decline in the international competitiveness of the United States. Thus, in spite of the corporate tax reductions, the wage dampening encouraged by anti-union policies, export subsidies, the competitive position of the United States has declined by most measures over the past 20 years. As the result, the global leadership of the United States is doubted. Picco (2003) hypothesizes that Moscow is posed to become a major exporter of oil and a challenger to the market-share and price-setting role of Saudi Arabia. Today Russia has an impact on the oil world; the US investments and political support are required. Russia has also become the intermediary between Washington and several countries in Asia.

Dependence on Oil

Osama bin Laden has repeated said that the war against the United States was religious as well as economic. One of the most important economic factors in this war was dependence on oil. The global oil market environment is characterized with strong demand and lack of supply. Terrorists assume that the most effective way to hurt the American economy is to focus on oil (Luft, 2005, p.1). Since the end of the war in Iraq, there have been numerous attacks on pipelines and oil installations throughout the world. These attacks resulted in approximately 1 million barrels taken off the market a day. If this oil reached the market, the oil prices would be much lower. The global environment is characterized with the transfer of wealth from the economies of Europe and the United States to oil-producing countries. Middle East countries will enter the global market aggressively.

Currently, China, Europe, the United States, and Japan are competing over the same oil reserves. Moreover, China has more power in the Middle East compared to other countries. For example, the massacre in Uzbekistan on May 2005 resulted in the death of hundreds of citizens. The United States tried to intervene, while China said no (Luft, 2005, p.1). China, which signed a $600 million gas agreement with Uzbekistan, urged the United States to remove all its military forces from Central Asia. It is evident that oil shapes foreign policy and determines the division of power on the international level. Access to energy resources dictates the international behavior of countries as well as relations between the major powers.

The United States has to deal with a highly uncertain security environment. From one side, the threat of the global war is removed and American core value of market economics is introduced in many parts of the world. From the other side, there is the threat of cross-border aggression against the United States by hostile countries with significant military power. Unlimited and stable access to oil reserves remains the core national requirement for successful future of the United States. It is reasonable to assume that several regional powers will have both the means and the desire to challenge military the economic interests of the United States. Failing counties, in particular, contribute to global instability and international conflicts.

Security Environment

Despite of the numerous efforts, the United States are not empowered to control the flow of information and regulate the technological advances that can be used by terrorists. Proliferation of weapons, for example, can destabilize some regions and increase military capabilities of hostile nations. The security environment is marked with the lack of the global competitor able to challenge the military and economic leadership of the United States. Undoubtedly, the United States is the only global superpower; however, there is the possibility for other countries to threaten the American domination. For example, Russia and China have the potential to become key military and economic competitors of the United State s in the nearest future.&

Notably, the US economy gains the new feature: real income growth is inverted. It means that there are few high earners while income of the most workers tends to decrease. The root of economic slowdown is traced to protectionist US policy. American citizens support involvement into the global economy, however, the security issues outweigh the economic gains. Globalization brings numerous benefits to the American economy, nevertheless, the US government opposes the freer trade and investment due to security concerns.& First, the United States introduces restrictions on trade with the hope to reduce illegal export/import. Second, the foreign policy is drafted more carefully to avoid potential threats to security of the American citizens.

Blurred Borders

Today, energy and environmental security constitute the primary concern of the global community.& The United States has insecure energy supplies; there are no technological advances that can provide alternative secure energy sources. Moreover, there is no global agreement on the best actions to reduce dependency on fossil fuels. Taking into account that borders among the countries have already blurred, the distant threats can evolve into immediate problems. Traditionally, American policymakers view security threats as involving bombs; however, they fail to establish the link between poverty and conflict. The United States is the only hegemonic power in the world. It nurses addiction to foreign capital while China and oil-exporting countries sustain surpluses.

In addition, the emerging powers (BRIC: Brazil, Russia, India, and China) are capable of reshaping the global economy and international politics. These four countries are developing much faster than the rest of the world, including the United States. The economic growth of these countries influences the global distribution of power. Middle East, for example, has enormous economic potential backed up with the young and economically active workforce. The United States is characterized currently as aging nation experiencing economic slowdown. As the result, both economic and military security of the country is threatened. Moreover, the emergence of private sector as a significant player reshapes the global economic agenda. 

The fact is that the majority of the products consumed by Americans are produced in the Third World. The United States has to accept the idea that it is no longer the center of economic activities (Agtmael, 2007, p. 5). Current policy of protectionism stifles innovation. Emerging markets won more than 75% of the global foreign exchange reserves and are empowered to influence the US mortgage rates (Agtmael, 2007, p. 5). The United States is moving from economic dominance to dependence. In addition, more products are sold in emerging markets than in mature markets. American corporations seek the growth potential in emerging markets because the domestic demand tends to decline.

Economic Globalization

Returning to the attack on September 11, 2001, it has significantly influenced the movement of people. In the United States, as well as in other countries, the border controls have intensified. The increased migration controls are not an attempt to maintain security against international terrorism, but rather another limitation to impend movement between countries benefiting and falling behind globalization (Muller, 2004, p. 49). The paradox of globalization is that it leaves the borders open for goods and closed for people. Taking into account that it is impossible to maintain borders closed and open at the same time, the protectionism policy leads to the rapid growth of underground economy.

Economic globalization demands efficiency: those who are prepared for it are rewarded. However, the opportunity to take part in globalization is not available to all nations. In particular, countries with corrupt governments and uneducated population are not able to attract foreign direct investment. The global economic gap is significant: industrialized nations of Europe, North America, and Asia on one side and Middle East, former Soviet Union, and Saharan Africa on the other side. These excluded regions are the grounds for frustration leading to terrorist activities and strikes against the interest of the United States. The United States is associated with the global economy and is the key target of hate.

Security Implications

The economic wellbeing of the United States is intimately linked to the national security. The way economic policies are formulated is essential to national security. The United States is a leader of global economy and shapes the international trade policies, distribution of foreign direct investment, international economic relations, and initiatives of the financial institutions such as WTO and IMF. Researchers agree that globalization is not beneficial for all countries: while the United States and Great Britain are winners, African countries experience economic stagnation and political instability. Economic underdevelopment fosters international extremism and violence. Influential presence throughout the world and leadership in the global economy of the United States is not welcomed by many countries.

Economic element of the American power plays the key role in the national security. Prosperity and security in the United States depends on security around the world. The United States is and will remain the example of prosperity by maintaining a strong domestic economy. The American business sector is a foundation of technological innovations in virtually every sector. However, more attention should be devoted to educating citizens and business community on global issues. In addition, all nations should have an opportunity to participate in the global economy. The national security is maintained only when the United States promotes sustainable development, encourages democratic development, and enhances regional stability. For example, the United States should help nations with debt repayment. The assistance provided by the United States would benefit to positive image of the American nation and decrease aggressiveness.

Conclusion

Globalization and unequal distribution of wealth call for the new way of dealing with security issue in the United States. The transnational threats pose numerous risks that cannot be ignored. The United States and other countries with stable economies should promote economic growth and build democracy to address the fundamental causes of threats. American leadership in creating international collective decision-making processes is critical. The traditional ways in which the national security and economic policymaking representatives used to deal with security issues are no longer effective. The successful attack on September 11, 2001, showed that the US economy and infrastructure are vulnerable to transnational threats and, more important, the country is not prepared to respond to threats effectively.

Taking into account that the fundamental cause of aggression towards the United States is disparity in economic development, more funds should be made available to assist poor countries on their way to democracy, stable economy, and global integration. Undoubtedly, strong military has a major stake in the success of new security policies. The Defense Department must be prepared for the different military actions. The United States is the only economic and political leader worldwide.  The American government is empowered to intervene into international conflicts, to shape the global economics, to block actions of other countries, and to support democratic initiatives in the developing states. The power of the United States is unlimited because there are no competitors for global leadership. The American leadership is not encouraged by many nations and, as the result, they express aggression and hate in the form of terrorist attacks. If the United States wants to maintain security, the attention should be drawn to equal distribution of wealth.

Word Count: 2532 (10 pages)