Economic Problems in the US, EU and China, Essay Example

Economics can be described as the scientific study of production and consumption patterns within any given society. Economics entails the study and analysis of the relationship between production, distribution, and consumption of either goods or services, in a nation or regional block. In life, political and social situations influence the economic aspect of any population. These two aspects determine the needs and wants of individuals within any given society. In this case, any economic situation serves to satisfy and individuals or a nation’s needs and wants based on its political and social orientation. During analysis, economic situations are studies under two broad categories, which are the macroeconomics and the microeconomics. Macro economics entails the analysis of a region’s economic situation as a whole while microeconomics involves the evaluation of an individual’s economic status (Gomez 26). These two broad areas provide a substantial insight regarding the relationship between production and consumption of goods and services within any region under consideration. Since social and political situations influence a region’s economic performance, then economic situations may defer from one region to another around the globe. In this regard, we are going to analyze current economic situations in three different regions in the world. In addition, we will try to establish a contrast between the witnessed trends in production, distribution, and consumption of goods and services.

China’s Economic Problems

In the world, China is the second largest player in terms of production and distribution of goods and services around the globe. China’s levels of production and consumption have increased steadily over the past decade. Exports have increased immensely over the last five years, especially to third world countries like Africa and some parts of Middle-East nations. Despite the improvement in China’s current economic situation, there are problems that may presents substantial impacts if they are not considered. The first problem is a pronounced increase in the cost of production, especially in heavy industries. In 2010, there was a 41% increase in the heavy industry profits. However, 2011 statistics indicated that there was an increase in production costs while profits dropped to 32%. The significant changes in profit margins can be attributed to the increase in the costs of fundamental manufacturing factors like energy and labor. With respect to the increased costs of productions, leading manufacturing and processing industries reverts to considering other ways of increasing their profit margin. One way to effect this reduction of production cost has been to reduce the cost of labor. Major employers choose to embrace technological advances and mechanization of production lines, which severs to reduce labor cost (McKinnon, 17). Consequently, this resulted in the laying off of workers. The massive layoffs in an effort to reduce production cost present a substantial problem in China’s macroeconomic sector of employment.

Currently, approximately 4.29% of the Chinese urban population is unemployed. This reflects an increase in the number of unemployed people as indicated in economic statistics of 2008, which recorded a whole time lowest unemployment rate of 4.10%. This rise in the unemployment rate indicates that the laying off process led to an increase in the number of unemployed people in China. Rise in the unemployment rate, coupled with other opportunistic economic situations as inflation may present negative impacts in the nation’s economy (McKinnon, 21). Increase in unemployment translates to a decrease in unemployed individual’s purchasing power. The imminent negative impacts may range from the increase in crime level to riots.

Another pronounced economic problem in China is the deterioration of export product quality. Despite the general improvement in the nation’s export industry, there have been indicators, which depict massive distribution of low quality exports to China’s current markets. According to the nation’s export statistics, $ 17 billion was generated in 2011 alone from the export of clothes. However, the average unit price of the exports was US$ 3.40. This unit price indicates that there is a compromise in product quality (McKinnon 27). In the production sector, there is a pronounced competition among manufacturing organizations. This has led to the shift of focus from quality to quantity of products manufactured. In this regard, the current economies of mass production in china may lower the nation’s reputation due to immense production of sub-standard goods. This trend has started affecting the export industry whereby some nations bans importation of counterfeit and substandard products.

EU’s Economic Problems

Despite improvement of EU’s GDP growth rate over the past few years, there are increasing economic problems within the regional bloc. These problems dominate in Europe’s economic giants like Germany and France. Currently, these two nations are experiencing a phase of slow economic growth rate and a substantial decline in production levels. In the recent past, Germany started feeling the impact of the underlying demographic changes within its population. Germany experiences a decline in birth rate, which presents a negative effect on the nation’s population structure. Recent statistics shows that Germany’s population structure clusters around elderly people above 50. This means that there is an increase in the need to provide social security benefits to this aging population. In addition, there is a significant decrease in tax contribution due to low productivity levels. This economic situation presents EU’s governments with serious spending demands on the social aspect of its population (Dominguez 72).

In other EU’s nations like France, the prevailing decline in production levels presents another challenge to the labor market. In the last five years, French unemployment rate increased tremendously. This negative economic trend made the government impose inflexible labor regulations. One such regulation is the provision of limited freedom as to when an employer is justified to fire an employee. This rigidness in the labor market has discouraged foreign investments, hence further aggravating the unemployment situation (Dominguez, 78). Such problems are wide spread across the European Union nations. In this context, most nations within the EU regional bloc experience similar economic problems just like the two giants, which are France and Germany.

US Economic Problems

On the other hand, the US has a share of economic problems just like the other key players in the global economic plat form. The US continually experiences a slow rate in the growth of its production industry. This subsequently leads to slow employment rate for its population. From its economic history, the US depends largely on import goods and services. In this case, the US is largely dependent on foreign production and innovations. This immense dependency on imports means that the nation’s economy suffers whenever there are economic problems in nations producing their import goods (Quiggin7). In addition, increased costs in domestic production facilitate continuation of the product importation market. Both the federal and state tax systems have increased domestic production costs. Therefore, the US government should work towards solving the issue and turning the trend from the American dependency on import products to domestic sustainability.

Apart from the import pattern, the American population feels the impact of federal and state policies even at an individual level. US still operates with the super power mentality it had a few decades ago. However, the rapid change in economic patterns around the globe may usher in a new era whereby the nation’s super power mentality could be rendered obsolete. The strict market and production regulations in the US continue to provide an advantage to foreign competitors. For example, the US market placed their environmental and labor bar policies too high for most domestic investors to reach that level of standards. In this context, the US policy makers should consider loosening their regulations in order to promote domestic production (Quiggin 5). This opportunity may facilitate growth in the employment rate and lessen the effects of economic problems from foreign producers exporting products to the US.

Based on the analysis of economic problems present in the three regional markets, one can objectively point out pronounced similarities and differences witnessed in these areas. The macroeconomic aspect of employment trends prevails in all the three regions. In the EU, there is an increase in the unemployment rate due to the decline in production levels. Similarly, the US experiences the same problem due to strict domestic production regulations. In addition, China’s unemployment rate is rising due to the increase in production costs. Therefore, there is a commonality in the economic problem of employment patterns within the three regions. However, the other economic problems present in each region seem to be customized economic predicaments. For example, the continual dependency on import products by the US population is due to strict production regulations at the domestic level. On the other hand, compromised product quality is responsible for the eminent decline in China’s export industry. Finally, the EU has its own customized economic situation attributed to the imbalanced demographic characteristics of its population. Therefore, some economic problems are globalized while others are customized situations (Gomez, 22). These customized situations largely depend on a nation’s political and social orientation and objectives.

Works Cited

Dominguez, Kathryn. “The European Central Bank, the Euro, and Global Financial Markets”.  Journal of Economic perspective. 20(4). (2006): 67-88. Print.

Gomez, Leonard. International Economic Problems. New York: Macmillan Press, 2011. Print.

McKinnon, Ronald. “Solidifying a new G2: China and the United States should stabilize the yuan/dollar relationship”. The International Economy, Winter, (2009). Print.

Quiggin, John. “The Ussustainability of U.S Trade Deficits”. The Economist Voice.  1(3). (2004): 1-10. Print.