There is a lot of talk going around about the USA States versus the European Union. A strong argument can be made that the US has been a bit slow to react to what the EU is doing in an economic downturn. As a result, the EU has been able to push through policies that are pro-active and pro-competitive. For instance, the EU has been working on allowing its nations to increase competitiveness by reducing tax rates, cutting regulations, and creating a more competitive environment for business. While the US has been lagging behind, it is time for the US to catch up and really step up its game if it wants to win against the EU.
The European Union is an alliance of countries that are very concentrated in Europe. Its member states are all rich and powerful. It also has a very flexible free trade area and a tradition of open trading. Most importantly, though, the EU has the backing of the largest consumer market in the world. This alone makes the US economically disadvantaged.
A large part of the US economy is found in the agricultural industry. The same holds true for the EU. However, while the EU has been willing to invest in improving the conditions of its agricultural industry, the US has been lagging behind. In particular, the farm bill and the farm lobby have been shot down by US states. As a result, farmers are afraid to invest in America any longer.
The state of the American economy has been touched by a few major factors. One is the decline of manufacturing. The manufacturing sector of the US has been on a downward spiral in recent years. While this is affecting all industries across the country, the impact has been particularly sharp on the manufacturing heartland of the country. Several states, including Wisconsin, have been badly hit by this trend.
Another major factor is the decline of business investment. Business investment is one of the pillars of any healthy economy. Without it, states are forced to find other sources of revenue to pay their bills or to create new jobs for the remaining residents who have been forced out of the workforce due to the high cost of living in these states. Few states, like North Carolina, have been able to maintain solid job growth despite the loss of corporate headquarters.
A Much Ado
The other major policy issue that has affected the US economy is the policy of free trade. For decades, the US was one of the most protectionist nations in the world. The protectionist policies of the US caused many industries to move their operations to other countries, resulting in the creation of millions of jobs in the developing world. Protectionism was a great boost to the US economy during the past two-decade period, but it hurt the American economy when it was implemented. Many US states, like Tennessee, attempted to protect their residents from free trade deals bypassing “guarantee bill” laws.
Unfortunately, these laws were not effective, and in some cases, they hurt the economy more than helped it. Some experts believe that these types of policies are nothing more than a way for a state to receive tax dollars without doing anything for the economy. According to the World Bank, “A policy that eliminates incentives to invest may have the effect of reducing investment, but it also increases the rate of savings and investment.” These types of policies have been successful for the large corporations and oil companies, but detrimental to the small business owners who attempted to protect their businesses from foreign competition. The resulting free market in the US economy has not been effective in the long run, leading to an increasing number of job losses.
When discussing these policy issues, remember that all US states are responsible for their own economic policies. Only the state governments can curb those policies which are harming their own economies, but they cannot create policies that solve the problem. It is up to the citizens of these states to do whatever they can to keep their own state governments from trampling on the rights of the citizens. If the citizens of these states do not have confidence in their government, they will not feel confident enough to spend their money or invest in the economy. In this way, the citizens of these states are indirectly causing their own economic problems.