Geography Reference
In-Depth Information
growing faster than others. Geographic disparities are partly explained by the overall
context in which the US economy has evolved. Since the end of the Second World
War, the US economy has dominated the global economy with its enormous appetite
for consumer goods which has oriented world production resources to its economic
advantage. In the United States and in Europe, it is said that the economy is
“dematerializing”, meaning that the activities of agricultural production and
manufacturing tend to employ less manpower, either because companies replace
labor with capital (mechanization, automation, innovation, etc.), or because they
relocate production to low-wage countries like Mexico or the Asian countries.
Following the Second World War, American capitalism took advantage of its
dominant position to exploit disparities in the international allocation of production
factors across a US sphere of influence, which was by then extended to Asian-
Pacific Seaboard and the Pacific Rim and Europe. Benefiting from the gradual
establishment of international rules of free trade that worked to their advantage, US
companies had access to a system of low-cost maritime transport, as well as an
international communications network to coordinate their activities across the world.
Some multinational firms even transformed themselves into transnational
corporations at the end of the Cold War, greatly expanding their scope of activities,
in particular with the economic opening of China, and at the same time, reducing
resistance to their multifaceted global presence just as the introduction of digital
communication networks was enabling instant worldwide real time communications
at a cost approaching zero. Foreign direct investment by American firms thus
produced an increase in the import of manufactured goods, particularly cheap
consumer goods, from Asia.
Large transnational companies of American origin were significantly enriched in
the process of globalization of the American economy. As consumers, Americans
were able to increase their consumption while benefiting from a drop in real prices
(expressed in number of working hours, for example) for a range of products. The
US economy improved as households spent an increasing share of their budgets on
leisure products and services. The globalization of the economy fueled the influx of
savings from pension funds and Asian markets, and confirmed the impression that
US household wealth lay in security holdings. The US economy was thus
“financialized”.
But globalization is not all positive. Inflated market liquidity made markets more
volatile. Speculative bubbles and soaring real estate prices constituted two obstacles
to the new financial economy, especially as US household debt remained at a very
high level, and worsened over time as a result of unbridled bank competition. The
