Economic History of USA238 years history

ECO422(E)Lecture 08

By W.A Senathissa

Salient features of USA• Independence: 4 July 1776 (declared); 3 September 1783 (recognized by

Great Britain)

• Area: total: 9,826,675 sq km • land: 9,161,966 sq km • water: 664,709 sq km • note: includes only the 50 states and District of Columbia

• Population 313,847,465 (July 2012 est.)• Life expectancy at birth: total population: 78.49 years

– male: 76.05 years – female: 81.05 years (2012 est.)

–Government type: Constitution-based federal republic; strong democratic tradition

Economic history of the USA

• Ithalian Citizen Amerigo Vesputchi found America Continent in 1507

• In 1776, 13 small, independent farming economies joined together to form the United States of America.

• In 237 years the United States grew to a huge, integrated, industrialized economy

• Nearly a quarter of the world economy.

Secret behind the successfulness early USA• A large unified market• A supportive political-legal system• Vast areas of highly productive farmlands• vast natural resources (timber, coal, iron & oil)• An entrepreneurial spirit• commitment to investing in material & H: capital• Maintained high wages, attracting immigrants by

the millions from all over the world. • Technological and industrial factors played a

major role

American Revolution• Americans in the 13 Colonies demanded

their rights as Englishmen.• they saw it, to select their own representatives to

govern and tax them– which Britain refused. • struggle through refusing British manufactured

items.• British responded with a rejection of American

rights • War against the British and to independence for

the new United States of America

Gains from The American Revolution (1775–1783) • brought a dedication to unalienable rights to

"life, liberty, and the pursuit of happiness," • emphasize individual liberty and economic

entrepreneurship• simultaneously a commitment to the political

values of republicanism, which emphasize civil virtue(benefit) and duty, and promotion of the general welfare.

Early period of America• Britain's war against the Americans, French and Spanish cost

about £100 million.

• The British imposed a tight blockade on every American port to cut off all imports & exports.

• The American states had no end of difficulty financing the war• In 1775 there was at most 12 mn dollars in gold in the colonies,

not nearly enough to cover current transactions, let alone on a major war.

• Only solution : support from militiamen, and donations from patriotic citizens

• Due to the depreciated currency, delay actual payments for soldiers and suppliers on the promises it to be made good a after the war

• in 1783 the soldiers and officers were given land grants to cover the wages they had earned

• But had not been paid during the war. • 1781, Robert Morris(Superintendent of Finance of the United States)

established a private Bank of North America through France loan to finance the war

Early period of America

Main methods to cover the cost of the war

• 01st Issues of paper money(242 mn $)• This paper money were cashed in through the

state taxes• By 1780, the paper money was "not worth a

Continental“ just only paid 01 cent for holders• 02nd Issues of paper money• paid 100 cents on the dollar for holders• the paper money was a hidden tax on the

people

War stressed

• The skyrocketing inflation just for a few people, Being 90% as farmers they were not been much suffered from the huge inflation

• The greatest burden was borne by the soldiers, whose wages in value every month.

• 1776, the French secretly supplied the Americans with money, gunpowder and weaponries in order to weaken its arch enemy

http://en.wikipedia.org/wiki/File:GROWTH1850.JPG

New nation

• Direct government involvement in the economy

• Strong central government able to promote science, invention, industry and commerce, was seen as an essential means of promoting the general welfare

• made the economy of the United States strong enough for them to determine their own destiny

• Americans were motivated by specific beliefs that only a republican form of government could ensure political and economic freedom

• Goal of any good government was to promote the general welfare

• Usefulness of the society depended on govt responsibility,– for individuals to “choose for themselves” how they will

apply their labor and their intelligence in production.

New nation Cont’d

• The U.S. Constitution in 1787, established that the entire nation was a unified, or common market, with no internal tariffs or taxes on interstate commerce.

• Alexander Hamilton(The 01st secretary of the treasury during the presidential administration of George Washington) believed that the United States should pursue economic growth through diversified shipping, manufacturing, and banking

New nation Cont’d

• Hamilton wanted and achieved Congressional authority to create the First Bank of the United States in 1791

• Alexander Hamilton, who proposed the creation of a government-sponsored bank and increased tariffs to encourage industrial development

New nation Cont’d

The differences between the American and British systems of political economy

• One looks to increasing the necessity of commerce; the other to increasing the power to maintain it

• One looks to underworking the Hindoo, and sinking the rest of the world to his level; the other to raising the standard of man throughout the world to our level.

• One looks to pauperism(poverty), ignorance, depopulation, and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilization.

• One looks towards universal war; the other towards universal peace.

• One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world

The American and British systems of political economy Cont’d

The roles of Army

• establishment of the Patent Office in 1802• in 1807 and other measures to improve river

and harbor navigation• the various Army exploring to the west• Corps of Discovery in 1804 always under the

direction of an officer from the Army Corps of Topographical Engineers

The assignment of Army Engineer officers

• surveying and construction of the early railroads and canals

• Second Bank of the United States established in 1816,

• The War of 1812, by cutting off almost all foreign trade, created a home market for goods made in the U.S toward free trade into a protectionism

Mass production

• The requirement for substitutable parts forced forward the development of modern metal-working machine tools, including milling machines, grinders, shapers and planers.

• The development of these modern machine tools made possible the development of modern industry capable of mass production

From the 1830s to 1860

• policies of Economic nationalism & higher tariffs– included increased state control, regulation and

macroeconomic development of infrastructure

Expansion and growth

• Cotton, at first a small-scale crop • The raw cotton was shipped to textile mills in

Britain, France and New England• built roads and waterways/ Canal, opening up

markets for western farm products

Scene of Lockport on the Erie Canal (W. H. Bartlett 1839)

Railroads made a decisive impact on the U.S. economy 1850–1873 era

• the railroad became the first large-scale business enterprise and the model for most large corporations

• made cities such as Atlanta, Billings, Chicago, and Dallas

• They created career tracks that took 18 year old boys and turned them into brakemen, conductors and engineers

Development of transportation sector

• As transportation improved, new markets continuously opened

• The steamboat made river traffic faster and cheaper, but development of railroads had an even greater effect, opening up vast stretches of new territory for development.

• enabled the nation to develop a large-scale railroad system, establishing the base for the country's industrialization

Rail rods and industryCountry 1850 1870 1890New England 2,507 4,494 6,831kmTOTAL USA 9,021 52,914 129,774km

early in the history of the American oil industry

By 1860, on the eve of Civil War

• one third of the nation's income came from manufacturing.

• cotton cloth production was the leading industry, with the manufacture of shoes, woolen clothing, and machinery also expanding

• Between 1845 and 1855, some 300,000 European immigrant arrived annually

Government income

• The largest tax sum by far came from new excise taxes

• a sort of value added tax—that was imposed on every sort of manufactured item

• Second came much higher tariffs• Third came the nation's first income tax

Second major source of govt income

• Apart from taxes, the second major source was government bonds

• For the first time bonds in small denominations were sold directly to the people

• national bank involved buying and holding federal bonds

Agriculture

• Agriculture was the largest single industry and it prospered during the war

• encouraged the rapid adoption of horse-drawn machinery and other implements

• Many wives took their place, and often consulted by mail on what to do

• The 1862 opened up the public domain lands for free. Land grants to the railroads meant they could sell areas for family farms (80 to 200 acres) at low prices with extended credit

• the government sponsored fresh information, scientific methods and the latest techniques

A wheat harvest in Idaho

The Gilded Age: 1865–1900

• Industrial economy• By 1890, the USA leaped ahead of Britain for first place in

manufacturing output• Second Industrial Revolution." Railroads greatly expanded

the mileage and built stronger tracks and bridges that handled heavier cars and tank engine, carrying far more goods and people at lower rates.

• Cooling railroad cars came into use.• The telephone, phonograph, typewriter and electric light

were invented. By the dawn of the 20th century, cars had begun to replace horse-drawn carriages.

Resource abundancy

• Coal was found in abundance in the Appalachian Mountains from Pennsylvania

• Oil was discovered in western Pennsylvania• Large iron ore mines opened in upper

Midwest• Large copper and silver mines opened,

followed by lead mines and cement factories

Power of human capital

• In 1913 Henry Ford introduced the assembly line, a step in the process that became known as mass-production.

• Frederick W. Taylor pioneered the field of scientific management

• After 1910 mass production was sped by the electrification of factories, which replaced water power

Depicting Standard Oil as a ruthless octopus

Pre condition for a take off

• The Gilded Age saw the greatest period of economic growth in American history

• From 1869 to 1879, grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita

• Capital investment also increased tremendously during the 1880s nearly 500%, , increasing.

• Capital formation doubled during the decade

The power of labour union

• the first significant labor union, the Knights of Labor in 1869.

• The Knights collapsed in the 1880s and were displaced by strong international unions that banded

• grew to a peak during World War I

A series of recessions happened(1873-1897)

• Fear of 1873 had New York Stock Exchange closed for ten days,

• of the country's 364 railroads, 89 went bankrupt, • a total of 18,000 businesses failed between 1873

and 1875,• Unemployment reached 14% by 1876, during a

time which became known as the Long Depression.• The end of the Gilded Age coincided with the Panic

of 1893,

Progressive Era: 1890–1920

1900 panoramic image of the Chicago slaughter houses

radical political movements of business elite and farmers/laborers in the Midwest and West

these people favored government regulation of business practices to, in their minds, ensure competition and free enterprise.

preventing large firms from controlling a single industry in 1890

Ford Assembly line

• In 1913, Henry Ford, adopted the moving assembly line, with each worker doing one simple task in the production of automobiles

• Ford offered a very generous wage—$5 a day—to his workers, arguing that a mass production enterprise could not survive if average workers could not buy the goods

Electrification in the U.S

• 1900 and by 1930 about 80% of power used in industry was electric.

• Electric utilities with steam turbines greatly lowered the cost of power with businesses and houses in cities.

• Electric street railways developed into a major mode of transportation

• electric inter-urban service connected many cities in the northeast and mid-west.

• Tractors began being mass-produced.

Waves/Roaring twenties: 1920–1929

• The rapid growth of the automobile industry stimulated industries such as oil, glass, and road-building.

• Tourism soared and consumers with cars had a much wider radius for their shopping.

• Small cities prospered, and large cities had their best decade ever, with a boom in construction of offices, factories and homes.

• The new electric power industry transformed both business and everyday life.

• Telephones and electricity spread to the countryside, • but farmers never recovered from the wartime bubble in land

prices. • Millions migrated to nearby cities.

Great Depression: 1929–1941

• in October 1929, the Stock market crashed and banks began to fail

• The Federal Reserve worsened conditions in the U.S. when by allowing the money supply to contract by one-third

• Congress in 1932 worried about the rapidly growing deficit and national debt, and raised income tax rates

Great Depression By 1932,

• The unemployment rate was 25%. • Conditions were worse in heavy industry,

lumbering(hardly maintain/wood), export agriculture (cotton, wheat, tobacco), and mining.

• Conditions were not quite as bad in white collar sectors and in light manufacturing

Spending

• Government spending increased from 8.0% of GNP under Hoover in 1932 to 10.2% of GNP in 1936.

• Roosevelt met Keynes but did not pay attention to his recommendations. After a meeting with Keynes, who kept drawing diagrams, Roosevelt remarked that "He must be a mathematician rather than a political economist

Banking crisis

• losses in investment banking• Between 1929 and 1933 40% of all banks (9.490 out of

23.697 banks) went bankrupt• Hoover had already considered a bank holiday to prevent

further bank runs• Roosevelt acted as soon as he took office; he closed all the

banks in the country and kept them all closed until he could pass new legislation

• provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed

End of the depressions

• By the end of 1933, 4,004 small local banks were permanently closed and merged into larger banks

• the U.S. had gotten back on track by 1934 and made a full recovery by 1936

Table 2: Depression Data

[86]1929 1931 1933 1937 1938 1940

Real Gross National Product

(GNP) 1101.4 84.3 68.3 103.9 103.7 113.0

Consumer Price Index 2 122.5 108.7 92.4 102.7 99.4 100.2

Recovery waves

• but as Roosevelt said, one third of the nation was ill fed, ill-housed and ill-clothed.

• GNP was 34% higher in 1936 than 1932, and 58% higher in 1940 on the eve of war.

• The economy grew 58% from 1932 to 1940 in 8 years of peacetime, and then grew another 56% from 1940 to 1945 in 5 years of wartime.

• The unemployment rate fell from 25.2% in 1932 to 13.9% in 1940 when the draft started

Severely of Great depressionTable 2: Depression Data 1929 1931 1933 1937 1938 1940

Real Gross National Product (GNP) 

101.4 84.3 68.3 103.9 103.7 113.0

Consumer Price Index  122.5 108.7 92.4 102.7 99.4 100.2

Index of Industrial Production 

109 75 69 112 89 126

Money Supply M2 ($ billions)

46.6 42.7 32.2 45.7 49.3 55.2

Exports ($ billions) 5.24 2.42 1.67 3.35 3.18 4.02

Unemployment (% of civilian work force)

3.1 16.1 25.2 13.8 16.5 13.9

Wartime controls: 1941–1945

• Converted consumer-products plants filled many military orders.

• Automakers built tanks and aircraft• Six million women took jobs in manufacturing and

production; most were newly created temporary jobs in munitions.

• Some were replacing men away in the military.• After the war many women returned to household

work as men returned from military service.

Postwar prosperity: 1945–1973

• the early 1970s was a golden era of American capitalism.

• $200 billion in war bonds matured, and theG.I. Bill financed a well-educated work force

• The middle class swelled, as did GDP and productivity

• labor union membership peaked historically in the U.S. during the 1950s

• Congress advised to promote high employment, high profits and low inflation

Keynesian policies

• The Eisenhower administration (1953–1961) establish Keynesianism as a dual-party economic policy for the nation.

• accelerating public works programs, easing credit, and reducing taxes

• Republican President Richard Nixon in 1969 proclaimed as “I am now a Keynesian in economics,"

• Although this period brought economic expanding to the country as whole, it was not recession proof. The recessions of 1945, 1949, 1953, 1958, and 1960 saw a drastic decline in GDP.

Baby Boom (1942–1957)

• The "Baby Boom" saw a dramatic increase in fertility in the period 1942–1957

• caused by delayed marriages and childbearing during depression years,

• a surge in prosperity, a demand for suburban single-family homes (as opposed to inner city apartments)

• new optimism about the future. • The boom crested about 1957, then slowly declined

Liberal programs

• Congress cut tax rates in 1964. • President Lyndon B. Johnson (1963–69) dreamed of

creating a "Great Society", and began many new social programs to that end, such as Medicaid and Medicare.

• The government financed some of private industry's research and development throughout these decades,

• most notably ARPANET (which would become the Internet)

Inflation woes: 1970s

• the collapse of the Bretton Woods system in 1971• the growing influx of imported manufacturing goods, such

as automobiles and electronics• the 1973 oil crisis,• the 1973–1974 stock market crash,• and the ensuing displacement of Keynesian economics by

monetarist economics, • especially by the free-market Chicago School of Economics,

led by theorist Milton Friedman. At the same time, the consensus among experts moved against New-Deal-style regulation, in favor of deregulation.

Bretton Woods Agreement collapsed

• The United States grew increasingly dependent on oil importation from OPEC

• Stagflation gripped the nation, and the government under President Nixon tested with wage and price controls

• The Bretton Woods Agreement collapsed in 1971–1972. United States entirely off the gold standard.

New regulations & regulatory agencies

• Productivity growth was small, when not negative. Interest rates remained high, with the prime reaching 20% in January 1981

• the increased rise of the environmental and consumer movements, and the government established new regulations and regulatory agencies – Occupational Safety and Health Administration, – the Consumer Product Safety Commission,– the Nuclear Regulatory Commission

Deregulation and Reaganomics: 1976–1992

• Deregulation spurred by – slow productivity growth – increasing operation and capital costs in several key sectors.

• Transportation deregulation accelerated in 1980:deregulation of railroads and trucking

• Deregulation of interstate buses followed in 1982• banks were partially deregulated

• 1973–75 recession president Jimmy Carter instituted large fiscal stimulus package in 1977

• Inflation rose by double digits following the 1979 energy crisis

Strategies to reduce inflation

• In order to combat inflation, Carter raised interest rates and caused a sharp recession in the first six months of 1980

• Carter introduced his own policies for reducing inflation, and the Federal Reserve brought down interest rates to cooperate with the initiatives

• During the 1980 recession, manufacturing shed 1.1 million jobs, while service industries remained intact. Employment in automotive manufacturing in particular suffered, experiencing a 33% reduction by the end of the recession.

• Collectively these factors contributed to the election of Ronald Reagan in 1980

Federal intervention & Unemployment

• The Federal Reserve once again began to raise interest rates in 1981,

• which plunged the economy back into recession. Unemployment rose to a peak of 10.8% in December 1982

Reaganomics

• In 1981, Ronald Reagan introduced Reaganomics.

• fiscally-expansive economic policies, cutting marginal federal income tax rates by 25%

• Inflation dropped dramatically from 13.5% annually in 1980 to just 3% annually in 1983 due to a short recession

• the Federal's tighter control of the money supply and interest rates

Economic growth vs inequality

• Real GDP began to grow• peak unemployment of 10.8% by late 1982,

dropped well under 6% unemployment at the end of Reagan's presidency by 1989

• The gap between those in the upper socioeconomic levels and those in the lower socioeconomic levels increased during Reagan's presidency

Failure government policies

• the federal debt spawned by his policies tripled (from $930 billion in 1981 to $2.6 trillion in 1988), reaching record levels

• In addition to the fiscal deficits, the U.S. started to have large trade deficits

• Vice President George H. W. Bush was elected to succeed Reagan in 1988.

Bush Presidency

• The early Bush Presidency's economic policies seen as a continuation of Reagan's policies,

• but in the early 1990s, Bush went back on a promise and increased taxes

• In 1992, Bush lost to Democrat Bill Clinton

The advent of deindustrialization(1960-1970)

• income inequality increase dramatically.• But at the same time, most mainstream

economists, and most policy makers, pointed that consumers could buy so many goods, even with the inflation of the 1970s,

• due to the widespread prosperity of shifting away from manufacturing and into services.

Increasing inequality with oppenens

• increasing free trade, globalization and high corporate taxes, and the desire to escape more severe environmental and workplace safety regulations in the U.S., have caused U.S. companies to begin to shift their manufacturing and heavy industrial operations to second- and third-world countries with lower labor costs.

• One result has been that rising income• In 2005, the American Gini coefficient had reached

0.469, similar to that of Malaysia and the Philippines, both at .461, and well-ahead of China (.440).

The Rise of Globalization and a World Superpower: 1990s-late 2000s

• During the 1990s, the national debt increased by 75%, GDP rose by 69%, and the stock market as measured by the S&P 500 grew more than threefold

• From 1994 to 2000 real output increased, inflation was manageable and unemployment dropped to below 5%, resulting in a soaring stock market known as the Dot-com boom.

Triggering a recession by September 11 attacks

• The economy worsened in 2001 with output increasing only 0.3% and unemployment and business failures rising substantially

• triggering a recession that is often blamed on the September 11 attacks

• the fall of the US markets and in investor confidence included numerous corporate dishonors

• Through 2001 to 2007, the red-hot housing market across the United.

The roots of Great recision-2007

Great Recession• The most serious began with the collapse of housing

bubbles in California and Florida• Millions of mortgages (averaging about $200,000

each) had been bundled into securities that were resold worldwide

• A series of the largest banks in the U.S. and Europe collapsed– Lehman Brothers with $690 billion in assets;– the leading insurance company AIG– The leading bank Citigroup, and the two largest mortgage

companies were bailed out by the government.

• Banks drastically tightened their lending policies, despite infusions of federal money

• The stock market plunged 40%, wiping out tens of trillions of dollars in wealth

• housing prices fell 20% nationwide wiping out trillions more• as the "Big Three" of the automobile industry (General

Motors, Ford and Chrysler) were on the verge of bankruptcy, and the retail sector showed major weaknesses

• lower-paying jobs constituted about 58% of the jobs regained

Great Recession Cont’d

Obama accomplishes Keynes policy

• President Barack Obama signed the American Recovery and Reinvestment Act of 2009 in February 2009;

• Bailout package $787 billion in stimulus through a combination of spending and tax cutsThe plan is largely based on the Keynesian theory that government spending should offset the fall in private spending during an economic downturn;

Crowding out

• Critics claim that government spending cannot offset a fall in private spending because government must borrow money from the private sector in order to add money to it.

• However, most economists do not think such "crowding out" is an issue when interest rates are near zero and the economy is stagnant.

• also point to problems of possible future inflation and government debt caused by such a large expenditure

leader in scientific research and technological innovation

• In 1876, Alexander Graham Bell was awarded the first U.S. patent for the telephone.

• Thomas Edison's laboratory developed the phonograph, the first long-lasting light bulb, and the first viable movie camera.

• Nikola Tesla pioneered the AC induction motor and high frequency power transmission used in radio.

• In the early 20th century, the automobile companies of Ransom E. Olds and Henry Ford popularized the assembly line.

• The Wright brothers, in 1903, made the first sustained and controlled heavier-than-air powered flight.

Technological and industrial development of US

Giant economy in the World

GDP $15.676 trillion (2012)GDP growth 2.3% (2012)GDP per capita $49,601 (2012)

(14th–2011, nominal; 6th–2011, PPP)GDP by sector agriculture: 1.2%, industry: 19.2%, services: 79.6% (2011 est.)

Inflation (CPI) 1.7% (December 2011-December 2012)

The economy of the United States is the world's largest national economy since at least the 1920s and the world's second largest overall economy,

American businesses raise investments

• In 2010 healthcare/medical accounted for the largest share of angel investments, with 30% of total angel investments (vs. 17% in 2009)

• followed by software (16% vs. 19% in 2007)• Biotech (15% vs. 8% in 2009)• Industrial/energy (8% vs. 17% in 2009)• Retail (5% vs. 8% in 2009) • IT services (5%).

• world's wealthiest nations, with abundant natural resources, • a well-developed infrastructure, and high productivity• the world's sixth-highest per capita GDP (PPP).• The U.S. is the world's third-largest producer of oil and second-

largest producer of natural gas• It is the largest trading nation in the world

– export trading partners are as of 2011: Canada, China, Mexico and Japan.

Of the world's 500 largest companies, 132 are headquartered in the United States

Highest net migration rate in the world. American investments in foreign countries total over $3.3 trillion,

Giant economy in the World

Wealth

• Domestic financial assets totaled $131 trillion and domestic financial liabilities totaled $106 trillion

• the government has extended economic control to other kinds of industries as well. In the years following the Great Depression

Demograpghy factorsPopulation below poverty line

15.0% (2011)

Gini coefficient 0.477 (2011)Labor force 155.654 million (includes 12.332 mil.

unemployed, January 2013)Labor force by occupation

farming, forestry, and fishing: 0.7% manufacturing, extraction, transportation, and crafts: 20.3% managerial, professional, and technical: 37.3% sales and office: 24.2% other services: 17.6% (2009)

Unemployment and EmploymentUnemployment 7.9% (January 2013) (+0.1%)Average gross salary $45,230 (May 2011)Main industries Highly diversified, world leading,

high-technology innovator, second largest industrial output in world; petroleum, steel, motor vehicles, aerospace,telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining

Ease of Doing Business Rank 4th

In 2011, the ten largest U.S. employers

• Walmart, U.S. Postal Service, IBM, UPS, McDonald's, Target Corporation, Kroger, Home Depot, General Electric, and Sears Holdings

• World's five most valuable brands–Apple, Google, IBM, McDonald's, and Microsoft

Port of Houston in the United States

ExportsExports $1.564 trillion (2012)Export goods capital goods, 27.9%; industrial supplies

and materials (except oil fuels), 24.8%; consumer goods (except automotive), 11.8%; automotive vehicles and components, 9.4%; food, feed, and beverages, 8.6%; fuel oil and petroleum products, 7.6%; aircraft and components, 6.1%; other, 3.8%.

Main export partners Canada 18.9%; Mexico 14.0%; China, 7.1%; Japan, 4.5%; United Kingdom, 3.5% (2012)

ImportsImports $2.299 trillion (2012)Import goods Consumer goods (except automotive),

22.7%; capital goods (except computing), 18.7; industrial supplies (except crude oil), 18.4%; crude oil, 13.7%; automotive vehicles and components, 13.1%; computers and accesories, 5.4%; food, feed, and beverages, 4.8%; other, 3.1%.

Main import partners China, 18.7%; Canada, 14.2%; Mexico, 12.2%; Japan, 6.4%; Germany, 4.8% (2012)

FDI stock $227.9 billion (2011)Gross external debt $14.71 trillion / 98% of GDP (as of June

2011)

Government financials

Public debt $16.588 trillion/ 107.18% of GDPBudget deficit $1.09 trillion (2012)Revenues $2.45 trillion (individual income tax, 46.1%;

social insurance, 34.7%; corporate taxes, 9.9%; other, 9.3% - 2012)

Expenses $3.54 trillion (Social Security, 21.5%; defense, 18.4%; Medicare, 13.2%; interest, 7.3%; Medicaid, 7.1%; other, 32.4% - 2012)

Economic aid ODA $19 billion, 0.2% of GDP (2004)Foreign reserves $151.866 billion (Dec. 2012)

New York City, financial center of the United States