Comparison Essay Example: America's Economy vs. Venezuela's Economy

Published: 2019-10-16
Comparison Essay Example: America's Economy vs. Venezuela's Economy
Type of paper:  Essay
Categories:  Economics
Pages: 5
Wordcount: 1130 words
10 min read

The economy of a country defines the rate of development and growth based on the sustainable and strategic plans such as production, trade, and distribution processes. The consumption rates also assist in determining the performance of a country by comparing practices and material expressions based on set measures. The economic agents of a state assist in implementing and attaining the required objectives for the creation of a stable financial environment in local and global dimensions. The plan to build stable economies requires resources that will be vital in creating significant transactions for the purpose of generating and improving value. Based on the diversity of the distribution patterns of the primary economic resources, countries differ in the approaches used to attain the desired economic standards. The different methodologies used across the globe have contributed to the success of some states as well as poor performance for some. This excerpt examines the economy of America and Venezuela and recommends strategies that the later should adopt.

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The US is among the countries with stable economies based on the sound policies. The nation has also learnt from the past economic downturns and the general performance, which contributed to strategic financial planning and implementations. Currently, the US has GDP growth rate of 1.1% that has been noted to be stable over time. As at December 2015, the government debt to GDP was at 104%, which is expected to normalize in 2016 (Trading Economics n.p). The industrial development and production processes have contributed to increased local production as well as importation. The unemployment rate is about 5.0% a figure that significantly dropped from the previously recorded values. The inflation rate in the country stands at 1.0% with a comparable interest rate of 0.5%. The control of the monetary circulation and economic stability factors have contributed to the inflation performance in the US. Moreover, the balance of trade for the US is currently about a negative of $ 41,000 million. On the other hand, the GDP growth rate for Venezuela is 6.8% with a 49.8% government debt since it is a growing economy and most of the foundational infrastructures are not yet in place. The country is 7.3% unemployment rate, which is significantly lower that the US value (Trading Economics n.p). Venezuela is having a high inflation rate of 181% with an interest rate of 21.36%. It is also essential to note that the country has a negative balance of trade valued at $ 782 Million.

Moreover, the two states have implemented several policies to stabilize their economies. The United States took the initiative of improving the performance of the economy through monetary policies such as savings control and money market mutual funds to ensure that the circulation of currency does not contribute to financial risks in the local and international corporate market. The government improved the manufacturing sector to create more jobs as well as the service industry to subsidize the deficit. A declining unemployment rate has contributed to the stable GDP and reduced government spending through the Fiscal Policies. Besides, the US structural policies on medication, security, and external investment have assisted in controlling the balance of payment and the government debt. On the other hand, the need to stabilize the economy led to huge spending on ambitious development programs in Venezuela. The country received a lot of income from the oil business between 2009 and 2014. The move to redistribute the resources let to growth and decline in poverty (World Bank 1). Overdependence on oil was catastrophic since the declines in international prices caused an economic downturn. Macroeconomic policies that diversify production and value creation have not been established or implemented. This explains why the country has a significant boom but later fell into economic recession.

Nevertheless, Venezuela needs to learn from the United States to improve the statistics of the economic indicators. The country needs to strategize on diversifying the economy and avoid overdependence on hydrocarbon trade. The economy needs to include manufacturing of mechanical and consumer products to reduce the balance of payment deficit. The prices of oil products are subject to global changes posing a greater risk of the economic downturn. The state also needs to implement savings approaches so that the surplus income can be reserved to cover the recessions and poor performance. Relying on borrowing to fund recurrent expenditures subject the country to low GDP and high skewed fiscal policies. The current imbalances and possible stagflation in the country required a stable exchange system and controlled exchange rate system that factors the countys international performance. Multiple exchange system increases more pressure and external restrictions on international lending. The move to improve the consumption and investment should be diversified and sustain through the restructuring of the central administration. Supporting a population of about 31.4 million requires a low unemployment and inflation rates (World Bank 2). Monetary control regimes both on government spending and borrowing will assist to stabilize the currency value.

Furthermore, the current economic situation in Venezuela is bound to change if the necessary measures are undertaken. Diversifying the economy will assist in the development of other sectors of investment. The industries will contribute to enhancing the national income and the creation of employment. When more jobs are generated, the GDP performance will improve the current statistics to better values that will attract external investment. Therefore, the country will be in a position to manage the deficit balance of payment through local production, which encourages less importation. Such a move will also preserve the oil reserves by controlling the mining and production rate caused by a single-resource economy (World Bank 2). Stabilizing the currency will encourage investment and saving creating a favorable environment for setting other income generating ventures.

In conclusion, the United States economy is more stable as compared to the Venezuelas performance. The US implemented sound macroeconomic policies that created the sustainable environment for investment and diversification of production and value improvement to essential inputs. On the other hand, Venezuela concentrated on a single source of income, and when the global oil industry was subjected to the price reduction, the economic performance of the country was at a stake. However, the country needs to implement several measures to improve the performance and eradicate the current economic threats. Controlling the circulating currency through fiscal policies restructuring will assist in improving the rate of investment and savings. Diversifying the economy will enable the state to distribute growth and eliminate the risk of vulnerability. Such moves will create employment, ignite growth and development, enhance GDP, and reduce the balance of payment deficit.Appendices

Appendix 1: Annual GDP Forecast and Percentage Performance Venezuela (Source: World Bank)

Appendix 1: Annual GDP Percentage Performance - USA (Source: World Bank)

Work Cited

Trading Economics-1. Economic Indicators: United States. Trading Economics. N.p., 2016. Web. 22 July 2016.

Trading Economics-2. Economic Indicators: Venezuela. Trading Economics. N.p., 2016. Web. 22 July 2016.

World Bank. Venezuela Overview: IDA Commitments. World Bank. N.p., 11 Apr. 2016. Web. 22 July 2016.

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