U.S. Economy

Those levels of production, consumption, and spending make the U.S. economy by far the largest economy the world has ever

U.S. Economy



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. Foreign outsourcing sends production to countries where labor costs are lower than in the United States. One of the first methods of foreign outsourcing was the maquiladora (Spanish for “mill”) in Mexican border towns. Manufacturers built twin plants, one on the Mexican side and one on the United States side. Companies in the United States sent partially manufactured products into Mexico where labor-intensive plants finished the product and sent it back to the United States for sale. Outsourcing to Mexico became more widespread after the North American Free Trade Agreement went into effect in 1994. Firms in the United States also outsource to many other nations, including South Korea, Indonesia, Malaysia, Jamaica, and the Philippines.

In the 1990s, few products were made entirely within the United States. Although a product may be fabricated in the United States, some component parts may have been produced in foreign countries. Despite outsourcing and the international operations of multinational firms, the United States is still a major producer of thousands of industrial items and has a comparative advantage over most foreign countries in several industrial categories.

B1bPrincipal Products
Ranked by value added by manufacturing, in 1996 the leading categories of U.S. manufactured goods were chemicals, industrial machinery, electronic equipment, processed foods, and transportation equipment. The chemical industry accounted for about 11.1 percent of the overall annual value added by manufacturing. Texas and Louisiana are leaders in chemical manufacturing. The petroleum and natural gas produced and refined in both states are basic raw materials used in manufacturing many chemical products.

Industrial machinery accounted for 10.7 percent of the yearly value added by manufacture. Industrial machinery includes engines, farm equipment, various kinds of construction machinery, computers, and refrigeration equipment. California led all states in the annual value added by industrial machinery, followed by Illinois, Ohio, and Michigan.

Factories in the United States build millions of computers, and the United States occupies second place in the world in the production of electronic components (semiconductors, microprocessors, and computer equipment). Electronic equipment accounted for 10.5 percent of the yearly value added by manufacturing, and it was one of the fastest growing manufacturing sectors during the 1990s; production of electronics and electric equipment increased by 77 percent from 1987 to 1994. High-technology research and production facilities have developed in the Silicon Valley of California, south of San Francisco; the area surrounding Boston; the Research Triangle of Raleigh, Chapel Hill, and Durham in North Carolina; and the area around Austin, Texas. In addition, the United States has world leadership in the development and production of computer software. Leading software producers are located in areas around Seattle, Washington; Boston, Massachusetts; and San Francisco, California.

Food processing accounted for about 10.2 percent of the overall annual value added by manufacturing. Food processing is an important industry in several states noted for the production of food crops and livestock, or both. California has a large fruit- and vegetable-processing industry. Meat-packing is important to agriculture in Illinois and dairy processing is a large industry in Wisconsin.

Transportation equipment includes passenger cars, trucks, airplanes, space vehicles, ships and boats, and railroad equipment. This category accounted for 10.1 percent of the yearly value added by manufacturing. Michigan, with its huge automobile industry, is a leading producer of transportation equipment.

The manufacture of fabricated metal and primary metal is concentrated in the nations industrial core region. Iron ore from the Lake Superior district, plus that imported from Canada and other countries, and Appalachian coal are the basis for a large iron and steel industry. Pennsylvania, Ohio, Indiana, Illinois, and Michigan are leading states in the value of primary metal output. The fabricated metal industry, which includes the manufacture of cans and other containers, hardware, and metal forgings and stampings, is important in the same states. The primary metals industry of these states provides the basic raw materials, especially steel, that are used in making metal products.

Printing and publishing is a widespread industry, with newspapers published throughout the country. New York, with its book-publishing industry, is the leading state, but California, Illinois, and Pennsylvania also have sizable printing and publishing industries.

The manufacture of paper products is important in several states, particularly those with large timber resources, especially softwood trees used to make most paper. The manufacture of paper and paperboard contributes significantly to the economies of Wisconsin, Alabama, Georgia, Washington, New York, Maine, and Pennsylvania.

Other major U.S. manufactures include textiles, clothing, precision instruments, lumber, furniture, tobacco products, leather goods, and stone, clay, and glass items.

B2Energy Production
The energy to power the nation's economyto provide fuels for its vehicles and furnaces and electricity for its machinery and appliancesis derived primarily from petroleum, natural gas, and coal. Measured in terms of heat-producing capacity (British thermal units, or Btu), petroleum provides 39 percent of the total energy consumed in the United States. It supplies nearly all of the energy used to power the nations transportation system and heats millions of houses and factories.

Natural gas is the source of 24 percent of the energy consumed. Many industrial plants use natural gas for heat and power, and several million households burn it for heating and cooking. Coal provides 22 percent of the energy consumed. Its major uses are in the generation of electricity, which uses more than three-fourths of all the coal consumed, and in the manufacture of steel.

Waterpower generates 4 to 5 percent of the nations energy, and nuclear power supplies about 10 percent. Both are employed mainly to produce electricity for residential and industrial use. Nuclear energy has been viewed as an important alternative to expensive petroleum and natural gas, but its development has proceeded somewhat more slowly than originally anticipated. People are reluctant to live near nuclear plants for fear of a radiation-releasing accident. Another obstacle to the expansion of nuclear power use is that it is very expensive to dispose of radioactive material used to power the plants. These nuclear fuel materials remain radioactive for thousands of years and pose health risks if they are not properly contained.

Some 33 percent of the energy consumed in the United States is used in the generation of electricity. In 1999 the nations generating plants had a total installed capacity of 728,259 megawatts and produced 3.62 trillion kilowatt-hours of electricity. Coal is the most common fuel used by electric power plants, and 57 percent of the nations yearly electricity is generated in coal-fired plants. The states producing the most coal-generated electricity are Ohio, Texas, Indiana, Pennsylvania, Illinois, West Virginia, Kentucky, and Georgia.

Natural gas accounts for 9 percent of the electricity produced, and refined petroleum for 2 percent. The states producing the most electricity from natural gas are Texas and California. Refined petroleum is especially important in Florida, New York, and Massachusetts. The leading producers of hydroelectricity are Washington, Oregon, New York, and California. Illinois, Pennsylvania, South Carolina, and California have the largest nuclear power industries.

Petroleum is a key resource for an American lifestyle based on extensive use of private automobiles and trucks for commerce and businesses. Since 1947, when the United States became a net importer of oil, annual domestic production has not been enough to meet the demands of the highly mobile American society.

In 1970 domestic crude-oil production reached a record high of 3.5 billion barrels, but this had to be supplemented by imports amounting to 12 percent of the nations overall crude oil supply. Most Americans were unaware of the dependence of the country on foreign petroleum until an oil embargo imposed by some Middle Eastern nations in 1973 and 1974 led to government price ceilings for gasoline and other energy products, which in turn led to shortages. In 1973 the nation imported about one-fourth of its total supply of crude oil. Imports continued to rise until 1977, when about half of the crude and refined oil supply was imported. Imports then declined for a time, largely because energy-conservation measures were introduced and because other domestic energy sources such as coal were used increasingly. As of 1997, however, 47 percent of the crude oil needs of the United States were met by net imports. Energy Supply, World.

The United States consumes 25 percent of the worlds energy, far more than any other country, despite having less than 5 percent of the worlds population. The United States also produces a disproportionate share of the worlds total output of goods and services, which is the main reason the nation consumes so much energy. In addition, the U.S. population is spread over a larger area than are the populations in many other industrialized nations, such as Japan and the countries of Western Europe. This lower population density in the United States results in a greater consumption of energy for transportation, as truck, trains, and planes are needed to move goods a

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