Economic Restructuring in Superpowers (Edexcel A Level Geography)

Economic Problems

• The USA and EU face ongoing economic challenges, these include:

  • Debt

  • Economic restructuring

  • Unemployment

  • Social costs

Debt

• In 2007-2008 there was a global debt crisis which started in the US 

  • It rapidly spread around the world as so many countries are dependent on the US as a trade partner

• Prior to 2007 there were low interest rates and many borrowers took the opportunity to take out loans

  • The banks allowed even those people with poor credit history to take loans and mortgages (sub-prime lending)

• In 2006 house prices fell and the borrowers owed more on their homes than they were worth

• Interest rates increased and many people could no longer afford the repayments

• This meant that the banks and lenders went out of business

• In 2008 Lehman Brothers bank filed for bankruptcy this led to the stock markets and price of oil falling

• Governments around the world tried to bailout the banks and prevent the collapse of the banking system

• In the UK Lloyds bank and RBS were given government funds to prevent their collapse, Northern Rock and Bradford & Bingley were nationalised 

  • It is estimated that these interventions cost £137 billion significantly increasing the UK's debt

• The increase in debt was common in many countries around the world

• The UK debt was £2.4 trillion in 2021 and the US debt was $30 trillion

• and led to:

  • Reduced spending on public services

  • Increased unemployment

  • Lower demand for goods and services

  • Political instability

• The US increased their borrowing and national debt to avoid a reduction in consumer spending 

Economic restructuring

• There are two aspects to economic restructuring:

  • The global shift of manufacturing to emerging and developing countries

  • The shift in employment in developed countries to tertiary and quaternary economic sectors

• This has led to deindustrialisation which causes:

  • An increase in unemployment in traditional manufacturing areas such as South Wales and the North-West of the UK

  • A spiral of decline (negative multiplier effect) where people leave the area, so services and quality of life decrease so more people leave

  • A need for investment in these areas to attract new businesses and jobs, this places increased financial pressure on the government

Unemployment

• The USA and EU have experienced increased unemployment as a result of:

  • Deindustrialisation

  • Global financial crisis

Social costs

• In areas where deindustrialisation has occurred the social costs have been high, many areas have experienced:

  • An increase in people with mental health problems

  • A decrease in quality of life

  • An increase in migration from the area

  • An increase in crime and vandalism

• This has led to a need for investment, regeneration and retraining, all of which are expensive

• The US and EU also face additional social costs from:

  • An ageing population

  • Decreasing working age population 

• This has led the UK, France and other countries to increase the state retirement age in a bid to reduce costs

Economic Costs of Maintaining Military Power

• A key part of being a superpower or emerging power is military strength 

  • This is essential in the utilisation of 'hard power'

• Maintaining and expanding military resources is expensive

  • The US spent $801 billion on defence in 2021

  • China was second highest at estimated US$293 billion

• In the US the defence budget accounts for 10% of all government spending

Naval power

• The US currently has 296 ships in the Navy 

• There is building political pressure to increase this to at least 355 

• The UK has significantly decreased the Naval fleet since the 1950s but in 2020 Boris Johnson announced the intention to

• European naval forces have decreased by approximately 32% since 1999

• The reduction in naval forces have been due to successive governments attempts to reduce costs

Nuclear weapons

• There are currently nine nuclear powers 

Countries with nuclear weapons

• In 2016 the UK government voted to replace its continuous at sea deterrent (CASD) by replacing the Vanguard submarines with new Dreadnought class submarines

• NATOs nuclear deterrence policy states that the weapons are there to:

Air power

• Much of the recent military focus has been on air power rather than naval power due to the speed of response

• In 2021 the UK announced £700 million investment in new helicopters and transport aircraft 

• US Air Force spending has increased from $164 billion in 2011 to $222 billion in 2022

Intelligence services

• Increasing terrorism risks have led to greater spending on the intelligence services

  • In the 12 years after the September 11th attacks on the US $500 million has been spent on the intelligence services

  • In 2021 it was announced the UK intelligence services would have a £0.7 billion increase in 2024/25

Space exploration

• The US has by far the greatest expenditure on space exploration

• The cost of NASA's new Artemis mission is predicted to be $93 billion up to 2025

Questions about military spending

• In superpowers and emerging powers, such as the US and the EU, the amounts of money spent on maintaining global military power is increasingly being questioned

• One argument is that the focus of global influence is now on 'soft powers' and the relevance of the military is reduced

• A second argument is that the money would be better spent on reducing poverty, infrastructure and healthcare rather than on 'hard power'

Future Balance of Global Power

• A rapid shift in global balance of power has occurred since the end of the Cold War

• The number of emerging nations have increased and hegemonic status of the US is not certain in the future

• The US is still dominant in terms of economic and military power, its soft powers are not as influential as in the past

• In 2030 it is predicted that China's economic status will almost have surpassed the US

  • China has also announced plans to modernise China's military by 2035

  • The use of soft power is also an area that China is increasingly focussed on, promoting Chinese language, educational exchanges and the expansion of the media

  • It is unlikely that China will yet have the political and cultural influence to challenge the hegemonic status of the US

• In 2050 there may be significant changes in the balance of powers

• The world may be bi-polar with the US and China as the opposing superpowers

• Alternatively it may be a multi-polar world with other emerging powers such as India and the EU achieving similar levels of power

• It is not possible to accurately predict the changes as world events are unpredictable - recent events that may impact on the balance of power include;

  • Russia's invasion of Ukraine and the ongoing conflict

  • Brexit - the UK leaving the EU may weaken the power and influence of the union