Economic Restructuring in Superpowers (Edexcel A Level Geography)

• 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

Unemployment in the US and Eurozone

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

• 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

'to restore Britain’s position as the foremost naval power in Europe’

• 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:

'preserve peace, prevent coercion and deter aggression.'

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

Government expenditure on space programs in 2020 and 2022

• 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'

• 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