The United States’ Economy

With an annual gross national product (GNP) of about $13 trillion in 2006, the United States is the world’s largest and most powerful economy by a wide margin. By any measure, the country is an economic giant. In fact, it is responsible for about 30 percent of all of the world’s economic production and services! To place the country’s economic strength in perspective, were California an independent country, it would be the world’s fifth-ranking economic power! Texas and New York would be close behind, also in the top 10.

Many factors contribute to a country’s economic development, and the United States has benefited from several. The country’s location is in the easily developed temperate midlatitudes but has extremities that extend into both the tropics and the arctic. Because of this environmental diversity, the United States can engage in any climate-dependent economic activity. The country is strategically positioned between the world’s largest populations and the thriving economies of Europe and East Asia. It faces three oceans that allow inexpensive access to world resources and markets, as well as offering protection for much of the country’s periphery. Economic growth also has been spurred by the country’s wealth of natural resources, including metals and fuels, productive and diverse ecosystems, abundant water and fertile soils, and many other elements that are essential to economic growth.

Humans also are important resources. No country can match the United States in terms of its well-educated, skilled, healthy, and hardworking labor force. Unlike many countries, the United States has ample space for future human settlement and economic development. As has already been emphasized elsewhere, the economic system—the means of production, the variety and efficiency of services, and the ways in which wealth is distributed—and a stable government have been the keys to more than two centuries of prosperity. In a free market economy, individuals and businesses can pursue their economic goals with little government interference.


Many factors influence a nation’s level of economic well-being. You already have seen how vital a role government plays in this process, but that is only one of many pieces of a much larger economic picture. It may seem that a vast area of land, a wealth of natural resources, and a large population would be keys to strong economic development, but a survey of the world’s countries clearly shows that none of these factors alone can ensure a strong economy. Ultimately, the most important key to economic development is a people’s cultural system. Space and natural elements are of no value until they are used by humans. Needs, perceptions, and values all play an important role, as do available capital and technology, human resources, the economic system, laws and customs, and a number of other cultural factors.

Environmental Resources

Natural resources are things in nature that people use. Environmental resources can and often do provide a solid foundation for economic development. Former Chinese leader Mao Tsetung once suggested that there is no such thing as unproductive lands; rather, there are only unproductive people. The United States is extremely fortunate in having a varied and abundant natural endowment, but it is the country’s human resources, a stable government, and adequate capital and technology—all components of the American cultural system—that have made the country so economically successful.

As you learned in Chapter 2, no country can match America’s environmental diversity or the wealth of its natural resource endowment. It has a wealth of land features, climates, natural vegetation and animal life, soils, water features, and natural resources. No country comes close to equaling the United States in terms of its quantity of productive land, either.

Agriculture thrives on the country’s huge expanse of relatively flat land, with adequate moisture, good soil, and a long growing season. Where nature fails to provide adequate moisture, abundant capital resources and technology make irrigation of crops possible. Because of the diverse environmental conditions in the United States, any of the world’s crops or animals can be raised somewhere in the country. Huge expanses of forest support a productive logging industry, just as the oceans provide many valuable marine resources. Highlands attract tourists and retirees and also serve as giant sponges that take up and gradually release water into hundreds of streams that join to form the nation’s major rivers. As you learned in Chapter 4, climate played a major role in the Snow Belt-to-Sun Belt migration of
people and businesses.

The United States has been blessed with a wealth of mineral resources, as well. Mineral fuels are essential to economic growth, and the country has been able to tap vast supplies of petroleum, natural gas, coal, and uranium. Manufacturing industries have had access to huge deposits of iron ore, copper, lead, zinc, and many other metals, and the country has benefited from large stores of precious minerals, including gold, silver, platinum, and gemstones.

Culture and Economic Prosperity

Many cultural factors also have contributed to America’s economic development. A strong “Protestant work ethic” was introduced by northwestern Europeans. These same people introduced the ideas and practices associated with the Industrial and Commercial revolutions that began several centuries ago in the British Isles. Once they became rooted, the ideas of manufacturing and marketing the goods produced spread rapidly along the eastern seaboard, as did the growth of early industrial cities. The important idea of a market-based economy also came from northwestern Europe. Americans have been world leaders in inventions and innovations that have made the United States the unchallenged world leader in technology. To name but a few, where would we be without electricity, telecommunications, airplanes, and the computer and Internet? These and many other developments have helped the U.S. economy become the world’s strongest.

A well-integrated network of highways and railroads, airways and waterways, pipelines and transmission lines, and other distribution networks is essential to economic development. The United States is fortunate to have excellent facilities and networks in each of these vital categories. These linkages support production, distribution, and provision of services that are essential to economic growth and stability.

Many other factors also are of great importance, but a detailed list would far exceed the scope of this book. The financial sector, for example, is extremely complex and also essential to economic growth and stability. Banking; credit, including the use of credit cards; and the stock and commodity markets are important, as are advertising, marketing, regional and global economic alliances, and an affluent consumer-oriented society.

To be successful in today’s economy, one must think globally. The price of commodities here in the United States is often influenced by events in some distant land. Conflict in the Middle East, for example, has caused an increase of the price of gasoline. Drought in China or Brazil can mean a banner year for soybean farmers in the United States, and financial problems in Japan or terrorist activity such as that which occurred in New York City on September 11, 2001, can cause staggering losses in the stock market. Many Americans are concerned about the practice of “outsourcing”—turning to foreign sources for less-costly labor, manufactured goods, and various services. All Americans benefit from lower costs, but the practice can create hardship for some workers who are unable to adapt to changing conditions. This is particularly true of many blue-collar workers who lack the education and skills to move into white-collar jobs.


Economic activities can be divided in several ways. The classification system most commonly used by geographers is based on how people make their living and the skills or knowledge needed to adequately perform their tasks. Most jobs in the extractive industries (farming, fishing, mining, and lumbering), for example, require some skill and considerable physical labor but little formal education. Levels of schooling tend to be low, as are the incomes of most people engaged in these industries, and jobs tend to be tied to one location, as are the people who depend on them. People who work in these “primary” industries often have little awareness of the world that exists beyond their own community or area.

At the opposite extreme are workers who provide specialized services. They are educated professionals who are usually highly paid for their services. Executives, physicians, educators, research scientists, airline pilots, and many other highly skilled people fall within this category. People engaged in these activities are quite mobile. (The author, a college professor, has moved about 20 times.) Increasingly, they work in a “global arena” and must be keenly aware of events that occur throughout the world: They must think geographically. The jet age has placed nearly any city in the world within a day’s reach, and telecommunications and computers have shrunk the world into one small neighborhood. We live in an “information age.” Today, one can easily communicate almost instantaneously with people anywhere in the world. Perhaps more than any other factor, this has changed the way in which business is done in the new and still emerging global marketplace.

Primary Industries

Primary industries are economic activities based directly on the extraction or exploitation of natural resources. As the nation becomes more concerned about various environmental quality issues, these industries—such as logging, mining, fishing, and farming—have become increasingly subject to various legal restrictions and limitations. Today, only a small number of people, about 2 percent of the population, are engaged in primary industries, and the number continues to decline sharply.


Traditionally, agriculture—ranching or farming to produce food, beverage, and fiber—has been the primary industry that involves the greatest number of people; however, today, less than 1 percent of all Americans are involved in agriculture. Nonetheless, the United States is the world’s greatest producer of agricultural commodities by a wide margin. Farmers have been helped by a favorable climate, fertile soils, and abundant relatively flat land suitable for large mechanized equipment. The country also has benefited from outstanding agricultural research and technology. A major step in this direction was taken by the 1862 Morrill Land-Grant Act, which created land grant colleges. These institutions (which often incorporate “State” in their names) place heavy emphasis on agricultural research.

Although the number of farmers and ranchers has declined steadily for nearly half a century, the size of agricultural operations has increased greatly, as has agricultural production.

Today, huge farms and livestock or poultry raisers have replaced small family units. Most specialize in a single crop or type of livestock or poultry. The result has been record production that shows no sign of slowing. In fact, farmers are so successful that Americans now use 20 percent of corn in our vehicles (ethanol), rather than for livestock or in food and beverage products! Fishing Fishing is a troubled industry. Initially, fish, shrimp, lobsters, crabs, oysters, and other marine resources were abundant in America’s waters. Today, however, overharvesting has resulted in many species becoming severely depleted. Not only is the cost of most seafood outrageously high, but many species, including salmon, shrimp, oysters, tilapia, and crawfish, are now “farmed.” The demand for seafood nonetheless continues to increase. If the global sea is going to continue to be productive, international laws must be adopted and enforced to protect this fragile ecosystem and its resources.

Mineral Extraction

Mineral resources—fuels, metals, stone, and clay—have long been a backbone of American economic growth. One could even argue that the country’s mineral wealth was instrumental in its rise as the world’s leading economic power. Until very recently, the United States had adequate supplies of coal, petroleum, and natural gas to fuel its economy. Essential metals, including iron, lead, zinc, and copper, were abundant, as were a number of alloys and precious metals. Only during recent decades has the country been forced to rely more on foreign sources for many minerals. Many political, economic, and scientific leaders are concerned about the country’s future energy supply: America has become increasingly dependent on foreign—and often politically unstable—sources for petroleum. Coal, of which huge deposits exist, is a “dirty” energy source, and its use is discouraged by many people who are concerned about environmental quality. Rich uranium deposits exist, but the idea of generating electricity with nuclear energy worries some people.


Of all primary industries, perhaps none is under greater attack by environmentalists than logging. Can you imagine, though, not having wood for building, pulp for packaging and paper, and other industrial products that depend on the logging industry? Forests once covered much of the country with the exception of lower elevations in the central and western interior. In the West, dense forests of redwood, fir, pine, spruce, and other valuable species stretched from central California northward into Alaska. Today, however, much of the lumbergrade natural timber is either gone or is growing in protected sanctuaries such as parks or federal wilderness areas. Paradoxically, during recent decades, woodlands have actually increased in area. “Tree plantations,” acreages on which trees are grown as a crop, are scattered throughout the South. In the Northwest, as trees are cut, they are replaced (although it can take centuries for some trees, such as the giant redwoods, to grow to harvestable size).

Secondary Industries

Secondary industries are those that process natural resources or agricultural products. They include most types of manufacturing, the construction industries (which use stone, gravel, cement, clay, or other earthen material), food processing, and energy production. Smelting and refining, steel production, and industries that manufacture products such as petrochemicals, textiles and garments, and automobiles and aircraft fall within this category. Today, much of the world’s secondary economic activity has shifted from the Western industrial world to less-developed countries. In places such as China, Indonesia, and Mexico, wages and other costs are much lower. In addition, labor and environmental laws are lax or nonexistent. Since the end of World War II, the number of Americans engaged in secondary industries has declined from about 40 percent of the workforce to about 10 percent, and the number decreases every year.

Tertiary and Other Related Activities

Today, about 84 percent of all employed Americans are engaged in tertiary or related industries, those that provide a special service of some kind. Perhaps you have heard of the “postindustrial,” or “information-based,” economy. This type of activity dominates the economy of all developed countries.

Many people involved in tertiary economic activities work in wholesale or retail positions. Examples include those who transport and deliver goods and those who work in sales. Teachers and professors, law enforcement officers and attorneys, physicians and nurses all work in the tertiary economic sector, as do professional athletes and other entertainers, pilots and other airline personnel, and administrators. As this sector continues to grow, it will need millions of people who are well educated,
possess some useful technological skill, and are good communicators. Geographers and others in the geospatial sciences, for example, think globally, and many have mastered geographic information systems (GIS) technology and its applications. This ability is in such demand that geography and GIS rank among the very highest growth employment fields.


How many of your possessions did you create yourself? For most of us, the answer is “none.” Nearly everything we own, consume, use or come in contact with has come from someplace or someone else. Whether a stalk of celery, a stick of gum, automobile repair, or a haircut, the item or service was either produced or provided by someone other than you. It also involved transportation of either the product, or of you to the service. At various steps of the transfer, money was exchanged for the product or service. This, basically, is what trade and commerce entail.

Trade and commerce can involve something as local as a farmer growing produce and selling it at a roadside stand near his home. It also can involve a very complex series of exchanges that reach hundreds, if not thousands, of providers located throughout the global community. Your “Made in the USA” car, for example, may be manufactured by a Japanese corporation and made from components provided by dozens of countries around the world. (Just for fun, do a quick survey around your home and make a list of the items that are of foreign origin.) Obviously, the United States is unable to provide all of the goods and services that Americans consume or use. Americans produce many things in excess of our own needs, though, and this is the basis for international trade that involves exports and imports.

Not surprisingly, the United States and Canada are each other’s major trading partner. In fact, more trade flows between these two countries than between any others in the world. In 1988, Canada and the United States signed the mutual Free Trade Agreement (FTA). In simplest terms, it removed high tariffs (taxes) on goods exchanged between the two countries. In 1994, Mexico was included in what became the North American Free Trade Agreement (NAFTA). In 2007, approximately 50 percent of all U.S. trade involved its two NAFTA member neighbors.


The U.S. economy is the world’s strongest and most stable. As mentioned previously, it produces approximately $13 trillion in goods and services annually. Most economic indicators are strong: The nation’s economy is growing at about 3 to 4 percent every year, the annual rate of inflation is less than 3 percent (May 2007), unemployment is below 5 percent, and the percapita gross domestic product is $43,500 (2006). There also are problems, however. For example, in 2007, the country carries a huge national debt, nearly $9 trillion (about $29,300 for each man, woman, and child). Also, in 2006, the country imported $765 billion more in goods and services than it exported, resulting in a huge and growing trade deficit.

As you have learned, the U.S. population is aging. As senior citizens leave the workforce, there are fewer and fewer young people to replace them. Increasingly, these jobs are filled by international workers, an estimated 11 to 13 million of whom are undocumented, or in the country illegally. As people retire, they are eligible for both social security and Medicare. Both programs are critically underfunded and will impose a huge financial burden on future workers. As the nation moves even further into the postindustrial information age, it requires an ever-increasing number of highly educated and highly skilled workers. American education, according to many experts, is unable to meet the demand. If future generations are to compete successfully in the global economy of the twenty-first century, they must understand the world in which they live. A strong background in geography certainly is one step toward achieving this goal, yet most states emphasize history, rather than geography, in their curriculum. In this regard, it must be remembered that a society that understands and lives a good geography will surely leave a good history.