7.9A Economic problems

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

  • Debt
  • Economic restructuring
  • Unemployment
  • Social costs
• Debt

  • The 2007/09 financial crisis caused massive debt levels
  • 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 t
  • 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)
  • A need for investment in these areas to attract new businesses and jobs
• 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
  • 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