The economies of most of the countries are developing toward world globalization, which increases the role of such phenomena as migration of capital, and international trade, which in turn is directly connected with the national debt. In 1985, a vital change took place in the state of the international assets of the US, where not long before that year, notably in 1981, where US was a net creditor for the period starting from 1917, where its international assets exceeded the foreign assets in the US. This paper discusses the path the USA had taken to move from being a net debtor to a net creditor.
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Omitting the period from1985, the US economy is a result of long development and achieved due to many factors. As ancillary elements for these factors, such points could be mentioned as natural resources, the absence of precapitalistic relations the remnants of which could have prevented the development of production, and the expanding of consumption market.
Additionally, it should be noted that the negative influences of wars did not affect the development in the US, as military actions on the territory of the US last time took place during the civil war, and world wars which decelerated the development of the other participants contributed to the rapid growth of the American economy.
The movement from a net debtor to a net creditor was a result of the successful domestic growth of the economy. This growth was initiated by the established freedom of economic activities. The antitrust legislation founded by the Sherman Act in 1890 and revised through 1899, 1909, 1911, and 1919 prohibited collusions that divide markets, the artificial support of prices, and the monopolization of the market by large companies and companies’ mergers that lead to breaking the competition. The start of the growth was influenced by the transformation from “a pre-dominantly rural-agrarian economy into an urban-industrial powerhouse.” (Atack, Passell and Lee 489)
The boom before the depression period was similar in a way to the boom following the end of World War II. The post World War II period can be characterized by the reorientation of the US economy toward civil needs, the restoration and the expansion of the role of the consumer demand as the engine of economic growth, and the establishment of the programs of anti-crisis government regulations.
In that sense, “the war fundamentally changed America’s role in the world economy from a debtor nation, owing to some $3.7 billion in 1914, to a creditor nation owed almost $12.6 billion in 1920.” (Atack, Passell and Lee 573) Similarly, after World War II, in the international arena, the period was characterized by an absolute economic superiority, where the US contributed to the restoration of the Western European countries and actively expanded the export of the loan and entrepreneurial capital into these countries.
The net debtor position was shifted when foreign investments in the US such as railroad and canal construction were withdrawn from the US to finance World War I and turned the US into a net creditor. “This net creditor position grew unabated after World War II and into the 1980s, when large inflows of foreign investment once again turned the nation into a net international investment debtor.” (Jackson 8)
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Atack, Jeremy, Peter Passell, and Susan Lee. A New Economic View of American History : From Colonial Times to 1940. 2nd ed. New York: Norton, 1994.
Jackson, James K. “The United States as a Net Debtor Nation: Overview of the International Investment Position”. CRS report 2009. Web.