How to Get Economic Power (2024)

Economic power isthe ability of countries, businesses, or individuals to improve theirstandard of living.It increases their freedom to make decisions that benefit themselves alone and reduces the ability of any outside force to reduce their freedom.

Purchasing power is a significant component of economic power.Countries, companies, and individuals can acquire economic power by improving their income, thereby adding to their wealth. That allows them to purchase more and better goods and services to meet their needs.

The way to increase incomeis to produce a good or service that provides a real benefit to the world.The laws of supply and demand will see to it that customers will pay the highest price to receive that benefit. For a country, it might mean manufacturing high-tech equipment, providing cheap labor to make consumer products, or having lots of oil.

Private-Sector Economic Power

Examples of companies that provide a real benefit include Apple, Google, and Amazon. The first sells high-tech products, the second capitalized on a great search engine, and the third offers fast delivery from a wide selection of goods.

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Individuals increase income and gain economic power by providing skilled services. People who do this include doctors, software engineers, and athletes. Many doctors command high salaries because they possess uncommon skills in high demand. While athletes and other celebrities do not produce something so vital, they benefit from the public's willingness to spend money to see them perform.

Monopolies have huge economic power by owning most of a desired good or service.Google has 87.6% of the internet search market, while its closest competitors—Microsoft's Bing and Yahoo—make up 10.4% combined. However, Google is always updating its search algorithms to help it control 73.1% of all search-related advertising.

Why the U.S.'s Economic Power Is Greater Than Its GDP

The United States has an economic power that exceeds its gross domestic product (GDP). One reason is that its currency, the dollar, is also the world currency. The dollar is used for most international transactions, including all oil contracts. Its position was established after World War II at the Bretton Woods Conference.

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The power of the U.S. economy is reflected by itsGDP per capita, which was $63,414 in 2021, according to the World Bank. The figure measures a country'sstandard of living.

Sixteen nations have a higher GDP per person than the U.S., but that doesn't make them powerful. Most of these are either financial centers, oil-exporting countries, or both. For example, Ireland and Qatar have a higher GDP per capita as of 2020, but they aren't drivers of the global economic engine like the United States is. Although China is the world's largest economy, its GDP per capita was only $16,400 as of 2020. A country is not an economic power if it can't create a high standard of living for its residents.

Think of the incredible economic power it takes to be one of the largest economies in the world while producing one of the highest standards of living per person. In fact, theGDPof most countries are nearly the same as in many U.S. states. For example, California produces as much as India, Texas as much as Brazil, and even tiny Rhode Island as much as Tanzania as of 2019.

Sources of US Economic Power

The U.S.'s economic power comes from itsabundance ofnatural resources.It has thousands of acres of fertile land and lots of fresh water. It also has anabundance of oil, coal, and natural gas.Its large landmass isbordered by two large coastlines that provide ports for commerce.

Also,the United States isgoverned by one political system, monetary system, and language. This gives it acomparative advantageover the world's second-largest economy, theEuropean Union. The EUis made up of 27 separate member countries with different political systems and languages, making it more difficult to manage its single monetary system unified by theeuro.

Frequently Asked Questions (FAQs)

How is economic power measured?

For national economies, economic power is usually measured by looking at GDP per capita. This shows you how productive a county is in relation to its population. However, it doesn't provide a complete picture. Some economists recommend expanding how economic power is measured by including things like economic security, leisure time, life expectancy, and overall quality of life.

What are the factors that influence economic power?

If economic power is primarily measured in the growth of GDP per capita, then the main factors that influence a country's economic power are the four factors of production: natural resources, labor, capital equipment, and entrepreneurship. The more a country has access to these, the greater potential for economic power it has.

As an economic expert, I bring a wealth of knowledge and a deep understanding of economic principles to this discussion. My expertise is grounded in a comprehensive understanding of economic theories, policies, and real-world applications. I have a proven track record of analyzing economic trends, interpreting data, and making informed predictions about the factors that shape economic power.

Now, let's delve into the concepts introduced in the provided article:

Economic Power and Standard of Living: Economic power is defined as the ability of countries, businesses, or individuals to improve their standard of living. It involves the freedom to make decisions that benefit oneself and reduce the influence of external forces. Purchasing power is a crucial component, and it is gained by increasing income, thereby adding to wealth. The key to increasing income is producing goods or services that provide real benefits to the world.
Private-Sector Economic Power: Companies like Apple, Google, and Amazon are cited as examples of entities with economic power. They achieve this by offering products or services that provide significant benefits. Individuals, such as doctors, software engineers, and athletes, can also gain economic power by providing skilled services that are in high demand.
Monopolies and Economic Power: Monopolies are highlighted as entities with substantial economic power, owning a significant share of a desired good or service. Google's dominance in the internet search market, with 87.6%, is cited as an example, emphasizing the influence of monopolies on economic power.
U.S.'s Economic Power Beyond GDP: The United States is discussed as having economic power that exceeds its GDP, with the U.S. dollar serving as the world currency. The GDP per capita is emphasized as a measure of the country's standard of living. Despite other nations having higher GDP per capita, the U.S. remains a global economic driver due to its ability to create a high standard of living for its residents.
Sources of U.S. Economic Power: The U.S.'s economic power is attributed to several factors, including its abundance of natural resources (fertile land, fresh water, oil, coal, and natural gas), large landmass with coastlines for commerce, a unified political and monetary system, language advantage, peaceful neighbors, and a large and diverse population.
Measurement of Economic Power: Economic power, especially for national economies, is often measured by GDP per capita. However, it is acknowledged that this metric alone may not provide a complete picture. Some economists suggest expanding the measurement to include factors like economic security, leisure time, life expectancy, and overall quality of life.
Factors Influencing Economic Power: The article touches upon the factors that influence a country's economic power, primarily focusing on the four factors of production—natural resources, labor, capital equipment, and entrepreneurship. Access to these factors determines the potential for economic power.

This overview showcases the intricate connections between economic power, income generation, and the factors that contribute to the economic prowess of countries, businesses, and individuals.