German, Greece And The UAE’ Economies Comparison Sample Paper

Introduction

Germany, Greece, and the U.A.E are notable economies in Europe and the Middle East. Many countries have emulated their economic models (The Global Economy 2015). For example, Saudi Arabia has tried to emulate the U.A.E’s diversification strategy to decrease its reliance on the energy sector (The Global Economy 2015). This strategy has led to the growth of the non-oil sector and the emergence of new economic sectors such as tourism and real estate industries that contribute to the country’s Gross Domestic Product (G.D.P). Other Gulf Cooperation Council (GCC) countries have also emulated this economic model with varying successes (Mallakh 2014).

Germany is a leader in the European Union (E.U) because it has managed to maintain a positive balance of payment, even when most industrialized economies are struggling with current account deficits (Owen-Smith 2012). Experts have used this country’s economic success to emphasize the importance of fiscal and monetary discipline in the financial sector (Owen-Smith 2012). Comparatively, they have used Greece’s economic troubles to demonstrate what not to do in terms of national economic management (Close 2014). Based on an overview of these economic characteristics, this paper explores the characteristics of the three economies with the view of identifying unique similarities and differences that would help explain what makes the three economies tick.

This analysis provides adequate information to understand the current economic situation in the three countries and predict their economic outlook as well. To come up with a comprehensive understanding of this research focus, this paper explores three key economic attributes of these economies – unemployment rate, GDP growth, and balance of payments. These variables come from an assessment of the economic model Y= C+I+G+X-M. The Y = equilibrium level of national income, C = level of consumption of goods and services, I = domestic real investment in buildings, G = government expenditure, X = foreign expenditures on goods and services and M = the level of imports (in terms of goods and services purchased from other countries).

X and M explain the need to analyze the balance of payment as an important economic performance indicator, while C highlights the need to analyze unemployment (employment) rates. Lastly, Y and G emphasize the importance of analyzing GDP as another economic performance indicator. This study uses these variables as the main economic performance indicators. However, before comparing the economic performance of the three countries, this way, it is important to understand their characteristics first.

Economic Characteristics

Greece

Global economic statistics rank Greece as a developed and high-income economy (The Global Economy 2015). Greece is among the largest 50 economies of the world (The Global Economy 2015). Its purchasing power parity of $238 billion ranks it as the 51st largest economy in the world (Close 2014). Regionally, Greece is part of the European Union. Despite its troubles in the economic bloc, the country has the 13th largest economy in the union (Close 2014).

Greece’s economy mainly relies on the service sector, which accounts for more than 80% of the country’s economic revenue (Close 2014). The huge contribution of tourism and shipping industries explain the country’s reliance on the service sector. About 16% of the economy is industry-based. Agriculture contributes a paltry 3% of the country’s economic output (Close 2014). Within the Balkans region, Greece is a significant investor and a powerful economic force (Close 2014). Since joining the E.U, in the 1980s, Greece uses the Euro as the country’s main currency.

The U.A.E

The U.A.E economy is among the largest economies in the Arab world (it is second to Saudi Arabia). The country’s GDP is $570 billion (Mallakh 2014). Although it primarily depends on the energy sector as its key revenue earner, recent diversification efforts have improved the contribution of the non-oil sector to more than 70% of the country’s G.D.P (The Global Economy 2015). By virtue of being part of the G.C.C, the UAE economy is the most diversified in the Arab world. Diversification mostly characterizes one emirate – Dubai. Other jurisdictions have adopted a conservative approach to this strategy (Mallakh 2014).

For example, Abu Dhabi (the country’s capital) still mainly relies on oil revenue (Mallakh 2014). Consequently, more than 76% of the country’s budget financing comes from the energy sector (The Global Economy 2015). Besides the vibrant oil sector, tourism is a major income earner in the UAE. Furthermore, the real estate and construction industries contribute to UAE’s economic growth (experts estimate that there are about $350 billion worth of ongoing construction projects in the UAE) (Mallakh 2014). The service sector also plays a secondary role in improving the U.A.E’s economic fortunes.

This sector has accounted for tremendous economic growth in the past five decades. Broadly, experts say since 1971, the economy has grown more than 200 times (The Global Economy 2015). As mentioned in this report, the discovery of oil contributed to most of this growth. Comparatively, the non-oil sector has grown by about 28 times since the early 1980s to 2012 (The Global Economy 2015). The country’s diversification policy is the main reason for the U.A.E’s impressive economic growth. For example, in 2014, the economy expanded by 5% because of the country’s diversification policy (The Global Economy 2015). According to the diagram below, the country’s G.D.P has been on an upward trajectory

The U.A.E G.D.P growth (Source: Zawya 2014).
Figure 1: The U.A.E G.D.P growth (Source: Zawya 2014).

Germany

The German economy is among the biggest economies in the world. The United States (U.S), China, and Japan are the only economies that rank higher than Germany (in terms of economic size) (Owen-Smith 2012). It has the fourth largest nominal G.D.P, globally (Owen-Smith 2012). It is also the biggest national economy in Europe and primarily relies on a social market economic policy. It is also heavily dependent on the export sector, with cars and pharmaceuticals being its primary export commodities (Owen-Smith 2012). The vibrancy of this sector has created a budget surplus of $282 billion in the country (The Global Economy 2015).

By virtue of being the biggest capital exporter in the world (and the third largest exporter in the world), Germany receives more than $1.5 trillion in revenue from its export businesses (The Global Economy 2015). In terms of G.D.P contribution, the service sector contributes more than 70% of the country’s output (Owen-Smith 2012). Industry and agriculture contribute the rest of the country’s G.D.P. Since the unification of East and West Germany, the country has had a steady population of 80 million people (The Global Economy 2015). Although this figure is on the decline, the German economy has remained steadfast.

This observation appears on the graph below.

G.D.P growth rate in Germany (Source: Waechter 2013).
Figure 2: G.D.P growth rate in Germany (Source: Waechter 2013).

Based on the above graph, the G.D.P growth rate in Germany has been on an upward trend, until the 2007/2008 economic crisis, which caused a sharp decline of this metric. However, since the global economic recovery started in 2009, the country has reported increased G.D.P growth (Waechter 2013).

Similarities and Differences among the Three Economies

Similarities

Greece and Germany are both members of the E.U. They use the Euro as the main currency. Unlike Greece, the UAE and Germany both have a positive current account balance. Germany’s current account balance is $239 billion (The Global Economy 2015). Comparatively, the UAE has a positive current account balance of $66.6 billion. Greece has a negative current account balance of 1.1 trillion (The Global Economy 2015). The service industry is also a significant G.D.P contributor in all the three nations. Although Greece leads the pack in this regard, the U.A.E and German economies also depend on their service industries for economic prosperity. Economic growth is another similarity that defines the three economies. The diagram shows this phenomenon

Economic growth: The rate of change of real G.D.P (Source: The Global Economy 2015).
Figure 3: Economic growth: The rate of change of real G.D.P (Source: The Global Economy 2015).

An overview of the above graph shows that the three economies have the same trend, in terms of economic growth. For example, the economic growth rates of the three economies plummeted during the 2007/2008 economic crisis. However, the U.A.E and Germany have done a better job of recovering from it.

Differences

The German economy is by far the biggest economy compared to the U.A.E and Greece. A comparison of the U.A.E and Germany shows that the latter is nine times bigger than the U.A.E economy (in terms of G.D.P). A graphical representation of this comparison appears below

Comparison between German and the U.A.E G.D.Ps (Source Owen-Smith 2012).
Figure 4: Comparison between German and the U.A.E G.D.Ps (Source Owen-Smith 2012).

The difference, in terms of G.D.P, per capita, for both countries, is relatively small (compared to their national G.D.P differences). Germany has a G.D.P per capita of $46,268, while the U.A.E has a G.D.P per capita of $43,048 (The Global Economy 2015). Germany still fares better in this regard.

Germany and the U.A.E both have low unemployment rates of 5% and 3%, respectively, but Greece’s unemployment rate is more than 21% (The Global Economy 2015). This problem stems from the country’s debt problem. The graph below shows a comparison of the unemployment rates in the three countries

Unemployment rates of Germany, Greece, and the U.A.E (Source: The Global Economy 2015).
Figure 5: Unemployment rates of Germany, Greece, and the U.A.E (Source: The Global Economy 2015).

Based on the above diagram, Germany offers more job opportunities to its citizens than Greece. Although the U.A.E has a relatively lower unemployment rate than Germany, the European nation has done a better job of reducing its unemployment rate after the 2007/2008 economic crisis. Comparatively, Greece’s unemployment rate has soared after the crisis. It is the highest in Europe (Close 2014). Not only does Germany have low unemployment rates, it is a lucrative destination for investment because it has a higher worker output per capita, than both Greece and the U.A.E combined (Close 2014).

Comparatively, Greece’s economic output per person is lower than Germany because it pays its workers high wages for little output, thereby making it a less attractive investment destination compared to its peers (Close 2014). In fact, its G.D.P per capita is like most less developed countries. This is why, over the years, Germany has increased its wealth, while Greece has decreased its wealth.

While Germany may fare better than Greece and the U.A.E in terms of economic performance, it is important to understand that population size is usually directly proportional to the economic potential of a country (Mallakh 2014). Compared to Greece and the U.A.E, Germany has a significantly higher population (more than 80 million people). Comparatively, Greece has a population of 11 million people, while the U.A.E has a population of 9 million people (Mallakh 2014). These figures show that Germany’s population is ten times higher than both countries. This statistic partly explains Germany’s big economic size.

The U.A.E economy differs from that of Germany and Greece because it is primarily dependent on the oil sector. Comparatively, the Greek economy is dependent on the service sector, while the German economy is dependent on the manufacturing sector. An assessment of the G.D.P growth rates across both countries also shows that the Greek economy performs poorly than both Germany and the U.A.E.

Economic Futures

Unemployment

Seven years into the debt crisis, Greece has not improved its economic performance. Although it was at par with America (in terms of unemployment and G.D.P growth) during the 2007/2008 economic crisis, the latter has made tremendous strides in improving its economic performance (The Global Economy 2015). Greece still lags behind in this regard (see appendix one). It is still early to predict the future of Greece’s economy because the country’s debt burden is still high ($360 billion) (Close 2014). This burden paints a gloomy picture of the country’s potential to improve its economic fortunes. The government’s budget cuts do not help in improving the economic performance of the country either because they are bound to slow the economy. The unemployment problem in Greece is likely to worsen because the country’s population of unemployed youth is at an all-time high. This bleak picture comes from the fact that unemployment at a young age tends to stifle the prospects for improved wages and employment opportunities in the future (Close 2014). Nonetheless, unlike the U.A.E both Greece and Germany are suffering declines in population growth. This is a concern because it is unclear how both economies will power future economic growth.

Current Account Balances

Although Greece continues to suffer from a negative current account balance, ongoing efforts to revive the economy should improve this index. The growth of the U.A.E non-oil sector is also likely to improve the country’s current account balance in the same way. In fact, based on the graph below, the U.A.E is likely to have a more positive current account outlook than both Germany and Greece combined.

Current Account outlook as a percentage of G.D.P (Source: The Global Economy 2015).
Figure 6: Current Account outlook as a percentage of G.D.P (Source: The Global Economy 2015).

Nonetheless, Germany will continue to tower over Greece and the U.A.E, in terms of realizing the benefits of a positive balance of payment because of its innovative culture and competitiveness. Indeed, the European nation is a fundamentally stronger economy than both the U.A.E and Greece combined (The Global Economy 2015). The U.A.E’s main export is oil, but this resource is slowly dwindling. Comparatively, Germany’s diversified exports are likely to grow and further improve its balance of payment. Comparatively, Greece’s competitiveness is low because of high wages.

Therefore, it is likely to continue suffering from low exports and a negative balance of payment. Greece has only one major export – tourism. However, this resource may decline because of increased competition with other tourism destinations in Europe (especially because it is part of the E.U). This concern explains why some observers propose that Greece should leave the E.U to improve its tourism exports (Close 2014). If it does so, it would revert its national currency to the drachma, which would be cheaper than the Euro and attract more tourists.

G.D.P

The U.A.E and German G.D.Ps are likely to improve in later years because both countries do not have outstanding tax debts as Greece does. Particularly, the performance of the U.A.E economy is likely to improve on the back of the energy sector and the non-oil sector. The country’s diversification strategy should spur this growth as it diverts attention from the energy sector to other economic sectors that have similarly high potential for growth. Therefore, the country’s business environment should improve on the back of an increasingly transparent economic environment that is likely to improve investor confidence because of minimal operation risks.

It is difficult to transfer the same optimism to Greece because it has had a problem of taxpayers remitting their returns to the government, thereby undermining the government’s efforts of paying its debts and reviving the economy (Close 2014). This difference not only explains possible reasons why both the U.A.E and Germany could scale to greater heights of G.D.P growth, but also contrasts the outcomes of disciplined and “extravagant” governments. Germany also has higher technological prowess than Greece does (Owen-Smith 2012). The U.A.E’s efforts to embrace new technology also give it the same economic advantage as Germany. Comparatively, Greece’s technological advantage has continued to decline in the wake of a slow economy. It is an example of how a wealthy nation could slip back in the path of economic progress. In fact, its G.D.P decline is among the greatest in history (see appendix two).

Summary

This paper has shown that Greece, Germany and the U.A.E are dominant economies in Europe and the Middle East. Although they have achieved significant levels of success in this regard, they have few similarities. Besides being members of regional economic blocs (such as the E.U and G.C.C) and relying on a few economic sectors for growth, this paper found many differences among the three economies. Therefore, they account for their varying economic differences. Germany emerged as the most dominant economy among the three countries sampled. Its current and future economic prospects are also promising because of strong economic fundamentals, such as a strong regional competitiveness, low unemployment rates and a large global market share for its goods and services.

The U.A.E also shares similar economic prospects because of its diversification policy. However, its current reliance on the oil sector continues to plague the country’s future economic outlook because, although it may support budget needs in the short-term, it is untenable to depend on the energy sector at the end. Comparatively, Greece has much more work to do to improve its current and future economic prospects because of its debt burden. Particularly, the country has to look for better ways to improve its tourist numbers because the economy remains heavily service-dependent. Collectively, these dynamics show that the three economies have different economic characteristics.

References

Close, D 2014, Greece Since 1945: Politics, Economy and Society, Routledge, London. Web.

Mallakh, R 2014, The Economic Development of the United Arab Emirates (RLE Economy of Middle East), Routledge, London. Web.

Owen-Smith, E 2012, The German Economy, Routledge, London. Web.

The Global Economy 2015, Comparator.

Waechter, P 2013, GDP Dynamics in the Euro Area. 

Zawya 2014, UAE economy growing stronger: with support of an effective diversification policy.Web.

Appendix

Rising unemployment rate in Greece (Close 2014).
Appendix One: Rising unemployment rate in Greece (Close 2014).

Biggest GDP falls in history (Source: Close 2014).
Appendix Two: Biggest GDP falls in history (Source: Close 2014).

Management Information System Concept

Abstract

In the not so distant past, companies were able to collect and process information by hiring a significant number of people that were tasked to collect and sort data and then file the same into storage cabinets. The old system was costly and inefficient.

However, due to the emergence of digital technologies, such as computerized systems and networking capabilities, present-day leaders have access to management information systems that made it easier to handle information especially when it comes to the following components: 1) input; 2) processing; 3) output; and feedback.

When a well designed MIS is enhanced with the integration of principles taken from a well-defined decision structure, corporate leaders are able to improve their ability to make high-quality decisions and improve the cost-efficiency of the business process.

Introduction

Changes in the way human beings conduct business operations are impressive, to say the least. There was a time when the technological advancements brought about by the Industrial Age, and the modern world was enough to keep human beings busy for centuries to come (Oz, 2009).

However, the emergence of new technologies based on computers and the Internet radically altered the way people view the business, the world, especially when it comes to managing information. In the not so distant past, critical information about the business organization is stored in filing cabinets. Business leaders were forced to hire hundreds of workers to manage voluminous amounts of information.

Nevertheless, the high payroll cost in maintaining the inefficient management of corporate data did little to improve the decision-making capability of the business leaders. More importantly, the said inefficient management of information generated by the company did little to improve the organization’s capability to develop innovative solutions to some of the persistent problems that made life difficult, not only for the corporate leaders but also for the rank-and-file employees.

It is therefore good to know that radical advancements in digital technology made it possible to develop management information systems (“MIS”) that paved the way for efficient knowledge management and decision making.

Defining Management Information System

One can argue that those who do not have an adequate understanding of the nature of information systems oftentimes label it erroneously as an example of a management information system. Thus, before going any further, it is important to define data and information in the context of digital technology. According to computer experts, data refers to “raw facts that describe a particular phenomenon” (Govardus & Heijden, 2009, p. 2).

For example, the number of wheels in a typical car is data. The number of colors in a color wheel is an example of data. Thus, the information goes beyond the simple concept of data because the information is data with a particular meaning based on a particular context (Govardus & Heijden, 2009, p. 2). A car’s color is just data, but a person’s favorite color is useful information if someone is thinking of giving him a gift on his birthday.

There is no need to elaborate on the fact that in a typical business organization, the business leader, CEO, manager, and supervisor is surrounded by different types of information. The amount of products that the factory produces in a single hour is one example. The number of distributors that work in partnership with a manufacturing company is also an example.

The sales volume of a particular distributor is another example of information. However, one can also realize that a corporate leader is surrounded by different types of information that, at first glance, are not related to each other. As a result, there are problems and opportunities that are not obvious to the manager or the CEO. If there is an opportunity to increase the efficiency of the company, this information is not known to the corporate leader.

Thus, there is a need for a system that allows the leader to see the interconnection of different sets of information. For example, the manager or CEO must have access to computer software that helps him see the connection between the production rate of the factory and the demand for the said product. As a result, the production manager or the company chief operating officer can make appropriate decisions that will result in improvements in terms of the production efficiency of the company in order to meet current demands.

Based on the above-mentioned requirement, a management information system is created to provide managers and employees information that they will need to “perform jobs as effectively as possible” (Pride & Kapoor, 2010, p.464). The main purpose of an MIS is to “distribute timely and useful information from both internal and external sources to the managers and employees so that they will have the necessary equipment and information that they will need to make effective decisions” (Pride & Kapoor, p.464).

Therefore, a typical MIS is constructed around a computerized system that is made more powerful by a record-keeping and communication software, making it easy to provide leaders and employees with relevant information based on different types of data (Pride & Kapoor, 2010, p.464).

Types of Information Systems

It is common to see business organizations using computerized systems that are built around record-keeping and communication software. Thus, many people make the mistake of confusing an MIS with an ordinary information system. Therefore, it is important to point out that a company’s MIS is an example of an information system. However, there are many different information systems that a company uses to enhance the efficiency of the business process.

One of the most popular types of information systems is the transaction processing system, and this type of information system provides support to the operation of a particular business. For example, the data related to sales order or production orders are recorded into the said system, and the employees and managers access the said information to keep track of inventory or to inform suppliers that there is a greater demand for a certain component or product.

The difference between an MIS and a transaction processing system is seen in the type of decisions that were made on account of both systems. In the first one, leaders and employees make short-term decisions. However, when it comes to the MIS, corporate leaders make long-term decisions that affect the strategies and policies of the company.

Another popular example of an information system is the Information Systems in Organization and the Decision Support Systems. These two systems go beyond the transaction type model because it collects information and processes the same information to help leaders and manager make effective decisions.

In these two types of information systems, there is a deliberate process of collecting and analyzing information. However, with regards to the Decision Support System model, the system goes beyond collecting information because it also generates statistical projection and data models, helping the leader enhance the quality of decisions made based on certain inputs (Stair & Reynolds, 2015).

The fourth type of information system is the Expert Systems and Neural Networks. This type of system is also known as a knowledge-based system, and corporate leaders utilize this system to analyze data, and at the same time, generate recommendations that leaders can use to make appropriate decisions.

The fifth type of information system is the management information system. It is different and similar to the four types of information systems discussed earlier on the basis of how it collects information generated by real-time business operations. In other words, it goes beyond the transaction processing system, because it utilizes the information generated from the transactions not only to react on the basis of short term needs, such as, the need to create invoices or to communicate to suppliers.

An MIS enables the leader of the company to have an overview of the business process. More importantly, an MIS allows business leaders to see how different components of the business process are interconnected. As a result, business leaders are able to make decisions that will impact the future success of the company.

Decision Structure and Importance to Companies

An effective MIS design is not only based on the ability of the system to collect and analyze data. It is also based on the identification of an appropriate decision structure because this is a need to “feed the results of decisions to points in the organization and other decision-makers affected by and or contributing to that decision” (Frankel, 2008, p.77).

A typical decision structure follows a pyramid form; at the top are leaders responsible for strategic management. The mid-level is made up of leaders responsible for tactical management. Finally, at the bottom of the pyramid are leaders responsible for operational management (Frankel, 2008).

Strategic managers are responsible for the creation of organizational goals and strategies. At the same time, they are also looking after the strategic performance of the business organization (Frankel, 2008). Those who are in the tactical management sphere are responsible for the creation of short and medium-range plans (Frankel, 2008).

Most of the time, the medium-range plans affect the schedules and budgets of a particular organization. When it comes to the sphere of operational management, the leaders develop short-range plans (Frankel, 2008). A good example is the creation of a weekly production schedule (Frankel, 2008).

It is important to create an appropriate decision structure so that the desires of top management must cascade to the mid-level tactical management leaders, and finally, to the operational management leaders. It is not wise to develop sophisticated plans if strategic leaders are unable to communicate their ideas and solutions to corporate problems to the other leaders and workers of the company.

MIS is an Asset

An effective management information system is an asset to the company. The value of an MIS is seen in the following components of the said information system: 1) Input; 2) Processing; 3) Output; and 4) Feedback (Stair & Reynolds, 2015, p. 9). The establishment of an MIS enables the company to enhance its inputs in the context of information systems.

Therefore, there is a way to gather important data that the company will use to improve the cost-efficiency of the business process (Stair & Reynolds, 2015). This will also help the company in terms of knowledge management. Leaders can develop an enhanced MIS design that collects other types of information. For example, leaders in a design firm create a system of collecting sketches and preliminary designs. The information collected forms a significant part of the company’s resources or assets.

With regard to the processing component of the MIS, the company has access to a mechanism that enables leaders to convert raw data into something that is useful. The next step is the output stage, and in this component of the MIS, the leaders are able to access documents and reports that can help them accomplish goals in the most cost-efficient manner. Finally, one of the most important components of an MIS is the feedback, the type of information that leaders use to make changes to a particular business process or policy (Stair & Reynolds, 2015).

A well-designed MIS provides a clear view of the company’s business operation so that a leader can see how the production process flows from one stage to the next. If there are external problems, the leader can analyze the business process using the information generated from the MIS to make necessary changes.

A good example is the case study on how the Pepsi Cola company utilized relevant information about the company’s business process to resolve a difficult dilemma that the organization encountered a few years back. In the said dilemma, there were negative commentaries about the company’s products that were spreading like wildfire across the nation (Rao & Krishna, 2009). The crisis was due to a rumor that says syringes and hypodermic needles were found inside Pepsi cans (Rao & Krishna, 2009).

Company executives had a difficult decision to make. The initial solution to the said problem was to react in a typical manner, and that was to order the recall of the products (Rao & Krishna, 2009. However, Pepsi’s corporate leaders realized that it was extremely expensive to recall Pepsi products, and at the same time, it will destroy the reputation of the company.

The corporate leaders decided to study the business process, and they discovered that there was no way that an outsider could have gained access to the production plants in order to insert syringes and hypodermic needles into the said Pepsi cans. In the end, the leaders found out that they made the correct decision. However, it would have been impossible to make the correct decision if they did not have access to the correct sets of information.

Conclusion

There are different types of information systems that corporate leaders can use to make effective and accurate decisions. However, the best type of information system is the management information system that takes into consideration the following components: 1) input; 2) processing; 3) output; and feedback.

An effective MIS also follows the design based on a decision structure that enables the different leaders of the company to receive feedback regarding strategic, tactical, and operational decisions. In the end, the value of a well-designed MIS is seen in the way it allows leaders to make high-quality decisions, and as a result, their respective subordinates are able to do their job well.

References

Frankel, E. (2008). Quality decision management. New York: Springer.

Govardus, J., & Heijden, M. (2009). Designing management information systems. New York: Oxford University Press.

Oz, E. (2009). Management information systems. MA: Thomson Learning.

Pride, W., & Kapoor, J. (2010). Business. MA: Cengage Learning.

Rao, V., & Krishna, H. (2009). Management: Texts and cases. New Delhi: Excel Books.

Stair, R., & Reynolds, G. (2015). Fundamentals of information systems.

Transportation And Logistics Management In USA

Abstract

Transportation is one of the key factors that drive any country’s economy. An industrialized nation such as the US relies heavily on transportation and logistics system for its economic growth. Statistical findings indicate that the system contributes about 10 percent to the US GDP. The developments in the US economy together with the adjusting trading patterns have largely influenced the modifications in the transportation and logistics structure.

Despite the importance of transportation and logistics to the American economy, the witnessed underinvestment in the system has ended up harming the economy. If no proper mechanisms to revamp the sector are implemented, the future of the US will be endangered. This paper reviews the US economy, specifically the impact of transportation and logistics system on the economy. It proposes some of the measures that can be adopted to improve the economy through proper transportation and logistics management.

Introduction

The Problem

The field of transportation and logistics has a key role to play in sustaining the growth and development of a state’s economy. Focusing on the US, the topic of transportation and logistics is important because it influences all economic activities. The sector contributes about 10 percent to the US Gross Domestic Product with respect to spending by customers, government, and companies. Furthermore, if household contributions were also computed, transport would account for 18% of the US economy. Conversely, the American population is anticipated to grow steadily in the next 30 years. In the next three decades, the population is expected to hit 380 million.

Similarly, a projected growth of 2.8% annually is expected. The US has not exhausted its investing potential in the transport sector. The existing transport infrastructure is poorly maintained. The current transport demand is not being satisfied and hence the doubt whether the existing transport and logistics will sustain the expected demand in the future decades. Experts have cited the need to invest $1.6trillion to revamp for the sector to meet the demand capacity. With a good transportation system, America is assured of creating and retaining jobs for its citizens. Besides promoting business growth, the system will reduce the cost of household items.

Research Question

Based on these highlights, this paper seeks to answer the question, ‘Will America rely on the current status of its transportation and logistics sector to sustain its growing population and economic demands?’

Definition of Terms

Infrastructure: This term refers to a system that a country puts in place to encourage productivity, creativity, high returns, affordable goods and services, and ultimately a healthy competition.

Logistics management: This term refers to the section of supply network that processes, executes, and guides the proficient, effectual forwarding and overturning the movement and storage of commodities and services starting from their initial places to their required destinations and usage.

Literature Review and Background

The US Economy and Transportation

Over the past years, the US economy has relied heavily on transportation to build and sustain the growth of its economy. Initially, ports that are located on the East Coast offer a quick connection with other regions such as Europe and West Indies that in turn attracted investors, migrants, and capital. Other water bodies such as the Mississippi River and the Great Lakes invited traders from regions such as Midwest and the Great Plains. Moreover, as Snyder (2006) reveals, the transcontinental railway network promoted the efficient transportation of goods for traders in the East to buyers in the West and vice versa.

In the 20th century, America successfully constructed national interstate highways with the aim of harmonizing the diverse communities while at the same time promoting national security and easy flow of freight and movement by citizens. Governors also invested heavily in constructing subways and commuter railway networks within their jurisdictions to encourage economic growth.

The government also invested in the air transport sector to promote a long-distance movement of valuable goods with low weight and travelers. Moreover, to help in the transportation of large cargo, the US utilized containerization. According to Crews and Bhatia (2012), the rapid rise in the number and size of ships promoted international trade, which expanded the American economy, particularly because of the high returns from the global sales. The diagram below shows the share of various US transportation mechanisms.

America’s Public Transportation Systems.
Fig. 1: America’s Public Transportation Systems. Source: Glass, Kenjegalieva, and Sickles (2013)

Commentators such as Casey and Heliums (2008) reveal how the current transport system has transformed in unison with the urbanization and transformation of the US economy from an agricultural state to an industrialized state. Investment in the transportation sector has not only been limited to highways, but also marine, air, and rail transfer to accommodate the diverse demand for traders, consumers, and the government.

Currently, the US is seen to own the most widespread transport system globally. Whether the existing transporting system will accommodate the changing economy in the near future is a matter that is debatable as Wallace and Heliums (2008) observe.

The US economy has undergone various changes due to a convergence of numerous drifts. Products and services are no longer only traded in the domestic market. A growing trend of companies has been witnessed in terms of their choosing to go international and/or seek the rich market and other jurisdictions. As Wallace and Heliums (2008) claim, this observation implies that the US economy is to greatly affected by the export and import of raw materials from other countries. Furthermore, the economy has grown from an agrarian market to an industrialized one.

Besides, the country is also beginning to focus more on service provision and innovation than on manufacturing products. Consequently, the finding implies that America relies on technology and expertise more than natural resources. While the initial economic development was more in the Northeast region than other areas, current records indicate that the South and West have an impressive economic growth rate.

The country is witnessing an increased rural to urban migration and development as people seek jobs and services. The labor force is experiencing more diversity because of the immigrants who hail from various regions around the globe. The elderly population has undergone a significant growth in the 20th century. This class is expected to hit 80 million by 2050. According to Cassidy (2013), the aging population comes with several social and economic challenges.

A strong link exists between transportation demand and the US economic growth. Over the past 30 years, the American economy has witnessed impressive growth, rising from $2.7trillion back in the 1980s to a GDP of $17.7trillion in 2015. Economists such as Cassidy (2013) approximate that this GDP will rise to $22.4trillion in 2020.

Moreover, the US contributes about 17% to the world’s GDP, with its economic strength surpassing that of any other developed country. The US is home to world’s largest financial market. The state is ranked the second when it comes to manufacturing services. Despite the monetary turmoil back in 2007-08, America was able to recover and maintain its steady growth. This impressive growth has largely attributed to its hi-tech transportation network. For instance, as shown in figure 1 below, it deployed strategic machines to do its container loading and offloading to save time at the ports.

Machines for Loading and Offloading Containers
Fig. 2: Machines for Loading and Offloading Containers. Source: Glass et al. (2013)

However, although the country’s economy depicts such an impressive progress, it is facing fierce competition from other industrialized states in Asia, especially China. China has the fastest-rising economy in the world, with an average growth rate of 10 percent. At the onset of the 21st century, China was ranked the seventh-largest economy globally. However, due to its skyrocketing rate, it is expected to rank second in 2020 to the extent of surpass the US by 2050 (Snyder, 2006).

Commentators such as Crews and Bhatia (2012) believe that the transportation system has become more dependable and affordable because of a number of factors. First, economic deregulation in the 1980s transformed the freight transportation sector. Besides increasing competition, it also led to the reduction in the cost of shipping. Secondly, the construction of interstate highway minimized the cost of cargo transportation. The emergence of advanced technology such as the intermodal freight containers, as well as satellite communication, had a substantial impact on making freight processes efficient.

Shippers have utilized the cheap transportation of goods to focus on transforming their logistics culture from an inventory-oriented supply chain to a replenishment-oriented one (Crews & Bhatia, 2012). Three decades ago, traders preferred inventory-based supply chains to replenishment- oriented ones since suppliers sold raw materials to the manufacturers who in turn supplied the manufactured goods to distributors who would then ensure that the products trickled down to the ultimate consumers. Traders had to maintain a huge and expensive supply of vital products to avoid the consequences of a stock out (Crews & Bhatia, 2012).

Currently, the pattern has changed. Traders deploy the on-demand supply chains and restock the products that are ordered by clients. To ensure that they remain with adequate stock, companies choose to study their consumers, determine their demand capacity, remain in tandem with their consumers’ interest, and keep their stocks in fewer locations.

The process of delivering all the inventories and replacing them soon after they have been transported to the consumers ensures that businesses transport smaller sizes of cargo as they go by order. The goal is to maximize returns. This trend has encouraged the transport sector to prefer keeping its products in transit, rather than on stockrooms. On-demand supply chain system is efficient to both clients and traders. Clients are assured of more goods at a cheaper price. On the other hand, as Mothorpe, Hanson, and Schnier (2013) reveal, businesses are assured of an increased demand for their products.

However, the challenge of the on-demand supply chain is that it depends highly on the just-in-time (JIT) transport of lesser cargo. Therefore, the failure of the cargo transportation network is detrimental to the shipper. A minor delay while goods are in transit might inconvenience several players, including suppliers, consumers, and carriers.

A hurricane in the Gulf can easily interrupt several supply chains, thus leading to losses, which can eventually reflect in the country’s economy. Essentially, the contemporary supply chain requires a highly reliable and affordable transport mechanism. Nevertheless, the logistics cost has recorded an increasing tendency in the past two decades as Wallace and Heliums (2008) confirm.

In the 1970-80s, the cost of logistics was evidently high, particularly because of the high-energy cost, interest rate, and low productivity. The investment in interstate highways was affected. Technical expertise among other factors reduced the cost of logistics to an approximately 8.6 percent of the GDP. Such a reduction had a positive impact since customers could get affordable goods.

Traders could easily penetrate the international market. However, the cost of logistics is increasing again due to the upsurge in fuel cost. Besides, congestion at the ports, roads, and railway stations has led to delays and an increased cost of delivering goods. If the transportation system is not rectified, the logistics cost may keep rising to the extent of deterring the easy flow of freight, hence eventually hampering national economic growth.

The international market has been the main source of income for most traders, especially with the persistence of globalization. Traders need to keep up with the level of competition in the international market for them to maintain their profitability. Unfortunately, in overall, logistics rates have been on the rise in the US. However, other developed nations such as Germany and France are recording comparably lower transportation logistics costs.

A prolongation of this drift will harm the American economy since most of the US businesses will be disadvantaged in the global market. The changes have not been limited to freight transportation since passenger transportation has undergone several adjustments. There has been an increased movement with the Vehicle Miles Travel (VMT) rising at double the rate of population growth. Although the VMT has occasionally declined because of high fuel charges and the aging population, it keeps reviving because of the increasing population, as well as the individual income. Therefore, the transportation sector must be adjusted to accommodate the anticipated rise.

For instance, analysts such as Scheid (2014) assert that the increased urbanization will lead to a huge population of Americans in the metropolitan areas, a situation that will have an influence on the country’s productivity. There will be a need to have a proper transportation network to cater for the population for the country to fully utilize its full potential (Scheid, 2014).

Rural dwellers will also have a great impact on the American economy since the aging population that will be searching rustic amenities will require reliable transportation systems. The tourism industry is projected to boom with an increase in both local and foreign visitors. Nonetheless, if the rising congestion is not handled promptly, it will hamper the expected economic growth (Snyder, 2006).

Transportation and the US Industries

Cassidy (2013) presents America’s economy as very competitive, thanks to its education system, the huge market size, creative citizens, business originality, and transportation systems. The above systems have enabled the US industries to have a competitive advantage in the international platform where they serve a huge market globally.

The US industries have controlled most of the global markets mainly because of a reliable transportation system, although every system has a specific demand for transportation. Four main sectors drive the US economy. They include agriculture, the manufacturing industry, the retail market, as well as service sector. They control 84% of the economy (Crews & Bhatia, 2012).

These sectors have a fluctuating demand for transportation and logistics. The agricultural sector, for instance, requires more transportation services than the manufacturing and retail sector. Recent statistical observations by Crews and Bhatia (2012) have indicated that transportation accounts for 7% of agriculture budget while the manufacturing sector only spends 3.2 % of its budget on transportation and logistics. The service sector, which involves the delivery of services, spends about 1.8 percent of its budget on transport (Waldorf, 2015). The subsequent paragraphs provide a detailed discussion on the linkage of transport to the US industry.

Agriculture and Natural Resources

Despite the industrialization of the US, Americans have not quit farming. The demand for agricultural materials and natural resources has not declined. The main demand comes from three sub-sectors, namely forest harvesting, crops animals, energy, and mining. According to Waldorf’s (2015) statistical findings in 2006, the agriculture and natural resources industry contributed a total of $13, 246.6billion to the US economy. However, much of this contribution came from the energy industry, which accounted for $407.6billion (Waldorf, 2015).

Agriculture and natural resources form the cornerstone that supports other sectors of the economy. The industry offers food, construction materials, and raw materials that form the ingredients of other essential products such as plastics, chemicals, and medications among a myriad of other products. It is anticipated that the demand for agricultural products will increase in the near future as the American population and economy expands.

In particular, the energy sub-sector is anticipated to increase at a quicker rate than other industries because of an increased demand for fuel. The industry employs more than 2.6million Americans. However, experts such as Snyder (2006) assert that the number of local employees is likely to decline as more activities become automated. On the other hand, the demand for agricultural products will keep rising as the population rises (Snyder, 2006).

The US is a leading exporter of agricultural products in the international market, serving the world with quality meat and grains. By 2006, the country was exporting agricultural products worth $69billion. However, it is receiving stiff competition from other countries such as China and India that utilize advanced technology in their farming practices. In fact, the largest exporter of agricultural products to the US is China (Waldorf, 2015). The agricultural and natural products are transported to various locations, both within the country and to foreign states.

Furthermore, since most of these products are transported over long distances, the price of these products often reflects the transportation costs. For instance, every dollar that is charged for American agricultural goods contains eight cents to cater for the transit. Thus, the costs of agricultural products are often influenced by fluctuation in transportation costs, as well as its reliability. Unlike other sectors, the agriculture and natural resources industries are fixed because crops have to be produced where the land is fertile. Mineral and energy products must be produced where the deposits are sufficient.

Since the production sites are inflexible, transportation has to be organized in a way that traders can access the site or reach the consumers conveniently. According to Shacklett (2014), most of the transportation systems in the US are organized to enhance the access to agricultural and natural resource production areas.

Nonetheless, the demand for transportation has been adjusting as new production areas and markets are discovered. For example, the discovery of the Powder River Basin as a rich resource of clean-burning coal that can be used in manufacturing natural gas has inspired the government to restructure its railway network to make the production site more accessible (Scheid, 2014). A reliable and low-cost transporting system is vital for the survival of the agricultural industry in the international market.

Countries such as Brazil that can export cheap products are quickly taking control of the global agricultural market. Brazil has been successful mainly because it has invested heavily in infrastructure that connects the agricultural industries and the terminals for exporting purposes (Shacklett, 2014). The country should strive to adjust the infrastructure at the ports to avert the delays that lead to a damage of agricultural products. Most ports do not operate in a 24-hour working system at a time when progress can only be achieved through a 24-hour economy.

Short operating hours exacerbate congestion and delays in the ports. Economic rivals such as China and Brazil have an impressive infrastructure at the ports that discourage congestion. Hence, goods reach their destinations in time. At this rate, the US will be outwitted if it chooses to continue under-investing in its infrastructure (Shacklett, 2014).

The Manufacturing Sector

For many centuries, manufacturing has remained the bastion of the country’s economy, with a huge dependence on its textile, steel, and car industry. Today, it remains a global leader in the manufacturing industry, with most consumers across the relying on the US for its quality and affordable products. The industry employs more than 14million Americans. The figures translate to about of 10% of the US labor force. It also accounts for over $13billion of the US GDP. Despite its global leadership, it is receiving fierce competition from Japan and China.

Thus, it must strive to produce quality and reasonable services to retain its positions. Reliable and supple transportation system is essential for ensuring that the manufactured cargos reach their desired destinations within a reasonable time (Crews & Bhatia, 2012). Currently, the US manufacturing has maintained its leadership in the sector mainly because of the good interstate highway transportation system and trucks, which help in sorting all the logistics. Furthermore, as Hill (2014) reveals, the railway, ports, and aviation industry provides an easy means through which it can transport its items to foreign states.

However, as America becomes more mobile than in the previous years, the highways are becoming crowded, thus increasing the time and cost of transporting goods. Furthermore, the manufacturing sector relies on a skilled labor force. A huge number of these workers are residing in the urban areas as the rate of urbanization keeps on rising. Subsequently, manufacturing companies will have to set their premises close to the metropolitan areas. For workers to operate efficiently, they need an affordable and reliable passenger transportation system, a matter that is debatable in contemporary America.

The security regulations that seek to ensure proper scanning of contents before they are moved into the country make it difficult for manufacturers to import raw materials for their production purposes. It is imperative for the challenges that manufacturing sectors face with respect to transportation to ensure free flow of manufactured goods in and outside the country. In particular, the country needs to develop clear freight transportation investment guidelines, as most states in Europe and Asia do, to ensure proper investment in the transportation and logistics sector (Mothorpe et al., 2013).

The Retail Industry

The retail industry is made up of firms that focus of vending commodities. It accounts for over 7% of the US economy. It employs more than 11% of the American labor force. Most of the retail firms are located around the towns and areas that have a big population of Americans. While the retail industry often involves consumers who come to the retail shop premises to buy the merchandise they desire, the introduction and growth of the internet has reduced this trend as a huge number of retailers vend their goods online.

Online shopping has increased the trend for home delivery by retailers themselves or by agents such as the United Parcel Service and DHL. Furthermore, the industry is affected by other factors such as consumer debt that slows consumer purchase patterns, poor quality of products imported from oversea companies, the declining value of dollar, and the unreliable transportation network (Glass et al., 2013).

Transportation plays a key role in the retail industry since it ensures that products from various destinations are availed to the customers in retail shops within a convenient time. Retailers sell a variety of products that can be bulky, heavy, perishable, and flammable. For instance, where the retailer is dealing with perishable products, he or she has to ensure that he or she uses a quick means of transport so that the products reach the market before they expire. Consequently, the retailer relies on accessible, reliable, and efficient transportation systems that keep them in good connection with their distributors (Hill, 2014).

The Service Industry

The service sector is the largest industry in the US. It employs almost 50 percent of the US workforce. It accounts for about 50 percent of the GDP. It comprises a myriad of industries. Since it is the hub of the US economy, the government needs to pay close attention to ensure that it promotes its sustainable growth. Indeed, as Glass et al. (2013) reveal, the industry depends heavily on the transportation sector for the sake of transportation of workers and clients. Nonetheless, the current transportation system has derailed its growth. Congestion raises the cost of service delivery.

It makes it less effective. For instance, poor transportation system influences negatively the tourism industry since congestion causes delays while at the same time increasing the cost of tourism to cater for the extra transportation expenses. Evidently, the government must reinvest in the transportation sector not only to improve the infrastructure but also to attract visitors (Hill, 2014).

Results/Discussion

As aforementioned, it is evident that the transportation system in the US has a great link to the performance of the American economy. An efficient freight and passenger transportation system assures the country of good returns and high productivity. Economists such as Crews and Bhatia (2012) approximate that the US economy will grow by double in the next 30 years if no major havoc occurs such as economic recession. The population is anticipated to increase by 80 million. The US citizens are anticipated to become wealthier with an estimated per capita income of $66,000. The society will become more mobile, with the VMT rising by 80 percent.

Commercial passengers are anticipated to rise to a billion by the end of 2015. This figure translates to a 36% growth in a decade. Conversely, the currently strained aviation industry will have to serve more clients as Americans and the world become more mobile. Globalization has encouraged international trade with business to transport their freight to long distances because of the efficiency of operations. The US is not an exemption. It is estimated that freight transport will grow by 89% in 20 years, as the country will be transporting 26 billion tons of cargo. Indeed, according to Snyder (2006), transporting such tons of cargo will be a proof of an effective transportation and logistics system.

While the demand for reliable transportation and logistics system is on the upsurge, the condition of the transportation system is being given a score of D (Shacklett, 2014). Two main issues have caused the deprived status of the American infrastructure. The first one is the increasing disproportion in the supply and demand while the second one is the aging infrastructure. Most of the American bridges are almost half a century old. The current commuter rail cars have served the country for close to two decades while the commercial planes are approximately ten years old. Indeed, as Cassidy (2013) confirms, this infrastructure is drained.

More exacerbating is the fact that the level congestion is mounting as the infrastructure continues to wear out. The impact of congestion cannot be ignored. Americans who reside in the metropolitan areas lose up to 4.2 billion hours as compared those who are affected by the congestion. Furthermore, $78 billion is wasted with respect to the fuel that is lost during the congestion. Unfortunately, the rate is increasing with urban areas being the most affected. To cope with competition from other industrialized states, the US has to solve the congestion problem (Waldorf, 2015).

Freight system performance is also an alarming trend. While Interstate Highway System has improved the freight transportation, the high demand for goods is surpassing the capacity of the available infrastructure. The situation has resulted in congestion and unexpected losses. To remain in business, traders are compelled to increase the cost of their products to counter the delays that are caused by the unreliable transportation and logistics system and holding inventories. High prices lead to an increased cost of living and reduced consumer spending.

Eventually, the economy becomes less industrious as well as competitive. The impact of congestion on the US economy is evident in the ports. For instance, APM Terminals Company that runs over 50 workstations globally has opted to move most of its terminals in the US to inland areas because the ports are crowded. Thus, the available space cannot accommodate APM containers that need to be shipped to other countries or be carried by trucks to inland buyers. However, to ensure that inland terminals are operating efficiently, APM Terminals must innovate to ensure a proper link between its inland locations and the harbor. These linkages can only be achieved by having proper road and rail networks to facilitate the transportation of cargo into the inland terminals (Waldorf, 2015).

Nonetheless, highways are also highly affected by congestion, particularly in specific zones where the volume of vehicle surpasses the capacity. Most of congestion occurs in the metropolitan interstate interchange, thus causing losses worth $4 billion. The persistent growth of the economy and the population will ignite more pressure on the current infrastructure to the extent of exacerbating the level of traffic in the country. Experts approximate that although the highways serve 10,500 trucks daily, the figures will increase to 22, 700 by trucks 2035. This huge number of cargo trucks will share the roads with other commuter vehicles because of the increase of wealth among Americans following the projected economic growth (Glass et al., 2013).

The railroads system has for several years enjoyed a surplus capacity, which has often been utilized to accommodate an excess volume of cargo and passengers who cause congestion on the highways. Nonetheless, as shown in figure 1, the railway system is also gradually running out of capacity.

A train carrying two layers of containers to overcome the increase container supply. Source: Shacklett (2014)
Fig. 3: A train carrying two layers of containers to overcome the increase container supply. Source: Shacklett (2014)

Indeed, the government has initiated several projects to renovate the railway network. More of the renovation must be initiated, as more cargo will be transported via railway to avoid the traffic in the highway. The impact of the overcrowded railroads and highways has affected the water transportation sector too, as more demand for water transport has increased.

Water transport provides a convenient means to transport contents to their required international destinations. With the growth of the international trade, the demand for goods in overseas areas has increased impressively. Moreover, for water to become a reliable medium for transporting cargo, it has to be supported by a strong network of railroads and highways. Nevertheless, while the use of the water transportation in the US has increased, statistical findings indicate that the current ports can barely support the number of contents that are being transported across the waters (Waldorf, 2015).

Another challenge for water transportation is the channel depth. Most of the ports have a channel depth that cannot harbor mega-container ships. Therefore, to avoid congestion in the ports, most containers are transported to the inland zones before their owners can clear with the ports. However, to get to the inland terminals, trucks must travel through the congested interstate highways, which cause delays and losses. Security regulations have also attracted several restrictions on traders, most of which the shippers cannot meet.

For instance, the Department of Homeland Security stipulates that containers need to be properly scanned at the foreign ports prior to being shipped to the US. While this requirement is meant to secure the citizens, it limits the choices for shippers since only a few ports can perform such scanning. Consequently, most containers that are meant to be transported to the US may remain congested in the foreign ports since measures have to be taken to transport them (Cassidy, 2013).

Passenger transportation has suffered turmoil as witnessed in the freight transport. The country has become more mobile than ever, with more citizens purchasing private cars. The increased automobiles on the road contribute to congestion that hails America. As a result, business has become strenuous in the urban centers. Moreover, the poor road networks also lead to an increase in road accidents.

More than 45,000 citizens succumbed to road accidents back in 2004, with most of the accidents being reported to have occurred in the highways. The air transport industry has also been affected with congestion in the form of flight delays, which have become a common feature in the country. The delays harm the economy by reducing productivity. For example, experts estimate that the US loses approximately $9billion yearly because of congestion in the aviation sector (Cassidy, 2013).

Climate change legislation also poses a great challenge to the transportation sector. The impact of climate change and global warming has led international leaders to enact policies that limit the emission of carbon (IV) oxide, as well as energy consumption. These legislations conflict with the trends in the transportation sector as shown below since the country has a mounted consumption of fuel and carbon (IV) oxide.

The US CO2 Emissions.
Fig. 4: The US CO2 Emissions. Source: Crews and Bhatia (2012)

To adhere to the new energy regulations and climate change policies, America may be forced to restructure its transportation sector. The move may further exacerbate the status of its transportation system (Waldorf, 2015).

Underinvestment in the transportation and logistics sector is harming the American economy. The country suffers a deficit of $58million to offer effective transportation system performance and a further $119billion with respect to enhancing the transportation sector. Meanwhile, as Americans opt to under-invest in the transportation sector, other countries such as the UK are overtaking it with a huge investment and application of advanced technology in the sector. For example, Europe has initiated infrastructure advancement plans with the aim interlacing the landlocked countries with those that have access to the sea to promote trade and economic development.

Developing countries are following suit. China, whose economic development rate is alarming to several industrialized states such as the US, has initiated a program that will enable it to construct a 25000-mile highway within 12 years. The plan will enhance the movement of cargo and passengers within China, hence promoting economic productivity. It is evident that to keep up with the competition from industrialized states, the US has to introduce several reforms and policies to its transportation and logistics sector.

Discussion of Potential New Solution

Initiating a National Strategic Roadmap to Steer Investment

Glass et al. (2013) say that the failure of some of the transportation network is largely because of the poor investment plans. No matter the amount the government and investors put in the transportation sector, the initiatives are likely fail if they do not follow a well-structured roadmap (Hill, 2014). It is imperative to chart a strategic roadmap that integrates federal and state authorities, the Surface Transportation Policy Commission, and the interested investors. The strategic roadmap should give priority to technology, innovation, and environmental sustainability such that any developments in the transport sector will be of great quality.

The developments should adhere to both domestic and international laws. In particular, policy developers should make efforts to unite climate policies and transportation policies, which are currently conflicting. Furthermore, it will be prudent that while charting a roadmap for the investors, policy developers can borrow ideas from other regions that are currently revamping the transportation and logistics sector such as China and the UK.

Re-investing in Interstate Transportation Network

Interstate system remains a key determinant of the country’s economic success. The benefits that America has recorded because of the interstate system are impressive. However, the US should not rely on the past, but rather project in the future while focusing on how the interstate transport can continue to benefit the traders and the public. The diagram below shows the contemporary interstate network as it appears in New Jersey.

Contemporary Interstate Network.
Fig. 5: Contemporary Interstate Network. Source: Snyder (2006)

To retain the advantages of interstate transportation, there is the need to expand cargo logistics and tackle the problem of urban mobility, create geographic networks, particularly for regions that have no access to the system. This plan will involve creating an extra 88, 600-mile lane to the current 212000miles. Furthermore, exhausting current construction technology will also help in enhancing intermodal linkages.

Conclusion

Transportation and logistics sectors have a direct impact on a country’s economy. The impact can be negative or positive, depending on the condition of infrastructure in the state. An established economy such as that of the US hugely relies on its transportation and logistics system to maintain the high productivity. Indeed, interstate highways, railroad networks, and economic deregulation and proper maintenance of the ports have played a key role in the growth of the American economy.

Initially, the reliable transportation system reduced the cost of products in the market, thus encouraging consumers to increase their spending and eventually the revenues that traders and the state accrued. However, as the infrastructure became depleted with the government making little efforts to renovate the transport system, many problems arose to the extent of currently challenging the growth of the economy. Congestion in the ports, airports, railways, and highways has delayed freights and passengers, thus causing huge losses to the economy. This paper has proposed some of the ideas that can help the US to revamp its transportation network to stir its economy towards a further growth and development.

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