The Changes and Development in Texas' Economy

Introduction

Texas is a state in the South of the United States with Austin as its capital. Texas borders Arkansas to the Northeast, New Mexico to the West, Mexico and Gulf of Mexico to the Southwest and East and Louisiana to the East. This essay discusses the changes and development in the Texas economy, the effects of North American Free Trade Agreement, threats, and opportunities as well as the future forecast of the economy.

Changes and developments in Texas economy

Texas was known to be a thinly colonized, remote place of the weakening Spanish empire. It represented a huge, insecure and sparsely populated zone with slight, immediate economic and even political value. Due to underpopulation, it was difficult for substantial commerce generation to thrive therefore the people of Texas remained poor. Prior to Second World War, timber, cattle and bison, oil and cotton were the crucial occupational enterprises that made up the economy of Texas. Cattle and bison business enjoyed success due to the sale of hides and furs and later introduction of beef industry which had an amplified demand. Moreover, production of cotton increased to the extent that by the start of the 20th century, Texas was the leading cotton manufacturer. Furthermore, the Spindletop Hill oil exploration in 1901 was a major advance in the oil production allowing to Texas establish itself as the leading U.S oil producer by 1940; as the unearthing was the largest in the world. It is after independence that the New Mexico government focused on the establishment of laws, constitution and state administration. Over time, Texas transformed from rural and agricultural state to an industrialized urban state hence increase in population with high levels of migration mainly from outside the state (Bartik 566). The economy diversified creating room for growth and development of more industries, later creating job opportunities. Currently, Texas is the United States second largest economy, being home for six out of the fifty companies that made it on the Fortune 500 list. Its economy relies largely on oil and natural gas, agriculture, information technology, manufacturing, electric power and processing of fuel among others (The University of Texas 320). The dramatic rise in property values that occurred within the first two years of the oil boom reflected both the sudden discovery of great prosperity and the previously minimal worth of East Texas farmland. Cheap land had lured settlers to Texas; on the eve of the Civil War, wealth in slaves exceeded the assessed value of cultivated lands by 20 percent. After the wildcatter Columbus Marion “Dad” Joiner brought in the first producing well in the East Texas field on October 3, 1930, land values changed abruptly. In two years property values in the core oil field counties rose more than tenfold. Owning farmland in the area, according to one oilman, promised to make up for years of negative returns; people “became rich overnight.” (McFarlane 860).

Theory of Creative Destruction in Texas Economy

Capitalism as an economic system underwent revolution powered by innovations and technology in production as well as distribution. Creative destruction provided a useful way to reflect on shaping and reshaping of the economy. Furthermore, industrialization and technological innovations have opened employment opportunities to the population that was considered very poor and unemployed thus raising their living standards (Mollick 142). Moreover, local forces and global competition have been taking charge in reshaping the Texas economy forcing the existing companies to be efficient and innovative. The rise of the education sector is of great importance as it has led to boosting of workers’ productivity and increased flexibility to the labor market (Mollick 139). Additionally, Texas continues to prosper in its natural wealth focusing on extraction and processing of oil. Additionally, industrialization has spurred company’s competitive pressures thus reduced prices with the rise of new competitors offering new, better, and cheap, goods and services. With many industries finding their solutions in technology, competition, and availability of cheap credit provided powerful inducements to invest in the latest expertise. Also, tourism has become an important industry with both international and domestic visitors touring the state. Effects of NAFTA on the Economy North American Free Trade Agreement (NAFTA) came into effect in December 1992 with the aim to lower and remove tariffs in trade among Canada, Mexico, and the U.S. Since the implementation of NAFTA, the U.S trade, in general, has grown rapidly. Even though the costs have concentrated highly on industries like manufacturing, the benefits are distributed widely across the society. Its implementation has also led to some jobs created as well as benefits to consumers due to significant falling prices and improved quality of goods brought about by the import competition. Furthermore, NAFTA has reinforced globalization of the economy. Due to the increase in exports to Mexico and Canada, Texas has increased in export-related jobs (Vaillancourt 212). Texas has experienced substantial changes in technology growth, economic diversification and integration increase with both levels of national and international economies. The said changes have affected the state’s politics since new economic players seek their interests’ representation in the political system. The international exports increased due to production increase and trade between Mexico and the United States with the agreement helping stabilization of Mexico. More so, the diversification has condensed the susceptible crises induced by the reduction of oil prices in Texas. NAFTA helps reduce the state’s dependence on oil by increasing trade volume that fosters industrial modification. In addition, energy-related refining and petrochemical businesses and others that are affected directly or indirectly by expansion in the mining industry support a more differentiated Texas economy that helps shield it from oil price shocks. Supported by these efforts and more trade after NAFTA, the medical industry blossomed in Houston, Austin became the Silicon Valley of the South, and retail trade expanded in Dallas. This period of revitalization also included banking reforms, both legislatively and internally, and a host of public policies supporting capital formation and job creation (Ginn and Roach 322). It is evident that the changes in economic structure, matters related to policy actions and the political strategy continues to drive change in the political economy (Vaillancourt 213).

Opportunities and Threats Facing the State’s Economy

One of the major opportunities for Texas economy is the diversification and a supportive business environment henceforth small business and startups are free to seek aid from development centers and entrepreneur organizations. Additionally, the metropolitan areas are growing, leading to more economic activities due to growth in population and demand for goods as well as services. Also, low tax burden since the state does not impose individual or corporate income taxes is a benefit to the population as the cost of living is low (Bartik 552). Moreover, the state regulations are simplified, providing a favorable environment to operate a business as the government does not get in the way of business operations. The state economy equally has its threats such as lack of access to capital as many businesses are unable to access bank loans. Venture capitalists may be difficult to find or are unwilling to invest or attach unfavorable terms thus small businesses unable to acquire them. Secondly, small businesses are unable to find the type of labor force they need. Inadequate qualified, experienced and trained employees are a major threat to businesses (Mollick 142).

Texas Future Economy

With all the main elements for economic success, Texas is properly positioned for expansion in business events and the affluence that goes with it for coming decades. However, continuous economic performances hinge on adapting to the fundamental population and workforce changes. The diversity and strength as noted in overcoming recession will assist to deal with challenges. The effect of the hurricane Harvey will continue to be felt for the next years as many of the people affected are still recovering. The recovery of the energy will positively contribute to the economy. Furthermore, the oil prices, as well as demand support, are expected to move upward as the sector manages to cut costs and the ability to sustain activity at lower prices (Bartik 559). The state needs to ensure adequate infrastructure investment, improvement of the public education, and encourage higher education as well as training and enhance the preparedness of the future jobs workforce. In addition, it is anticipated that the population will continue to grow hence, and this will have instantaneous effect on infrastructure, healthcare, education and social services. Growth in the energy industry is expected to continue thus bringing about population changes, the creation of more jobs and overall growth of the economy (Theis).

In conclusion, Texas economy has continued to grow over the years due to diversification, industrialization and innovative technology.