buy needed goods and services predominantly in the private
marketplace. US business firms enjoy considerably greater
flexibility than their counterparts in Western Europe and Japan in
decisions to expand capital plant, to lay off surplus workers, and
to develop new products. At the same time, they face higher barriers
to entry in their rivals' home markets than the barriers to entry of
foreign firms in US markets. US firms are at or near the forefront
in technological advances, especially in computers and in medical,
aerospace, and military equipment; their advantage has narrowed
since the end of World War II. The onrush of technology largely
explains the gradual development of a "two-tier labor market" in
which those at the bottom lack the education and the
professional/technical skills of those at the top and, more and
more, fail to get comparable pay raises, health insurance coverage,
and other benefits. Since 1975, practically all the gains in
household income have gone to the top 20% of households. The
response to the terrorist attacks of 11 September 2001 showed the
remarkable resilience of the economy. The war in March/April 2003
between a US-led coalition and Iraq, and the subsequent occupation
of Iraq, required major shifts in national resources to the
military. The rise in GDP in 2004 was undergirded by substantial
gains in labor productivity. The economy suffered from a sharp
increase in energy prices in the second half of 2004. Long-term
problems include inadequate investment in economic infrastructure,
rapidly rising medical and pension costs of an aging population,
sizable trade and budget deficits, and stagnation of family income
in the lower economic groups.

Uruguay
Uruguay's well-to-do economy is characterized by an
export-oriented agricultural sector, a well-educated workforce, and
high levels of social spending. After averaging growth of 5%
annually during 1996-98, in 1999-2002 the economy suffered a major
downturn, stemming largely from the spillover effects of the
economic problems of its large neighbors, Argentina and Brazil. For
instance, in 2001-02 massive withdrawals by Argentina of dollars
deposited in Uruguayan banks led to a plunge in the Uruguyan peso
and a massive rise in unemployment. Total GDP in these four years
dropped by nearly 20%, with 2002 the worst year due to the serious
banking crisis. Unemployment rose