On this blog, It Does Not Add Up, I discuss major issues affecting our country.  For example, in my last post, I discussed the strength of democracy around the world.

Today, I write about the incredible strength of the American economy, following Michael Beckley of the American Enterprise Institute.

Consider:

• The United States is an economic powerhouse, accounting for 26% of global GDP, the same as during the unipolar moment of the early 1990s. Even the Chinese economy is shrinking relative to that of the U.S. in current dollar terms.  In reality, China’s economy is smaller than the Communist Party claims, and it is barely growing.  From 2021 to 2024, Chinese citizens illicitly moved hundreds of billions of dollars out of China, and became the fastest growing migrant group crossing the U.S. southern border.
• From 1990 to 2019, U.S. median household income rose 55% after taxes, transfers, and adjusting for inflation, with income in the bottom fifth seeing a 74% gain. Since 2019, wages for the lowest-paid decile have grown nearly four times as fast as for middle earners and over ten times as fast as top earners.
• Consider the dollar. The currency now accounts for nearly 60% of global central bank reserves. It is used in roughly 70% of both cross-border banking liabilities and foreign currency debt issuance and almost 90% of global foreign exchange transactions.

  

• Once the world’s largest energy importer, the U.S. is now the leading producer of oil and natural gas, surpassing both Russia and Saudi Arabia. European companies currently pay two to three times as much for electricity and four to five times as much for natural gas, prompting some foreign manufacturers to relocate to the U.S. Meanwhile, the huge American consumer market, equivalent to China’s and the Eurozone’s combined, pressures foreign companies and governments to align with U.S. trade policies to maintain access to the world’s most lucrative revenue source.
• The U.S. lead in global innovation further strengthens its structural power. S. firms generate over 50% of the world’s high-tech profits, whereas China captures only 6%.
• The U.S. also attracts human capital, drawing thousands of scientists, engineers, and entrepreneurs from around the world each year. Coupled with higher birthrates, the average annual influx of over a million immigrants makes the U.S. the only great power whose prime working-age population is projected to grow throughout the century.
• The decentralized U.S. system also excels at adopting and scaling innovations across industries, a capability more crucial for long-term growth than invention alone. American localities – like American businesses – face fewer constraints from central government red tape.  As a result, successful ideas tend to spread quickly.  This diffusion advantage is reinforced by the U.S. deep venture capital markets, which account for about half of the global total.
• China’s subsidy-driven, authoritarian model creates isolated pockets of innovation without enhancing productivity across the economy. China prioritizes what it thinks of as internationally important sectors, such as the electric vehicle and renewable energy industries.  But these two industries make up only 3.5% of the Chinese economy, too little to offset declines in the bloated property and construction sectors, which account for roughly 30% of GDP and have erased $18 trillion in household wealth since 2021.

Conclusion.  The U.S. economy is enormously productive, totally surpassing any other country in the world, friend or foe alike.  This creates the responsibility, and opportunity, for the U.S. to provide enlightened leadership to help other countries increase their own economic growth.  This will be the topic of a future post.

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