If there is one thing that Americans of all political stripes can agree on, it is that the economy is broken. Donald Trump, who saw trade as a rip-off and his country in decline, came into office promising to make America great again. President Joe Biden is spending $2trn remaking the economy, hoping to build it back better. Americans are worried. Nearly four-fifths tell pollsters that their children will be worse off than they are, the most since the survey began in 1990, when only about two-fifths were as gloomy. The last time so many thought the economy was in such terrible shape, it was in the throes of the global financial crisis.
Yet the anxiety obscures a stunning success story—one of enduring but underappreciated outperformance. America remains the world’s richest, most productive and most innovative big economy. By an impressive number of measures, it is leaving its peers ever further in the dust.
Start with the familiar measure of economic success: gdp. In 1990 America accounted for a quarter of the world’s output, at market exchange rates. Thirty years on, that share is almost unchanged, even as China has gained economic clout. America’s dominance of the rich world is startling. Today it accounts for 58% of the G7’s gdp, compared with 40% in 1990. Adjusted for purchasing power, only those in über-rich petrostates and financial hubs enjoy a higher income per person. Average incomes have grown much faster than in western Europe or Japan. Also adjusted for purchasing power, they exceed $50,000 in Mississippi, America’s poorest state—higher than in France.
The Economist
Far from being convincing about ‘America’s astonishing economic record’, this article illustrates how easily you can draw flawed conclusions by cherry-picking data and relying on broad, but imprecise indicators. A higher income per person doesn’t mean much in a country with rising income inequality; higher efficiency and more patents doesn’t mean much if the gains from this productivity and innovation are amassed by the top 1% of earners and by corporations that are essentially monopolies with ballooning cash reserves.
Several articles have recently drawn attention to the remarkable decline of life expectancy in the US, arguably a better indicator of general wellbeing. Even more notable: after a drop in 2020 due to the COVID pandemic, in 2021 life expectancy at birth rebounded in most comparable countries while it continued to decline in the US. Between 2019 and 2021, life expectancy in the U.S. fell by 2.7 years to 76.1 years, thus erasing two decades of life expectancy growth.
It’s hard to attribute this exclusively to the pandemic, since other countries recovered just fine from the 2020 shock. In the US, multiple factors are straining this statistic, from the opioid epidemic to more fatal crashes and liberal access to firearms, which in turn fuel mass shootings, accidental deaths, and suicides. What’s even more ironic is that the US has the highest per capita healthcare spending, but the lowest life expectancy among peer countries. This is the perfect example of gdp presenting the wrong picture: the higher spending in the privatized US healthcare system increases gdp, but has a negative contribution in terms of life quality.
The same can be argued about the higher overall consumption in the US: when people consume more compared to other countries it raises gdp, but the net effect can diminish people’s wealth despite higher incomes. Americans consume more than twice the electricity per capita compared to EU citizens, an externality that gdp figures don’t account for – and they seem reluctant to revise these wasteful habits to address global warming.
Another questionable contributor to gdp? Inflated valuations of borderline useless startups, sustained for years by abnormally low interest rates. Under the recent pressures of rising interest rates, the vaunted innovation engine of Silicon Valley is starting to show signs of slowdown, as tech giants engaged in multiple rounds of layoffs. The financial system is strained as well, between the spectacular failure of FTX last year and the collapse of SVB this year. Maybe the four-fifths concerned about their economic outlook have a better grasp on the state of the economy that a journalist cursorily looking at a bunch of aggregated measures?
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