Ignore the Obituaries, U.S. Reign Will Endure
Kevin Hassett
Feb. 4 (Bloomberg) -- The negative employment report on Feb. 1 was
another sign
the U.S. economy is on the ropes. Increasingly, this downswing is being
portrayed as more than just a cyclical phenomenon. The U.S. used to be
the envy
of the world, the story goes, and soon it will be just another nation.
The question no longer seems to be whether the U.S. will recede into
the pack,
but rather, who is to blame. The New York Times recently explored that
question
with a provocative cover piece in its Sunday magazine by Parag Khanna,
entitled
``Waving Goodbye to Hegemony.''
But has the U.S.'s position in the world really changed?
In terms of gross domestic product, the U.S. has been an economic
colossus for a
long time, and continues to be so.
Economist Angus Maddison writes in his book, ``The World Economy: a
Millennial
Perspective,'' that America's share of world GDP peaked at almost 28
percent in
1951, up from 1.8 percent in 1820, 8.8 percent in 1870 and 18.9 percent
in 1913.
The U.S. share of world income then declined consistently until 1975,
when it
accounted for 21 percent of world GDP. It has been roughly the same
since.
Maddison, who has compiled global national-income data for the world
from 1 A.D.
to 2001, estimates the U.S. share of world GDP was 21.4 percent in
2001.
Since then, growth outside the U.S. has picked up, while the expansion
inside
the U.S. has slowed. According to the International Monetary Fund,
which offers
more recent statistics, the U.S. accounted for 21.0 percent of world
income in
2001 (which is close enough to Maddison's estimate to allow one to draw
on
both); it declined to 20.0 percent in 2005.
Not Cover Material
Such a minor deterioration may just be cyclical, and is hardly
magazine-cover
material.
The U.S. economy continues to be positively awe-inspiring compared with
the
competition. The value of U.S. imports in 2006 was roughly the same as
the
entire GDP of France. The U.S. is the world's largest exporter; indeed,
if all
U.S. exporters banded together and seceded from the country, they would
have the
eighth-largest GDP in the world.
The economy of Brazil is about the size of the economy of Texas. The
economy of
India is about the size of the economy of America's Plains states. The
economy
of Venezuela is about the size of the economy of Alabama.
The U.S. share of the value of global-equity trading is more than 40
percent.
The total value of trading on the New York Stock Exchange in 2006 was
greater
than all of Europe's combined. While the Sarbanes-Oxley
corporate-governance law
may have made the U.S. a less-attractive locale for new issues, the
NYSE was
still the world leader in total new capital raised in 2006.
Foreign Capital Magnet
The U.S. is still the place that foreign capital wants to be and is the
largest
receiver of foreign direct investment. Nine of the top 50 transnational
financial corporations are American, including the top two (Citigroup
Inc. and
General Electric Capital Corp.). Thirteen of the top 50 non-financial
transnational corporations are American, including four of the top
eight:
General Electric, General Motors Corp., Exxon Mobil Corp. and Ford
Motor Co.
Looking ahead, the U.S. has relatively high immigration and fertility,
something
that should help it avoid the demographic nightmares awaiting many of
its
trading partners.
Big Footprint
My colleague at the American Enterprise Institute, Nicholas Eberstadt
summed up
the conventional wisdom on the importance of demographic trends as
follows: ``In
2005, Europeans outnumbered Americans in virtually every age group,
exceeding
Americans by 37 percent among people of prime working age, between 35
and 49
years old. By 2030, however, there will be nearly as many Americans as
Western
Europeans in the 35-to-49-year-old category and many more Americans
under the
age of 30.'' With regard to Europe, the footprint of the U.S. will
inevitably
increase.
While China's growth has been impressive lately, a recent study found
that it
may well be at least 50 years before it catches up to the U.S.
The U.S. stands out in another way. Among developed nations, it is by
far the
most committed to a strong national defense. U.S. national defense
spending in
2006 was greater than the combined national incomes of Saudi Arabia,
Iran and Qatar.
The Stockholm International Peace Research Institute keeps a database
of world
military spending that goes back to the late 1980s. According to the
institute,
U.S. defense spending as a share of world defense spending peaked at 44
percent
in 1992, and then declined until 2001, when it fell below 39 percent of
the
world total.
Iraq, Terror
Since 2001, however, the U.S. military has grown considerably, largely
because
of the war in Iraq and the war on terror, and the U.S. constituted 45.7
percent
of global defense spending in 2006.
Given the relative size of the U.S. armed forces, there is little doubt
the U.S.
will have to take a leading role going forward in assuring world
security.
Looking both at the economic and the military facts, one can only
conclude that
the U.S. is a singular nation, and will likely be so for a long, long
time.
To contact the writer of this column: Kevin Hassett at [EMAIL PROTECTED]
