Daniel W. Drezner
Hey, remember how, four months ago, Americans were convinced that China was taking over the world and the U.S. was on the way out? I bring this up because the New York Times’ Floyd Norris, Business Week‘s Mike Dorning, and Slate‘s Daniel Gross have long stories suggesting that the U.S. economy is about to come roaring back ...
Hey, remember how, four months ago, Americans were convinced that China was taking over the world and the U.S. was on the way out?
I bring this up because the New York Times’ Floyd Norris, Business Week‘s Mike Dorning, and Slate‘s Daniel Gross have long stories suggesting that the U.S. economy is about to come roaring back (though see Kevin Drum for a pessimistic counter). This section from Gross’ story captures the basic idea:
[T]he long-term decline of the U.S. economy has been greatly exaggerated. America is coming back stronger, better, and faster than nearly anyone expected—and faster than most of its international rivals. The Dow Jones industrial average, hovering near 11,000, is up 70 percent in the past year, and auto sales in the first quarter were up 16 percent from 2009. The economy added 162,000 jobs in March, including 17,000 in manufacturing. The dollar has gained strength, and the United States is back to its familiar position of lapping Europe and Japan in growth. Among large economies, only China, India, and Brazil are growing more rapidly than the United States—and they’re doing so off a much smaller base. If the U.S. economy grows at a 3.6 percent rate this year, as Macroeconomic Advisers projects, it’ll create $513 billion in new economic activity—equal to the GDP of Indonesia….
So what accounts for the pervasive gloom? Housing and large deficits remain serious problems. But most experts are overlooking America’s true competitive advantages. The tale of the economy’s remarkable turnaround is largely the story of swift reaction, a willingness to write off bad debts and restructure, and an embrace of efficiency—disciplines largely invented in the United States and at which it still excels. America still leads the world at processing failure, at latching on to new innovations and building them to scale quickly and profitably. "We are the most adaptive, inventive nation, and have proven quite resilient," says Richard Florida, sociologist and author of The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity. If these impulses are embraced more systematically and wholeheartedly, the United States can remain an economic superpower well into the current century.
So what will our new economy look like once the smoke finally clears? There will likely be fewer McMansions with four-car garages and more well-insulated homes, fewer Hummers and more Chevy Volts, less proprietary trading and more productivity-enhancing software, less debt and more capital, more exported goods and less imported energy. Most significantly, there will be new commercial infrastructures and industrial ecosystems that incubate and propel growth—much as the Internet did in the 1990s.
If this happens, it would be consistent with the aftermath of past crises. The U.S. tends to bounce back more quickly from global shocks — including those caused by the United States.
What’s intriguing about all of this is whether a U.S. economic resurgence would affect American attitudes about the rest of the world. Afghanistan, Iraq, and the economic downturn have caused a lot of Americans to (understandably) grow weary of sustained engagement in other parts of the globe. If the economy turns around, a lot of attitudes about foreign affairs might become less sour.
Question(s) to readers: do you think the U.S. economy is primed for an supercharged recovery? If so, how will that affect attitudes towards American foreign policy?