The U.S. Economy Is Not As Bad As We’d Imagined

The following two sentences are taken from the World Economic Forum’s recently released global competitiveness rankings:

The United States for the first time lost its seat as number one to Switzerland. By contrast, up-and-coming economies such as China, India and Brazil have ascended in rank.

The United States’s slip naturally can be attributed to the financial crisis. While the U.S. economic crisis takes up much attention in the media, any negative news related to the U.S. economy is magnified to the extent that some Chinese people may believe the U.S. economy has collapsed.

Did the U.S. economy actually collapse?

Far from it! Recently a number of U.S. public figures have expressed a shared sentiment: when they previously heard the news, they believed the U.S. economy had fallen to shambles. However, as they can see now, everyone is holding their breath in anticipation; the market is still bubbling up with new developments everywhere. The U.S. economy is still maintaining orderly operations, and previous beliefs were completely incorrect.

True, the economic crisis was indeed a major shock and threat to the American economy. Housing prices fell suddenly and sharply, consumer expenditures suffered and unemployment rates were not dropping. It is important to note, the U.S.’s previous 9.8 percent unemployment rate was the highest it had been in 26 years. Compared with so many other countries, though, this unemployment rate is still low. Considering the U.S.’s relatively faultless social security network, the unemployment rate created shock waves, but remained within bearable limits.

As the world’s largest developed economy, the U.S.’s anti-shock capabilities and development potential are much greater than those of other developed countries. The IMF’s most recently announced economic statistics serve as evidence to this claim.
 
Looking at the economic growth rate, according to the IMF’s most recent report, the U.S. economy shrunk by 2.7 percent this year, with next year’s expected growth rate at 1.5 percent. These statistics are much better than those of euro-based economies, at rates of -4.2 percent and 0.3 percent respectively.

Moreover, the U.S.’s sustainable development is still much more advanced than that of other developed countries. According to IMF statistics, the U.S. economy has grown 20 percent in the last 8 years. At the same time, France, Japan, Italy and Germany’s growth rates were only between 10-15 percent. The U.S.’s superiority remains clear.

Looking at GDP per capita, the U.S. still stands above the rest. Based on World Bank statistics, in terms of purchasing power parity, the U.S. GDP per capita reached $42,000, higher than the U.K.’s by about 33 percent, Germany’s by about 37 percent, and Japan’s by about 38 percent.

The U.S. economy’s resilience cannot be separated from its inherent structure.

The U.S. labor market flow and flexibility is much greater than the E.U.’s and Japan’s, and in terms of investments, other developed countries can only follow behind the U.S. World Bank statistics clearly show in 2005 the average American invested $8,018, far exceeding Germany’s $4,963 and Britain’s $4,937. One can say, even though the financial crisis has harmed the U.S. on a fundamental level, it did not completely destroy the basis of the U.S. economy.

Moreover, the U.S. has the status of the U.S. dollar as an advantage. In the midst of the economic crisis, even if other countries’ [citizens] would like to take out a loan, they often still lack the funds necessary to purchase a house. However, the U.S. can still print currency, allowing others to ask the U.S. to foot the bill. World Bank President Zoellick acknowledges that when helping other countries fill their fiscal and trade deficits, he feels the strength of the U.S.’s advantage – to freely issue bonds and printed currency. 

It is worth noting the United States’s long-term goal: while adopting a series of influential, long-lasting policies, the U.S. is – in Obama’s words – building a “house on rock,” striving to ensure its role as a world economic leader in the post-crisis era.

The phrase “house on rock” comes from a speech Obama gave at Georgetown University in April of this year. In his meticulously prepared speech, Obama drew from a Biblical metaphor: a house built on sand will collapse in a disaster, but a house built on rock will stand firm.

According to Obama’s explanation, the U.S. economy is like a house on fire. In order to revive the economy, it is imperative to quickly extinguish the flames, at the same time replacing the base of the American economy; hence, building a “house on rocks.” In other words, the U.S. must reform finances on all fronts, including fields such as health care, in order to strengthen the U.S.’s overall competitiveness.

One cannot deny, the U.S.’s power has slipped to a degree compared to its status pre-crisis, while up-and-coming economies are quickly emerging as new powers. However, as the saying goes, even a starving camel is bigger than a horse*: at least in the long-term, the U.S.’s strength cannot be matched by that of other countries. The U.S. dollar is still the leading reserve currency, and one cannot deny this fact.

Believing the crisis has crippled the U.S. economy is simply an out-of-this-world conjecture. Even in the financial realm, Wall Street is still the world’s financial center. Even though Citigroup and U.S. banks have suffered tremendous losses, even though the ICBC (Industrial and Commercial Bank of China), China’s Agricultural Bank and the Bank of China are now the world’s largest banks in terms of market capitalization, who is to say that they are the world’s strongest banks?

The economic crisis has increased up-and-coming economies’ influence and confidence, which is a good thing and part of history’s inevitable trend. However, if this swell in confidence blinds us from the actual situation at hand, that is the sign of a real crisis!

*Editor's Note: Even weakened, the U.S. economy is still the largest.