The Dragon Is Still Soaring but at a Lower Altitude

The U.S. debt-ceiling crisis has made the world question and worry about America’s economic growth and its global leadership. Some have compared it to the situation of Great Britain after World War II: The dragon that had soared in the sky for a whole century fell to the ground and became a relatively weak country.

The question of whether or not the United States has lost its role as a world leader and fallen into a decline is a worthy one. But U.S. power cannot be solely determined by its financial index or credit; we must also consider the following ten economic strengths it possesses.

America Can Succeed Quickly

First, there is economic momentum, in other words, the GDP and the GDP per capita. According to the World Bank, the United States made up 23.4 percent of the world’s total GDP in 2010, while Japan only made up 5.46 percent, and the EU made up another 25.9 percent (with Germany making up 3.32 percent, France 2.58 percent, and Britain 2.25 percent), and China made up 5.88 percent. In the 28 years between 1980 and 2008, the GDP growth rate of the United States was the highest among all developed countries. The GDP per capita was US$40,800 in the United States, while Japan’s was 83 percent and Germany’s and France’s were both 92 percent of that of the United States.

America’s significant proportion of the world’s GDP has provided the country an edge over other developed countries. It has a faster economic growth and is wealthier overall. There is still a huge gap in economic scale and wealth between newly developed countries and the United States, and it will take a long time for anyone to surpass them.

Secondly, labor productivity determines the competitive strength of a country and the corporations. The United States still has the lead among all developed countries. In the 60’s of last century, Japan and 15 countries within the European Union once had a tremendous growth on labor productivity of 8 percent and 5 percent respectively, but it had been slowing down ever since. Meanwhile, Japan and Europe also do not surpass the United States in creativity. Among developed countries, China’s labor productivity is only 15% of that of the United States. There is still a long way to go until China can catch up.

Next there is technological power. No country has yet significantly surpassed the United States on technology research when it comes to funding and statistics. The United States also has the fastest growth in number of patent registrations and makes up of 38 percent of the world’s new technology patents. Its publications are also the most cited, at 63 percent of the world total.

Next let’s look at human capital. The United States was the first country in the world to implement compulsory education, which established the backbone that fuels the country’s innovations. Colleges in the United States are highly competitive, and research facilities and laboratories supply a large amount of outstanding scientists. In the United States, funding for higher education is 2.4 percent of the GDP, while other Organization for Economic Co-operation and Development countries only spend 31.5 percent of that amount. The federal government is responsible for 32 percent of the total spending on higher education, while only making up 7 percent of the spending in middle and high schools. As a result, colleges have been more successful than middle and high schools in the United States.

Fifth, there is public finance. Although the revenue of the United States is relatively low compare to its GDP, its GDP and its financial strength is still the top in the world.

There is also financial strength. The financial strength of the United States comes from well-funded, diverse financial institutes and a large-scale, active financial market. Although the financial crisis hurt the United States’ finances, it also redirected the focus of the financial sector back to the path of the true economy. In fact, it did not affect the United States’ position as the leading figure of global finance.

Next is main currency. As the U.S. dollar remains the major currency used in government reserves, trading and price benchmarks, the United States is still the most significant and influential country in the worldeconomy.

In September 2009 prior to the financial crisis, the world’s total reserve consisted of 61.6 percent of U.S. dollars, 27.7 percent Euro, 3.2 percent Japanese yen, 4.3 percent British pound, and 3 percent other currencies. The U.S. dollar also made up 62 percent of the world’s currencies. There will be no threat to the position of the U.S. dollar as the world’s reserve currency.

The eighth reason is international enterprises. The globalization of American enterprises has significantly increased the competitive strength of the United States. Investments from America’s international enterprises play a major role in the global economy. In 1990, the United States led developed countries and made up 35 percent of the world’s Foreign Direct Investment, three times as much as Britain, which was in second place. Although the amount diminished to 22.7 percent in 2010 after the global financial crisis, it still clocked in at double that of France, which was in the second place. America’s international enterprises have great competitive strength globally.

America also has their work force. The increase in population in the United States is also a contributing factor to its positive economic forecast. In 2010, the population of the United States was 312 million (4.5 percent of the global population). This was due to immigration and a high birth rate among immigrants. Meanwhile, only 12 percent of its population was over 65 year old, with an average age of 36. Unlike most developed countries, it is not in a midst of an aging population, which provides a beneficial environment for continuous prosperity in the United States.

Finally, they have their natural resources. With its good climate, good water supply and the abundance of lands and mineral resources, the United States is a country with plentiful natural resources. The lack of “Dutch Disease” in the United States also maximizes its advantage in natural resources.

The Strength of the United States

As long as the above economic factors remain true, it will be extremely difficult for any developed country or emerging market to surpass the United States within the next 50 years. It is premature to say that the power of the United States is in a decline.

Back in 1958, the impact of the Sputnik crisis led J.F.K. to prioritize U.S. production policy. He focused resources and effort onto the recovery of manufacturers, traders and the consumer’s market instead of solely relying on the financial market to strengthen the country’s power and vitality. If Obama takes notes from history, the resurgence and revival of the United States will arrive.

As long as the American dollar and America’s debt remain the world’s standard currency and investment, and as long as the United States remains the most profitable consumers’ market to the new markets; the final destination of international investment markets; the shelter (not a perfect one, but the only one) for countries that suffer from natural disasters and wars; and the leader in technological innovations and human capital; the dragon called America, although it may have to lower its flying altitude, will still be flying in the sky in the next half of century. Europe will remain the only fallen dragon with regrets.