The Economic Role of the US in the 21st Century

What will be the role of the United States in the 21st century? Is the future role of the U.S. really in the hands of Americans?

The answer is yes, but only to a certain point. According to Martin Wolf, from Financial Times, the United States can control their own actions, but they can not control the actions of others. He states that America maintains a dominant role because of its remarkable assets. It represents a continental power surrounded on the east and west by oceans and by neighbors to the north and south that do not present a threat. It has enormous natural resources, even though they are diminishing. It has been the biggest power of the world since the end of the 19th century.

Some of the most influential financial markets are located in the United States, despite the fact that it was these same markets that triggered the Great Depression in the 1930s, as well the economic crisis we are facing today. It has been issuing the main currency reserve worldwide since the end of World War I. Also, it represents the largest import market; these markets are exceeded in exports only by the European Union.

How Many of These Achievements Will the US Maintain This Century?

The most obvious threat is the one against its position as the world’s biggest economy. From the point of view of the exchange rates on the market, the American economy is still approximately two times bigger than China’s. However, according to the International Monetary Fund, it is only 30 percent bigger in purchasing power parity.

China’s economy is likely to slow over the next few decades, but it continues to head toward U.S. productivity levels. The odds are that by the 2020s, China will be an even greater economy than America.

In principle, the United States can hold their dominant position in science and commercial innovation, as Wolf sees it. Still, the “combination of xenophobia with hostility to science, self-inflicted fiscal constraints and weird spending priorities risks robbing the U.S.” of this position. Wolf quotes Edward Luce: “In 1990, [California] spent twice as much on its universities as its prisons. Now it spends almost twice as much on prisons.”

In addition, the costliness and inefficiency of the U.S. healthcare system is one of the main reasons why [Wolf writes] “long-term fiscal prospects look so grim.”

As a result, it takes a radical reform. “But this has become impossible, because of the exploding role of money in politics and the rising intransigence of the Republican party,” Wolf writes. In a system built on divided governance, seeing compromise as a sign of weakness may very easily trigger chaos.