The United States produces more per person each year than the majority of other sophisticated economies. In 2015, the United States’ real GDP per capita was $56,000. Adjusting for purchasing power, Germany’s actual GDP per capita in that year was only $47,000, France and the United Kingdom’s was $41,000, and Italy’s was only $36,000.
I can think of ten characteristics that set America apart from other industrial economies, which I detail in a recent essay for the National Bureau of Economic Research, which this piece is based on.
A culture of entrepreneurship. Individuals in the United States express a desire to create and expand enterprises, as well as a readiness to take risks. In American culture, there is less stigma attached to failing and beginning over. Even students who have attended college or a business school demonstrate this entrepreneurial drive, which is self-reinforcing: Silicon Valley successes such as Facebook inspire further entrepreneurship.
A financial framework that encourages self-employment. The United States has a more developed equity financing system than Europe, with angel investors prepared to fund companies and a very active venture capital market to aid in the expansion of those businesses. We also have a decentralized financial system that gives loans to entrepreneurs, with over 7,000 local banks.
Universities with a reputation for excellence in research. Much of the basic research that fuels high-tech entrepreneurship comes from universities in the United States. Faculty and doctoral grads frequently spend time with adjacent companies, and the cultures of both universities and businesses encourage this collaboration. Top research universities attract bright students from all over the world, and many of them choose to stay in the United States.
Large trade unions, state-owned firms, and extremely rigid labor regulations do not obstruct labor markets in general. There are only about 7% of private-sector workers in the United States who are unionized, and there are essentially no state-owned businesses. While working conditions and employment are regulated in the United States, the regulations are far less onerous than in Europe. As a result, workers have a higher chance of finding the perfect employment, businesses have an easier time innovating, and new businesses have an easier time getting off the ground.
A rising population, owing in part to immigration. The aging of America’s population means a younger workforce that is more adaptable and trainable. Although there are restrictions on immigration to the United States, there are also unique rules that allow individuals with exceptional skill and industry sponsorship to have entry to the American economy and a path to citizenship (green cards). A separate “green card lottery” allows persons who want to immigrate to the United States to do so. The ability of the country to recruit immigrants has been a key factor in its growth.
A culture (as well as a tax system) that promotes long hours and hard effort. The average American employee works 1,800 hours per year, which is much more than the 1,500 hours worked in France and 1,400 hours in Germany (albeit not as much as the 2,200+ hours worked in Hong Kong, Singapore, and South Korea). Working longer generally implies generating more, which translates to better actual incomes.
A source of energy that allows North America to be energy self-sufficient. Natural gas fracking, in particular, has offered abundant and relatively inexpensive energy to American enterprises.
A regulatory environment that is beneficial. Despite the fact that US laws are far from ideal, they are less onerous for firms than those imposed by European countries and the European Union.
Government is smaller than in other industrial countries. According to the OECD, federal, state, and local government spending in the United States reached 38 percent of GDP, compared to 44 percent in Germany, 51 percent in Italy, and 57 percent in France. In some nations, increased government expenditure entails not just a bigger share of income received in taxes, but also higher transfer payments, which weaken labor incentives. It’s no surprise that Americans work a lot because they have an added incentive.
States compete under a decentralized political system. State competition stimulates entrepreneurship and work, and states compete with their legal laws and tax regimes for firms and individual people. There are no income taxes in some states, and labor regulations restrict unionization. In-state students have access to high-quality universities with inexpensive tuition. They also compete in terms of legal liability rules. Both fresh entrepreneurs and huge corporations are attracted to the legal systems. In terms of political decentralization, the United States is arguably unusual among high-income countries.
Will America be able to sustain its advantages? Joseph Schumpeter predicted that capitalism would decline and fail in his 1942 book, Socialism, Capitalism, and Democracy, because the political and intellectual climate required for capitalism to thrive would be weakened by capitalism’s success and intellectual critique. He believed that social democratic parties would construct a welfare state that would stifle enterprise if they were elected by the people.
Despite the fact that Schumpeter’s book was published more than 20 years after he emigrated from Europe to the United States, his warning appears to be more relevant to Europe now than to the United States. In the United States, the welfare state has grown, although at a far slower rate than in Europe. Furthermore, the intellectual milieu in the United States is far more pro-capitalist.
If Schumpeter were alive today, he may refer to the rise of social democratic parties in Europe, as well as the extension of the welfare state that has resulted, as reasons why Europe’s industrial countries have not had the same robust economic growth as the United States.
What accounts for the US economy’s size?
The United States is a mature market economy with the biggest nominal GDP and net wealth in the world. After China, it has the second-largest purchasing power parity (PPP) economy. In 2021, it had the ninth highest nominal per capita GDP and the fifteenth highest PPP per capita GDP in the world. The United States possesses the world’s most technologically advanced and innovative economy. Its companies are on the cutting edge of technological advancements, particularly in artificial intelligence, computers, pharmaceuticals, and medical, aerospace, and military technology. The United States dollar is the most widely used currency in international transactions and the world’s most important reserve currency, supported by its economy, military, petrodollar system, and enormous U.S. treasury market. It is the official money of certain countries and the de facto currency of others. China, the European Union, Canada, Mexico, India, Japan, South Korea, the United Kingdom, and Taiwan are the top trading partners of the United States. The United States is the world’s top importer and exporter. It has free trade agreements in place or in the works with a number of nations, including the USMCA, Australia, South Korea, Switzerland, Israel, and others.
Natural resources, a well-developed infrastructure, and high productivity drive the economy of the country. With a total estimated value of Int$45 billion, it is the seventh most valuable country in terms of natural resources.
How did the United States become the world’s greatest economy?
When did the United States become the world’s largest economy? The Industrial Revolution increased production, and by 1890, the United States had surpassed the United Kingdom as the world’s greatest economy. 1 Manufacturing, finance, and technology innovations have all contributed to the country’s current status.
Is the United States wealthier than China?
In both nominal and PPP terms, the United States and China are the world’s two largest economies. The United States leads in nominal terms, while China has led in PPP terms since 2017, when it overtook the United States. In nominal and PPP terms, both countries account for 41.89 percent and 34.75 percent of global GDP in 2021, respectively. Both countries have much bigger GDPs than the third-placed countries, Japan (nominal) and India (PPP). As a result, only these two are competing for first place.
According to IMF forecasts for 2021, the United States will be ahead by $6,033 billion, or 1.36 times, in terms of exchange rates. On a purchasing power parity measure, China’s GDP is worth $3,982 billion dollars, or 1.18 times that of the United States. According to World Bank estimates, China’s GDP was approximately 11% of that of the United States in 1960, but is now 67 percent in 2019.
Due to China’s enormous population, which is more than four times that of the United States, the gap in per capita income between the two countries is enormous. In nominal and PPP terms, the United States’ per capita income is 5.78 and 3.61 times that of China, respectively. The United States is the world’s fifth richest country, while China is ranked 63rd. On a PPP basis, the United States ranks eighth, while China ranks 76th.
China’s GDP growth rate reaches a high of 19.30 percent in 1970 and a low of -27.27 percent in 1961. Between 1961 and 2019, China experienced a 22-year growth rate of greater than 10%. In 1984, the US hit an all-time high of 7.24 percent, while in 2009, it hit a new low of -2.54 percent. For the first time in eight years, the United States’ GDP growth rate was negative. In the last four years, China has experienced negative growth.
China is ahead of the United States in the agriculture and industry sectors, according to the World Factbook. Agriculture output in the United States is only 17.58 percent of China’s, whereas industry output is 77.58 percent. The US services industry is more than double that of China.
Is the UK wealthier than the US?
According to a research by wealth specialists New World Wealth, the United States led the ranks for the world’s richest countries, followed by China with $48.73 trillion and $17.25 trillion in wealth, respectively (NWW).
Individuals’ property, cash, investments, and business interests are included in the numbers, which show that the UK is the fourth richest country in terms of average wealth per person ($147,600), behind Switzerland, Australia, and the United States. Germany, which was fourth in total wealth, fell to 11th place, with people owning assets worth an average of $114,400.
The report’s author, Andrew Amoils, attributed Britain’s high average wealth to the high value of real estate: “Property makes up such a large amount of UK wealth.” Many people in Germany do not own their homes and instead rent them, which has a detrimental influence on their overall wealth,” he told City A.M.
Who is the more powerful, China or America?
The US has resisted the global epidemic to acquire comprehensive power in Asia for the first time in four years, solidifying its place at the top, while China has lost ground and has no obvious path to uncontested domination in the region.
The Lowy Institute’s 2021 Asia Power Index used 131 factors to evaluate 26 countries in the Indo-Pacific area on eight criteria, including economic resources, military spending, and cultural and diplomatic impact.
According to a study of regional power shifts, the United States has surpassed China in two key categories: diplomatic influence and projected future resources and capabilities, expanding its lead over China as Asia’s most powerful country.
It’s the first time the US has grown in power since the Asia Power Index was introduced in 2018, and it follows a severe drop in 2020 when COVID-19 destroyed the country.
Why is the United States the most powerful nation?
America’s influence is largely due to its size: it is one of the world’s largest countries in terms of population and area, as well as being rich in natural resources and human capital. It is likewise an island nation in many ways; it is freer to project influence globally because it confronts no big dangers on its frontiers.
There was no cause for the borders of North America to become what they are. The French and Indian War, which was at the time merely a diversion in Europe’s broader Seven Years’ War, was a pivotal moment in how that happened. France surrendered its huge territory on the continent to Britain and Spain at the end of the war. In 1803, Napoleon reclaimed Louisiana and sold it to the United States, but New France was gone permanently. The continent was left open to annexation by the British Empire and its successor, the United States, while the Spanish Empire was already in decline.
What will the state of the US economy be in 2021?
As the economy continues to recover from the ravages of the COVID-19 pandemic, US GDP growth surged in the fourth quarter, expanding at a 6.9% annual rate, up from the preceding four quarters’ rate of growth. Increased inventory investment and increased service consumption accounted for all of GDP growth in the fourth quarter. Real GDP increased by 5.5 percent in the first four quarters of 2021, the fastest rate since 1984.
In the fourth quarter, the economy was most likely producing at or near its full potential. The economy was still trending 1.4 percent below pre-pandemic levels. Even if the pandemic had not occurred, the economy is unlikely to have continued to develop at the same rate in 2020 and 2021 as it had in previous years. Prior to the pandemic, forecasters projected a slowdown since the economy was close to or at maximum employment, making it improbable that job gains would continue at the same rate. Furthermore, because of higher fatalities and limited immigration, which resulted in a smaller-than-expected labor force, and low investment, which resulted in a smaller-than-expected capital stock, the pandemic itself has certainly diminished potential.
Even while the economy was near to where it would have been had the epidemic and the government’s response not occurred, the economy’s makeup was drastically changed. On the supply side, employment remained low (because to low labor force participation), but this was compensated for by longer average hours and improved productivity. Final expenditures were biased towards commodities and residential investment, rather than services, business fixed investment, inventories, and net exports, on the demand side. In the fourth quarter, the demand side began to take on a more regular composition, but it remained highly skewed.
Is China owing money to America?
Over the previous few decades, China has steadily increased its holdings of US Treasury securities. The Asian nation owns $1.065 trillion, or 3.68 percent, of the $28.9 trillion US national debt, more than any other foreign entity save Japan as of October 2021.
How much debt does America have?
“Parties in power have built up the deficit through increased spending and poorer tax collection, regardless of political affiliation,” says Brian Rehling, head of Global Fixed Income Strategy at Wells Fargo Investment Institute.
While it’s easy to suggest that a specific president or president’s administration led the federal deficit and national debt to move in a given direction, it’s crucial to remember that only Congress has the power to pass legislation that has the greatest impact on both figures.
Here’s how Congress responded during four major presidential administrations, and how their decisions affected the deficit and national debt.
Franklin D. Roosevelt
FDR served as the country’s last four-term president, guiding the country through a series of economic downturns. His administration spanned the Great Depression, and his flagship New Deal economic recovery plan aided America’s rebound from its financial abyss. The expense of World War II, however, contributed nearly $186 billion to the national debt between 1942 and 1945, making it the greatest substantial rise to the national debt. During FDR’s presidency, Congress added $236 billion to the national debt, a rise of 1,048 percent.
Ronald Reagan
Congress passed two major tax cuts during Reagan’s two administrations, the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986, both of which reduced government income. Between 1982 and 1990, Congress passed Acts that reduced revenue as a percentage of GDP by 1.7 percent, resulting in a revenue shortfall that contributed to the national debt rising 261 percent ($1.26 trillion) during his presidency, from $924.6 billion to $2.19 trillion.
Barack Obama
The Obama administration oversaw both the Great Recession and the recovery that followed the collapse of the mortgage market throughout his two years in office. The Economic Stimulus Act of 2009, which pumped $831 billion into the economy and helped many Americans avoid foreclosure, was passed by Congress in 2009. When passed by a strong bipartisan vote, congressional tax cuts added extra $858 billion to the national debt. During Obama’s two terms in office, Congress increased the national deficit by 74% and added $8.6 trillion to the national debt.
Donald Trump
Congress approved the Tax Cuts and Jobs Act in 2017, slashing corporate and personal income tax rates, during his single term. The cuts, which were seen as a bonanza for the wealthiest Americans and corporations at the time of their passage, were expected by the Congressional Budget Office to increase the government deficit by $1.9 trillion at the time of their passing.
The federal deficit climbed from $665 billion in 2017 to $3.13 trillion in 2020, despite the Treasury Secretary’s prediction that the tax cuts would reduce it. Some of the rise was due to tax cuts, but the majority of the increase was due to successive Covid relief programs.
The public’s share of the federal debt has risen from $14.6 trillion in 2017 to more than $21 trillion in 2020. The national debt is made up of public debt and intragovernmental debt (amounts owed to federal retirement trust funds such as the Social Security Trust Fund). It refers to the amount of money owed by the United States to external debtors such as American banks and investors, corporations, people, state and municipal governments, the Federal Reserve, and foreign governments and international investors such as Japan and China. The money is borrowed in order to keep the United States running. Treasury banknotes, notes, and bonds are included. Treasury Inflation-Protected Securities (TIPS), US savings bonds, and state and local government series securities are among the other holders of public debt.
“The national debt is growing at a rate it hasn’t seen in decades,” says James Cassel, chairman and co-founder of Cassel Salpeter, an investment bank. “This is the outcome of the basic principle of spending more money than you earn.” Cassel also points out that while both major political parties have spoken seriously about reducing the national debt at times, discussions and strategies have stopped.
When both sides pose discussing raising the debt ceiling each year, the national debt is more typically utilized as a bargaining chip. The United States would default on its debt obligations if the debt ceiling was not raised. As a result, Congress always votes to raise the debt ceiling (the maximum amount of money the US government may borrow), but only after parties have reached an agreement on other legislation.