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Is America in Decline? The Economist’s View

By Shlomo Maital


U.S. % of global total for various indicators…

Is America in decline?

   An excellent graphic by The Economist (daily chart) lists a variety of economic, financial and technological indicators for the U.S. as a share of the global total. America leads firmly in venture capital investments, and the U.S. dollar is still 60 per cent of total world forex reserves. In technology, the U.S. leads firmly only in “social media’ (which does not generate jobs, only wealth for a handful) and “cloud hosting” (similar to social media). Most of the indicators in which America dominates are financial in nature.   US dollar share of bonds, R&D spending, FDI stock, debt, etc.  

   So here we have it.  The U.S. is still the financial leader of the world, but not the technology or economic leader. There is a serious mismatch.

   So the question arises:   Can the U.S. remain the center of financial stability of the world?   Or will its flagging economy weaken the dollar and the whole world system? Are we due for another crisis?

   In history, no power has remained dominant in finance without remaining dominant in economics (note the decline of the British empire and its industrial power, and the decline of the pound sterling).



Two Perspectives on America: Optimist vs Pessimist

By Shlomo  Maital  


 The two major weekly news magazines, TIME and The Economist, each analyzed the U.S. economy in their most recent issues.

    TIME’s take:  A two-page spread headline, reading, in 120-point,  Surprise: The Economy isn’t as bad as you think; 7 signs America has turned the corner.    It is by Roger Altman, an investment banker who was deputy undersecretary of the Treasury, under President Bill Clinton. 

    The Economist’s take:  A brilliant cover showing a jockey riding a … tortoise,  headlined:  America’s lost oomph:  Why its long-term growth rate has slowed.

     Here are the arguments.  You judge.

     Altman:  1. Americans are spending more; 2. Housing has come back, with a 26% average increase in home prices in 20 key metro areas since April 2012;  3. Manufacturing is returning home to America;  4. Energy production is booming; in 2015 America will be the world’s leading oil producer!  5.  The environment is improving. 6.  American schools are working smarter; 7. Social trends are moving in the right direction; 80 % of high school students graduated, up from 73% in 2006.  

    The Economist:   The post-2008 recovery has been the weakest in the post WWII period.  The supply of workers and their productivity have not grown as expected. Many Americans have just given up job hunting and have disappeared from the labor force.   America spends little on retraining the jobless, has not raised the retirement age, as happened elsewhere, and has made disability insurance into a widespread welfare scheme.  Conclusion:  “The odds are that America’s economy will continue to lumber along at an underwhelming pace, and Americans will have no one to blame but their leaders.”

     They’re both right.  There ARE ‘upticks’ in America, as Altman claims.  He searched really hard for them; and he has a strong interest in optimism, because investment banking is built on it.  But The Economist too is right.  Long-term, it’s hard to see America growing much faster than its anemic 2.0 – 2.5 percent, without a boom in innovation that drives productivity.

     Conclusion?   That old half-full half-empty cup?  Drink the water.  Find opportunities, while the optimists and the pessimists are haranguing one another.     

Blog entries written by Prof. Shlomo Maital

Shlomo Maital