Tags: Economy | Japan | Recession | United States

US Economy Strong Despite Public Gloom

Friday, 21 November 2014 12:25 PM Current | Bio | Archive

Two-thirds of Americans believe the country is on the wrong track, a poll number that has not shifted much in three years. The midterm election results were just another reflection of this pervasive discontent. And yet, if one looks at the rest of the world, what's striking is how well the U.S. is doing relative to other major economies.

Japan is back in a recession and Germany has barely avoided slipping into one, which would have been its third since 2008. President Obama says the U.S. has produced more jobs in its recovery than the rest of the industrialized world put together. 

Why is this? Many believe that the American economy has some inherent advantages over its major competitors — a more flexible structure, stronger entrepreneurial traditions, and a more demographically vibrant society. Along comes a fascinating new book that says you ain't seen nothing yet.

Peter Zeihan's "The Accidental Superpower" begins with geography, pointing out that America is the world's largest consumer market for a reason — its rivers. Transporting goods by water is 12 times cheaper than by land — which is why civilizations have always flourished around rivers.

America, Zeihan calculates, has more navigable waterways — 17,600 miles' worth — than the rest of the world combined. By comparison, he notes, China and Germany have about 2,000 miles each. And all of the Arab world has 120 miles. That's just the beginning. "The world's greatest river network . . . directly overlies the world's largest piece of arable land, the American Midwest."

Add to this deep water ports, which you need in order to get goods to and from the rest of the world. Many countries with long coastlines have very few natural harbors. Africa, for example, with a long and dramatic coastline has, according to Zeihan, "only 10 locations with bays of sufficient protective capacity to justify port construction."

The contrast in America is, again, striking. Puget Sound, San Francisco Bay and the Chesapeake Bay are the world's three largest natural harbors. "[The] Chesapeake Bay alone boasts longer stretches of prime port property than the entire continental coast of Asia from Vladivostok to Lahore," Zeihan writes. 

All of these factors have created the world's largest consumer market, which in turn creates surplus private savings and a dynamic, unified economy that is remarkably self-sufficient. Imports made up just 17 percent of the American economy in 2012, according to the World Bank, compared with Germany's 46 percent and China's 25 percent — and the U.S. number will fall as America imports less and less foreign oil.

Many people have argued that America's energy revolution will give it great economic advantages. Zeihan agrees, but emphasizes the degree to which this strength will insulate America from the rest of the world. For most of modern history, the vital sources of energy, in the Middle East, lay far away from the centers of economic production — in Western Europe and North America.

But now, thanks to shale and tight oil, North America has much of the energy it needs at home. It has less need to police sea lanes in the Persian Gulf, a task that now mostly ensures the safe passage of oil from Saudi Arabia to China.

For Zeihan, oil was one big reason America needed to be involved with the world. As the world gets messier, he argues, there are fewer compelling reasons for America to pay blood and treasure to stabilize it. In a sense, Zeihan sees some of the same international disorder that Bret Stephens does in his spirited new book, "America in Retreat."

But Zeihan would argue that its cause is not Obama's weakness but America's logical return to its traditional, pre-1945 strategy, to prosper far from the ills of the world.
I am not as sure as either Stephens or Zeihan that the rest of the world is going to hell. And I'm not as sure as Zeihan that America's advantages are chiefly structural.

If one looks at the last five years, again in comparative terms, American public policy actually comes out looking impressive. To combat the global economic crisis of 2008, Washington acted speedily and creatively in three ways — through aggressive monetary policy, aggressive fiscal policy, and aggressive reform and recapitalization of the banking sector.

Every other rich country did less and has seen a more troubled return to normalcy.
Since the response to the financial crisis, Washington has been paralyzed and polarized. But this is not the entirety of American politics.

Beyond the Beltway, mayors and governors are reaching across party lines, partnering with the private sector, and making reforms and investments for future growth. When de Tocqueville wrote about America in the 1830s, he was struck by the bottom-up vitality of its towns and villages. This genius of America is still alive, whatever most Americans think.

Fareed Zakaria hosts CNN's "Fareed Zakaria GPS," and makes regular appearances on shows such as ABC’s "This Week" and NBC's "Meet the Press." He has been editor at large at Time magazine since 2010, and spent 10 years overseeing Newsweek's foreign editions. He is a Washington Post (and internationally syndicated) columnist. He is author of "The Post-American World." For more of Fareed Zakaria's reports, Go Here Now.

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When de Tocqueville wrote about America in the 1830s, he was struck by the bottom-up vitality of its towns and villages. This genius of America is still alive, whatever most Americans think.
Economy, Japan, Recession, United States
Friday, 21 November 2014 12:25 PM
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