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The makings of U.S. economic exceptionalism
A look back
Economic growth comes from the accumulation of labor and capital. The post-WWII economic boom in the U.S. rode a wave of technological progress and capital investment. The undeniable and most relevant fact is the U.S. has been the outperformer among developed economies for the past half-century. Can this economic dominance continue in the face of building risks?
20%–25%
THE U.S. HAS MAINTAINED A ROUGHLY 20%–25% SHARE OF THE WORLD ECONOMIC STAGE OVER THE PAST 50 YEARS.
Sources: IMF, Wilmington Trust. Data as of October 2021.
$5.3T
U.S. DIRECT FISCAL STIMULUS TOPPED ALL OTHERS WITH $5.3T IN NEW SPENDING, HITTING 26% OF GDP.
Fiscal Monitor Database of Country Fiscal Measures in Response to the COVID-19 Pandemic, International Monetary Fund, as of October 2021.
Dimensioning the U.S. and world economies
Compared to Europe, Australasia, East Asia, and emerging markets, the U.S. has a leading edge when it comes to the drivers of economic exceptionalism.
1
Growth pillars
The factors to compete globally include capital markets, infrastructure, demographics, education, and labor flexibility.
2
Policy framework
Fiscal responsiveness helped nations weather the pandemic. The downside is its impact on the debt-to-GDP ratio.
3
Innovative capacity
Economies with strong digital infrastructure and robust research & development are well placed to compete in the global market.
Differentiating drivers of post-Covid-19 exceptionalism
The drivers of U.S. economic exceptionalism were in place prior to the Covid crisis, and the U.S. recovery was more rapid due to what was enacted across three measures:
- After the pandemic, the U.S. emerged as a leader in labor flexibility, which can be attributed to the ease for workers to change jobs and the ability of firms to restructure their workforce as needed.
- The U.S. response to direct fiscal stimulus exceeded all others with $5.3T in new spending, amounting to 26% of GDP.
- The U.S. dominated in its ability to innovate. It was the key contributor to the development of mRNA technology and becoming a leader in deploying vaccines. Outside the pharma sector, innovation resulted in a shift to online transaction capabilities and increased entrepreneurship.
Fiscal Monitor Database of Country Fiscal Measures in Response to the COVID-19 Pandemic, International Monetary Fund, as of October 2021.
Luke Tilley
Chief Economist
LOOKING AHEAD
We expect the U.S.’ competitive advantages to power continued outperformance over the next 12 months, though there are risks on the horizon.
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