I was sent a book called “When Giants Fall” – which I am part of the way through. It is very well written, although I have some issues about the economics type ideas in it. Once I have finished it I will be sure to pop a review up.
One of the implicit claims in the book and among many people I’ve heard from is that the US is only ahead of everyone else because they are borrowing – once the game of musical chairs between developing nations and the US stops the US will not be the primary superpower, or even a superpower, anymore.
Now I don’t really buy this. Lets think about the GDP of the US. Now if the US is borrowing to buy things this wouldn’t increase GDP – as any increase in consumption or investment would be netted out by a similar increase in imports. US GDP is currently $13.8 trillion pa (US definition of trillion 😉 also all figures are in US$ as of 2007). The other big boys have: Japan, $4.3 trillion pa, Germany $3.3 trillion pa, and China $3.3 trillion pa – these three produce less per year COMBINED than the US produces. World GDP is $54.3 trillion pa – so the US accounts for about a QUARTER of world production.
Sure the US has borrowed a lot, and sure the US economy is in big big trouble at the moment, but lets keep some perspective here – the ability for the US to produce is far beyond anything that any of the rest of the world has. Could this change over time – sure. But I wouldn’t say that the US has solely relied on borrowing – it also makes a hell of a lot of stuff.