United States

Overview

The USA was undoubtedly the twentieth century’s global economic giant. Although it still accounts for around a quarter of the world’s GDP, there are worrying signs that in the twenty-first century this giant is sleepwalking into difficult territory.  The USA’s overall rank of twenty-third out of thirty-five countries is disappointing and should be a cause for concern.  The election of Donald Trump, with his promises to reduce free trade, cut taxes for the wealthy, and increase public debt suggests the situation will worsen rather than improve in the short-run.  Strengths in innovation and knowledge are not sufficient to outweigh significant weaknesses in demography and levels of inequality. These problems, if not addressed, are likely to further contribute to the USA’s relative economic decline.

Strengths

“The chief business of the American people is business,” said former President Calvin Coolidge in 1925, and that statement still rings true today. American workers work hard and for much of their lives. Older workers are much more likely to be employed than in many other countries: nearly twice the rate in the UK and three times the rate in Germany. This means that the USA does not face the demographic drag facing other countries such as Germany or Italy. Productivity is very high: third highest of all countries studied, Americans produce twice as much per hour as Greek workers. Together with a business-friendly environment, and levels of spending on research and development above the OECD average, this enables American firms to command a competitive advantage in sectors as diverse as social media (Facebook), consumer goods (Coca Cola), and technology (Tesla, Apple, Google).

Weaknesses

While the USA does better on fertility rates and employing older workers than many other countries, demographically it falls down in rates of obesity and in life expectancy. It has the highest rates of obesity of all countries studied, while its health-adjusted life expectancy, at 69, is below that in Chile. This means that Americans are less healthy than their counterparts elsewhere. This has serious implications for the US healthcare system which is already the most expensive in the world.

Known as the home of capitalism, nonetheless levels of trade in relation to GDP are low:   the second lowest of any country studied, lower than either Japan or the UK. While this partly reflects the size of the economy, it may also be indication of the need for greater openness to trade.

Perhaps most concerning are the levels of inequality. Levels of gender inequality are worse than any European country. This means that the potential and skills of women are not being sufficiently harnessed – a major flaw in its economic model. Furthermore, the economy is distributing its rewards very unevenly: levels of income inequality are higher than the UK or Australia and comparable to Russia and Turkey. Such inequality creates political and social tensions and is a sign that economic potential is not being fully utilised.

Fact File

Population: 319 million (OECD, 2014)

GDP: $17,947 billion (OECD, 2015)

GDP per capita: $55,798 (OECD, 2015)