Americans are purging their excesses one by one. Spending by the US Federal government has seen the steepest drop as share of national income since demobilisation after the Second World War. Claims that President Barack Obama is bankrupting America with a lurch towards hard-Left statism are for tabloid consumption only. Outlays have fallen from 24.4pc to 20.6pc of GDP in five years. Spending is roughly in line with its 40-year average. This fiscal squeeze has been achieved without driving the economy into recession or a Lost Decade, a remarkable feat. The US Congressional Budget Office expects the budget deficit to drop to 2.8pc of GDP this year, and 2.6pc next year. This is about the same as the eurozone but with a huge difference. The US economy is expanding fast enough to outgrow its debts. The US energy revolution is of course half the story. It has stoked booms across the Dakotas, Wyoming, Nebraska, Washington, Oregon, Utah and Texas.Francisco Blanch, from Bank of America, estimates that shale gas and oil have given the US economy an extra tailwind worth 1.9pc of GDP - what he calls the energy carry - with effects rippling through the chemical and plastics industries. New investments in ammonia plants are rising at an exponential rate, thanks to natural gas prices that are $4.40 (per BTU) in the US and $15 on Asias spot market. The US transferred more than $3 trillion to oil exporters from 2001 to 2008. That chapter is closed. The US is back to where it was in 2000 with an energy deficit well below 2pc of GDP and improving every month, while the eurozone is at -4.4pc and getting worse, and Japan is at -6.3pc. The US has added 2.5m barrels a day of crude output over the last three years, almost as much as the next three countries combined. America covered a quarter of its oil needs in 2007. It covers well over half today. It has overtaken Russia to become the worlds biggest exporter of refined petroleum products, and will soon be an exporter of liquefied natural gas aswell. For more than half a century the US has been losing part of its industry with each recession. A study by the International Monetary Fund found that the pattern has been very different this time. Manufacturing has recovered quickly, led by machinery, computers and electronics. Americas global share of manufacturing has stabilised at 20pc. Chinas share has also stabilised, at exactly the same level. The two superpowers are competing toe-to-toe for factory dominance. China is no longer gaining. America still has a lot of debt to clear. The errors of the pre-Lehman boom and the fifty year cycle of rising leverage that preceded it have left a debt burden comparable to the effects of a major war. Yet predictions of inevitable American decline that had such resonance five years ago already look oddly dated, a misreading of underlying economic and geopolitical power. The concept of the BRICS no longer has any economic meaning. Brazil and Russia fell by the way side long ago. India is decades away from any real challenge. Only China counts. History is full of such false declines. Informed opinion thought Britain finished after losing America, but it was actually France that was ruined by the costs of the Revolutionary War. Britain was just about to embark on its greatest days. The Roman Empire seemed beyond saving by the start of the Second Century. It was instead the precursor of the Antonines, almost eighty years of stability and wealth. Americas governing institutions still work remarkably well. There is no necessary reason why America cannot enjoy it own Antonine revival until the middle of this century.
Posted on: Thu, 24 Apr 2014 19:50:11 +0000
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