Source: Zhou Ziheng

Recently, a large number of articles and articles about "American exceptionalism" have appeared Commentary: The U.S. economy is advancing by leaps and bounds in terms of economic growth, high-tech investment, and productivity, leaving the rest of the world behind. So it's no surprise that the dollar is higher and stocks are booming. This success is attributed to reduced regulation, entrepreneurship, lower investment taxes, etc. – in other words, without the interference suffered by Europe, Japan, and other advanced capitalist economies. There is optimism about America's success, even among the broader public, not just in the stock market. The U.S. RealClearMarkets/TIPP economic optimism index has risen to its highest level since August 2021, but remains below pre-pandemic levels.

But this story of prosperity is misleading. Yes, the U.S. economy is doing better than Europe or Japan. But historically, is the U.S. economy really better than Europe? Take, for example, a recent Financial Times article titled “Why the U.S. Economy Is So Far Ahead of Its Rivals,” which praised the U.S.’s performance relative to Europe. The author continues:“The United States is growing much faster than any other advanced economy. Since the end of 2019, U.S. gross product has increased by 11.4%, and the International Monetary Fund in its latest forecast predicts that the U.S. economy will up 2.8%. ”And: “Its growth record is rooted in faster productivity growth—a more durable driver of economic performance… Since the 2008-09 financial crisis, U.S. labor productivity increased 30%, more than three times that of the euro area and the UK This productivity gap that has been visible for a decade is reshaping the hierarchy of the global economy ”

Also: “U.S. Productivity growth is rapidly outpacing that of almost all advanced economies, many of which are trapped in a vicious cycle of low growth, declining living standards, strained public finances and compromised geopolitical influence.” The problem with this statement is that everything is relative. Note the title of the article: Why the U.S. Economy Is Soaring—Ahead of Its Rivals. The U.S. economy is surging, blah blah blah... but only ahead of its competitors. Yes, the US is doing much better compared to Europe and other advanced capitalist economies (not compared to India or India, of course). But that's because Europe, Japan, Canada are all in stagnation or even in outright recession. From a historical perspective, the U.S. economy is performing worse than it was in the 2010s and even worse than it was in the 2000s.

Take productivity growth as an example. Here is a chart from the Financial Times that showsAmerican exceptionalism.

But if you look closely at the trajectory of the U.S. productivity growth line, you will find that since about 2010, U.S. productivity growth has been Slowing down. Its relative outperformance was entirely due to slower growth in the rest of the G7. As the Financial Times article says: "Labour productivity has fallen in most advanced economies relative to the United States over the past few years, according to the Conference Board." Yes, relative to the United States , but U.S. labor productivity growth is also slowing, if not as much.

In fact, if we look back at the history of productivity growth, we will find that capitalist economies are increasingly unable to expand productivity and increase labor productivity. You can see this in the table below. U.S. productivity growth in 2006-18 was much better than in other major capitalist economies, but at only half the rate of the 1990s.

The same applies to productive business investments. The Financial Times showed a chart showing that U.S. business investment is growing faster than the rest of the economy. But it’s also important to note that the U.S. investment growth trajectory is also slowing: compare current growth rates with those of the 2010s, and even with those of the 2000s. U.S. business investment is slowing over the long term, while business investment elsewhere in the G7 is stagnating.

Let's look at another chart showing the historical trend of U.S. economic growth.

The average annual real GDP growth rate in the United States has dropped from 4% in the postwar "golden age" to 3% before the Great Recession. , and then for a period that I call the Long Depression, it was below 2%. The current consensus forecast is for U.S. economic growth in 2025 to be just 1.9%. But it will still be the fastest-growing economy in the G7.

Furthermore, what we measure here is real GDP growth. The U.S. economy has grown rapidly in recent years in large part because of immigration, which has fueled growth in the labor force and overall output. After the epidemic, although the per capita output growth of the United States is much lower than that of other G7 countries, it is still higher than that of other countries.

The following growth trend chart for the United States and Europe better illustrates this situation. In the 21st century, growth rates have been declining in the United States; and in Europe.

Furthermore, the performance of the U.S. capitalist economy is relatively better than that of other advanced economies, but this does not explain whether ordinary Americans are better off. As the Financial Times article admits As: "Despite the strength of the U.S. economy, the United States has the greatest income inequality among the Group of Seven nations, according to the OECD, along with the lowest life expectancy and the highest housing costs. Market competition is limited and millions of workers endure precarious employment conditions. ” This is hardly a recruiting poster for life in America, even if stock market investors don’t care.

If we talk about is the relative growth in per capita income in the United States, see this table I compiled from the World Inequality Database. The average income earner in the United States is growing less and less (even in relative terms), especially in the 21st century.

Nevertheless, some argue that U.S. productivity is booming, thanks to the introduction of artificial intelligence and other technological investments that the capitalist world (including) cannot match. As According to Nathan Sheets, chief economist at Citigroup, although Despite these efforts and efforts to become an AI superpower, the United States remainswhere AI happens and will continue to bewhere AI happens. There are signs of U.S. productivity growth. May be accelerating - although please note that the image below is an estimate

Perhaps so, but huge investments in AI have yet to have real effects across the economy, which will likely reduce jobs enough to sustain large gains in per capita productivity. This could take dozens

In fact, there is a lot of evidence that the artificial intelligence boom may be just a bubble-what Marx called virtual capital. The substantial increase in capital (i.e. investment in stocks and dollars in AI-related companies) is seriously inconsistent with the reality of profits and productive investments in AI.

Ruchiel Shire, Chairman of Rockefeller International. Ma once again called the US stock market boom in the Financial Times the "mother of all bubbles" and let me quote: Global investors are turning to a. More capital is being invested than at any time in modern history. U.S. stocks are now higher than other markets. Relative prices are at their highest levels since data began more than a century ago, and relative valuations are at their highest levels since data began half a century ago. As a result, the United States accounts for nearly 70% of major global stock indexes, up from 30% in the 1980s. By some measures, the dollar is trading at a higher value than at any time since the developed world abandoned fixed exchange rates 50 years ago. "

But "The market's awe of 'American exceptionalism' has gone too far... Talk of a technology or artificial intelligence bubble, or a bubble of investment strategies focused on growth and momentum, obscures all the U.S. markets The origin of the bubble. The United States completely dominates global investors. Mindspace is overowned, overvalued, and overhyped to an unprecedented degree. As with all bubbles, it's hard to know when this one will burst, and it's hard to know what will trigger its downfall. ”< /p>

And the support of this kind of bubble is very weak. The U.S. stock market drives world stock markets, and only seven stocks drive the U.S. stock market: the so-called Big Seven. For the vast majority of U.S. companies, outside of the booming energy, social media and tech industries, things are not looking good. Free cash flow per share for S&P 500 companies has not grown in three years (see red line in the chart below). Profit growth forecasts differed significantly from actual growth.

U.S. corporate debt-to-earnings ratios remain near record highs, and the interest costs on that debt have increased since the Federal Reserve decided to begin lowering interest rates. It hasn't dropped significantly.

The difference in the average cost of debt of smaller companies in the Russell 2000 Index and larger companies in the S&P 500 Index recently It more than doubled to about 300 basis points. With medium and long-term interest rates still rising, signs of relief in the short term are not obvious.

The number of U.S. corporate bankruptcies in 2024 has exceeded the level during the 2020 epidemic. Bankruptcies are surging, as if the U.S. economy is in trouble.

The Fed noted in its recent Financial Stability Report that“Valuation pressures remain high as price-to-earnings ratios rise to the high end of their historical ranges, while premiums are placed on equities. Estimates of (stock market risk compensation) remain well below average ”The Fed worries, "While balance sheets in the non-financial corporate and household sectors remain solid, a sharp decline in economic activity will depress corporate earnings and household incomes and reduce financial stress among smaller, riskier businesses with lower returns on capital The solvency of particularly large households ”

The stock market has not yet collapsed. But if it collapses, leaving many companies in trouble and mounting debt burdens, the financial crisis is likely to spread to the 'real economy'. and spread to the world.

Productivity growth across major economies has generally slowed as growth in productive investment fell. In a capitalist economy, productive investment is driven by profitability. 20th centuryNeoliberal attempts to increase profitability after the profitability crisis of the 1970s were only partially successful and ended at the beginning of the new century. The stagnation and “long depression” of the 21st century manifest itself in rising private and public debt as businesses and businesses try to overcome stagnation and low profitability by increasing borrowing.

This remains the Achilles heel of American exceptionalism. The story of American exceptionalism is really the story of the collapse of Europe—that’s another story.