Quite like an Olympic sport, hand-wringing about "America's decline" is popular, practiced all around the world, and often dominated by Americans, themselves. Unlike an Olympic event, it's wasted energy.
Usain Bolt is the most dominant sprinter the world has seen in a century, perhaps more, so when he runs at the London games, anything less than victory by a blistering margin will be greeted as a disappointment. Results are always relative to expectations, and this as true for global economic competition as for the 100-meter dash. These days, the United States is an underestimated underdog, while China is still widely seen as something more like Bolt. The expectations gap is crucial to parsing the confused public discussion of the American recovery, and what it means for America's future.
Since the crisis of 2008, most Americans have come to expect gloom rather than gold in the near future. The long-term US growth rate is now burdened by our huge debts, and is slowing to 2.5 percent, down from 3.4 percent between 1950 and 2007. This fall is stoking a premature sense that American preeminence is already over. Polls show that a majority of Americans think China is already the world's "leading" economy, even though it is still about one third the size of the U.S. economy. The reality is that, at 2.5 percent growth, the US remains the fastest-growing rich economy, and is in fact regaining some of the recent ground lost to newcomers like China.
America's performance should be measured against the current competition, not against the records it set in the 1990s or 2000s.
America's performance should be measured against the current competition, not against the records it set in the 1990s or 2000s. All the big emerging markets are slowing, most notably China, which has lowered its growth target to under 8 percent for the first time in many years and may well fall under 7 percent. It is hard to grow at a sprinter's pace when you are hitting middle age, growing careful and a bit fat. China is all three, having recently reached an average real income of more than $5,000, with a total GDP of more than $7 trillion, and a new taste for welfare state programs. Every "miracle economy," from Japan in the 1970s to South Korea in the 1990s, slowed at this real income level.
Unhappily, for those who like to imagine that globalization can produce "win-win" finishes, China's slowdown will be America's gain. The story of American growth slipping by a point will pale in comparison to the three or even four point slip in China. If the U.S. grows 2.5 percent this year, and China slips to 7 percent, the United States should regain the title it lost to China in 2007: that of the single largest contributor to global growth.
This year, the United States will also grow faster than the global average for the first time since 2003, the year an unprecedented boom in emerging market growth began. For the next four years, emerging market growth doubled to over 7.0 percent, creating the widespread perception that the rich nations of the West were being overtaken by the rise of the poor. Now, the historic norm is reasserting itself -- the big emerging nations are slowing dramatically, and the coming years are once again likely to produce more laggards than winners. As of 2007 the emerging markets were on average growing three times faster than the United States; now they are growing only twice as fast.
Evidence of an American revival, against both developed and emerging world competition, is mounting, driven by the traditional strengths of the American economy--its ability to innovate and adapt quickly. America's worst worries -- heavy debt, slow growth, the fall of the dollar and the decline of manufacturing -- will look much less troubling when compared to its direct rivals. While US growth has slowed by a full point so has growth in Japan and Europe, leaving the United States on top of the league of rich nations.