Why the U.S. recovery will be bigger, faster, and stronger than economists and politicians expect.

Commentary about business and finance.
April 11 2010 7:20 AM

You're Awesome, America!

Why the U.S. recovery will be bigger, faster, and stronger than economists and politicians expect.

Illustration by Rob Donnelly. Click image to expand.

In the wake of the 2008 financial meltdown and the deep, long recession that followed, the decline of America has become the preferred intellectual preoccupation of the elite—left, right, and center. Joseph Stiglitz, the Nobel-winning economist, has argued that the Obama administration's tepid response to the recession and the financial meltdown will sandbag the U.S. recovery. Historian Niall Ferguson has made the case that high debt and profligate spending will cause the downfall of a once mighty American empire. Harvard economist Ken Rogoff frets that the United States could become the next Greece. In January, French President Nicolas Sarkozy, once dubbed "l'Americain," delivered a blistering speech at the World Economic Forum in Davos that criticized the U.S.-led model of global capitalism.

After the failure of Lehman Bros. in September 2008, industries and institutions tethered to the easy-money era were sliced nearly in half. And so was America's economic self-esteem. Between the end of 2007 and the first quarter of 2009, $9 trillion of wealth evaporated. The relentless boom of China, India, and Brazil, with their cheap labor and abundant natural resources, emerged as a frightening new threat. The collapse coincided with other foreboding omens: $4-a-gallon gas, the rise of the Tea Partiers, an ungovernable Senate, an oddly blasé White House, unrepentant banks, and stubbornly high unemployment. The broad unemployment measure that also tallies frustrated part-timers and those who have given up looking for a job remains at 16.9 percent. If the United States doesn't tumble back into recession, the consensus holds, we'll face a Japan-style lost decade. A 2009 NBC/Wall Street Journal poll found that only 27 percent were confident their children's standard of living would be better than their own.

Advertisement

Bleak is the new black.

But the long-term decline of the U.S. economy has been greatly exaggerated. America is coming back stronger, better, and faster than nearly anyone expected—and faster than most of its international rivals. The Dow Jones industrial average, hovering near 11,000, is up 70 percent in the past year, and auto sales in the first quarter were up 16 percent from 2009. The economy added 162,000 jobs in March, including 17,000 in manufacturing. The dollar has gained strength, and the United States is back to its familiar position of lapping Europe and Japan in growth. Among large economies, only China, India, and Brazil are growing more rapidly than the United States—and they're doing so off a much smaller base. If the U.S. economy grows at a 3.6 percent rate this year, as Macroeconomic Advisers projects, it'll create $513 billion in new economic activity—equal to the GDP of Indonesia.

So what accounts for the pervasive gloom? Housing and large deficits remain serious problems. But most experts are overlooking America's true competitive advantages. The tale of the economy's remarkable turnaround is largely the story of swift reaction, a willingness to write off bad debts and restructure, and an embrace of efficiency—disciplines largely invented in the United States and at which it still excels. America still leads the world at processing failure, at latching on to new innovations and building them to scale quickly and profitably. "We are the most adaptive, inventive nation, and have proven quite resilient," says Richard Florida, sociologist and author of The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity. If these impulses are embraced more systematically and wholeheartedly, the United States can remain an economic superpower well into the current century.

So what will our new economy look like once the smoke finally clears? There will likely be fewer McMansions with four-car garages and more well-insulated homes, fewer Hummers and more Chevy Volts, less proprietary trading and more productivity-enhancing software, less debt and more capital, more exported goods and less imported energy. Most significantly, there will be new commercial infrastructures and industrial ecosystems that incubate and propel growth—much as the Internet did in the 1990s.

The current pessimism is part of a historical economic-inferiority complex. To hear some critics tell it, things have been going south in this country since the cruel winter in Jamestown, Va., in 1609, when most of the settlers died. For most of the 19th century, America was the immature, uncouth cousin that required huge infusions of European capital to build its railroads. The United States emerged from World War II as the globe's industrial, financial, and technological leader by default—the rest of the developed world had destroyed much of its industrial capacity. Yet Americans were insecure about their rising status. In the 1920s, many Progressives returned from Mussolini's Italy convinced that Il Duce had a superior economic model. During the New Deal, bankers and industrialists earnestly fretted that Franklin Roosevelt would ruin the nation's prospects for growth by establishing a new safety net. The U.S.S.R.'s launch of the Sputnik satellite in 1957 inspired fears that the Soviet Union's presumed technological lead would allow it to triumph in the Cold War. And in the 1980s, Japan threatened the United States with exports of electronics and cars and by buying trophy properties like Rockefeller Center and the Pebble Beach golf resort. "The Cold War is over, and Japan won," as Sen. Paul Tsongas put it in 1992.

Of course, the declinists were often wrong—Rockefeller Center and Pebble Beach returned to U.S. ownership within a decade. Just as exuberant projections are generally made precisely at the top (remember Dow 36,000?), prophecies of long-term decline usually gain traction after we've suffered a catastrophic fall. This time around, the chorus of naysayers reached its climax in March 2009, when Federal Reserve Chairman Ben Bernanke was widely mocked for his identification of "green shoots" of recovery. In the first quarter of 2009, the economy was shrinking at a 6.4 percent annual rate. By the fourth quarter it was growing at a 5.9 percent rate. Consider the scope of that swing: The growth rate of a $14.5 trillion economy shifted by 12.3 percentage points in about nine months. Like a massive sailboat pivoting 180 degrees in choppy seas, this wrenching turnaround produced a massive wake and induced nausea among many of its passengers.

TODAY IN SLATE

Jurisprudence

Don’t Expect Adrian Peterson to Go to Prison

In much of America, beating your children is perfectly legal. 

Ken Burns on Why Teddy Roosevelt Would Never Get Elected in 2014

Cops Briefly Detain Django Unchained Actress Because They Thought She Was a Prostitute

Minimalist Cocktail Posters Make Mixing Drinks a Cinch

How the Apple Watch Will Annoy Us

A glowing screen attached to someone else’s wrist is shinier than all but the blingiest of jewels.

Books

Rainbow Parties and Sex Bracelets

Where teenage sex rumors come from—and why they’re bad for parents and kids.

Books

You Had to Be There

What we can learn from things that used to be funny.

Legendary Critic Greil Marcus Measures and Maps Rock History Through 10 Unlikely Songs

Catfish Creator Nev Schulman’s Book Is Just Like Him: Self-Deluded and Completely Infectious

Behold
Sept. 12 2014 5:54 PM An Up-Close Look at the U.S.–Mexico Border
  News & Politics
Jurisprudence
Sept. 14 2014 2:37 PM When Abuse Is Not Abuse Don’t expect Adrian Peterson to go to prison. In much of America, beating your kids is perfectly legal. 
  Business
Moneybox
Sept. 12 2014 5:54 PM Olive Garden Has Been Committing a Culinary Crime Against Humanity
  Life
Inside Higher Ed
Sept. 13 2014 8:38 AM “You’re More Than Just a Number” Goucher College goes transcript-free in admissions.
  Double X
The XX Factor
Sept. 12 2014 4:05 PM Life as an NFL Wife: “He's the Star. Keep Him Happy.”
  Slate Plus
Behind the Scenes
Sept. 12 2014 5:55 PM “Do You Know What Porn Is?” Conversations with Dahlia Lithwick’s 11-year-old son.
  Arts
Brow Beat
Sept. 14 2014 7:10 PM Watch Michael Winslow Perform Every Part of “Whole Lotta Love” With Just His Voice
  Technology
Future Tense
Sept. 12 2014 3:53 PM We Need to Pass Legislation on Artificial Intelligence Early and Often
  Health & Science
New Scientist
Sept. 14 2014 8:38 AM Scientific Misconduct Should Be a Crime It’s as bad as fraud or theft, only potentially more dangerous.
  Sports
Sports Nut
Sept. 12 2014 4:36 PM “There’s No Tolerance for That” Pete Carroll and Jim Harbaugh say they don’t abide domestic abuse. So why do the Seahawks and 49ers have a combined six players accused of violence against women?