In the aftermath of the housing collapse and the “Great Recession,” the slow-motion implosion of the U.S. economy is taken as gospel. Conventional wisdom has it that thanks to the combination of exploding government debt and Wall Street cronyism, the United States is on track to become “the next Argentina” — a formerly prosperous nation that self-destructed, descending into political corruption and economic chaos.
As radio personality Paul Harvey was fond of noting: “At times like these, we need to remember that there have always been times like these.” In the 1970s, Americans grew up with two myths. First, that the Soviet Union would dominate the United States militarily; second, that the Japanese would dominate the U.S. economically. With the Soviet Union erased from the map, and the Japanese stock market below levels it traded in 1984, both fears seem almost quaint.
Yet, we take it as gospel today that China is destined to dominate the United States economically in the 21st century. Perhaps. But perhaps not. I believe that much of China’s economic growth is based on a misallocation of resources on a scale never seen in history. A good example is White Elephant projects like building a copy of Manhattan and Disney World in the middle of nowhere. Throw in the oppression of Chinese citizens’ human rights, and China looks a lot more like the next Soviet Union than it does like the next United States.
It’s also worth reminding ourselves where the world’s new economic challengers stand in comparison to the United States today. Despite the high economic growth rates of developing nations, the United States is by far the world’s wealthiest nation as measured by Gross Domestic Product (GDP) — the broadest measure of economic wealth. And the rest of the world isn’t even close. In 2010, U.S. GDP was $14.6 trillion. That means that the U.S. economy is as large as the next three-largest economies in the world — China, Japan and Germany — combined.
The map below — originally published in Britain’s Economist magazine — puts the size of the United States’ global rivals in perspective. On the map, the name of each U.S. state is replaced by a country, whose GDP equals approximately that particular U.S. state’s GSP (gross state product.) A quick glance at the map leads to some fascinating — and unexpected — comparisons.