I’m usually not big on fancy interactive graphics in the media, but The Economist magazine and the Washington Post have just issued two that are both worth your while. Each vividly illustrates some of the most important national and international economic trends of the last few decades.
The “American Abacus” in The Economist‘s October 3 feature on the surprising (to many) resilience of America’s superpower status makes possible examining the U.S. share of 26 categories of global economic activity and how it’s changed since 1980. The categories are even color-coded into several super-categories, which enables you to see some mega-trends at a glance. Because data going back 35 years can’t be found for all the subjects the Abacus seeks to measure, it’s far from a perfect gauge. (We’ll get to some other flaws shortly). But I found it thought-provoking at the very least, and although I hope you’ll want to play around with it yourself, here are some of the main conclusions that stand out to me.
First, the situation this year – the picture presented when you first see the Abacus – makes clear that the greatest relative U.S. global strengths are in finance (look at all those medium blue bars near the top) and to a much lesser extent, technology. The technology measures, however, seem controversial, to say the least. I’m OK with including “cloud hosting.” But “social-media users”? At the risk of seeming flip, how are they going to help the nation keep Vladimir Putin at bay in the Middle East, or boost living standards across the board?
Much less impressive is the U.S. standing in the “economy” category, and not just because these measures of economic power are more concrete. After all, they also include America’s share of global research and development activity and patent issuings. At the same time, why are “public and private debt” and “cross border lending” in this grouping, rather than finance. And I know that “consumption” is part of the real economy. But does it generate, or even have much to do with, economic strength and influence?
Also more than little troubling is how indicators such as “manufacturing output” and “merchandise exports” are found near the bottom. And somewhat surprisingly, the United States doesn’t exactly dominate the world in “services exports,” either, even though economists tend to view services as sectors of the future, and goods as kind of old hat.
The results get even more interesting as you move the toggle at the bottom back and historical comparisons become clear. Take “GDP at market prices.” That’s the best measure of how big the U.S. economy is, and last year (the latest data available) it represented slightly over 20 percent of the global total. Toggle back to 2010 and it looks somewhat higher, and it stays higher going all the way back to 1980s, seeming to peak as a percentage of the world economy in the mid-1980s. The main message here: However quickly the United States has grown during this 35-year period, the rest of the world as a whole has been growing faster.
Manufacturing output shows a similar same pattern (though for some reason, the figures only go back to 1997), as do merchandise exports. Household consumption, interestingly, is somewhat different. The U.S. share of the global total has fluctuated some, but has stayed roughly the same since 1980. That, coupled with the nation’s shrinking share of global production, readily explains why the United States runs such big trade deficits. More encouragingly, the percentage of total worldwide public and private debt accounted for by Americans is down since 2000 – apparently when the first figures became available.
Also good to see – since 1985, the U.S. share of global patents has more than doubled . Yet since 1997, America’s research and development spending sank from about 40 percent of the international total to about 30 percent. That doesn’t sound like a formula for continued world science and technology predominance – and all their prosperity- and national security-related benefits.
Unfortunately, The Economist‘s Abacus doesn’t show you which other countries have been on the rise according to these various measures, and which have fallen behind. For a sense of those changes, click on this link at the Washington Post‘s cite for a short video showing that “Asia is the New Europe.” It shows how the world’s economies have seen their percentages of the total global economic pie wax and wane (according to that GDP at market prices measure).
The main conclusion drawn by the Post is that “national economies and the global economy tend to move in waves.” But that claim seems belied by the “trading places” act staged by Asia and Europe, not to mention by the ballooning of Chinese economic power. Concentrate on what happens to the China space starting about three-quarters of the way through the production. Then tell me you’re absolutely sure that it’s in America’s interests that China continue to grow strong and prosperous – and that you’re equally certain that the U.S. government has fully thought through the full implications of the PRC’s spectacular rise.