is the US economy exceptional — or overhyped?

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The US’s recent economic performance is the envy of the developed world. US GDP has expanded by 11.4 per cent since the end of 2019, while the IMF predicted US growth at 2.8 per cent this year. In contrast, the economies of Japan and the UK have grown by only 3 per cent over the past five years. Others in the G7 are doing even worse.

Much of this, as Valentina Romei explored in a Big Read this week, can be explained by the fact that US productivity is outstripping almost all advanced economies. US labour productivity has grown by 30 per cent since the 2008-09 financial crisis, more than three times the pace in the Eurozone and the UK.

Alongside this productivity boom, the US economy has also taken a pioneering role in tech innovation, with its leading companies more concentrated in the digital economy compared with Europe, as noted by Mario Draghi in his recent report on EU competitiveness.

The phrase “American exceptionalism” has snowballed recently. An idea that originated with the founding fathers, referring to the nation’s civic and moral ideals, it has increasingly taken on a financial bent, particularly among investors. But America’s strengths come at a cost, particularly to many of its citizens. “It is the best of countries, it is the worst of countries, or at least of the high-income ones,” argues Martin Wolf, also this week, pointing out the US’s homicide and incarceration rates, surprisingly high child mortality and revealingly low life expectancy. “The US stands out for its prosperity and its brutality,” Wolf goes on.

In Ruchir Sharma’s column on this fascinating subject, he takes a different tack, suggesting that faith in the US economy is misplaced, if not actively risky. “Global investors are committing more capital to a single country than ever before in modern history,” he writes. It now accounts for nearly 70 per cent of the leading global stock index, up from 30 per cent four decades ago.

This confidence has gone too far, Sharma suggests, comparing it to the financial crisis that affected emerging markets in 1998: “America is over-owned, overvalued and overhyped to a degree never seen before. As with all bubbles, it is hard to know when this one will deflate, or what will trigger its decline.”

So, what do you think: is the US economy exceptional? Or dangerously overhyped and on its way to blowing up? Tell us your view by voting in our poll or commenting below the line.