U.S. winning world economic war
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The United States economy grew faster than any other large advanced economy last year — by a wide margin — and is on track to do so again in 2024.
Why it matters: America's outperformance is rooted in its distinctive structural strengths, policy choices, and some luck. It reflects a fundamental resilience in the world's largest economy that is easy to overlook amid the nation's problems.
By the numbers: U.S. GDP looks to have grown 2.5% in 2023, according to the IMF's hot-off-the-presses World Economic Outlook, the highest among the G7 economies (Japan was second at 1.9%).
- IMF economists forecast similarly best-in-class growth this year, with 2.1% U.S. growth (second place: Canada at 1.4%).
State of play: All countries were dealing with the same problems of post-pandemic inflation and high interest rates meant to combat it. But the U.S. managed to achieve solid growth in spite of those headwinds.
- Strong growth in the U.S. labor force was one factor — both due to more Americans choosing to enter the workforce and a surge in immigration.
- The U.S. also experienced strong productivity growth fueled by an innovative corporate sector and, Biden administration officials argue, big federal investments in infrastructure and manufacturing capacity.
What they're saying: Adam Posen, president of the Peterson Institute for International Economics, argues that an important part of the story is a U.S. pandemic response that led to more Americans shifting toward higher-productivity work.
- "The enormous labor market churn of COVID in 2020-21 had the unintended benefit of moving millions of lower income workers to better jobs, more income security, and/or running their own businesses," Posen tells Axios.
- "We are reaping the benefits of it now in labor force participation, wage growth, and improved productivity," which was "very different from Europe and Japan where most workers remained tied to their pre-COVID jobs."
Yes, but: It's not just that the U.S. is doing well — it's that other major economies have distinctive problems holding back growth.
- Japan, for example, has a shrinking population and low immigration rates, which means even when its economy is doing well, growth is lower than the U.S.
- The United Kingdom is still working through the supply disruptions triggered by Brexit.
- Major European economies have been reliant on Russian oil and natural gas, so the war with Ukraine and elevated energy costs are hammering manufacturers in Germany and beyond. Attacks in Red Sea shipping lanes could add further disruption to European industry.
White House economic adviser Lael Brainard, speaking to reporters last week, cited "strong policy actions that were designed to lead to a strong and broad-based recovery faster than we have seen previously in the U.S. — and faster than we saw in other countries."
