The United States continues to make up more than 22 percent of the world’s economy. It continues to dominate the world’s oceans and has the only significant intercontinental military force. Since 1880, it has been on an uninterrupted expansion of economy and power. Even the Great Depression, in retrospect, is a minor blip. This expansion of power is at the center of the international system, and our forecast is that it will continue unabated.
The greatest advantage the United States has is its insularity. It exports only 9 percent of its GDP, and about 40 percent of that goes to Canada and Mexico. Only about 5 percent of its GDP is exposed to the vagaries of global consumption. Thus, as the uncertainties of Europe, Russia and China mount, even if the United States lost half its exports — an extraordinary amount — it would not be an unmanageable problem.
The United States is also insulated from import constraints. Unlike in 1973, when the Arab oil embargo massively disrupted the U.S. economy, the United States has emerged as a significant energy producer. Although it must import some minerals from outside NAFTA, and it prefers to import some industrial products, it can readily manage without these. This is particularly true as industrial production is increasing in the United States and in Mexico in response to the increasing costs in China and elsewhere.
The Americans also have benefited from global crises. The United States is a haven for global capital, and as capital flight has taken hold of China, Europe and Russia, that money has flowed into the United States, reducing interest rates and buoying equity markets. Therefore, though there is exposure to the banking crisis in Europe, it is nowhere near as substantial as it might have been a decade ago, and capital inflows counterbalance that exposure. As for the perennial fear that China will withdraw its money from American markets, that will happen slowly anyway as China’s growth slows and internal investment increases. But a sudden withdrawal is impossible. There is nowhere else to invest money. Certainly the next decade will see fluctuations in U.S. economic growth and markets, but the United Stares remains the stable heart of the international system. While I subscribe to Strafor’s Intelligence service, they have chosen to make this intriguing report, on possible future geopolitical trends, available to the public via the link below.