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Sunday, 7 October 2012

WHY AMERICA MATTERS


At its most basic, the reason that it's worthwhile knowing something about America is that events in America have a profound impact on events everywhere else. Petrol price going up? Blame US actions in the Middle East. Food prices rising? Blame American commodities trading. Climate changing? Blame American polluters.
This isn't just facetiousness; the plain fact is that America has a much larger impact on world events, markets, and trends, than any other country (although China is becoming more and more important). It just isn't possible to understand what's happening in the world without knowing what's going on in the US of A.
Really, this should be obvious. After all, we're all still reeling from the effects of a global economic meltdown that was caused by troubles in American housing markets (you can bet that troubles in, say, the Chilean housing market would not have sent the whole planet into a spin.) The fact that defaults by some deadbeat American homeowners have the power to plunge the whole world into recession should be a stark illustration of the fact that events in America have significant global consequences.
The main reason why America has such outsized effects on the world is that America itself is outsized, in a variety different ways.
First, let's look at the US economy. In this brilliant map, each of the 50 American states has been labeled with the name of a country that has a similar-sized GDP (South Africa is about the same size, in GDP terms, as Wisconsin). It's a clever visual way to make the point that America's economy is very, very big; the GDPs of 50 other countries, some of them quite large (like France, Russia, and Canada) can be comfortably folded into the US economy.
The chart below, which lists the ten largest economies in the world according to GDP figures from the International Monetary Fund, is another way of visualising how big the American economy is. As you can see, the US economy is far larger than all the others. In fact, if you add up the GDPs of Japan (2nd), China (3rd) and Germany (4th), that total is still smaller than the US GDP.
Another way of looking at the scale of the American economy is to look at the dominant position enjoyed by American companies and brands. The pie chart below shows the geographic origins of the world's most valuable brands. As you can see, the majority of them are American.
The point of all these visual aids is that the American economy is very, very big, and therefore very, very important. The size and depth of the US economy are such that it attracts a lot of foreign investment and it's also a major global investor (see chart below), which means it's deeply connected to other economies around the world. The US is also an important trading nation, which further deepens its linkages with other nations. In short, the American economy is large and heavily interconnected, and so it has a major impact on all other economies worldwide.
But America is not just an economic big gorilla; the US is also the world's foremost military power. Look at the military spending chart below; US spending is higher than the spending of the next nine nations combined.
The implication of this military dominance is that US actions in the world are always backed up by the implicit or explicit threat of formidable force, which gives them added impact. Because America can deploy serious military muscle, its international actions are weightier than the actions of a smaller player, like Italy.
America's military power means that it has a greater-than-average ability to influence global politics. Whatever the merits of the wars in Iraq and Afghanistan, the US was (and remains) the only country in the world with enough brawn to actually invade two other nations and force regime change on them. This fact, like America's economic might, is a good reason to pay attention to what's happening in America.
Whether it's in the economic or geopolitical realm, when America acts, the world is changed. This has been true for the last fifty years, and will continue to be true until another power (my money is on China) emerges to challenge and constrain American power. Even though there are reasons to fear that perhaps America is a power in decline, America is still a power, the dominant power in the world. It's worth knowing what's going on across the Atlantic.

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