Economists cannot forecast, and the current economic status in America is showing us proof of that today. No scientist ever imagined that an advanced economy such as the United States could grow by almost 4% in a year while also bringing unemployment figures below 4%. It was theoretically impossible, but the current situation proves otherwise.
Inaccurate predictions could be one explanation, but this only offers hypothetical reasons for U.S. economic growth. Before all else, it should be noted that Donald Trump has had little or no impact. America’s current growth began under Barack Obama’s administration, and Trump’s government has not significantly changed tack. Generally speaking, there is also no clear-cut link between the president and the economy. The federal government has few powers in this area, and there is not even a minister for the economy. The only influential authority in the matter is the Federal Reserve and its ability to fix interest rates. But while this may not be enough to create growth, it is at least unable to hamper it. It can also be said that all governments are better suited to blocking development than encouraging it. Trump does win one point, however, in that his generally favorable attitude towards entrepreneurs, corporate tax breaks, and a hostile approach to overly restrictive environmental regulations have encouraged investors. But he also loses a point in that his opposition to immigration has suffocated certain sectors such as construction, services, and agriculture, which are now lacking in workers.
The deeper reasons for this growth can be found beyond questions of current policy. Firstly, the United States appears to be a stable haven in a chaotic world. Political instability in Europe, the rise of anti-capitalist parties, and uncertainty surrounding the Euro Zone combine to make the U.S.A. seem like an El Dorado. China also offers an unpredictable context, while India is in its teething stages, and Latin America is a fearsome challenge. At a time when investors, capital, and companies all move quickly, the United States remains a top destination with stable laws, an immutable constitution, a vast market, an irresistible currency, and a free-market-focused political landscape. Trump’s saber-rattling against free trade has not yet had any negative consequences, and pundits believe the president will move onto something else after the legislative elections in November.
But let’s go beyond the short-term aspects of politics to envisage a more decisive explanation: the technological revolution sparked by the Internet. In economic history, major changes are always the result of significant scientific and technological developments. Examples include the steam engine, electricity, nuclear energy, mass vaccinations, and GMO-based agricultural science. And now, the Internet.
Obviously, this innovation dates back 25 years, but a period of time is needed before any new development is reflected in terms of production and behavior. Given that there was no leap in productivity in the quarter of a century before the Internet, it was quickly assumed that this innovation would not change the economy. This proved to be false. Thanks to the web, industry was the first sector able to easily distribute and globalize its activities. Services are now following suit. The Internet is the steam engine of our time, the little imp pulling the strings behind the new economy.
But what about Europe? The Old Continent is not progressing fast enough to absorb its rising generations. The results of which are mass unemployment and/or low salaries. The causes run so deep that we are unable to see how to fix them in the short term. Firstly, the euro has failed to stabilize or make itself foreseeably sustainable like the dollar, despite being a shot in the arm for the continent upon its creation. The theoretically positive single currency and single market are less implicated in this misfire than the demagogical outcry of populist parties defined by two extremes — suicidal in nature but rising fast.
However, an even deeper-running reason than the euro is the integration of the welfare state into European political morals. While it has undeniably assisted those most in need, which is positive, it has also slowed growth due to its cost, poor management, and the choice it offers between working and not. Only Germany and Denmark have been able to create a vague new balance between the market economy and the welfare state. All the other European countries are lagging far behind. No technological innovation, political declaration, or miniscule reform can reverse this dangerous sluggishness. And it is dangerous, because slow growth is a breeding ground for demagoguery and xenophobia. And the main consequence of even a partial application of their imaginary solutions would be even slower growth due to a reduction in investment, business creation, trade, and available labor. While we wait for a sincere, true, and brave political stance, this century will remain American.