In which parallel reality do you live? Some metrics:
- U.S. share of global GDP (nominal). 40% in 1960 to around 24% nowadays.
- Share of global exports from the peak of 17% in 1963, to around 8.5% today (China is 14%).
- Global R&D expending from the 1960 peak of 69% to 30% today with China closing the gap currently at 23%.
- Reserve currency status of the Dollar dropped from 71% to 59%.
- Share of outward Foreign Direct Investment (FDI) 47% in 1960 vs 22% in 2022.
Even the strongest selling point of the american economy of being the largest consumer economy is strongly dependent on high levels of consumer debt as well as the ability to sustain gigantic trade deficits based on the global appetite for the dollar and US bonds.
And then we have some other points of concern: In 1950, manufacturing represented 28% of GDP, while FIRE was 10%. Today, manufacturing is 10%, and FIRE is 20%. FIRE’s dominance reflects financialization — prioritizing short-term profit through financial engineering over productive, long-term investment. It encourages Rent-Seeking vs Productive Activity, for example, in Finance, much of the sector’s growth comes from fees, interest, and speculative trading (e.g., derivatives, high-frequency trading) rather than financing innovation or infrastructure. In Real Estate Rising prices often reflect speculation rather than new construction or improved living standards. This leads to inequality amplification, FIRE disproportionately benefits high-income earners (e.g., Wall Street, landlords). The top 1% owns 53% of stocks and 40% of real estate wealth (Fed data), which exacerbates wealth gaps without broadly improving household economic security. Real Estate alone now accounts for ~60% of corporate profits, something that create obvious systemic risks.
The US is still the richest and most powerful country in the world, but it is far from being as economically dominant as it was in the past, exactly the contrary of what you said.
I understand that after the gains we all had in the stock market in recent times, we might be tempted to consider this as a measure of the health of American Economy and considering market capitalizations, its global dominance. But that is a mistake. Stock Prices reflect investor sentiment, not fundamentals, they are driven by factors like speculation, liquidity and future expectations, not direct economic performance. Also, a handful of mega-cap companies dominate indexes, which introduces a lag that could mask broader economic issues. For example, the "Magnificent Seven" drove around 75% of the S&P 2023 gains, while small-cap stocks lagged. Also, tech and finance dominate markets, but they are not labor intensive, and thus they can't contribute as much to employment. Also, as the top 10% of the households own almost 90% of stocks, rising markets enrich the wealthy but don't reflect wage growth or living standards.
Also, a lot of the stock market exhuberance has been driven by things like stock buybacks, inflating share prices at the expense of investment and wages.
