World GDP: A Story of American Leadership and Asian Partnerships
Derek Scissors /
In the midst of a downturn, it’s easy to lose perspective. It feels at the moment like America’s position in the world is slipping and Asia is taking our place. Permanently. On a longer view, that turns out to be only half-right: Asia is rising but America is not falling. With sound policies, the U.S. will be by far the world’s most important economy for a long time. One of those sound policies is strengthening our ties with Asia.
To get a better sense of the current situation, go back to the last time American leadership was supposedly headed for extinction. That was the oil crisis, with its stagflation, in the mid 1970’s. Starting with the Reagan Administration in 1980, the U.S. was considered by the entire globe to have recovered and cemented its place at the top. It turns out that, except for a blip in the late 1990’s, the American share of the world economy has been almost the same for 35 years. The U.S. accounts for more than a quarter of the world economy by itself and continues to hold that level even in these tougher times.
That one blip is the Asian financial crisis, where the American share of the world economy rose because the Asian share dipped. The dip, however, was just a temporary setback in a 40-year surge that has taken Asia’s share from below 15% to more than 25%, and still rising.
“Asia”, of course, covers a lot of ground. China, India, Japan, Korea, Indonesia, and many others all count as Asia, which gives the region a population of over 4 billion, compared to America’s 300 million. With the shares of the global economy about the same, the average person in the U.S. is much, much richer than the average person in Asia.
What Asia has going for it is dynamism — the world’s fastest-growing countries are heavily concentrated there. As the global leader, the U.S. should ensure it continues to play a helpful and crucial role in that growth and that we benefit from it. This is one linchpin of a strategy to maintain America’s status. Right now, the obvious first steps are to ratify the free trade agreement with South Korea and move forward with the Transpacific Partnership, a trade group already including Singapore, Chile, Brunei, New Zealand and looking to expand.
It bears noting that the true counterpart to Asia’s rise is not America’s decline, but Europe’s. A big economic role for government has served Europe very poorly and the European Union can be seen as an attempt to keep Europe relevant despite bad policy. Our economic relations across the Pacific are an important element of our foreign policy, but getting things right on the home front still comes first. For those who care about American leadership, that means less government intrusion in the economy, not more.