Here to stay

Its so fascinating looking at the american economy bouncing back. It was all but done with in 2009. The subprime crisis had prompted everyone to think that the age of US led capitalism is over and the age of state capitalism is here (with state owned firms such as Petrobras, Gazprom, China Mobile, ICBC and even Emirates airlines growing the fatest). There was such intense opposition to the state bailing out the ailing automobile and financial firms with the popular slogan "private profits and public losses". Quarter after quarter unemployment data kept getting worse.

But here we are again. US growth seems to have stabilised at 2% and unemployment at 7% is on a downward trend. Its really a matter of a few months when the FED would start sucking out excess money from the US economy (by stopping buying treasury bonds) the anticipation of which has already started strenthening the dollar and shaking emerging economies such as India and Turkey which had been benefiting from the inflow of hot dollars. US companies are again dominating the top 10 corporations list. So clearly the storm seems to be waning.

And what great resilience this is. Is it because of the intellectual capital of america? The worlds best universities are American and the way to global economic dominance was through disproportionate investment in R&D. Its been this belief in science that has enabled US firms to figure out the economically viable method (hydraulic fracturing) to extract shale gas. Shale gas as we know has been one of the foremost contributors to keep global oil prices and hence the global economy stable and has been the basic diving dorce behind US growth in 2013. Similarly, its R&D that has made it possible for US pharmaceutical firms (such as abbot, pfizer and johnson and johnson) to remain dominant among global players. And its tech innovation that has allowed the Apples, Googles and Microsofts of the United States to literally shape human behavior and lifestyle. And ofcourse they are able to attract talent from all over the world due to the opportunities they offer.

Is it because of the dominance of the dollar? It allows the US to live on debt by selling Treasury Bills at low cost and always have the option of printing more dollars to repay it without hurting the US any more than the world economy. Similarly, it keeps them safeguarded from exchange rate risk.

Or is it simply the pristine form of capitalism of the US that calls for turning even the smallest component of the economy i.e individuals into pursuers of profit  which resultantly makes constant innovation, efficiency and self correction the very core of US dna. The materialism and single minded consumerism that is sometimes criticized is probably the very reason why US is the richest country in the world. It increases productivity. It makes certain the maximum people work. And it encourages people to have multiple jobs so that they can live the American dream.

Some say its the millitary might of the US thats the driving force of the US economy. Through its clout the US is able to intimidate other countries; to be able to access resources of other countries and favorably influence international trade terms bilaterally as well as through multilateral institutions such as UN and IMF. By invading Iraq, US was infamously able to get energy related contracts awarded to Haliburton and Bechtel. Whenever a situation starts arising which could potentially be detrimental to US economic interests, the US is able to 'nip the evil in its bud'.

Regardless of whether its one or a combination of the above factors, the US has shown that it has an economic system and momentum that will not be easy to dislodge. It would be hard to imagine any empire in history which would be literally micro managing the world, be undertaking multiple wars and yet be able to recover from an economic crisis as big as the sub prime mortgage one. Looks like the US empire is here to stay.