The mighty Mississippi rolls on. If you don’t live near it, you might never think of that wide, powerful river. You may associate it with old Mark Twain stories. But every day, 24/7, it rolls on.
American capitalism is kind of like that. You can invent fables about how America is in economic decline. You can rail against “neoliberalism.” But the American economy doesn’t care. It just keeps rolling on.
The Economist magazine published a report on American economic performance over the last three decades. Using an avalanche of evidence and data, the main thrust of the article is that far from declining, American capitalism is dominant and accelerating.
Back in 1990, for example, America’s gross domestic product per capita was nearly neck and neck with that of Europe and Japan. But by 2022 the U.S. had raced ahead.
In 1990, the U.S. economy accounted for 40 percent of the nominal G.D.P. of the G7 nations. By 2022 the U.S. accounted for 58 percent.
In 1990, American income per person was 24 percent higher than the income per person in Western Europe. Today, it is about 30 percent higher.
The sources of this strength are many. I was especially struck by how much America invests in its own people. America spends roughly 37 percent more per student on schooling than the average for the Organization for Economic Cooperation and Development, a collection of mostly rich peer nations. ChatGPT and mRNA vaccines are not the only signs of American technical prowess. The United States accounts for 22 percent of the patents in force abroad, up from 19 percent in 2004. That’s more than any other nation. The level of education is one reason American labor productivity increased by 67 percent between 1990 and 2022, compared with a 55 percent increase in Europe and 51 percent in Japan.
American companies continue to generate amazing value. If in 1990 you had invested $100 in the S&P 500, an index of American companies, you would have about $2,300 today, according to The Economist. If you had invested that $100 in an index of non-American rich-world stocks, you would have about $510 today.
Of course, China has risen to superpower status during these years. But that hasn’t eclipsed American prominence. In 1990, the U.S. economy accounted for about 25 percent of global G.D.P. In 2022 it still accounted for roughly 25 percent, The Economist found.
The mighty rolling river sweeps up new generations. The millennial and Gen Z generations are practically defined by a story of economic hardship. Many people believe that the coming generations will not enjoy the same living standards as their parents.
It may have been possible to accurately tell that story in the wake of the financial crisis, but as Jean Twenge shows in a new piece for The Atlantic, it’s not possible to accurately tell that story today. She writes, “By 2019 households headed by millennials were making considerably more money than those headed by the Silent Generation, baby boomers and Generation X at the same age, after adjusting for inflation.”
Millennials, according to the Census Bureau, had household incomes $9,000 higher than Gen X households and $10,000 higher than boomer households at the same age, in 2019 dollars.
Real estate costs have been surging in many metro areas, but Twenge reports that 48 percent of millennials owned their own homes during the 25-to-39 age range, nearly the same as the rate for boomers at that age. Many millennials bought their homes at a time of historically low interest rates and saw their values shoot up during the pandemic. “Millennials have not been economically unlucky as to homeownership,” Twenge concludes. “If anything, the reverse is true.”
My point is not that American capitalism is perfect. My point is that there is a tension between economic dynamism and economic security. For reasons deeply rooted in our culture, the American brand of capitalism has always been tilted toward dynamism, with freer markets and smaller welfare states.
But over the past many decades, Americans have experimented with ways to provide more security without smothering the capitalist turbo that produces growth and social mobility. This has been the great project of the center-left and the center-right. It has worked and it continues to work.
Between 1990 and 2019, American social spending rose from 14 percent of G.D.P. to 18 percent. In part because of this government support, poverty hit an all-time low in 2021, according to the Census Bureau.
In 2013, Thomas Picketty published a much discussed book called “Capital in the Twenty-First Century” arguing that widening inequality is an inherent feature of modern capitalism. The problem is that right around the publication of his book, inequality stopped widening, the economist Noah Smith notes, and it now appears to be slightly decreasing.
The American model of capitalism is under assault from the left, which rails against the supposed horrors of neoliberalism and globalization, and from Tucker Carlson-style populists, who often treat American capitalism as a great betrayal. But it has proved superior to all real world alternatives.
In fact, I’m kind of amazed. We’ve lived through a wretched political era. The social fabric is fraying in a thousand ways. But American capitalism rolls on.
