Economists have been waiting for US economy to stumble for much of the past year. They had reasons for this foreboding.
After all, US economy has been hit by tariffs, labour disruptions, geopolitical tensions and renewed inflationary pressure. By conventional wisdom, such combination should have slowed growth sharply.
Perhaps it would have ushered in the dreaded spectre of stagflation. Yet the world’s largest economy continues to expand
The temptation is to attribute this resilence either to political genius or statistical illusion..Both explanations are inadequate.
The more important story is that United States posses structural strength that allow it to absorb shocks better than many of its advance economy peers. That makes it more adaptable rather than
invincible.
America’s economic model has long rewarded experimentation and tolerated failure. Businesses can raise capital through deep and liquid financial markets.
Venture capital finances risk. Bankruptcy while painful, is hardly a permanent social stigma.
Companies facing rising costs are more inclined to reorganise, invest and innovate rather than retreat into caution. This flexibility is often criticised for creating instability.
Yet, in periods of upheaval, it can become a source of strength. Energy is another underappreciated factor.
The shale revolution transformed U.S from a country acutely vulnerable to oil shocks into one of world’s largest producer of oil and gas. Access to abundant energy has given American industry a cushion many competitors lack.
However, resilence should not be mistaken for health. Aggregate indicators can conceal deep fractures.
Inflation continues to erode purchasing power. Housing affordability has become a crisis in metropolitan areas.
Wealth creation remains unevenly distributed. It is fuelling resentment among those who feel left out from the prosperity reflected in the stock market indices and GDP figures.
America may indeed be, as one economist memorably put it, the cleanest shirt in a very dirty laundry basket. But even the cleanest shirt eventually stains if neglected
Adaptability has bought United States time. It has to use this time to address inequality, inflation and social fragmentation to ensure today’s resilence becomes tomorrow’s renewal.
