It goes without saying that the US has been a dominant force in the global economy. The structural foundations of its long-term economic growth included a winning combination of superior productivity, a culture of innovation and risk-taking, and a stable, predictable regulatory framework.
Innovation, rapid tech adoption, and flexible reallocation of labour and capital have underpinned the US’s impressive productivity growth since the late 20th century. This compares favourably to Europe which has faced declining productivity, particularly since the Global Financial Crisis, due to lower investment in technology and structural rigidities. Japan has also struggled since the 1970s with a need to invest in digitisation to boost productivity. And while China achieved significant productivity gains as it transitioned from an agrarian to a manufacturing economy, maintaining such strong growth will depend on innovation and efficiency improvements.
Productivity superiority has been a key tenet of US exceptionalism
As we look ahead, Artificial Intelligence (AI) is emerging as a transformative force.
Historically, several technological breakthroughs have revolutionised industries and significantly boosted productivity. The steam engine, electricity, the internal combustion engine, semiconductors, and the internet are prime examples of General Purpose Technologies (GPTs) that have reshaped economies. AI is anticipated to join this illustrious list.
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