From: Myth of Decline, Danny Gross, Newsweek, Apr 30, 2012 (edited)
In the fall of 2008, the US suffered its deepest longest economic contraction in 80 years. Its markets were cut in half.
The numbers: Annual deficits over $1 trillion, 8.75 million jobs lost, $4-per-gallon gasoline.
Declinism quickly emerged as the chic intellectual pose.
All agreed that the U.S. had a very slim hope of recovering from self-inflicted blows.
In fact, March 2009 marked the beginning of a recovery.
The US economy went from shrinking at a 6.7% annual rate in the 1st quarter of 2009 to expanding at a 3.8% annual rate in the 4th quarter of that year — a turnaround unprecedented in modern history.
The stock market has doubled since March 2009. Corporate profits and exports have surged to records.
The economy has regained its 2007 peak and is now growing at a 3% annual clip — more than any other developed economy.
A rapid, decisive policy response was the precondition for a return to growth.
It took the US 18 months to conduct the required fiscal and monetary actions. Japan waited 12 years for after its credit bubble burst.
Since then the recovery has been fueled by the private sector as US companies restructured operations and debt.
Business bankruptcy filings spiked from 28,322 in 2007 to 60,837 in 2009 — an increase of 115% in 2 years.
In 2009 a record 191 US companies, with a combined $516 billion in debt, defaulted on their bonds.
But financial failure in the U.S. gets worked out much more quickly than it does elsewhere.
GM and Chrysler each spent 40 days in Chapter 11 after filing for bankruptcy in the spring of 2009.
In their brief sojourns in Chapter 11, they ripped up contracts, shucked benefits, lopped off $109 billion in liabilities, and established new, profitable business models.
Ford, was more impressive. Eschewing a bailout, Ford ground out a recovery by embracing foreign markets, aggressively cutting costs, investing for growth, and paying down billions of dollars in debt.
After hitting a nadir of $1.59 in February 2009, its stock rallied to $18 in January 2011.
By the end of 2011, Ford reinstituted its dividend and stood on the cusp of regaining an investment-grade rating.
The American private sector emerged better equipped to meet obligations, to save, to invest, to spend, and grow.
Pretax corporate profits rose from $1.25 trillion in 2008 to $1.8 trillion in 2010, and to $1.94 trillion in 2011.
Rather than surrender to Chinese competitors, US companies figured out how to get more out of existing resources.
From the 4th quarter of 2008 to the 4th quarter of 2009, productivity rose 5.4% and 4.1% in 2010.
At businesses big and small, memos went out about using fewer paper clips, printing on both sides of the paper, and canceling newspaper subscriptions.
UPS squeezed more deliveries out of existing resources by eliminating left turns from trucking routes.
The typical passenger car sold in 2010 averaged 33.9 miles per gallon, up from 30.1 in 2006.
Companies that made a business of helping other people save money thrived during the recession.
BigBelly Solar, a startup in Newton, Mass., manufactures solar-powered trash compactors that send text messages when they’re full.
They enable cities and colleges to cut costs on garbage collection by up to 75%.
Sales of the $4,000 units, which are made in the U.S., doubled every year between 2008 and 2010.
Declinists believe the new global economy is working against the US but it often works in America’s favor.
The US remains the largest, richest, most secure market in the world. That’s why it continues to lead the world in foreign direct investment (FDI).
In 2010, FDI rose to $194.5 billion from $135 billion in 2009. It stood at $155 billion in the 1st 3 quarters of 2011.
Declinists claim that the US doesn’t make anything -- except for the $180 billion in goods and services Americans export every month.
Since bottoming in April 2009 at $124 billion, monthly exports have risen nearly 50%.
In 2010, when the economy added 1.03 million new jobs, the number of jobs supported by exports rose by 500,000, from 8.7 million to 9.2 million.
Agricultural exports hit a record $115.8 billion in 2010. In 2011 soared to $136 billion—nearly double the 2007 total.
The US ships soybeans to China ($9.19 billion in 2009 alone). Total exports to China soared from $41.2 billion in 2005 to $104 billion in 2011.
“Every unit that gets manufactured in this site this year is going to be exported,” GE CEO Jeff Immelt told employees at the company’s gas-turbine plant in Greenville, S.C., in the spring of 2011.
The 2011 production schedule called for 90 such electricity-generating units, at about $25 million each.
Small companies have transformed into export powerhouses, as well.
Wallquest, a family-owned high-end wallpaper company outside Philadelphia, saw exports rise from 35% of sales in 2009 to 65% in 2010.
Foreigners also buy education.
Since 1972 the number of foreign students has risen every year, with the exception of the three years after 9/11.
A record 690,923 foreign students enrolled in the 2009–10 academic year.
Tourism has boomed too. In 2010, a record 59.8 million international visitors came to the U.S., up 8.7% from 2009. That year, tourism was a $134.5 billion export industry.
Increasingly, U.S. companies are meeting global consumers where they live.
Whether it is Starbucks in Turkey, Mary Kay in China, Taco Bell in India, or an American medical school in the Persian Gulf, U.S. business concepts travel well.
In 2010, for the firms in the S&P 500 stock index that broke out such results separately, 46.3% of revenues came from outside the U.S., up from 43.5% in 2006.
A car plant in Shanghai is a joint venture of GM and the Chinese car company SAIC. They make Buicks.
In the 3rd quarter of 2011 GM sold 620,000 vehicles in China, compared with 555,000 in the US.
At Davos where American decline is a perennial theme, the most significant presences were U.S. companies.
Apple and Google are the nation’s 2nd- and 9th-largest companies by market capitalization, with a combined value of nearly $600 billion.
Facebook has been valued at more than $100 billion.
Yet in 2002, none of these companies existed in anything like their current form.
Their combined market cap was a few billion dollars, consisting mostly of Apple, an also-ran pc maker. Google was a piece of code. Mark Zuckerberg was just entering Harvard.
All three gained mass and scale during the long expansion of the 2000s, but took off in the years after the Lehman crash.
Today, they represent American economic dynamism the way Chevrolet and McDonald’s once did.
They employ modest numbers of people but they’ve created platforms for other businesses, industries, and entrepreneurs to create new economic arrangements.
Think of what iTunes has done for the publishing, music, and entertainment industries.
The US has a long way to go to make up for lost ground in housing and jobs.
The resurgence of the corporate sector hasn’t translated into new positions for the legions of unemployed. But there’s positive news.
Since February 2010, the private sector, which accounts for 83% of all employment added nearly 4.1 million jobs.
It’s a sign that the jobs machine is working again.
The public sector has been the sole source of job loss: austerity-minded government entities cut a million jobs since 2010. But the sharp reductions have come to a halt.
There’s no reason the expansion that started in July 2009 can’t go on as long as the previous three, which lasted 73 months, 120 months, and 92 months, respectively.
This post-bust era will go down not as a time of economic decline, but as one of regeneration.