The United States finds itself amidst an intriguing economic surge, which carries implications not just for its own trajectory but also for global power dynamics, environmental sustainability, and the growth prospects of nations like the UK. This economic boom is fueled by significant borrowing, presenting both risks and potential rewards on a grand scale.
Evidence of this economic upswing is palpable on the ground. A recent visit to Georgia in the southern US revealed a rapid transformation of landscapes, where fields and forests are swiftly giving way to burgeoning factories. In my two decades of reporting across the globe, I can only draw parallels between what I witnessed in the US over the past year and the rapid industrialization I observed in China during the mid-2000s.
President Joe Biden’s economic policies are leaving an indelible mark on the country’s economic landscape. The figures speak volumes: since February 2021, shortly after his inauguration, monthly investment in factory construction has more than tripled, nearing the $20 billion mark.
This surge in investment is not coincidental. President Biden is strategically allocating vast sums to reshore the manufacturing of green technologies and microchips from China to the US. What was once thought to be China’s domain in the global green economic transition is now being fiercely contested by the US. However, this endeavor is not without its risks.
The US is accumulating hundreds of billions in debt to finance these initiatives, sparking concerns about potential inflationary pressures and the sustainability of the country’s debt burden. With the US annual deficit ballooning to around 6% of its GDP, well above historical averages, the stakes are high.
Nevertheless, there are notable positives amidst these uncertainties. Unemployment in the US has plummeted to its lowest rate in half a century, and the workforce is expanding at a remarkable pace, defying expectations. The US also aims to produce a significant portion of the world’s advanced microchips.
The state of Georgia is emerging as a major beneficiary of this spending spree, particularly in the Battery Belt region where factories for electric vehicle components are sprouting up. Covington, once renowned as the filming location for “The Vampire Diaries,” is now home to an Archer Aviation factory, set to mass-produce futuristic flying cars. Similarly, plans are underway for a factory producing electric trucks, and a Hyundai “meta factory” for electric cars and batteries is slated to commence production on the Georgia coast.
However, despite these industrial transformations, the everyday reality for many remains unchanged. Rising prices persist, families rely on credit cards, and the boom in factories hasn’t necessarily translated into noticeable improvements in people’s lives.
Moreover, the persistence of inflation has prompted the US central bank to keep interest rates elevated, impacting borrowing costs not only within the US but also reverberating across global markets. The UK, for instance, faces rising mortgage rates due to this trend, highlighting the interconnectedness of global economies.
Looking ahead, President Biden’s ambitious spending plans hold the promise of enhancing long-term productivity in the US economy. Yet, the immediate challenge lies in addressing inflationary pressures and the risk of entrenched government debts.
The US national debt, soaring to $34 trillion, is projected to reach unprecedented levels as a proportion of GDP. The costs accrued from the pandemic, military expenditures, tax incentives, and green investments have all contributed to this fiscal predicament.
The ramifications extend beyond economic concerns, endangering the US’s reputation as a safe haven for investors. With credit ratings downgrades and warnings of an unsustainable fiscal trajectory, the US must tread carefully to maintain investor confidence.
Despite these challenges, the US’s status as the world’s reserve currency provides a degree of stability. However, this privilege cannot be taken for granted. As President Biden’s spending spree continues, the US must reckon with the potential consequences and ensure the safeguarding of its economic stability.
In contrast, the UK adopts a more cautious approach, acknowledging its limitations without the advantage of a reserve currency. While the US takes bold strides to reshape global manufacturing, the UK opts for alternative strategies to support its economic growth.
In essence, President Biden’s economic gamble holds the promise of reshaping the global economy, presenting both opportunities and challenges for the US and its allies like the UK. As the post-election landscape unfolds, these choices will reverberate far beyond national borders, shaping the trajectory of the world economy.
