COVID-19 has killed tens of thousands of Americans, thrown tens of millions more out of work and ended the longest bull-market run in modern American history. It has also proved beyond doubt that U.S. politics has become only more polarized.
Yet an appraisal of its broader comparative advantages shows that America will stumble through this crisis with less lasting damage than other nations can expect to sustain.
First, the U.S. still enjoys the age-old blessings of favorable geography. Though the security of its southern border will remain a hot political topic, the country faces nothing like the pressures Europe can expect from future waves of desperate people struggling to escape the Middle East and North Africa.
There are newer U.S. advantages too. In 2008, even before the financial crisis slowed its economy, the U.S. produced just 5 million barrels of crude oil per day. After years of innovation in exploration and production, that number surged to a record 12.3 million in 2019. Earlier this year, a price war launched by Saudi Arabia against Russia pushed some U.S. energy firms into financial trouble, but the Saudis and Russians, under pressure from President Trump, backed down.
There is food production, which will matter even more in a world facing both a coronavirus-forced re-emergence of poverty in many countries and the damage that climate change will inflict on agriculture. Only China and India produce more food than the U.S., which has far fewer mouths to feed than those giants. America also enjoys substantial financial advantages. The coronavirus has put banks everywhere under tremendous strain as default risks skyrocket. But prices for credit-default swaps suggest that investors consider large European banks to be at greater risk than their Wall Street counterparts, in part because the largest U.S. banks had much more capital before the crisis began.
There is also the continuing “exorbitant privilege” that Americans enjoy, thanks to the continued dominance of the dollar as the world’s main reserve currency. In the final quarter of 2019, nearly 61% of global foreign-exchange reserves were denominated in dollars. The euro ran a distant second at less than 21%. When governments face stress, they need dollars, and that allows the U.S. to continue to borrow as no other country can.
But the greatest advantage for the post-COVID future is the continuing dominance of U.S. tech companies. It’s not just that 13 of the world’s 16 largest Internet companies are American. It’s that the U.S. produces far more of both the biggest digital-platform companies and the startup “unicorns” that will drive innovation in artificial intelligence, Big Data, cloud computing, autonomous vehicles, drones and other cutting-edge technologies that will dominate global economic development in decades to come.
The coronavirus has actually enhanced their advantages, thanks to their central importance in restarting shuttered economies. Think geotracking for contact tracing, development of immunity passports and the ability to do business while maintaining social distance. U.S. companies will set new standards in all these areas.
Many more people will die. Lives will be upended and livelihoods lost. But whatever else can be said about tragically dysfunctional American politics and the country’s substandard health care system, the U.S. has lasting advantages that will matter in the years ahead.
