US - world's no.1 capitalist country is currently creating no capital
By John RossThisarticleoriginally appeared on the blog
Key Trends in Globalisation
on 27 November 2009.
A previous postnoted an article by this blog's author onchina.org.cndemonstrating that for
the first time for a century and a half the US had lost its position as the country producing, ingross dollar terms, the greatest amount of finance for investment - i.e savings. The US has been overtaken by China. In short the world's number one capitalist economy no longer produces the most capital. The New York Timesnoted this as Newsweek did later.
The 3rd quarter US GDPfigures published this week however confirm another extremelystriking statistic, this time concerning net creation of capital - that is savings minus capitalconsumption. This shows that in net terms the US, the world's number 1 capitalist economy,is currently producing no capital at all - currently US capital consumption exceeds capitalcreation. The US is at present subtracting from the world's stock of capital not adding to it.This situation shows how deep has been the impact of the financial crisis on the US. Theopen visible wounds are the recession and rapidly rising unemployment, but hidden financialinjuries under the skin of the US economy appear more serious.The factual situation is shown in Figure 1. This illustrates US gross saving compared tocapital consumption. As may be seen US saving, that is capital creation, has been decliningfor a prolonged period but had hitherto since World War II had remained above the level of US capital consumption.The impact of the financial crisis has however driven US saving precipitately downwards.The Bureau of Economic Analysis statistics show US gross savings in the 3rd quarter of 2009were $1.483 trillion or 10.4% of GDP. US fixed capital consumption was $1.852 trillion or 12.9% of GDP. Even given that saving and capital consumption are among the harder figuresin GDP to compute the $369 billion gap leaves no doubt that at present the US is consumingmore capital than it is creating. In net terms, the world's number 1 capitalist country is simplynot creating any capital.