John Ross has an article at Key Trends in Globalisation explaining how the United States “is currently producing no capital at all – currently US capital consumption exceeds capital creation”.
This graph below represents what has happened:
While there is no precedent in the last 150 years for the US falling behind another country for gross creation of capital, as has now occurred with China, there is actually one for the US consuming more capital than it creates. But this comparison illustrates strikingly the significance of the present situation of the US economy. The previous period when the US was literally creating no capital in net terms was in the depth of the Great Depression in 1931-34.
The gravity of the current financial depression as demonstrated above reveals the deliberate obfuscation by sections of the media that seek to portray that the depression is not very serious, or that it has already come to an end. The truth is that investment levels – capable of generating economic growth – have now collapsed to the point that enough wealth cannot be created just to stay still – in other words, consumption is now higher in the US than capital creation. The fact of this matter does not necessarily exacerbate the US’ economic situation of it’s own – but it does indicate quite how profound the slump is and how difficult – if even feasible – it will be for the US to recover its previous position.
Hence Ross comments:
it is hard for the US to overcome the present situation. Due to financial factors, and the increasing speed of technological progress, consumption of fixed capital, that is its obsolescence and wearing out, tends to increase slowly with time – it has risen from 10.2% of US GDP in 1950 to 12.9% of US GDP currently. It is almost impossible to lower the rate of capital consumption – which means that the US has to save 12.9% of GDP simply to maintain existing capital stock at a constant level.
It seems clear that the net effect of the 2008 financial crisis is already the structural weakening of the US’ economic and political position in the world and the consolidation of China’s emerging role as the new world superpower. This will form the backdrop for world developments for decades to come.