The American election campaign has just started with the Republican primary in the Iowa and it is sure that, along with the society challenges as immigration, the economic issues will have a central place in the debate. The Biden administration will defend its achievements when the Republicans will explain that, with them, the results would have been much better and especially that most of the recorded progresses were resulting from decisions taken under the Donald Trump mandate. The only thing which is sure, it is that the American economy during these last years has obtained clearly better performances than the European Union ones. That has been also passed on the financial markets, Wall Street has by large overpassed Paris and Frankfurt.
In 2023, growth in the other side of the Atlantic Ocean has reached 2.1% according to the first estimations when on the Old Continent, it has only been 0.7%. The structural difficulties of Germany which has been near recession and for which the 2024 year seems not to be better, have contributed to this gap and the European prospects remain poor. To the opposite, the United States are near full employment with an unemployment rate which lowly fluctuates around 3.5% and the household consumption remains the main engine of that growth thanks to a dynamic evolution of the household available revenue. Once inflation is subtracted, it has increased by 14% between 2018 and 2023 against only 5% in the euro zone.
When in Europe we saw, notably in France, a saving increase, a signal of worry about the future, and a slowing of the indebtedness, the behaviors in the U.S. have been quite different with a strong reduction of the saving rate, fallen to 7% of the gross available revenue and with an increase of the indebtedness which shows a higher confidence level. The economic policy choices have not been without connection with these differences, in particular during the Biden administration.
At the beginning of his mandate, the new president inscribed his action under his predecessor logic with a very expansionist budgetary policy, huge infrastructures investments programs by large financed by the federal State. Public aids, quite also important are offered to industrial and technological sectors considered as strategic in a context of increased tensions with China. But that policy also concerns the European competitors. They will be the Inflation Reduction Act whose title must not induct into mistake because inflation is only a minor preoccupation in this program, and the Chips Act.
After the inflation rebound caused by the invasion of Ukraine by Russia, the country will adopt a restrictive monetary policy. Federal Reserve basic rates will be strongly increased until 5,5% in less than 18 months. The last growth figures show that if this policy has contributed to bring down inflation at a level still above 2% but much lower than the peak reached in 2023, it has not, by far, provoked a recession, contrary to what had been observed in the past.
The American economic achievements are also caused by the development of the production of fossil fuels thanks to the putting into operation of the huge shale oil and gas fields. The sanctions decided against Russia have generated market prices increases along with a rebound of investments and of exports. It is forecasted for 2024 a record production of 12.8 million b/j of oil. The U.S. also became, thanks to the Liquefied Natural Gas, one of the top world exporters with Qatar and Australia and have taken the place of Russia as the first supplier of Europe in 2023.
For ten years, the U.S. have continuously reduced their CO2 emissions but it is not, the result, to the difference with Europe, of the adoption of a voluntarist policy of energy transition. The main cause of this fall has been the substitution of the coal by natural gas in the power plants thanks precisely to the competitive prices of the new resources coming from the shale gas fields. The reduction of the emissions so comes from a transfer between fossil fuels and not from a reduction of the recourse to fossil fuels. No special effort has been carried to reduce energy consumption and to dissociate it with economic growth. Regarding renewables, they have been the purpose of important investments but they have not as a vocation to be an alternative to fossil fuels. Their share of the primary energy consumption (8%) is almost twice lower of that one observed in Europe (14%).
As another difference with Europe, there is the comeback of the State, of the industrial policy and of a protectionist spirit to address the geopolitical tensions. Competition is not any more the solution. The Buy American Act exists for a long time but its application has become more rigorous. Tarif barriers have been introduced and huge programs of public financing have been launched to re-localize on the American territory productions considered as strategic each time it was possible. No action of such a magnitude has even been imagined in Europe where competition is a principle you can’t get away from it and where States aids, whose definition is very large as we have just seen it about EDF, remain forbidden. A recent example has been given by the Space European Agency with the affirmation that Arianespace will have no guarantee regarding its future launchings.
At last, the American economic policy, under the mandates of its last two presidents has not fixed any constraining objective regarding public finance. The 2023 deficit is estimated at 7% of the GDP without giving rise to any worry or to a true political debate. Likewise, the household consumption growth has been at the origine of a foreign trade deficit near 1000 billion dollars, despite a large energy surplus. The European Union, itself, has a foreign surplus and the eurozone has limited its public deficit in 2023 at a twice lower level than the U.S.
The contrast between the situations of these two major economic zones is spectacular. Are put forward the American successes with a growth rate three time higher than in Europe but it is rarely mentioned that the country has made radically different choices: the level of the public deficit is not regulated as in Europe with the Maastricht criteria. The ceiling of the debt is regularly lift by the Congress after a debate more about the nature of the public expenses than their amount. The energy policy is based on the development of the production of oil and gas and not on the exit from the fossil fuels. At last, the State intervention is more and more important to the detriment of foreign competitors and in favor of the re-localization on the American territory.
It is not possible in the same time to look with an envy at the results of the American economy and not to rise the issue of the pertinency of the policies adopted in Europe. The American model is not without weaknesses with the increase of the foreign indebtedness and deficits and the past makes us reminding that the risk of a major crisis with consequences on the world economy exists. The current situation would be then like a mirage. But, to the opposite, if these successes become lasting, whoever will be the next president of the United States, we could then talk about a miracle and it would be good that Europe takes the lessons from it.