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United States
OpinionComment
David Brown
David Brown

Macroscope | Reversing decades of US industrial decline needs domestic investment, more effective fiscal policies

  • Laissez-faire policies are hampering US growth, and the government needs to lead from the front with better incentives for investment-driven rather than consumer-led growth
  • Without it, the US economy will continue to stagnate and be increasingly reliant on imports to bridge its domestic demand gap

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An employee works on solar panels at the QCells solar energy manufacturing plant in Dalton, Georgia, on March 2. The US industrial base has suffered from decades of decline and underinvestment, putting the country’s future economic stability at risk. Photo: Reuters
David Brown
The United States needs to mend its ways and get back to basics on growth. There are suggestions that a US recession could be on the way, a self-fulfilling prophecy if the Federal Reserve has its way and comes down even harder on inflation with higher-than-expected interest rate increases in the next few months.
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US stock markets are already on edge after last week’s collapse of Silicon Valley Bank. Consumer confidence remains fragile and inflation-busting interest rate rises could be the last straw. The problem is that the US economy is too lopsided and geared towards the consumer. A new model for recovery is needed, based on stronger investment in capital-intensive, productivity-driven growth.
US President Joe Biden has kicked off the process hoping for a green, investment-led revival, and not a minute too soon. His US$370 billion Inflation Reduction Act package of protectionism, state aid and subsidies is designed to galvanise US business in the fight against climate change, but more government commitment will be needed to spark a wider supply-side renaissance for US industry. More business investment is needed to improve the nation’s economic health and growth potential.
The US is taking in too much of the world’s savings simply to plug its yawning trade and budget deficits. These savings would be better employed building up the nation’s productive capacity for stronger and sustainable, non-inflationary growth longer term.

Laissez-faire policies are leaving US growth coming up short, and the government needs to lead from the front with better incentives for investment-driven rather than consumer-led growth. Without it, the economy will continue to stagnate and be increasingly reliant on imports to bridge its domestic demand gap.

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