By Tabby
America, despite making up only 5% of the world’s population, currently generates about 20% of the world’s total income. This makes America the world’s largest national economy and makes it the world’s leading global trader. This is important as American prosperity has heavily depended on creating world markets and expanding trade to allow America to have an income 9% higher than it would’ve been without these efforts. To give some context this extra 9% funnels an extra $1.5 trillion into American incomes. This means that America’s real GDP has grown by 3.1% on average between 1948 and 2021. This growth in the American economy has benefited the rest of the world accordingly due to America’s trading policies. Since many countries benefit from the growth in the American economy it stands to reason that the same countries would also be negatively affected by a decline in the American economy.
The greatest example of a negative decline in the American economy affecting other countries can be seen in how the Great Depression affected the world. It hit America especially hard as GDP fell by 30%, the wholesale price index fell by 33% and unemployment rates hit over 20%. In comparison America’s next largest recession was the Great Recession of 2007-2009 in which the GDP only declined by 4.7% and the unemployment rate only just hit 10%. Around the world, the Great Depression had crippling effects such as in Britain, where there was little growth and a recession in the second half of the 1920’s. However Britain didn’t slip into a severe depression till early 1930’s and its decline was only a third of America’s. In France and Germany, there was relatively little downturn during the late 1920’s to early 1930’s however industrial production fell significantly during the 1930’s in both countries. The more-developed Latin American countries such as Argentina and Brazil alongside others like Japan experienced only mild depressions beginning relatively late and ending rather early. Unfortunately due to Japan’s more flexible price structure, deflation of prices was unusually rapid but this may have subsequently helped keep Japan in a mild depression rather than a more severe depression. We can see that price deflation was rather extreme all over the world as the prices for coffee, cotton, silk and rubber were roughly half of their original prices.
While it is unlikely that anything of this scale will ever happen again nor that the American economy will ever collapse in such a way that it is unrecoverable there is always the chance as economies struggle from the effects of the pandemic. If this were to happen it is likely that the majority of the world’s economies would also be taken out in the following years including the economies of Canada, the UK, the majority of Europe, China and Japan. This mostly due to how heavily they rely on American trading or America’s economy being stable. The rest of the world would suffer a knock on effect such as the commonwealth from the crash of the UK and Canadian economies and would likely also go into a severe depression. Luckily there is very little reason for this to happen despite fears as the majority of the world won’t benefit from a crash and China and Japan (who hold the majority of America’s debt) also rely on America’s economy being stable and their constant imports and exports.
Sources:
https://ustr.gov/issue-areas/economy-trade
https://www.imf.org/external/pubs/ft/wp/2001/wp01119.pdf
https://www.britannica.com/event/Great-Depression/Causes-of-the-decline
https://www.thebalance.com/u-s-economy-collapse-what-will-happen-how-to-prepare-3305690
The Halcyonite 
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