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Vol. 3, 2026
Still Exceptional?
America 250 Years After the Declaration Of Independence
America marked 250 years of independence this summer, but a persistent media drumbeat says the country’s best days are behind it. We examine the five most common narratives and provide context showing that America's best days may still lie ahead.
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America marked 250 years of independence this summer, but a persistent media drumbeat says the country’s best days are behind it. We examine the five most common narratives and provide context showing that America's best days may still lie ahead.
America’s best days are behind it, or so goes the media chorus.
The occasion? The 250th anniversary of America's Declaration of Independence.
The Economist warns that America is still “mighty but becoming less dominant.”1 A New York Times essay goes further, with the headline, “America Is Officially an Empire in Decline.”2 Open any financial publication, and similar indictments recur: America’s share of global output is in decline, the U.S. doesn’t manufacture anything, the dollar is losing its dominance, investors are fleeing, and Americans are drowning in debt.
We admit it: none of these narratives is outright wrong. But you need context to see the full picture.
Join us as we examine these top five pessimistic narratives about the U.S. economy and explain why the situation may not be as dire as it seems.
Bye-Bye, Miss American Pie?
The Economist’s July article on the decline in U.S. dominance featured a chart showing countries’ shares of global gross domestic product (GDP). When GDP is adjusted for local purchasing power parity (PPP), which accounts for differences in price levels between countries, the U.S. share has been declining for eight decades. By this measure, China became the world’s largest economy in 2014 (see Figure 1).3
Fig. 1
Shrinking Slice
Share Of World GDP in International Dollars*
Sources: Bolt & van Zanden (2024), Maddison Project Database, World Bank, The Economist
*Purchasing Power Parity (PPP) adjusted constant 2011 international dollars, 2023-2025 data adjusted with World Bank PPP.
But zooming out, U.S. dominance in 1945 had less to do with the U.S. itself and more to do with the outcome of World War II and math.
First, the U.S. GDP share surged during the two world wars as wars disrupted production in other major economies, especially those that had dominated global output between 1850 and 1900, such as Germany, France, and the UK (see Figure 1 again). Protected by the vast Atlantic and Pacific oceans, the U.S. not only maintained its output during the wars but actually expanded it.
After World War II, the decline in the U.S. share of global output has been more attributable to growth elsewhere than to American decline. China’s and India’s share of global output had slumped for centuries, but with China plugging into world trade in the 1980s and India liberalizing its economy in the 1990s, the two countries saw rapid growth.
Second, Figure 1 adjusts real GDP for purchasing power parity (PPP), a theoretical factor that matches price levels across countries. So, after PPP adjustments, prices will increase in countries with a lower cost of living, inflating overall spending. Similarly, PPP would deflate total consumption in economies with a higher cost of living.
But that’s not how the global economy works. When a country buys oil, chips, or airplanes from abroad, it pays at the market exchange rate, not a theoretical one. So, for measuring economic heft, market exchange rates are the better yardstick.
Turns out, when measured using market exchange rates instead of the PPP adjustment, the U.S. economy dwarfs every other economy, accounting for 23% of global GDP (see Figure 2). Not only that, but a better headline for The Economist would have been: "The U.S. economy has maintained its leading share of global economic output for at least a stunning 65 years and running."
Fig. 2
Unadjusted Exceptionalism
Share of World GDP in U.S. Dollars, Not PPP-Adjusted*
Source: World Bank
*Constant 2015 U.S. dollars using market exchange rates
Third, a better measure of a country's welfare and standard of living is output per person. We can see this more clearly in output-per-worker measures: U.S. real GDP per person employed today is more than three times China’s and more than six times India’s (see Figure 3).
U.S. real GDP per person employed today is more than three times China’s and more than six times India’s.
Fig. 3
America Keeps Pulling Away
Real GDP Per Person Employed For All Countries With More Than 50 Million In Population
Source: World Bank
Made In The USA
American declinists remain unconvinced by the economic output figures.
“U.S. Manufacturing Is in Retreat and Trump’s Tariffs Aren’t Helping,” declared The Wall Street Journal in February 2026.4 Indeed, since 1980, manufacturing employment has fallen by more than a third and now makes up less than 10% of total employment (see Figure 4).
Fig. 4
Lights Out
Manufacturing Employment Versus Real Industrial Output Index
Sources: Bureau of Labor Statistics, Federal Reserve
Has America lost its manufacturing sector? Quite the opposite: U.S. real manufacturing output has nearly doubled despite the decline in manufacturing employment during the same period (see Figure 4 again).
U.S. real manufacturing output has nearly doubled despite the decline in manufacturing employment during the same period.
What’s more, in terms of manufacturing value added, the U.S. remains the world's second-largest manufacturer behind only China. The U.S. added $2.9 trillion in value in 2025, more than the combined value added of Germany, Japan, and South Korea (see Figure 5).
Fig. 5
Still A Silver Medal
Top 10 Countries Manufacturing Value-Added*
Sources: Bureau of Economic Analysis, World Bank
*U.S. Data As Of 2025, All Other Countries Data As Of 2024
Most importantly, the U.S. also manufactures further up the value chain: it accounted for 42% of global defense equipment exports over the last five years, 59% of orbital launches lifted off from the U.S., and 77% of active satellites are American.5 Beyond aerospace, the U.S. economy is spending more than a billion dollars per day on manufacturing, power, and data center construction. The U.S. accounts for 90% of the world's AI compute capacity.6
Not bad for an economy that “doesn’t build anything anymore.”
Don't Stop Believin’
All data points referenced so far have featured a common denominator: the U.S. dollar. To the pessimists, that’s precisely the problem: the dollar is in decline, they say. Indeed, the dollar’s share of official foreign exchange (FX) reserves slid from 71% at the dawn of the century to 57% today (see Figure 6).
Fig. 6
Falling Usage?
U.S. Dollar Share Of Official FX Reserves
Source: IMF
Reserves show what central banks are doing. What about everyone else? A Bank for International Settlements (BIS) census of the $7.5 trillion-a-day FX market shows that dollar dominance has barely budged this century: the dollar is on one side of 89% of all trades, even after “Liberation Day” (see Figure 7). In other words, about 90% of the world’s foreign exchange trades funnel through New York. In fact, the recent rise in Chinese renminbi (RMB) usage has come at the expense of the yen and euro (see Figure 7 again).
Census of the $7.5 trillion-a-day FX market shows that dollar dominance has barely budged this century.
Fig. 7
The Dollar King
Share Of All Over-The-Counter FX Trades With Currency On One-Side*
Sources: Bank of International Settlements (BIS) Triennial Central Bank Survey
*Total sums to 200% since we are measuring both sides of FX trades.
Fine, maybe another sovereign fiat currency won't replace the dollar. What about new forms of money such as stablecoins, which have more than doubled in supply since 2023? Well, 99.5% of stablecoins are pegged to ... the U.S. dollar.7 Try again.
Hotel America
Another narrative popular among the pessimists is the “sell America trade.”
At the start of the year, The New York Times published an essay noting that global investors had shunned U.S. equities, with the S&P 500 Index underperforming the EURO STOXX 50 Index in 2025.
But “sell America” never actually materialized. Since Liberation Day in April 2025, foreign investors have purchased a net $274 billion in additional U.S. securities, excluding valuation changes: $65 billion in additional Treasuries, $10 billion in other bonds, and almost $200 billion in stocks.8 It turns out to be much harder to “sell America” when 56 of the 100 most valuable companies in the world are headquartered in the U.S., commanding 74% of the total market value (see Figure 8).
Fig. 8
Selling The Majority?
Total Market Capitalization Of The Top 100 Public Companies By Headquarters Region*
Source: companiesmarketcap.com
*As of August 11, 2026
In fact, the eight largest American companies are together worth more than Europe’s entire public equity market.9
The eight largest American companies are together worth more than Europe’s entire public equity market.
Critics might argue that this dominance simply reflects the valuations of companies benefiting from the current AI boom and is not repeatable (“a bubble”). Well, if history is any guide, it’s the opposite: for a hundred years, the world's most valuable companies have been American — first in steel and oil, then autos, then tech. The industries change. The host nation hasn’t.
Bills, Bills, Bills
Sure, foreign investors are still buying equities, but the worry is that the fiscal trajectory will eventually convince investors to shun U.S. government debt.
After all, the U.S. debt-to-GDP ratio has climbed from 30% in 1970 to 99% today, while the nation currently runs an annual budget deficit of 6% of GDP. In 2025, Moody’s stripped the U.S. of its Aaa credit rating, citing “persistent, large fiscal deficits [driving] the government's debt and interest burden higher.”10
However, what matters is not the size of the debt, but whether we can service it. It turns out that federal interest payments consume 21% of federal revenue, a much higher share than in the early 2000s but still well below the 1985 peak (see Figure 9).11
Fig. 9
We’ve Seen Worse
U.S. Federal Government Net Interest Payment As A Share Of Revenue
Source: Bureau of Economic Analysis
Okay, but isn’t the trajectory unsustainable? Well, the U.S. has more debt capacity than its developed peers, as its government revenue today makes up only 30% of GDP, versus 51% in France, 47% in Germany and Italy, and 38% in the United Kingdom and Japan.12
More interestingly, rather than expressing outstanding debt as a share of GDP, we could instead express it as a share of national wealth, which includes real estate, equipment, corporate equity, etc. Using that method, U.S. debt held by the public is only 20% of total wealth. Politicians may not have the fiscal fortitude to cut spending or the appetite to raise taxes, but the capacity to pay interest is there.
Harder, Better, Faster, Stronger
Five popular arguments for America's decline all crumble under the weight of context. But one factor also sets the U.S. apart: productivity.
American workers are by far the most productive in the developed world. For example, since 1995, U.S. productivity has grown nearly 60%, against 39% in the UK and 34% in Germany.
A more productive economy supplies high-value manufactured goods, clears nearly all the world's currency trades, builds the most valuable companies, sustains higher debt levels, and remains a solid share of world GDP despite a smaller population.
And investors know. After all, 64% of the world’s venture capital today is invested in the United States in an optimistic search for the next Nvidia.13
Two hundred and fifty years in, the world's eyes are still on the United States.
Happy semi quincentennial, America. You’re not perfect, but there’s much to be happy about and plenty of room to improve.
3. We have written previously about measuring economic size after adjusting for purchasing power (Payden & Rygel, 2014, “Summer 2014 POV: Sizing Up China”)
12. International Monetary Fund. (2026). General government revenue, percent of GDP [Data set]. Fiscal Monitor. Retrieved September 2026, fromhttps://www.imf.org/external/datamapper/rev@FPP
13. Venture Capital: Crunchbase. (2026). Global venture funding data [Data set]. Retrieved September 2026, fromhttps://news.crunchbase.com
This material reflects the firm’s current opinion and is subject to change without notice. Sources for the material contained herein are deemed reliable but cannot be guaranteed. This material is for illustrative purposes only and does not constitute investment advice or an offer to sell or buy any security. Past performance is no guarantee of future results. Point of View articles may not be reprinted without permission. We welcome your comments and feedback at editor@payden.com.
This material has been approved by Payden & Rygel Global Limited which is authorised and regulated by the Financial Conduct Authority. This material has been approved by Payden Global SIM S.p.A.. which is authorised and regulated by CONSOB.
