American Exceptionalism, v2.0

The years following WWII brought America into an era of exceptionalism.

We emerged as the war’s only true victor. Fighting the war necessitated a massive mobilization of resources, leading to rapid industrial expansion and technological advancements.

It also yielded an industrial base far more substantial than what we had going into WWII. Our infrastructure remained intact. By the end of World War II, the United States accounted for half of the world’s wartime industrial production. 

Factories quickly adapted to produce consumer goods. This adaptability, combined with a skilled and productive workforce, positioned us to sell and lend to the world. The U.S. supplied goods and provided financial assistance to countries worldwide, solidifying its position as a global economic leader.

The war also yielded a naval force with global scope, strengthening our hand.

By 1945, the U.S. Navy had expanded to include over 28 fleet carriers, more than 250 submarines, and sufficient amphibious lift for over 400,000 troops, establishing absolute naval supremacy.

It had the capacity and mandate to secure the oceans, seas, and shipping lanes. 

This formidable naval presence enabled the U.S. to safeguard oceans, seas, and shipping lanes, ensuring the free flow of global trade. The strategic deployment of carrier strike groups, each typically comprising an aircraft carrier, guided missile cruisers, anti-aircraft warships, and anti-submarine destroyers or frigates, allowed for rapid response to potential threats against maritime commerce.

The mere proximity of a U.S. carrier strike group served as a powerful deterrent, significantly reducing the risk of disruptions to shipping. Whatever could be gained by any party intentionally disrupting global trade came at too great a cost. This naval dominance protected international commerce and reinforced the United States’ position as a central figure in maintaining global economic stability.

The resulting stability—at least on international waters—encouraged a trade growth pace unlike any previously experienced.

Americans paid the cost of maintaining such a widespread and intimidating police force and distributed the rewards globally. But the price was worth it.

With that rise came NATO, the United Nations, the World Trade Organization (WTO), and other institutions designed to hold all countries accountable to the same general principles of free trade.

By fostering these institutions, America ceded the power to deal with other nations individually. We exchanged unilateral authority for multilateral stability.

This trade-off was worth it.

Unfortunately, as most things do, the institutions that emerged after WWII became corrupted. Countries with political systems at odds with the American Way of merit-based success could not compete with free choice and free trade.

Instead, those countries manipulated the system to bind America to even more costs and trade-offs in the name of equality of ends rather than common principles of free trade.

Meanwhile, the price Americans paid to enforce global peace rose far higher than the benefits received.

And that cost without a corresponding benefit explains, in large part, why Trump won such an overwhelming mandate to change the terms of global trade.

American exceptionalism has taken on a new flavor. Multilateralism is out, and unilateralism is in. We control the terms. 

Call it version 2.0.

This new version has enormous implications. The U.S. economy, freed from the costs and trade-offs of a corrupt, manipulated international order, will boom as it reaps rather than distributes the reward of The Holy Trinity of Growth.

Over the next few days, I’ll explore these implications and show you how to position yourself to reap the rewards of American Exceptionalism v2.0.

Until then, 

Think Free. Be Free.

Don Yocham, CFA

Managing Editor of The Capital List