I mentioned early on that size is an advantage. This goes beyond the absolute
size of the internal market. Being the largest economy in the world also has some other
advantages. It is not entirely obvious that the United States should have more influence
in international markets or international politics than the EU, which after all is larger in
the aggregate. But I think it is clear that our foreign policy ends up carrying more
weight in the world than anybody’s. So far, the Fed’s interest rate moves carry
somewhat more weight than the ECB’s interest rate moves. So far, the dollar is a more
important international currency than the euro.
Why is this so? I am not going to give a long analysis for two reasons. First, I
have already gone on long enough. And second, I don’t know the answer. But I think it
has something to do with the fact that the United States is one large country, which
speaks with a relatively unified voice, whereas the EU still consists of many countries
that speak with different voices.