Browsing through an American bookshop does not lift the spirits. Books that chart the end of American supremacy, predict wars over finite natural resources, study the squeezed middle class or the catastrophic Bush presidency proliferate. The US is going through a period of introspection.

The US economy is certainly in transition, made vastly more difficult by the spreading impact of the credit crunch. But the underlying story is much stronger. The country is developing the prototypical knowledge economy of the 21st century, an economy in which the division between manufacturing and services becomes less clear cut, in a world where the deployment of knowledge, brain power and problem-solving are the sources of wealth.

What counts is the strength of a country’s universities, research base, commitment to information and communications technology and new technologies along with a network of institutions that supports new enterprise. Of the world’s top 100 universities, 37 are American. The country spends more proportionately on research and design, universities and software than any other, including Sweden and Japan. Of the world’s top 50 companies ranked by R&D, 20 are American. Fifty-two of the world’s top 100 brands are American. Half the world’s new patents are registered by US companies.

This year, American exports have grown by 13%, so that the US has reclaimed its position as the world’s number one exporter. Moreover, and little remarked on, two-thirds of America’s imports come from affiliates of American companies that determinedly keep most of the value added in the US. The US certainly has a trade deficit, but importantly it is largely with itself.

It is this strange cocktail of argument, of plural institutions that check and balance, of investing in knowledge and of a belief that no problem can’t be fixed that underpins the US strength. China is the only country in the world with a similar continental-scale economy and bigger population that could mount a challenge, but it has none of these institutions and processes. Despite its size, it has only three universities in the top 100, not one brand in the top 100, not one company in the world top 50 ranked by R&D and it registers virtually no patents.

China has no tradition of public argument, nor independent judiciary. Unless and until its institutions change, it will always trail the US in the 21st century knowledge economy and experience upheaval and revolution. It is the much maligned EU that has the institutions and economic prowess to emerge as a genuine knowledge economy counterweight to America.

Sure, the US has problems. It runs its financial system like a casino. Its road and rail systems have been neglected for decades. University entrance has become too expensive. It has fetishised deregulation. Money corrupts its political process. To compromise the rule of law in order to ‘win’ the war on terror was stupid. But none of those problems can be fixed and the US is about to elect a President who will promise to try, in a world in which it remains the indispensable power. Anybody who would prefer China’s communists needs to see their doctor. The greatest danger is that we start believing the

pessimism. The US is — and remains — formidable. Which is just as well for all of us. — The Guardian