America Not in Decline

[Lemur]

A refreshing essay from Foreign Policy confirms something I've been suspecting for a few years now: The USA is not rolling toward collapse (although every heavy-breathing pundit will tell you the sky is falling).

1) The United States is successfully deleveraging. As the McKinsey Global Institute notes, the United States is actually doing a relatively good job of slimming down total debt -- i.e., consumer, investor and public debt combined. Sure, public debt has exploded, but as MGI points out, that really is the proper way of doing things after a financial bubble [...]

2) Manufacturing is on the mend. Another positive trend, contra the Harvard Business School and the GOP presidential candidates, is in manufacturing. Some analysts have already predicted a revival in that sector, and now the data appears to be backing up that prediction. [...]

3) A predicted decline in energy insecurity. British Petroleum has issued their Energy Outlook for 2030. The Guardian's Richard Wachman provides a useful summary: Growth in shale oil and gas supplies will make the US virtually self-sufficient in energy by 2030, according to a BP report published on Wednesday. [...]

Since the Second World War, the pattern in the global political economy has been for the United States to adjust to systemic shocks better than any potential challenger country. A lot of very smart people have predicted that this time was different -- the United States wouldn't be able to do it again. These trends suggest that maybe, just maybe, that might be wrong.

Am I missing anything?

[gaelic cowboy]

Are you missing anything hmm, no I would say it is spot on to be honest.

Much of the "Merica in Decline" stuff is overblown, America still has per head of population plenty room to expand on most indicators when taken on a national basis.


You population is predicted to keep increasing, and you land per head is bigger than most.

If you manage your resources properly even unsustainable Las Vegas can continue to grow albeit at a slower pace.

America has ports on both the Atlantic and Pacific giving a flexibility on trade and millitary resources most nations dont have.

American strategy was/is predicated on the need to prevent consolidation of an aggressive power on the central plain of Europe. A Russia, Germany or France that had controlled all Europe and the colonies of the same would have buried the US eventually.

We know that Europe is on the downswing so it merely remains to prevent Russia from being capable of dominating Europe, if Russia owns European manufacturing and warm water ports they can given time can overwhelm the US. However dont worry it's not going to happen for the reason it has never worked namely Ireland, Iceland and the UK unless you control them you will give up control of the Atlantic eventually.

The brief period after 1991 spolied us all really, it seems like the US is declining but really it is just assuming the position it always had.



Also one last peice on this idea of decline is to my mind it's always predicated on the idea of the military.


By this measure todays britain should be a poorer and weaker place that 1880 yes/no well I think we can all agree that todays Britain is richer than 1880 and the millitary far stronger than 1880.

[Furunculus]

nope.

http://www.arbuthnotgroup.com/uploads/9.1.12.pdf
http://www.nber.org/~wbuiter/3G.pdf
http://www.google.co.uk/url?sa=t&sou...ad=rja&cad=rja
http://www.carnegieendowment.org/fil...er_in_2050.pdf

[Hax]

Besides, the South Will Rise Again.

(am I doing this right?)

[rory_20_uk]

America is in relative decline compared to, say 25 years ago. America is changing its doctrine of two simultaneous wars to only one.

1) America has tried to keep the increase in living standards by one bubble after the other. Real increases are far more difficult due to increased competition from abroad.

2) That is genuinely great news and if can be kept up will buttress the country in years to come. Any country that fails to create real items is constantly having to watch their backs.

3) Shale gas will probably be a good source of energy, but there is an unknown environmental impact - well, it is known but companies tend to point out tap water that one can light as a bonus.

America isn't going to implode and become a wasteland but a slow adjustment is probably likely as the artificial suppression of China has ended and the latest attempts by Europe to immolate itself are not as great as they were at the start of the last century.

[Lemur]

America is in relative decline compared to, say 25 years ago.

I don't think 1987 was so fantastic. The advent of Max Headroom and Space: 1999 cannot save an otherwise lackluster year, what with the market crash of '87.

I keed, I keed. The same trends that are cited for American decline today have their roots in the policies of the late 1970s and 1980s. Energy shocks, offshoring of manufacturing, trade deficits, budget deficits, consumer deficits, deregulation of the financial sector ... all of this was happening in that period. If anything, I believe we have come through the aftershocks of those policies, and are well on our way toward taking the best elements and discarding the dross.

As for military supremacy, America does not need to be the preeminent power of the globe. We can't afford it; no single nation can.* We need to protect our interests, certainly, and we need to defend ourselves, but the gross imperial gambits of Bush II are now rightly seen as a budget-destroying error. The same sort of global overreach that did in the British Empire. I'm not in favor of isolationism, but a re-think of our global policing is no bad thing.

Our best days are ahead of us. I firmly believe this.




* Indeed, there's a good argument to be made that a bloated defense budget not only weakens us economically, but weakens us militarily.

[W]e have new fiefdoms pushing new products and guarding pots of resources that are not integrated with the rest of the force. We have the director of this center of excellence and the commanding general of that command, each with a flashy name and each with a new age explanation as to why we need them in modern warfare. Meanwhile, they pursue programs and supposed solutions in single-minded vigor, guarding and expending resources in a rabbit hole rather than pursuing business and military strategies integrated across functions and time. Look at a professional journal and see who is publishing most of the articles you don't read. Directors and staffs of these agencies are constantly justifying their existence and their pot of money. This, my friends, is the path to hell, decadence, and strategic decline. [...]

While each believes he or she is doing his best to save the world, the rest of us know most of this is a joke. The joke is on us, though, because no one cares to impart discipline on the system that got them to where they are and their interests have been so fully entwined with the interests of the organization and of the nation that there is no discerning them anymore.

[Xiahou]

Our best days are ahead of us. I firmly believe this.

You're not worried by unsustainable growth in entitlement spending? Or are you just confident someone will have the courage to fix them? I agree that the US has some good fundamentals, but we also face some daunting challenges.

Also, while we can certainly trim the fat on defense, I don't think it's accurate to paint it as "budget destroying". You could completely eliminate defense spending and we'd still be running a healthy deficit. At least defense is one of the enumerated powers of the federal government.

[Lemur]

You're not worried by unsustainable growth in entitlement spending?

One of several concerns, certainly, but I am quite certain that we will address it. I also think the tax code is a joke and a drag on the economy, needing radical simplification. Again, I believe we will address it.

Much less clear on how we will deal with some macro-economic trends, but that's a whole 'nother thread.

Also, while we can certainly trim the fat on defense, I don't think it's accurate to paint it as "budget destroying".

Conflating two separate issues; defense budget and the two off-budget wars we waged in the 00s. I do believe the DoD budgeting and procurement system encourages single-issue, single-program fiefdoms that drain away millions while doing little to help our men and women in uniform. The Iraq war, on the other hand, cost somewhere in the neighborhood of $2 trillion (some estimates go as high as $4 trillion, when factoring indirect costs), which was, in fact "budget-destroying."

[Sasaki Kojiro]

http://www.the-american-interest.com...cfm?piece=1183

(long)

I was going to post this in its own thread but I don't have much more than a recommendation. It fits here well enough because his topic is what needs to happen politically...why we are in a decline only if we think we have to stick with a certain system. Although I think there may be some contradictions with the above article.


Also, here's another article on "the myth of american decline":

http://www.tnr.com/article/politics/...ower-declinism

[ICantSpellDawg]

America is in a relative decline, not an actual one at this point. It could go that way, but my general understanding of the world is that when your competitors do well, you do better, unless you are a crappy competitor.

[a completely inoffensive name]

I read Sasaki's first link and it was very good all the way up until the end.

NOTE: To understand this, you have to read the article.
Those we call "conservatives" want liberalism 3.0 and those we call "liberals" want liberalism 4.1. But then he just goes on to say at the end that what we need and are ready for is liberalism 5.0. Except if everyone is looking to the past, who is going to create liberalism 5.0? This is why I feel America is declining, or about to decline. No one is looking towards the future, they are just clinging to their old ideas and feelings.

[Lemur]

[W]e are certainly not going to be the top dog in, say, fifty years or so if things keep going the way they are

If there's one thing you can count on, it's that linear trends don't stay linear.

What is in danger of collapse is the US political system

Unfortunately, when you declare all government to be evil, and then set out to prove it, there are unintended consequences.

[PanzerJaeger]

Good thread, and lots of good articles. I guess it depends on how one defines 'decline'. As most of the world embraces some form of free market capitalism, GDP size will be increasingly correlated with population size. Even with her significant legal, regulatory, and technological advantages, America's ~400 million people cannot hope to support an economy the size of the one China's 1.3 billion people can. Feudalism, colonialism, internal strife, outside aggressors, and finally communism artificially held China (and India on many of those counts) back. Falling behind large-population nations on global rankings of the biggest this and the most that is definitely relative and not particularly important.

However, is America being held back, or indeed declining, in real terms? I think Sasaki's first article makes a strong case for that argument. America is clinging to a model built for a different era while other nations are building new, innovative, and more efficient models that correspond more closely to the 21st century. Our private economy is desperately (and in many cases successfully) trying to adapt to to the realities of the emerging global marketplace under the onerous burden of a governmental system stuck in the Great Society.

I really liked this from the article:

But today the words liberal and progressive have been hijacked and turned into their opposites: A “liberal” today is somebody who defends the 20th-century blue social model; a “progressive” is now somebody who thinks history has gone wrong and that we must restore the Iron Triangle of yesteryear to make things better. Most of what passes for liberal and progressive politics these days is a conservative reaction against economic and social changes the Left doesn’t like. The people who call themselves liberal in the United States today are fighting rearguard actions to save old policies and established institutions that once served noble purposes but that now need fundamental reform (and in some cases abolition), lest they thwart the very purposes for which they were created.

I have thought the same for a long time but have not seen it written so succinctly.

At the same time, I think a lot of those hoping to return to the gold standard must acknowledge the following.

We cannot realistically solve our problems by trying to return to the 3.0 liberalism of the 19th century because the American economy of that era depended on conditions we cannot reproduce today. Though some may think it desirable, we cannot return to a largely agrarian economy. Nor can we replicate the industrial system of the 19th century, with its extremely high tariffs against foreign goods and a completely laissez-faire national attitude toward immigration. Trying to recreate the American economy of a century ago would lead to massive dislocations, depressions and quite likely wars around the world, not to mention thoroughly wrecking the American economy and bankrupting many of our banks and biggest corporations.

[a completely inoffensive name]

At the same time, I think a lot of those hoping to return to the gold standard must acknowledge the following.

But....but Ron Paul says we can.

[Papewaio]

You have some of the key energy companies and the key IT companies.
And a huge chunk of the worlds liquid fresh water.

Much better fundamentals then Australia which is essentially a quarry.

[Greyblades]

By this measure todays britain should be a poorer and weaker place that 1880 yes/no well I think we can all agree that todays Britain is richer than 1880 and the millitary far stronger than 1880.

Really? I would have thought that Britain with it's empire would have been (for it's time) considered far stronger than today's army.

[gaelic cowboy]

Really? I would have thought that Britain with it's empire would have been (for it's time) considered far stronger than today's army.

Who cares about "for it's time" it's today we live in, in 1880 most people lived short, dirty and poor lives in the UK

children died younger as did women in childbirth, well over 60-70% of people died before 60yrs of age.

Britains industry depended on tarriffs and raw materials from the colonies, thats no longer the case now it's services both domestic and exported ones in a open market.

Defensively Britain was always under threat at home due to commitments abroad, basically her empire drained millitary resources from the homeplace to protect strategic interests abroad.

Germany/France were the biggest threats when Britain still had an empire, they were able to threaten Britain without having to invade it's empire or Britain.
Britain then had to ensure it's alliances on the continent discouraged too great a single power on the continent, this would give it time to utilise it's colonies to eventually overwhelm an enemy.

Todays britain is better on every box you could want to tick.

[Greyblades]

Oh. I believe said stronger millitary not better way of life, and "for its time" probably does count as a country's strength is usually measured by comparing it to other countries and considering at the time Britain was in the top three then not the top 5 as is now I assume it was stronger then than it is now.

[Vladimir]

Oh. I believe said stronger millitary not better way of life, and "for its time" probably does count as a country's strength is usually measured by comparing it to other countries and considering at the time Britain was in the top three then not the top 5 as is now I assume it was stronger then than it is now.

It may be a problem with context then. I'm inclined to agree with your view but many people are thinking in terms relative to the country itself.

[Greyblades]

Well that's the problem with comparing a country's strength from different ages, most people would think of the roman empire's legions as stronger than the vatican City's Swiss guard, but in a straight fight the huge advances of tech would mean the only way the legions would win was if the guard ran out of bullets before the legion ran out of bodies. It still doesnt mean the Roman empire's armies were less powerful in the world then the swiss guard.
Anyway, it's Off topic.

[PanzerJaeger]

Todays britain is better on every box you could want to tick.

Well, obviously. It would be difficult to find a nation on earth that does not have a better standard of living than it did 100+ years ago, including those in the third world. It is a bit disingenuous to use natural human advancements to gloss over real and/or relative rises and declines.

For Britain, I would argue that it suffered relative declines during the World War periods when larger powers emerged to challenge its supremacy and then real declines after the Second World War as its economic system fell apart. Thatcherism re-aligned the economy with that of the rest of the world and set the stage for an impressive rise (whether it be in relative power or standard of living).

[Greyblades]

Either way it sure isnt powerful enough anymore to force China into buying opium.

[Lemur]

An update on the conspicuous lack of decadence and decline in America:

[T]he lows of March 2009 marked the beginning of an unexpected recovery—not the beginning of an era of irreversible stagnation. The U.S. economy went from shrinking at a 6.7 percent annual rate in the first quarter of 2009 to expanding at a 3.8 percent annual rate in the fourth quarter of that year—a turnaround unprecedented in modern history. The stock market has doubled since March 2009, while corporate profits and exports have surged to records. The U.S. economy has regained its 2007 peak, and is now growing at a 3 percent annual clip—a more rapid pace than any other developed economy. The crucible of the recession forged an economic structure that is more resistant to shocks than the brittle vessel that shattered in 2008. Meanwhile, Europe continues to grapple with insoluble banking and sovereign debt crises, and developing-economy juggernauts like China and Brazil are showing signs of cracking.

It’s clear that the story of America’s recovery—unsatisfying and problematic as it has been—isn’t a Hollywood tale. Rather, it rests on an understanding of its core competencies and competitive advantages: attitudes and capabilities that, even in this age of globalization, remain unique. Contrary to the declinists’ view, global growth has not been a zero-sum game for America’s economy. [...]

Rather than sink deeper into a financial morass, the American private sector emerged better: better equipped to meet obligations, to save, to invest, to spend, and, ultimately, to grow. Pretax corporate profits rose from $1.25 trillion in 2008 to $1.8 trillion in 2010, and to $1.94 trillion in 2011. And rather than throw in the towel and surrender to Chinese competitors, U.S. companies figured out how to get more out of existing resources.

[gaelic cowboy]

I wonder if we were to dig up newspapers from the late 40s up to the late 50's would we see people talking about the coming soviet juggernaut. I bet a tenner in Paddy Power they were talking about relative decline then too.

[HopAlongBunny]

The problem 'merica seems to have is it doesn't deal with peace very well. After burying the USSR rather convincingly it essentially squandered the peace.

The US has dealt under a wartime economy for so long it is questionable whether it can deal with peace. Bush dealt with the threat to America's mobilization economy by starting 2 rather foolish wars; one of which can only be described as the most elaborate art heist in history (since that is the only "observable" success of that campaign) The so called peace dividend was made to vapourize in a black-hole of military largesse and welfare for the rich.

The question (for me) is can the US still flourish under a peacetime economy? Is it possible for the US economy to move ahead w/o the welfare system for corporations that is essentially the MIC? Certainly, the political system seems to be dysfunctional w/o a threat looming over them (real or imagined)

[a completely inoffensive name]

I think you're on to something to here.

No he's not.

[Papewaio]

So Apple alone represents 1.5% of the pretax profits for 2011?

I think it's pretty well geared for non warfare based economy.

Likewise Google and Microsoft and Cisco and HP and Dell... Essentially the juggernauts of the information age are US controlled companies. So what if the assembly lines are offshore, look where the quality control, decisions, benefits and cash flow to.

[PanzerJaeger]

The question (for me) is can the US still flourish under a peacetime economy? Is it possible for the US economy to move ahead w/o the welfare system for corporations that is essentially the MIC?

Umm... the US economy moved ahead without significant military spending a long time ago. The MIC comprises just 3.6% of the US economy (as measured by GDP) without the foreign wars and just shy of 5% if that spending is included. Even after the relative boom in military spending that followed 9/11, these are historically low figures for the post-war era.

[HopAlongBunny]

Umm... the US economy moved ahead without significant military spending a long time ago. The MIC comprises just 3.6% of the US economy (as measured by GDP) without the foreign wars and just shy of 5% if that spending is included. Even after the relative boom in military spending that followed 9/11, these are historically low figures for the post-war era.

Like anything else: yes and no. Absolute spending is higher than at the height of the cold war, though it is lower as a % of GDP.

More interesting (to me) is the Government Accountability Office's statement that DoD expenditures are not able to be audited. Really? Is it a budget or a laundromat? If the same statement was made vis. Medicare or Old Age Security, Congress would be purple with rage.

Note too, that although spending as a % of GDP declined in the US, it still dwarfs any other player; or actually any other group of players worth naming. All this with essentially no oversight or accountability, despite being the largest beneficiary of the US budget process.

[a completely inoffensive name]

Like anything else: yes and no. Absolute spending is higher than at the height of the cold war, though it is lower as a % of GDP.

Absolute spending is pretty meaningless. Just looking that the number got bigger could just mean that it kept up with inflation. % of GDP is the only thing that matter when you are trying to make the point that we can't have a "peacetime economy", when clearly we have been getting closer to a peacetime economy in terms of the relative size of the MIC.

More interesting (to me) is the Government Accountability Office's statement that DoD expenditures are not able to be audited. Really? Is it a budget or a laundromat? If the same statement was made vis. Medicare or Old Age Security, Congress would be purple with rage.

Obviously, military spending is going to be on projects that really shouldn't be public knowledge for our enemies to know. This argument doesn't apply to Social Programs, thus we don't see any denials for auditing social programs.

Note too, that although spending as a % of GDP declined in the US, it still dwarfs any other player; or actually any other group of players worth naming. All this with essentially no oversight or accountability, despite being the largest beneficiary of the US budget process.

This is just factually wrong, Medicare/Medicaid was larger than military spending. Social Security by itself was larger than military spending.

If you don't mind me asking, where are you coming up with all this?