Zakaria's Optimism

Fareed Zakaria is everywhere these days, articulating a message similar to mine in The End of the American Century. But I think he underestimates the seriousness of the situation facing the United States.

Zakaria had the lead article last summer in Foreign Affairs’ issue on “Is America in Decline?” His book The Post-American World appeared shortly thereafter, and soon became a best seller. As an editor of Newsweek, his columns appear there regularly, and the October 20th issue of the magazine featured him on the front cover, with the title “The Bright Side” against a cheery yellow background. He even has his own television show, “Fareed Zakaria’s GPS,” where last week he endorsed Barack Obama as the best hope for America’s future.

Zakaria argues that it is not so much that the U.S. is in decline, but that other powers have risen, requiring the U.S. to deal with them with more consultation and compromise. He believes that the U.S. “has the strength and dynamism to continue shaping the world” (Foreign Affairs) and that “the world is moving our way” (The Post-American World). He sees a “silver lining” in the current economic crisis, in that the country will be forced “to confront the bad habits it has developed over the last few decades” (Newsweek).

These bad habits include spending and consuming more than we produce, leading to record levels of household debt, which has grown from $680 billion in 1974 to $14 trillion today. Spiraling consumer debt has been matched by the government. “The whole country has been complicit in a great fraud,” he writes in Newsweek. He quotes the economist Jeffrey Sachs:

“We’ve wanted lots of government, but we haven’t wanted to pay for it.”

He believes the current crisis will force greater fiscal “discipline” by both families and government, recognizing that “this discipline will be painful for a country that has gotten used to having it all.” It will also be good for our country’s foreign policy. Being the only superpower “has made Washington arrogant, lazy and careless.” Perhaps we could get away with this arrogance when we were on top of the world. But things have now changed.

“We cannot keep preaching to the world about democracy and capitalism while our own house is so wildly out of order.”

My book, and this blog, make similar arguments, and I agree with all of this, but especially that last sentence, which appears near the end of Zakaria’s Newsweek essay. However, I think Zakaria understates just “how wildly out of order” our system has become. Record consumer and government debts and a bankrupt financial system and foreign policy, as bad as those are, constitute only parts of the problem. At the same time that we have been madly spending on consumer goods, wars and debt servicing, we have let languish education, health care, infrastructure, science and technology. We have shuffled to the side the hugely expensive fixes required for Social Security and Medicare. Poverty and inequality are higher in this country than a generation ago, and among the highest in the developed world. Even our vaunted democracy, eroded by money and abuse of executive power, is no longer such a beacon for other countries. A major part of my book shows how all these interrelated problems result in a much more serious situation than Zakaria recognizes.

While we seem prepared to spend a trillion dollars bailing out a financial system led by incompetent billionaires, we need at least that much to fix the health care system, not to mention these many other neglected issues. It is difficult to see where the resources will come from to mend our society, once the banks are taken care of. It will require many years to restore the United States, and a change in America’s mindset, as well as its priorities.

Zakaria concludes his essay by suggesting that

“if we can learn the right lessons from this crisis, the United States will once more be playing by its own rules.”

I am not quite sure what “the right lessons” are, or what our “own rules” are. I think the needed lessons may be deeper and broader than he suggests, and that we may even have to change the rules. I am not as optimistic as Zakaria, but even without optimism, one can always hope. And this election week offers much hope.

The Post American World, by Fareed Zakaria

The Post American World by Fareed Zakaria (Norton, 2008)

Newsweek editor and columnist Fareed Zakaria has written a thoughtful and thought-provoking book about America’s relative decline in the world, and “the rise of the rest”—especially China and India. These emerging powers are following a “third way,” not always the path or model of the United States, and in the process reshaping the international system. They are gaining regional and global influence not with military muscle or political power, but by the force of example, and by sheer economic bulk. Meanwhile, much of the world is moving “from anger to indifference” about the United States—from anti-Americanism to “post-Americanism.”

Zakaria compares this global shift to previous epochal changes, with the rise of the Western world, and the rise of the U.S. He sees the main challenge for the U.S. to get beyond our “dysfunctional” political system that has us debating trivia instead of coming to terms with globalization and a more diffuse international system that requires consultation, cooperation and compromise.

Curiously, though, he still refers to the U.S. as “the single superpower” in a unipolar world, and sees U.S. continued strength based on the dynamism of the U.S. economy. Recent events, however, suggest that even the vaunted U.S. economy may be pretty “dysfunctional.” The trends Zakaria describes may be faster and more dramatic than he expected.

(More on Zakaria coming soon to this blog)

U.S. Loses High-Tech Dominance

For most of the 20th Century, the U.S. was the world leader in science, technology, and innovation, with the best scientists, the best universities and the most advanced research and development programs. But all of that has begun to change as other countries and regions have become more advanced and more competitive and increasingly challenge U.S. dominance.

A recent article in the New York Times addressed the U.S. technological decline, and the ways Senators Obama and McCain have approached the issue. This story includes some eye-opening statistics about the loss of U.S. primacy in technology, innovation and R&D. At the top of the story, the Times points out the importance of this sector for America’s economy and role in the world:

For decades the United States dominated the technological revolution sweeping the globe. The nation’s science and engineering skills produced vast gains in productivity and wealth, powered its military and made it the de facto world leader. Today, the dominance is eroding.

One sees this in multiple indicators, but perhaps the most important is the country’s high-technology balance of trade. Until 2002, the U.S. always exported more high-tech products than it imported. In that year, the trend reversed, and the technology trade balance has steadily declined, with the annual gap exceeding $50 billion in 2007.

The U.S. has also fallen behind in spending on research and development, which drives high-tech innovation and development. As a percent of GDP, total R&D expenditures have remained flat since the 1960s, while federal government spending on R&D has declined steadily. The U.S. has fallen to 8th place worldwide on R&D spending as a share of GDP, behind Israel, Sweden, Finland, Japan, South Korea, Switzerland and Iceland (Popular Science 11/08).

China is not yet on that top-ten list, but may not be far behind. The country is ramping up support for high tech innovation and R&D, and President Hu Jintao this year called on Chinese scientists to challenge other countries in this area: "We are ready for a fight,” he said, “to control the scientific high ground and earn a seat on the world’s high technology board.” ("China's Industrial Ambition")

The U.S. is also slipping, relative to other countries, in the creation of patents, scientific inventions, the publication of science and engineering articles, and the number of students focusing on science, math and engineering. In international comparisons of scientific and mathematical literacy, and in international competitions in those fields, American students fare poorly, often ranking near the bottom of the group of wealthy countries. Increasingly the top science and engineering students in this country are citizens of other countries, who then return home. Science magazine (7/11/08) recently reported that the most likely undergraduate alma maters for those who earned a U.S. Ph.D. were—get this--Tsinghua University and Peking University—both in Beijing.

These worrisome developments prompted a major study recently, “Rising Above the Gathering Storm,” from the National Academies, the nation’s most eminent scientific and engineering organization, calling for the U.S. to strengthen its international competitiveness. The authors of the report were “deeply concerned that the scientific and technological building blocks critical to our economic leadership are eroding at a time when many other nations are gathering strength” and were “worried about the future prosperity of the United States. A review of high tech by the magazine Popular Science (11/08) puts it a but more bluntly: “The technological dominance of the United States may soon go the way of the dollar.”

Fortunately, the man who will probably take over as President next January, Barack Obama, is on top of these issues, often speaks about them, and has aggressively promoted efforts to remedy them. In his book The Audacity of Hope, he called for a doubling of federal funding for basic research and the training of 100,000 more engineers and scientists over the next four years. He co-sponsored a bill in Congress based on the recommendations of “The Gathering Storm” and called for increased federal support of science education, especially for women and minorities. The Senate passed the bill 88 to 8 ( Senator McCain abstained), but has not yet funded the programs. It will be an expensive proposition—about $43 billion for the first three years—which will be all that much more difficult to manage in this time of economic crisis. But these long-term investments are critical to recovering America’s economic dynamism

Obama in Indianapolis

Today I went to Barack Obama's campaign rally in downtown Indianapolis, with my daughter and her daughter, 16 month old Katie, to whom The End of the American Century is dedicated. The rally was on the American Legion mall, which was jam-packed with tens of thousands of people--perhaps 50,000? (who can estimate these things?) Under crisp blue skies, a typical lovely Indiana autumn day, Obama stirred and inspired us all.

I have tried to keep this blog, and my book, nonpartisan, in the belief that the problems I address transcend parties, politics or particular leaders. There is no doubt that the Bush administration has made almost all our problems worse, but the domestic and international problems facing the U.S. precede Bush, and will dog his successors as well.

But it is hard to resist the appeal of Obama, and his speech today addressed both the problems we face, and the things we need to do to address them. He called for new attention and new investments in education, infrastructure, and research and development--all of which are critical to revitalizing the American economy and standard of living. Even more importantly, in my view, he spoke of the need for unity in diversity, for hope in the face of adversity, and for sacrifice in the cause of patriotism. He sees the future in our children, and in volunteerism and service. And he recognizes that some belt-tightening will be necessary, at least in the short term. These are all themes of my book, particularly in my last chapter on "America and the World After the American Century."

Katie was as cute as the button she was wearing, for Michelle Obama as First Lady. I also sported an Obama button. Writing my book was not exactly an exercise in hope, given the overwhelming number of problems I document there. And this blog has not exactly been full of cheerful news. But this afternoon, waiting for Obama amidst that huge, diverse audience, hearing the PA system booming the country-music song "I'm Alright" (Joe Dee Messina), and then seeing and hearing this smart, young, concerned, thoughtful multiracial candidate for President--even I had hope.

"It's a beautiful day not a cloud in sight so I guess I'm doin' alright."

Downplaying and Misrepresenting the Debt

It is bad enough that our political leaders make light of the unprecedented levels of government deficits and debt, as pointed out in a New York Times covers story October 20: "Deficit Rises, And Consensus Is to Let it Grow." The problem is compounded when The Times’ story on the subject totally misrepresents the scale of the problem.

The reporters use a strange method of calculating the burden of the debt, contending that it constitutes “a relatively modest 40.8 percent of the nation’s national income.” In fact, the current federal debt is about two-thirds of gross domestic product, according to official budget figures. The story asserts that the current debt burden is much less than during the 1990s. In fact, The Fiscal Year 2009 Budget estimates the debt at 69.3% of GDP, which is the highest figure since 1955.

The story also misrepresents the size of the current debt when it states that the federal government increased the national debt “to the present $5.8 trillion.” In fact, the current debt is over $10 trillion, and with the bailout bill, Congress raised the ceiling on the debt to $11.3 trillion.

The Times' story does a disservice to its readers with this misinformation, and contributes to the national problem of discounting the gravity of the situation, which could well lead the country into bankruptcy

U.S. Ranks Low on Health Care

Chapter 3 of The End of the American Century, titled "Torn Social Fabric," focuses especially on the relatively poor levels of health care in the U.S., and how badly it fares in comparison to other wealthy countries. As I point out there, this is surprising in many ways "because the United States indeed does have available the best medical care in the world and spends more on health care than any other country." But "because there are so many poor people in the United States and so many people without access to health care, the average level of health and medical care in the United States is among the worst in the developed world" (bold added). In the late 1990s, the World Health Organization ranked the U.S. at 37th in the world in the overall performance of the health system. This was the lowest ranking of any country in the OECD.

New data reported in the New York Times confirms these disturbing trends. The United States now ranks 29th in the world on infant mortality rates which, as the Times points out, is "one of the most important indicators of the health of a nation and the quality of its medical system." The U.S. ranking has declined sharply since 1960, when its ranking was 12th in the world.

This international gap has widened even though the U.S. spends far more on health care than most other wealthy countries, on both a per capita basis and as a percentage of GDP. In 2006, according to the Times, "Americans spent $6714 per capita on health--more than twice the average of other industrialized countries."

Grace Marie Turner, president of the Galen Institute, a conservative research organization, told the Times "infant mortality and our comparison with the rest of the world continue to be an embarrassment to the United States."

The dismal state of health care in the U.S. reflects broader trends of social and economic decline in the U.S.--compared both to our own past and to other countries in the world. It is the major theme of The End of the American Century: that the U.S. has lost ground as other countries have gained; and that we can no longer claim special privilege as the richest, or the most successful, or the most powerful--on almost any dimension.

The poor state of health care, and education, and infrastructure in the U.S. result from inadequate attention and resources to these areas of our domestic health. They pose the second horn of the U.S. dilemma: our economy is collapsing at the very time when we most need resources to rebuild the country at home, and reestablish our reputation abroad.

(See also my 9/23/09 post "U.S. Health Care Compares Badly to Others")

BBC wonders if this is The End of "The American Century"

BBC "Newsnight" recently had a 10 minute segment entitled "The End of the American Century?" inadvertently (I think) employing the title of my book. The segment begins with a reference (as my book does) to Henry Luce's 1941 "American Century" essay. The opening segment, by Paul Mason (no relation), wonders if the recent financial crisis is "the start of a wider American decline." The broadcast includes commentary by economists Joseph Stiglitz (winner of the 2001 Nobel prize) and Irwin Stelzer, and Gillian Tett of London's Financial Times. The link here is to the youtube posting of the BBC segment, in two parts.

Facing Reality

Rosa Brooks, columnist for the Los Angeles Times, sees the U.S. economy in the same situation as The Titanic bearing down on the iceberg (Obama's, and Our, Iceberg). She faults both McCain and Obama for underestimating the seriousness of the economic situation and the long term prospects for recovery from the crisis. Addressing the October 7 debate, she writes:

And when asked by Brokaw if the economy will get "much worse before it gets better," Obama's response was quick: "No. I'm confident about the American economy."

Really? I'm not.

The main problem, as I see it, is the inability or refusal of our political leaders to recognize what all this means for the United States and for its citizens. We have reached the end of a long period of prosperity--but it was a prosperity built on debt. The current crisis signals the end of the line. As Rosa Brooks astutely points out, nobody "yet" knows how to solve these problems. But the first step in solving a problem is recognizing it. Only then can we begin to fix it.

(Thanks to Vivian Deno for sending this column to me).

A Power That May Not Stay So Super

New York Times economist David Leonhardt, who is one of the few economists to raise alarms about the long-term structural problems of the U.S. economy, had a column on Oct. 11 that compares the decline of the British empire to the current situation of the U.S. His story raises many of the issues I address in The End of the American Century, including the long-term growth of deficits, debts and excessive consumption, as well as the pressing needs for spending on infrastructure, health, Social Security and Medicare.

Is the bartender finally presenting us the bill?

Washington Post columnist Eugene Robinson has a column today in the Indianapolis Star entitled "A Rude awakening from the American dream." He, like most of us, is bewildered by the economic upheavals and wonders if this means that the U.S. will become poorer and if the "next generation of Americans [will] lead lives of less affluence and comfort."

"I want to know if this is some kind of financial reckoning for the way we've been living so far beyond our means. Is the bartender finally presenting us the bill for our tab?"

He worries, as we all do, that this economic crisis "may be more than just an episode."

"I'm worried that what's at stake is not just a few years of lost economic growth, but our traditional notion of the American dream."

He wants straight talk from Obama and McCain.

"Don't give me empty words about American exceptionalism. Tell me in plain language what our new place is in the world and how we're going to give our children the good life that we've enjoyed."

I second all of these sentiments by Mr. Robinson, but I fear the answers are not what he would like to hear. We do need straight talk and truthtelling from our leaders, but it will mean facing up to the reality that the U.S. place in the world will be diminished, and our children will not have the affluence that we have enjoyed--mostly on borrowed money. But a good life can be built on other things than consumerism and instant gratification.

Reality and Hope

Last spring, I delivered the annual "Last Lecture" at Butler University, in which I reflected on the challenges of remaining hopeful in the face of relentless, dismal news. The transcript of that talk appears here.

America Loses Global Economic Leadership

Over the last decade, the U.S. has lost political, military and international influence in the world; now it has lost its economic clout as well. The collapse of the financial system in the United States, the very linchpin of both the American and global economies, has evoked comments of gleeful retribution from some countries, and worrisome concern from others. But everywhere, now, there is a recognition that the U.S. economy is weak and vulnerable, and hardly a model for emulation by others. The collapse of this final pillar of U.S. global leadership is also encouraging other countries to assume a more assertive role.

Some of the sharpest criticism, and even sarcasm, came from the usual suspects. Venezuela’s Hugo Chavez mocked Lehman Brothers

“They were always producing negative reports about Venezuela. . . .They forgot about themselves ... and 'boom!' they were bankrupt." (Toronto Star, 9/16/08)

and then skipped the opening of the UN General Assembly to visit China instead, saying that Beijing was now much more relevant than New York.

At a meeting of the Nonaligned Movement in Tehran, Iranian President Mahmoud Ahmadinejad proclaimed that

“the big powers are going down. . . .They have come to the end of their power, and the world is on the verge of entering a new promising era.” (NYT 7/30/08).

But even more moderate leaders have echoed such sentiments. The president of Argentina, Christina Fernandez de Kirchner declared that

“We are witnessing the First World, which at one point had been painted as a mecca we should strive to reach, popping like a bubble.” (NYT 10/3/08)

In Latin America, according to the New York Times (10/3/08), governments “have been working for the past decade to reduce their dependence on the American economy,” have “diversified trade with the rest of the world,” and have set aside funds “for times when international conditions turn sour.”

In Moscow, both former President (now Premier) Putin and his successor, Dmitri Medvedev, have been flexing Russia’s diplomatic and military muscles for several years. The Kremlin has repeatedly rejected U.S. global dominance in a “unipolar” world, and with its landmark conflict with Georgia in August, asserted its own “privileged” sphere of influence in the world, “just like other countries in the world.”(NYT 8/31/08). With the U.S. economic crisis, Medvedev, like Kirchner, has called into question even U.S. economic leadership. He asserted last week that U.S. global economic leadership was drawing to a close. “The times when one economy and one country dominated are gone for good.” (NYT 10/3/08).

While the U.S. financial crisis has accelerated these moves away from the U.S. economy, the trend had begun years before, and is an integral part of the decline of U.S global influence more generally. Surveys in recent years by the Pew Global Attitudes Project found surprisingly little support in other countries for “the American ways of doing business.” Antipathy to the U.S. business model is particularly widespread and strong in Latin America and western Europe. In the 2007 Pew survey, in only a third of the 46 countries surveyed did a majority of respondents like the American ways of doing business. Most of those were in Africa.

For most of the postwar era, the United States has been both a political and economic model for countries and peoples around the world. This began to wane in recent years, especially in the face of the belligerent and unilateralist policies of the Bush administration. The financial collapse of the U.S. is one more nail in the coffin of U.S. supremacy and global dominance.

The Book is Out!

My book, The End of the American Century, has been published! It is available now from the publisher (Rowman & Littlefield) and online booksellers (see links above) and should soon be in bookstores as well.

U.S. Economic Future Looks Bleak, Even With Bailout

A slightly revised version of my previous blog ("This sucker could go down") has been published in The Indianapolis Star (9/30/08), the day after the biggest stock market decline in U.S. history.