"Global Trends 2025" and "The End of the American Century" Radio Interview

I was interviewed about the National Intelligence Council's report Global Trends 2025 and my book, The End of the American Century, on WIBC Radio's "Indianapolis Tonight" with Steve Simpson. The interview, broadcast on November 26, can be heard on the "Indianapolis Tonight" audio archives.

Fukuyama: From "The End of History" to "The Fall of America"

Francis Fukuyama, Professor at the Johns Hopkins School of Advanced International Studies (my own alma mater), had a high profile essay in Newsweek in October, boldly titled “The Fall of America, Inc.” Professor Fukuyama addresses the declining global appeal of America’s “brand.” Two “fundamentally American ideas have dominated global thinking since the early 1980s,” he contends. The first of these was “a certain vision of capitalism” accompanied by “pared-back government.” The second idea was “America as a promoter of liberal democracy around the world.”

Fukuyama sees both of these ideas now tarnished and discredited. The U.S. economy “has gone off the rails and threatens to drag the rest of the world down with it. Even worse,

“the culprit is the American model itself: under the mantra of less government, Washington failed to adequately regulate the financial sector, and allowed it to do tremendous harm to the rest of society.”

The idea of American democracy was “tarnished even earlier,” with the freedom agenda of the Iraq War widely perceived around the world as “an excuse for furthering U.S. hegemony.”

In my book The End of the American Century, I make similar arguments about the decline of brand U.S, but I show that this decline started long before the recent financial collapse, and even before the Iraq War. Global public opinion surveys in recent years have shown little enthusiasm for “American-style democracy” and even less support for the American ways of doing business. And while Fukuyama uses the term “brand” as a metaphor, there actually have been marketing surveys of the popularity of “nation brands” among consumers around the world. In one such study, the United States ranked eleventh out of twenty-five countries.

Fukuyama’s Newsweek essay is interesting both for its perceptive insights, but also because of who he is and what he has written and argued in the past. He gained national prominence in 1989 with the publication of an influential and controversial article titled “The End of History?” In that essay, and a following book, he argued that the collapse of European communism and the end of the Cold War marked “the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.” Later he became a key figure in the neoconservative movement and its Project for the New American Century which, among other initiatives, strongly encouraged the removal from power of Saddam Hussein, even before September 11. By 2002, though, he had turned away from the neoconservatives, and became critical of the Bush administration and the Iraq War.

Much has changed in the world since the Western triumphalism following the collapse of communism. It has become painfully clear, for one, that many people around the world—perhaps even most people—are not so convinced that Western liberal democracy is—or should be—“the final form of human government.” Even so, it is quite startling to see one of the intellectual fathers of the neoconservative movement so frankly recognizing the failure of the American model to take hold in the rest of the world. As Fukuyama concludes his essay,

“the ultimate test for the American model will be its capacity to reinvent itself once again. Good branding is not, to quote a presidential candidate, a matter of putting lipstick on a pig. It’s about having the right product to sell in the first place. American democracy has its work cut out for it.”

The End of Affluence

Increasingly, even economists and bankers are coming to understand that we are in the midst of a global economic shift. The core of this change is the inevitable decline in American consumption, which for a generation has been fueled by borrowing and debt. The bill now has to be paid, so the trend of steadily growing U.S. affluence can not continue. Because consumer spending constitutes almost three-quarters of the U.S. economy, a decline in consumption will cause a general and long-term economic decline in this country. A slowdown in the world’s biggest economy will, of course, affect the whole globe.

The centrality and toxic nature of U.S. consumerism is highlighted in an op-ed piece in this week’s New York Times by Stanley Roach entitled “Dying of Consumption.” “It’s game over for the American consumer,” writes Roach, who is the chairman of Morgan Stanley Asia. His argument and many of the statistics he uses are similar to those I marshal in my chapter on “The End of Affluence” in The End of the American Century. Roach points out that for over a decade, “vigorous growth in American consumption has consistently outstripped subpar gains in household incomes.” The consequence has been a long-term decline in household savings and a huge increase in household debt. From 1950 to 1985, American consumers saved roughly 9% of their disposable income. Beginning in the 1990s, that rate steadily declined, dipping below zero in 2005—for the first time since the Depression. At the same time, consumer and mortgage debts rose from 77% of disposable income in 1990 to a record 127% in 2008.

According to Roach, this

“decade of excess consumption pushed consumer spending in the United States up to 72 percent of gross domestic product in 2007, a record for any large economy in the modern history of the world. With such a huge portion of the economy now shrinking, a deep and protracted recession can hardly be ruled out.”

The problem is that the whole American economy is built on consumption. The U.S. doesn’t actually produce much any more. Manufacturing has steadily declined as the linchpin of the American economy, and now constitutes less than a fifth of GDP. The imminent bankruptcy of the U.S. auto companies is simply another (albeit big) element of this downward trend. Meanwhile financial services—primarily banks and mortgage companies—have steadily grown, mostly by providing loans to consumers to finance purchases their incomes will not allow. So when both consumption and financial services decline, on top of the previous decline in manufacturing production, there is not much left. It will take a long time to rebuild the U.S. economy. There will be much belt-tightening for the middle class, growing unemployment, and more suffering by the poor.

Roach is opposed to “tax cuts aimed at increasing already excessive consumption.” I make a similar argument in my previous post on “Tax Cuts Will Make Things Worse.” Such cuts will decrease federal revenues, which are desperately needed to allay the new and mushrooming costs of unemployment insurance and mortgage foreclosures, not to mention the preexisting problems of health care, education, the environment, Social Security, and Medicare, all of which have been under funded for a generation.

Meanwhile, both the Bush administration and the incoming Obama team seem to feel that the best way to alleviate the economic crisis is to promote even more deficit spending, by both government and consumers. The federal deficit, already at record high levels, will balloon even higher with a trillion dollars or more of bailout money. Much of this money is being thrown at banks, mortgage companies and financial institutions to enable them to lend even more money to consumers who are already deeply in debt. This may (possibly) help stimulate the economy in the short run. But in the long run, we all have to stop spending and buying so much, and learn to save and invest. As Roach sums it up:

"Crises are the ultimate in painful learning experiences. The United States cannot afford to squander this opportunity. Runaway consumption must now give way to a renewal of savings and investment. That’s the best hope for economic recovery and for America’s longer-term economic prosperity.”

This shift, from consumption to savings, will be wrenching and painful for America, and for much of the rest of the world. As Britain’s Economist magazine notes (in "The End of the Affair"), America’s “return to thrift” presages a recession that will be both “long and deep.” It marks a fundamental shift in global economics, and in America’s role in the world.

Obama Set To Rebuild Our International Reputation

A revised version of my 11/13 post on "America's New Face to the World" was published last Sunday in the Indianapolis Star with the title "Obama Set to Rebuild Our International Reputation."

U.S. Intelligence Report Predicts Declining U.S. Influence

The National Intelligence Council has released its report Global Trends 2025: A Transformed World which forecasts that the relative strength of the U.S. "even in the military realm--will decline and U.S. leverage will become more constrained."

I posted a blog here in September about the preview of this report delivered in a speech by C. Thomas Fingar, the Chairman of the N.I.C. The full 120-page report, like Fingar's earlier remarks, sees the U.S. remaining the single most powerful global actor, but with reduced influence and leverage in the face of the growing clout of China, India, Russia and other countries.

The current report, however, seems less sweeping in its assessment of U.S. decline than Fingar made earlier. In September, he spoke of U.S. leadership eroding "at an accelerating pace" in "political, economic and arguably, cultural arenas." The Global Trends report does not have such language, and focuses more on the rise of other countries than on the decline of the U.S.

The report does, however, call attention to the importance of leadership in managing this transition to a transformed world. "Leadership matters," the first-page summary says. "No trends are immutable," and "timely and well-informed intervention can decrease the likelihood and severity of negative developments and increase the likelihood of positive ones."

Wise leadership, in Washington and elsewhere, is crucial because the scale of global changes are immense. "The international system...will be almost unrecognizable by 2025 owing to the rise of emerging powers, a globalizing economy, and historic transfer of relative wealth and economic power from West to East, and the growing influence of nonstate actors." Indeed, this transfer of global wealth and economic power from West to East "is without precedent in modern history."

The report forecasts a more diffuse distribution of global power, the transformation of current international organizations (like the U.N.), the growing influence of nonstate actors (especially NGOs--non governmental organizations), and "a more complex international system."

In this system, the U.S. will be a "less dominant power" with "less room for the US to call the shots without the support of strong partnerships." Even in the military realm, changes in science and technology and the rise of non-state actors "will construct US freedom of action."

These arguments are similar to those I raise in the last chapter of The End of the American Century, entitled "America and the World After the American Century." A key difference between my book and Global Trends is that most of my book is about trends that have already occurred. Only my last chapter projects into the future, as the NIC report does. In my view, the decline of the U.S. is a fait accompli. As I write on page 1 of my book:

"In the past decade, and particularly since September 11, every aspect of this American predominance has begun to wane. The U.S. economy is riddled with debt [this was written well before the current financial collapse] and unsustainable obligations--by both governments and households--presaging at least long-term economic decline if not general collapse. The educational system, once considered the world's best, now ranks near the bottom among developed countries, and a sizable portion of U.S. citizens is now functionally illiterate. American corporations, once models of dynamism, innovation and efficiency, are hampered by bureaucracy, corruption, and bloated executive payrolls, and few are generating either innovation or growth. Even science is marginalized and beleaguered under the gun of politics qnd religion. While American consumer goods and popular culture remain fashionable in much of the world, there is at the same time increasing resistance in many countries to the erosion of national culture and traditions in the face of U.S.-led globalization."

So a good deal of the decline of U.S. global influence is due to changes within the U.S.--changes that have been accelerating for the last two decades. These internal developments are as much responsible for "global trends" as are the dynamic changes elsewhere in the world.

"Rise of the Rest" Youtube Video

A cute and striking 5-minute Youtube video, "The Rise of the Rest," is produced by the Futures Group, and based on the phrase and data from Fareed Zakaria's The Post-American World.

The video illustrates some of the global trends favoring the emergence of China, India and other countries as major economic and political forces in the world. Much of this information is also in my own book The End of the American Century, though there are two important differences in my approach and the one in this video.

First, the video often uses projections of trends into the next decade or two--for example seeing the Chinese economy eventually surpassing that of the U.S. While this may turn out to be true, projections into the future are, of course, highly speculative. The recent financial collapse in the U.S., which has become a global crisis as well, illustrates how quickly such projections can turn sour. My book mostly uses trend data up to the present, to demonstrate changes that have already taken place.

A second difference (between this video and me; and between Zakaria and me) is that I focus much more attention on the declining fortunes of the U.S. Zakaria says his book is not about the decline of the U.S., but about the "rise of the rest." My book is about both. Over the last two decades, the U.S. has declined in many ways--the economy, education, health care, infrastructure, equality, and others. It is the combination of U.S. decline and the rise of the rest that is so quickly and dramatically changing the face of the globe.

David Mason Interview on Canadian Television

Television interview about The End of the American Century and the global financial crisis; Thursday on Canada's CTV Newsnet television, viewable here.