The End of the American Century documents the interrelated dimensions of American social, economic, political and international decline, marking the end of a period of economic affluence and world dominance that began with World War II. The war on terror and the Iraq War exacerbated American domestic weakness and malaise, and its image and stature in the world community. Dynamic economic and political powers like China and the European Union are steadily challenging and eroding US global influence. This global shift will require substantial adjustments for U.S. citizens and leaders alike.
The Stanley Foundation has a useful website on Rising Powers: The New Global Reality, which notes that the global order is changing "and will be marked by many competing sources of global power." It explores the rise of the European Union, China, India, Brazil and others, and the implications for the U.S.
A Washington Post article this week (9/10/08) reports on a forthcoming U.S. intelligence agencies report that “envisions a steady decline in U.S. dominance in the coming decades.” Thomas Finger, a top analyst for the U.S. intelligence community, delivered the preview in a speech in which he saw U.S. global leadership rapidly eroding in “political, economic and arguably, cultural arenas.” The one area of continued U.S. dominance—military power—was becoming increasingly irrelevant as an asset in global power and influence.
These are all themes of The End of the American Century, so should not be terribly surprising, except for the source—the U.S. government itself—and the sweep of the conclusions. It is not just U.S. diplomatic influence that is on the wane, but political, economic, cultural and military leadership as well. The multidimensional and interrelated aspects of U.S. decline are the central theme of my book, but it is startling to hear it expressed so bluntly from the top intelligence analysts of the federal government.
The intelligence report, however, misses a key element of the declining global influence of the U.S.: its domestic weakening. Fingar’s speech saw the decline in U.S. dominance coming from exclusively global trends: globalization, climate change, resource shortages. All of these are important, of course, but the root of America’s declining global influence is here at home. Just as at the global level, the domestic decay is multidimensional—it is political, social and (especially) economic; and affects education, health care, infrastructure, and competitiveness.
The United States has become the world’s largest debtor, and the governments of other countries are increasingly worried about the scope and scale of U.S. debt and fiscal weaknesses. Even the International Monetary Fund, normally concerned about debt and insolvency in Third World countries, has warned that the continuing large budget deficits of the U.S pose “a significant threat for the rest of the world.” Other countries are beginning to turn away from the United States, both for investments and for global economic leadership, and are increasingly abandoning the dollar as the favored international currency. This is one reason for the sharp and steady decline of the dollar compared to the euro and other international currencies.
In many other respects, as well, the United States is no longer seen as the standard for emulation by other countries. The U.S. has among the highest rates of both poverty and inequality in the developed world. This poverty and inequality contribute to highly uneven access to health care, so the U.S. ranks near the bottom of developed countries in most measures of health and medical care. Even our vaunted democracy, the “beacon on the hill” for centuries, is now so dominated by money and special interests that it is rarely cited by other countries as a model for political development. Global public opinion polls in the past showed foreign populations skeptical and wary of the U.S. government; increasingly now they reveal negativity toward the U.S. population, and even to U.S. ideals. All aspects of American “soft power” are withering away.
The Fingar report, like Fareed Zakaria’s new book The Post-American World, sees this global shift coming because of “the rise of the rest”—global powerhouses like China, India and Brazil that increasingly cut into the U.S. lead on the world stage. Zakaria asserts, indeed, that the shift is not about the decline of America, and writes about the many elements of this country’s continuing strength. Solidly within the U.S. establishment, both of these analyses ignore the sand shifting beneath their own feet. Only by confronting and addressing our own domestic weaknesses and problems can we begin to solve our international ones.
On Sunday (9/7/08) the New York Times carried a full two-page advertisement from the Peter G. Peterson Foundation, an appeal “to the presidential candidates at the American people” to take seriously “America’s $53 trillion hole,” which is the sum total of the country’s current liabilities and unfunded entitlement promises. This translates into $455,000 per U.S. household. The bulk of these unfunded liabilities ($41 trillion) are for Social Security and Medicare. But complicating these enormous debts and obligations, the ad points out, are “out of-control health care costs” an unprecedented trade deficit, and a personal savings rate that is near zero for the first time since the Great Depression. This grim fiscal picture threatens "severe economic hardship for our nation and its citizens, especially the young and future generations."
These were not end-of-times prophesies by some crackpot millionaire or eastern mystic, but a sober economic accounting by Peter Peterson--a former (Republican) Secretary of Commerce, a distinguished economist, and the chairman of the Peterson Institute for International Economics, a well-respected and mainstream economic think tank on Massachusetts Avenue in Washington, D.C. The appeal was also signed by three former U.S. Senators, two former U.S. Treasury Secretaries (George Shultz and Paul O’Neill) the former Chairman of the Federal Reserve (Paul Volcker) and the former Director of the Congressional Budget Office (Alice Rivlin).
Peterson himself first called attention to the multiple dimensions of U.S. debt and deficits in his 2004 book Running on Empty, which was central to the casting of my own book on the even broader dimensions of U.S. decline, The End of the American Century (appearing next month). In that book, I see the U.S. fading as an economic and political superpower, as a model for other countries, and as the preeminent factor in global politics. The core of this decline is economic and social: the multiple levels and dimensions of U.S. debt; the declining standard of living for most Americans; and the growing levels of poverty and inequality. The U.S. government and American citizens have been living beyond their means for at least two decades, and depending on borrowed money (much of it from abroad) to sustain this binge. This can not continue forever, of course, and the rubber is finally hitting the road.
The United States has had periods of debt and economic decline in the past, of course, and has always managed to pull back into economic growth and solvency. What is different this time is the convergence of so many dimensions of debt, deficit, and decline, all at the same time. The U.S. federal debt, at some $10 trillion, has grown from about a third of GDP in the 1970s to over two-thirds now. Next year’s budget deficit will add almost $500 billion to that debt. The U.S. trade deficit has reached new records in recent years, even as a percentage of GDP. Government profligacy is matched by consumers: the household savings rate in the U.S. has been declining for two decades, is the lowest among all developed countries, and in 2005 fell below zero for the first time ever. Credit card and mortgage debt are both near record levels, as are bankruptcies and mortgage foreclosures. The whole financial system is under stress, and not only because of Fannie Mae and Freddie Mac. Meanwhile, the value of the dollar is at a record low against the euro, and the price of oil is a record high.
It is difficult to see how the country can reverse all these trends. As Peterson points out in his New York Times appeal, to “grow out” of this crisis “would require real economic growth in double digits for the next several decades.” Even in the best of times, the U.S. economy grows only about 3% a year. Sustained double digit growth is impossible, especially given the new environment of high energy prices, competition from China, India, and others, and the declining willingness of other countries to let the U.S. set global rules. The United States is in for tough times.
Our leaders, and the mass media, need to address and confront these issues. This will be a difficult task for whomever is elected President, because it will require belt-tightening and reduced expectations from all of us. Both Obama and McCain are promising recovery and prosperity. The reality is likely to be quite different. The new president will have to make many tough decisions. It will require wisdom and patience from both leaders and citizens to navigate these difficult shoals.
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