Thursday, July 31, 2008
US Super despite the Travails
US Super despite the Travails
Whilst there is much talk about the upcoming Juggernaut People's Republic of China, and recession and the US currency crunch, the US is still Super despite the travails.
Browsing through an American bookstore does not lift the spirits. Books that chart the end of American supremacy, or which predict wars over finite natural resources, or study the squeezed middle-class, or which describe the catastrophic Bush presidency proliferate. The Unite states is going through a period of introspection, and the bookshelves of Boston, where I spent part of last week, are heaving with the results.
In one respect, it is hardly surprising: Iraq, Afghanistan and the rise of China. The credit crunch. The $140 per barrel oil price. The unbelievable unfairness of Bush’s tax cuts. The racism and violence that still porkmark American life. Yet the pessimism is overdone. The more I visit the US, the more I think the pundits predicting the US’ imminent economical and political decline hugely overstate their case. Rather, the next 50 years will be as dominated by the US as the last 50 have been. The US will widen its technological and scientific dominance, sustain its military hegemony, launch a period of re-industrialization and continue to define modernity both in culture and industry.
The fashionable view is that the American economy is a hollowed-out, de-industrialized shell that delivers McJobs and has only survived because of a ramped-up housing market and the willingness of foreigners to hold trillions of dollars of American depts..
China and India are set to overtake it in the foreseeable future. At best, the US will have to get used to living in a multipolar world it cannot dominate. At worst, it will have to accept, along with the West, that the new economic and political heart of the world is Asia.
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, where 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 generation.
What counts is the strength of a country’s universities, its research base, commitment to information, communications and other technologies along with a network of institutions that support new enterprise. Here, the US is far ahead.
The figures can make your head spin. Of the world’s top 100 universities, 37 are American. The US spends more money by proportion on research, 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, as are 52 of the worlds’ 100 top brands. Half the world’s new patents are registered by American companies.
This year, American exports have grown by 13 per cent, helped by the falling dollar, so that the US has reclaimed it position as the world’s top 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 has a trade deficit, but importantly, it is largely with itself.
The US will recover from the credit crunch. Four-fifths of new mortgages are underwritten by public mortgage banks, interest rates have been slashed and a bank bail-out was launched instantly. More activism is planned. There is a dynamic readiness to fix things in a tight economic corner, irrespective of ideal logy, that can only be admired.
It is a dynamism that also infects the political process. I was in the US on the day of the Indiana and North Carolina went to the polls in the Democratic primaries. The conventional wisdom is that Obama and Clinton’s fight is self-defeating and it would be better if Clinton had stood down earlier. I disagree. It has brought politics alive. Democrats are enrolling to vote in their hundreds of thousands because their vote and opinion now count. They will stay enrolled and vote in November.
There is also a great maturity about the process. It is a political argument that necessarily demands respect for your opponent because if you win, you will still need their support in November. Americans do public argument well. And it is a vital underpinning of the American success.
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 American strength. China is the only country in the world with a similar continental-scale economy and a bigger population that conceivably 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 it’s institutions change, it will always trail the US in the 21st century knowledge based economy and experience upheaval and revolution along the way.
It is the much-maligned European Union 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. It is grossly unfair society. Its road and rail systems have been neglected for decades. University admission is too expensive. It has fetishised deregulation. Money corrupts it political process. But none of those problems can’t 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 United States is, and remains, formidable. Which is just as well for all of us.
- Written by the Observer, Will Hutton.
Posted by MK at 11:06 PM
