Friday, May 18, 2012

Do Other Countries Have to Be Bad For the United States to Be Great?

“ Anyone who tells you that America is in decline or that our influence has waned,” said President Barack Obama in his 2012 State of the Union address, “doesn’t know what they’re talking about.”

It was a “rah-rah America!” applause line for a president who needed to get the assembled Republicans out of their seats a few times over the course of the evening. But the line works literally, too. Whenever someone tells me that the United States is in decline, I don’t have any idea what they’re talking about.

What does it mean for the United States to be in decline? Are we talking about our geopolitical influence relative to other world powers? Our standard of living relative to other nations? Our current standard of living compared with some assumption about its appropriate rate of improvement?

Let’s flip the question: What does it mean for the United States to be on the rise? If it’s growing at a perfectly respectable 3.5 percent a year while China is growing at 8.5 percent a year, enabling China’s economy to surpass the US economy in a decade or so, does that mean the United States is in decline?

My hunch is that’s how most Americans define decline. That’s a problem. Consider a different scenario: Let’s say the United States is growing at 3 percent annually, and China’s growth slows to 4 percent. In that case, China won’t surpass the United States for decades, forestalling American “decline.”

Yet that’s a worse outcome for everybody. It means more impoverished Chinese and more impoverished Americans — who will, incidentally, be competing with those low-wage Chinese workers who still can’t afford to buy American-made goods and services. It means fewer life-improving innovations will be developed in both countries.

If American pre-eminence relies on the continued misery of Brazil, China and India, then I’m not sure that it’s worth having. Yet it seems that some Americans prefer to be the only superpower in hell than the foremost member of a more prosperous Group of 20 in heaven.

A world in which global growth slows so much that countries with three or four times our population never surpass the US’s economic output is a world in which much is going wrong. Even now, many Chinese think that 8 percent annual growth is necessary for their society to remain stable. If growth falls to 4 percent, the Chinese system could crack, with untold geopolitical and human consequences. Perhaps it would lead to a more pluralistic, open political system. But I wouldn’t bet on it. More likely, it would lead to increased nationalism, xenophobia and internal repression.

If hundreds of millions of Chinese and Indians continue to be stuck on unproductive farms or in unskilled jobs rather than being freed to develop their human capital, the rest of the world will be denied access to the endless innovations they otherwise might have developed.

Put another way, the sun may now set on the British Empire, but the average British citizen lives much better because of the medical and computer technologies developed in Britain’s former colonies. If those colonies hadn’t grown rich and strong enough to throw off the mother country’s yoke, the result would be a worse world for everyone — including the British.

So, yes, the United States has its problems. But I wouldn’t trade our problems for anyone else’s. Europe, China and Japan face immense demographic challenges. All three are aging rapidly and, for cultural and political reasons, immigration is unlikely to swell their work forces. Japan, with a median age of 44.6, is one of the oldest countries in the world. In China, the birth rate has fallen from 2.6 births per woman 30 years ago to 1.56 today.

Political challenges loom equally large. The euro area looks irredeemably flawed — perhaps even unsalvageable. It’s unclear how China’s political system will evolve as the country grows richer, or how it will survive if the rapid growth of the past few decades slows dramatically. As for India, its political system makes the euro area look like a model of farsighted governance.

Then there are the economic challenges. Brazil, China and India are becoming middle-income countries. Historically, that is a harbinger of slower growth. Ruchir Sharma, head of emerging markets at Morgan Stanley and author of the book “Breakout Nations,” says the “gold medalists of growth” all experience a similar fate.

“Japan and Korea and Taiwan, at a similar stage to where China is today in economic development, all slowed down,” he says. “It’s much easier to grow from a low base. Once your base becomes bigger, it’s much more difficult to grow.”

If Europe gets back on track, and if Brazil, China and India manage to sustain their high growth rates, then it’s true that more nations will be vying for influence on the world stage: America’s unquestioned geopolitical dominance could decline. At that point, ensuring that the values the United States has imperfectly promoted — liberal democracy, human rights, open capitalism — continue to hold sway becomes a matter of statecraft.

The problems associated with expansive global economic growth are real, but they’re problems in the context of an improving world. Conversely, if the BRICs can’t rise out of poverty, and Europe and Japan can’t right their economies, that’s a world we don’t want, with problems we may well not be able to solve. Those who yearn for a form of American pre-eminence that can only exist due to economic stagnation elsewhere really do not know what they’re talking about.

Ezra Klein is a Bloomberg View columnist.

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