United States’ Economic Future – April 15, 2012

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With the demise of the Soviet Union many international affairs analysts had predicted that the 21st century would be dominated by one superpower: the United States. Such Panglossian ideas have in the past few years been tempered by views embracing the opposite end of the spectrum, namely that the US is in decline and its supremacy will be increasingly challenged by emerging giants such as China, Brazil and India. This report points to some important writings on the US’ economic prospects which might be useful in evaluating future trends. John Lloyd in a recent issue of the Financial Times has reviewed three books written this year by American authors which have portrayed the future of the US in unflattering terms. According to Lloyd, America has been described in one book as an “enervated, impoverished, introverted dwarf of an ex super power.” Robert Kagan one of the three authors in his book The World America Made believes that American decline is over-hyped but accepts that if it is true, than the vacuum will be both abhorrent and unfillable. Zbigniew Brzezinski, National Security Advisor to Carter, is surer of decline and also thinks it will be a disaster if the world is shorn of a sheriff. Lloyd states that Brzezinski admonishes the US to “shape up its fat lazy state and do what only it can: police, regulate and save the world.” The third writer, Ian Bremmer described by the reviewer as a “prodigy in the US global commentariat” is surest of decline. He more or less claims that the US’ days as a superpower are over and foresees a “G-Zero” world with the G-7 discarded and the G-20 too big for coherence or decisive action. One way to forge a new global compact would be for the US and China to share power and thus create a “Pax SinoAmericana, a G-2.” But Bremmer does not hold much hope for this eventuality emerging because, “China and the US both have too many complex problems: the latter will struggle to retain the greatness it achieved, the former will refuse to have global greatness thrust upon it.” Bremmer concludes that America must accept limits on its budget and on its global power. A G-Zero world is too dangerous to tolerate. There is no alternative. America must remake itself to remain “indispensable for the world that comes next.” Some Europeans and others may find the implicit exceptionalism in Bremmer’s conclusion tiresomely irritating, but the reviewer opines that it is hard to imagine a world without the US, in which a relatively liberal order is maintained. So the upshot of this important debate revolves around the question: can the United States remake itself? Is the glass half empty (and becoming emptier) or is it half full and going in the other direction? Two trends almost certainly inspire hope about continued American dominance and relevance: its unrivalled penchant for innovation in numerous fields. For example in our cyber age of the iPad, iPhone and other dazzling electronic inventions the US is the leader of the pack. US exports are projected to rise appreciably. Equally if not more importantly, the reversal of fortune in America’s energy supplies in recent years hold a promise of abundant and cheap fuel. According to columnist Jad Mouawad writing in the New York Times, it could have profound effects on what people drive, domestic manufacturing and America’s foreign policy. It is likely, given present trends that the US will shed its reliance on Middle Eastern oil partly by turning to domestic resources and partly by sourcing its imports from non- Middle Eastern countries. James Brick, an energy analyst with the research firm Wood Mackenzie recently reported that by 2030 the United States could end up exporting 500 million tons of coal a year, 3.2 billion cubic feet of natural gas a day and 2.5 million barrels a day of oil products. Another influential book Need Speed and Greed: How the New Rules of Innovation Can Transform Businesses, Propel Nations to Greatness, and Tame the World’s Most Wicked Problems by Vijay Vaiitheeswaran has elicited favorable attention. Vaitheeswaran has critically appraised dozens of theories and stories of innovation making their rounds in conferences and magazines. Vaitheeswaran makes the cardinal point that you do not predict the future, you create it. As the global leader in unleashing innovation in many fields, the US can leverage this advantage to remain economically strong in the ensuing decades. If these forecasts are largely accurate they are indicative of a country with a reinvigorated economy. While the US’ days as the world’s sole superpower are probably numbered, but it would still retain the wherewithal to exercise significant military, political and economic clout. It is thus too early to write off the US as a has been power. “The rumors of my death are greatly exaggerated” is the response attributed to Mark Twain after he had read an obituary about himself in a US newspaper! It may well apply equally to the United States.

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