October 8, 2011
AMERICAN DECLINE ALWAYS SINKS OUR RIVAL:The Decline and Fall of America's Decline and Fall (Joseph S. Nye, 2011-10-06, Project Syndicate)
Americans have a long history of incorrectly estimating their power. In the 1950's and 1960's, after Sputnik, many thought that the Soviets might get the better of America; in the 1980's, it was the Japanese. Now it is the Chinese. But, with America's debt on a path to equaling its national income in a decade, and a fumbling political system that cannot seem to address the country's fundamental challenges, are the "declinists" finally right?
Much will depend on the uncertainties - often underestimated - brought about by future political change in China. Economic growth will bring China closer to the US in power resources, but that doesn't necessarily mean that China will surpass the US as the most powerful country.
China's GDP will almost certainly surpass that of the US within a decade, owing to the size of its population and its impressive economic-growth rate. But, measured by per capita income, China will not equal the US for decades, if then.
Moreover, even if China suffers no major domestic political setback, many current projections are based simply on GDP growth. They ignore US military and soft-power advantages, as well as China's geopolitical disadvantages. As Japan, India, and others try to balance Chinese power, they welcome an American presence. It is as if Mexico and Canada sought a Chinese alliance to balance the US in North America.
As for absolute decline, the US has very real problems, but the American economy remains highly productive. America remains first in total R&D expenditure, first in university rankings, first in Nobel prizes, and first on indices of entrepreneurship. According to the World Economic Forum, which released its annual report on economic competitiveness last month, the US is the fifth most competitive economy in the world (behind the small economies of Switzerland, Sweden, Finland, and Singapore). China ranks only 26th.
Moreover, the US remains at the forefront of such cutting-edge technologies as biotech and nanotechnology.
Pretty much everyone you know has higher debt than annual income, otherwise they wouldn't have a degree (or two), a home and educated children. The main difference between them and America is that they are going to die fairly soon and their debts will need to have been settled in some fashion in short in order. America isn't eternal, but it isn't going anywhere anytime soon. Nor do its debts need to be settled imminently.
And if that doesn't give us some perspective on our debt, consider this factoid, Bernie Sanders says six bank companies have assets equaling 60 percent of U.S. GDP: True (Politifact, 10/04/11)
As the numbers for debt and GDP converge (temporarily), consider that the assets of just six banks would pay off 60% of that debt if we were closing up shop.Here are the top six and their total assets:
1. Bank of America Corp., $2.264 trillion2. J.P. Morgan Chase & Co., $2.246 trillion3. Citigroup Inc., $1.957 trillion
4. Wells Fargo & Co., $1.260 trillion
5. Goldman Sachs Group Inc., $937 billion
6. Morgan Stanley, $831 billion
Together, the top six companies' assets were $9.495 trillion.
For the second part of the equation -- gross domestic product -- we turned to the U.S. Commerce Department's Bureau of Economic Analysis.
Though the time spans don't line up perfectly, we decided to use the GDP figure for 2010, the most recent full year. That figure is $14.527 trillion.
Dividing these top banks' assets by the national GDP produces a result of 65 percent -- which is actually a slightly larger percentage than Sanders had indicated, but certainly in the ballpark.
Posted by Orrin Judd at October 8, 2011 10:35 AM
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