Thursday, February 24, 2011

Whither America?

Economic crises offer important opportunities to examine the true state of our union—to really take a look at where America stands in the global scheme of things. It is not something Americans are good at—taking lessons from other countries or taking a measured view of our own country and the direction in which we are headed. Indeed, to suggest that the United States is anything but the greatest country in the history of the universe approaches heresy in many corners (see Fox News).

America is the bestest, most awesome country in the history of humankind, we are told at an early age, and we grow up repeating such aphorisms without really reflecting on what it is that makes America and its people so great. Pressed to support such claims, an American patriot will tell you that our country has made the world safe for democracy, has fought for human rights around the globe, and that many countries owe their freedoms and prosperity to American generosity. America is also an unparalleled land of opportunity and wealth, where a person can rise from nothing to become a Bill Gates or Mark Zuckerberg. Quite simply, anything is possible in this country of ours. It is where people who want a better life for their children seek to immigrate—where a smart, ambitious kid can rise to the top if they only apply a little elbow grease.

This patriotic arms race over who loves and respects America the most—measured not just in statements to this effect but also in flagpins—is familiar territory for right-wingers, but it is not their exclusive province. Many on the Left, accused of insufficient patriotism, have endeavored to compete in the game of Who is the Greatest Patriot with their own talk of God and Country, accompanied by prodigious displays of the Old Glory and heart-warming stories of immigrant success and Horatio Alger-like stories of the poor boy-made-good (see Barack Obama, Bill Clinton).

Others on the Left are guilty of the opposite silliness, contrarily claiming to hate America. In their view, America is a tacky, consumerist, war-mongering country full of fat, ignorant, greedy fools. It is, quite possibly, the worst country in the history of the universe, and humankind and all other species would be better off if it were simply wiped off the planet.

I take a radical middle position—namely, that it is unhelpful to shout over whether America is the “best” or “worst” country in the history of the universe. Such talk is no more elevated than playground squabbles over who has the prettiest/ugliest/sluttiest mother. We are better advised to take a measured inventory of our faults so that we can devise realistic solutions to our problems. This requires a clear-eyed look at where the U.S. stands relative to other countries as well as itself in days gone past.

Perhaps the best, although admittedly crude, indicator of America’s status on the global stage is its relative economic size. Here, there is a noticeable downward trend: the U.S. share of world economy slid from 35 percent in early postwar period to a little over 20 percent today.

Let’s break this down, beginning with the industrial sector. Perhaps surprisingly, the U.S. is still the world’s biggest manufacturer, but America relinquishes this position to China in 2011. The American steel sector has been in decline for decades, and is now a pale shadow of what it once was. The bulk of U.S. textile sector has been outsourced to countries with lower labor costs, and the Big Three carmakers have been losing world market share since the 1980s. We lost some 5.5 million or around one-third of our manufacturing jobs since 2000.

But are these not sectors of the past? After all, job losses in heavy industry are due not only to outsourcing, but also to productivity increases—suggesting that our companies remain profitable and robust, even if they employ fewer people. Perhaps job losses in the old economy are made up for with an increase in the number of high-skilled jobs of the “new” economy of computers and other high-tech goods. Not so, according to former Intel CEU Mark Rooney, who observes that the U.S. has fewer computer manufacturing jobs now than in 1975.

As noted by Financial Analyst Mark Riddix,

“Most of our electronics are developed by foreign companies. Philips (PHG), Toshiba (TOSBF.PK), Sony (SNE), Hitachi (HIT), Samsung (SSNKF.PK) and Sharp (SHCAY.PK) dominate the US market in terms of television sales. Who owns a Zenith anymore? Are Magnavox and RCA American companies? No, they were sold off to foreign companies that use the American brand names. Popular electronics items like the iPod (AAPL) are mostly manufactured overseas and then sold in the US. We are also losing more of the US automobile market. Toyota (TM) just surpassed General Motors GM) to become number 1 in global sales. Even clothing and apparel sales in the US are dominated by foreign countries. Over 90 percent of clothing and shoes sold in the United States are made in foreign countries.”

America’s leading export to China is literally “scrap and trash.”

With its manufacturing sector in sharp decline, the U.S. has shifted to a service-based economy. Now, fully eighty percent of our workforce is employed in services (often low-paid, non-union jobs that are insufficient for supporting a family), while less than ten percent is employed in manufacturing.

So it seems that our economy now depends on the services sector. But competitiveness in the global services sector hinges on state-of-the-art communications infrastructure, and America has notoriously slow internet speeds and spotty penetration. According to 2009 data, the U.S. ranked 28th in the world in terms of average download speed; South Korea had quadruple the speed of the U.S., and Japan had triple. The supposedly ossified “Old Europe” had on average twice the download speed of the U.S.; we even lag behind the countries of the former East bloc such as Ukraine. To make matters worse, the U.S. had only the 18th highest broadband penetration worldwide, with 58 percent of households online (trailing South Korea with 97 percent, Singapore 90 percent, and Hong Kong 87).

What of America's relative standard of living?

Here too, the U.S. lags behind. Although the standard of living has risen for several continental European countries over the last few decades, the real median wage in America has barely moved, while the rich have made massive gains. In fact, two-thirds of the growth in earnings over the last decade went to the top one percent of income-earners. A recent article in Mother Jones displays this graphically:

America's growing inequality has been accompanied by a decline in social mobility (exactly the opposite of what Ayn Rand acolytes would expect). No longer is the U.S. the storied land of opportunity; now more than ever, your lifetime earnings are determined by that of your parents. If your parents were rich, chances are that you will be well-off as well; likewise, if your parents were poor, odds are that you will also be poor. Researchers at LSE conducted an analysis of relative social mobility in a number of European and North American countries and concluded that social mobility is actually higher in Canada and continental European countries (due in part to low-cost or free higher education, the principal means of upward mobility). The report observes that “the idea of the US as ‘the land of opportunity’ persists; and clearly seems misplaced.”

And what of other developmental indicators?

Average height is known to be a rough proxy for a country’s level of socioeconomic development. Whereas European Americans were once the tallest people in the world, they stopped growing in the second half of the twentieth century, whereas northern European nations continued to grow and are now significantly taller than their American counterparts.

Once among the longest-lived, today the American life expectancy is ranked 36th in the world (with Canada at 11th), meanwhile, American ranks 33rd on infant mortality, which is, incidentally, one of the most reliable predictors of state failure.

Our students’ math and reading scores are average among OECD countries, with many Asian and European countries leaving the U.S. in the dust. The U.S. is also losing its edge in basic and applied sciences, with a declining proportion of peer-reviewed articles in scientific journals, industrial patents, domestic expenditure on research and development, and full-time researchers in the sciences.

What of America’s highly touted freedoms? In 2010, the U.S. ranked 20th among surveyed countries for freedom on the press. Meanwhile, in 2005 the U.S. scored 17th among 58 surveyed countries in terms of gender equity.

It is clear that our position of global leadership and relative socioeconomic development, while still strong, have been eroding over time. Amazingly, our representatives in Congress appear determined to speed the process of American deindustrialization by continuing to give incentives to companies to offshore American jobs, making deep cuts in programs for research and development, slashing student grants and job training programs, and denying critical funding to shore up America’s infrastructure.

Even our Democratic president has gotten into the spirit, promising to cut entitlements such as Medicare and Social Security while extending Bush tax-cuts to the wealthy. Cash-strapped states, meanwhile, are laying off public employees (including police officers, teachers, social workers, and firemen) in droves, cutting funding to education and even reducing the number of schooldays per year. States and counties across America have elected to tear up their asphalt roads to save on maintenance costs.

Is this how we plan to compete in the next century--by turning America into a banana republic with gated communities surrounded by a massive and growing urban and suburban underclass? It is naive to imagine that this will not have major negative repercussions on the future socioeconomic well-being of our nation.

Simply, private investment will not build a high-speed rail system or repair our crumbling infrastructure, it will not provide quality education for millions of low-income children, provide the economic incentives that will give America’s high-tech sector a competitive advantage against Japan, China, India and Brazil. The private sector will not provide health care for poor old and disabled people, nor will it ensure the safety of our food, our cars, our drinking water, or the air that we breathe. It will not prevent unscrupulous insurance companies and lenders from tricking unsophisticated consumers, requiring a taxpayer-funded bailout. Nor will the private sector protect our financial system from financial “weapons of mass destruction” or the Bernie Madoffs of the world.

It is time to change our policy frame from one in which government is an inefficient drain on resources to one in which the government is the guardian of public interest, allowing us to solve collective action problems and provide basic social security for individuals during times of need. If we do not alter the way we view government, America is surely headed for inexorable decline.