America decline?

[Freeloader]

I was reading "Theodore Rex" - the autobiography of Theodore Roosevelt, and came across this passage in the book

"For several years, both he (Roosevelt) and the world had been aware that the United States was the most energetic of nations. She had long ben the most richly endowed. The first year of the new century found her worth twenty five billion more than her greatest rival, Great Britain, with a GNP twice that or Germany or Russia. The United States was so enriched with goods that she as the most self sustaining nation in history."

then it continues

"Wall Street was awash with with foreign capital. It was estimated that America could buy the entire United Kingdom, and settle their national debt. New York City seemed destined to replace London as the world's financial center"

The interesting note is that it was us, the United States, who surpassed and replaced the previous world Superpower, England. One hundred years later and some of the same elements can be slowly seen emerging from the United States-China relations as we go further and further into debt, while they (To be fair, Japan lends us a significant amount of money too) become our personal bank. Within 50 years, the takeover was complete and we we clearly overtook England.

Are we witnessing the beginnings of the same thing, this time our own replacement? This is a common question and discussion to be sure, but I found the quotes interesting and the timing eerily familiar. Events like the decision to discontinue the space race, watching our national debt grow and grow, and falling behind for renewable energy are worrisome.

Now, England obviously allowed themselves to fall from the top gracefully and did not go to war with us over the issue. Do you believe we would, in the event it did happen, be as willing to simply "step aside" per se? What steps must we take first and foremost in order to stall this slight faltering we are going through? What areas must we resolve or strengthen first in order to preserve democracy throughout the world and remain the world Superpower? I realize China has a lot of obstacles to work through themselves, but we did too in 1900's (Civil Rights movement, poverty to name a few) and that didn't stop us on the world stage.

Where would you start if you could choose?

[JAD_333]

Are we witnessing the beginnings of the same thing, this time our own replacement?

Not necessarily. If history is our guide, a new superpower will replace the US someday. But not for some time. If statistics are a guide, economically the US is already #2, behind the EU, but we know very well that this is aggregation of 28 otherwise sovereign states using a common currency.

GDP in trillions $$
— European Union 18,387,785[4]
1 United States 14,441,425
2 Japan 4,910,692
3 China 4,327,448h
4 Germany 3,673,105

China is still a distant 3rd to the US. Japan which grew by leaps and bounds throughout the 1960-70s slowed percentage wise, but still exceeds China. Both were/are heavily dependent on US markets.

Percentage growth is always high for a country emerging from undeveloped status because it is starting from a low point. That is China is today.

Thus, it would take 8% per percent in dollar growth in China's economy to equal 2-3 percent for the US (2008 figures).

Even if China grew at the rate of 25% of its 2008 GDP every year it would take 10 years for it to catch up with the US. That is, if the US stood still.

China is not the US's banker it would seem to be. It holds around $800 billion in US debt. Japan is close behind. Total US debt stands at around $10
trillion, or 10 times what China holds.

US debt is estimated to grow to 101% of GDP by 2011 or $14 trillion before decreasing. Our economic woes are to blame, not China. When our financial institutions are stabilized, stimulus spending is no longer needed, and industry regains it previous pace, then we'll see better how China stacks up to the US.

Now, England obviously allowed themselves to fall from the top gracefully and did not go to war with us over the issue. Do you believe we would, in the event it did happen, be as willing to simply "step aside" per se?

Americans are proud of being number 1 in the world economy. Were they to lose their position, I suspect they would accept it, albeit grudgingly. But "step aside" is not how I would characterize it. We're not going to bow out of the game, if that is what you mean. On the other hand, being number 1 always is not a goal I would consider worthy of pursing for its own sake. War simply to remain on top is out of the question.

What steps must we take first and foremost in order to stall this slight faltering we are going through?

Strengthen our capital markets; create effective financial controls; keep business taxes low as possible; negotiate effective international copyright and patent protections for intellectual property; innovate, innovate...

What areas must we resolve or strengthen first in order to preserve democracy throughout the world and remain the world Superpower?

Democracy is not worldwide. I believe we should do what we've always done, with occasional lapses, and that is to encourage democracy where it does not exist without imposing it and to serve as an example of it in action. Democracy helped makes the US a superpower; it ought to serve the US well in remaining so, whether we are the strongest or among the strongest superpowers.

[Bigfella]

Now, England obviously allowed themselves to fall from the top gracefully and did not go to war with us over the issue.

Just a point on this, don't assume that because Britain didn't go to war with the US that its slide from no.1 was 'graceful'. Both world wars, and especially the first, were tied up with heading off potential threats to British power. The tremendous financial & human cost of these wars dramatically accellerated the fall of the UK for near top to distinctly second rank. If you look at Britain from the 40s to the mid-60s there are a string of less than graceful attempts to maintain 'great power' status. Take such lessons as you will from this.

[Stan187]

Well, from what I've read in power transitions literature, it is said that the United States surpassed Britain in the 1890s. However, the surpassing challenger in this case is not a state dissatisfied with the world order. Instead it takes over and enforces many of the same Anglo-established norms.

The US not dissatisfied with British system in 1890 when they surpass them in industrial productions capacity. In fact, the US was satisfied with the British even in 1918 in running things in terms of enforcement, only with a new challengers to the world order (Soviets) did the Americans have to take the mantle from the British to keep the neo-liberal shape and institutions of the international system.

[Freeloader]

Even if China grew at the rate of 25% of its 2008 GDP every year it would take 10 years for it to catch up with the US. That is, if the US stood still.

China is not the US's banker it would seem to be. It holds around $800 billion in US debt. Japan is close behind. Total US debt stands at around $10
trillion, or 10 times what China holds.

While it's true that our debt is largely completely unrelated to China, I still feel uncomfortable knowing they hold as much as they do. Furthermore, that percent is a number that is expected to grow I would imagine. Hopefully not by much, but it always depends who is calling the shots at the time. I do not believe President Obama focuses very much on the US-China financial relations.

US debt is estimated to grow to 101% of GDP by 2011 or $14 trillion before decreasing.

Decrease? Due to what, anything particular?

Democracy is not worldwide. I believe we should do what we've always done, with occasional lapses, and that is to encourage democracy where it does not exist without imposing it and to serve as an example of it in action. Democracy helped makes the US a superpower; it ought to serve the US well in remaining so, whether we are the strongest or among the strongest superpowers.

I agree with this, and many other parts you stated I didn't comment on. The part I worry about, is if we are NOT the top dog, then it puts another country, and another style of government, on display as "the best" per se. Assuming it was China, then people would se ea Communistic style as the "way to rise to the top" in a manner of speaking. Which is really unfortunate.

[Freeloader]

Just a point on this, don't assume that because Britain didn't go to war with the US that its slide from no.1 was 'graceful'. Both world wars, and especially the first, were tied up with heading off potential threats to British power. The tremendous financial & human cost of these wars dramatically accelerated the fall of the UK for near top to distinctly second rank. If you look at Britain from the 40s to the mid-60s there are a string of less than graceful attempts to maintain 'great power' status. Take such lessons as you will from this.

Well yes Germany twice attempted to rise to power, and both times directly and indirectly challenged England greatly. I think part of why England fell was also due to the fact they simply lacked a sizeable army to enforce their ways and/or control others which has dictated many other empires in the past. You certainly do not see many countries with a smaller army, threatening people with a larger one (common sense I know) and England simply was dwarfed in time - financially and militarily. I see a similar trend falling the United States on at least one of those fronts, (albeit slowly, but still)

No England did not fall "gracefully" but they did not provoke war with Germany either time, nor with us. Thus why I called it "graceful" but I see your point.

[JAD_333]

While it's true that our debt is largely completely unrelated to China, I still feel uncomfortable knowing they hold as much as they do.

It may give you small comfort to know that China regards our debt (bonds) as an investment in a major trading partner. China is betting, wisely I believe, that the US will emerge from the current economic downturn as strong as ever and their exports will benefit as a result. It's strictly business.

Decrease? Due to what, anything particular?

Remember, it's the ratio we're speaking of. Any change in debt (spending) or GDP affects the ratio.

We're currently spending our way out of an economic crisis: bailing out banks, supporting AIG, GM, Chrysler, Fannie Mae, etc. and running a stimulus program. When that stops, debt will level off.

And when GDP returns to 2006-7 levels, the ratio will change for the better. The dollar amount of debt is meaningless. It's the ratio to earnings that matters.

The part I worry about, is if we are NOT the top dog, then it puts another country, and another style of government, on display as "the best" per se. Assuming it was China, then people would se ea Communistic style as the "way to rise to the top" in a manner of speaking. Which is really unfortunate.

Well, it's nice to be number 1. Just ask any Saints fan. But more to the point, number 1 means more than dollars on a chart. There's military might; there's quality of life; and many other measures.

You needn't worry that communism will get credit for China's growth. It stagnated for years under a command economy. Only when it turned to capitalism, did it bloom economically.

Keep in mind that China's population is nearly one billion more than ours. It stands to reason that when all those people become consumers like us
its GDP may exceed ours. I am not going to lose any sleep over it. :)

[Bigfella]

[QUOTE=Freeloader;716087]

Well yes Germany twice attempted to rise to power, and both times directly and indirectly challenged England greatly. I think part of why England fell was also due to the fact they simply lacked a sizeable army to enforce their ways and/or control others which has dictated many other empires in the past. You certainly do not see many countries with a smaller army, threatening people with a larger one (common sense I know) and England simply was dwarfed in time - financially and militarily. I see a similar trend falling the United States on at least one of those fronts, (albeit slowly, but still)

I guess it depends how you look at it. I would argue along 2 lines.

1) Britain actually did have a large army, it is just that most of it was spread all over the world policing a huge empire only made possible by an even more powerful navy. What Britain didn't have was a large standing army within its own borders or the sort of plans to create one that the continental powers did. In the end it was the need to maintain these armies in the field for 4 years & other war related costs that crippled all the major European powers. Britain actually got off more lightly than most.

2) It could be argued that the fact that Britain didn't have to maintain large standing armies compared to nations on the continent made a contribution to its rise to the top of the great power tree. It has been speculated that the difficulty in invading Britain (except by other British nations) made centralized royal power & armies less important, making it easier to maintain a more democratic form of government. It is argued that this, in turn, contributed to the success & creativity of the the British economy. While this might be a bit tenuous, a clearer argument might be that spending less on an Army allowed for a larger navy, which became the skeleton & muscles of the empire that pushed Britain to the top.

As for smaller & larger armies, I can list a huge number of examples where a nation with the smaller but better trained/equipped/luckier army triumphed.

No England did not fall "gracefully" but they did not provoke war with Germany either time, nor with us. Thus why I called it "graceful" but I see your point.

Thanks for conceding the point. A fine example of 'grace'.:)

It probably depends on how you choose to define 'provoked', especially in the case of WW1. In both cases (and esp. WW1) Britain invited itself to conflicts it could have avoided in order to maintain a particular balance on the Continent. Neither conflict was strictly 'necessary', though the decisions in both cases were entirely understandable. Britain was chose to keep down a rising power it saw as a potential threat. It succeeded, but at great cost.

[Old World Order]

Of course the US is declining. It's a zero sum game, and the US has been declining since the end of World War II. The world is increasingly becoming multipolar as opposed to unipolar. This isn't really a problem for the US, per se, as unipolar systems are the most unstable structures in international relations. Now, obviously, when you are the sole rule-maker you'd like to stay in that position, but it's not likely to last very long in the current climate, so it's all about setting yourself up for the 'new world order' (its original definition, not the conspiracist definition).

[Shek]

While it's true that our debt is largely completely unrelated to China, I still feel uncomfortable knowing they hold as much as they do.

Freeloader, we have the $$$, they have the paper that says IOU. Unlike personal debt, where someone comes and takes your stuff and gives it to creditors, there is no world court with enforcement power to do the same to the United States. Given that, who's in the position of power here?

Now, to default on the debt would be stupid, as it'd shoot the credibility of the dollar and harm our interests, but we don't even need that threat to maintain leverage over the Chinese. Instead, it's a situation similar to the recent financial crisis, where the banks were bailed out because they were too big to fail. Likewise, the Chinese see us as too big to fail, and so they did the same thing, which is buy the dollar to maintain its value.

As the saying goes, if you owe someone a little, they own you. If you owe them a lot, you own them.

[Shek]

Of course the US is declining. It's a zero sum game, and the US has been declining since the end of World War II. The world is increasingly becoming multipolar as opposed to unipolar. This isn't really a problem for the US, per se, as unipolar systems are the most unstable structures in international relations. Now, obviously, when you are the sole rule-maker you'd like to stay in that position, but it's not likely to last very long in the current climate, so it's all about setting yourself up for the 'new world order' (its original definition, not the conspiracist definition).

It's not a zero sum game. Look at the world economically today and compare it to the 1890s when the last major power transition occurred. Who would like to roll back the economic/technology clock and live at those standards? I'd submit very few, because it's a positive sum game. Thus, while nations may wish to be relatively powerful (zero sum), they still have to consider their absolute power and standards of living (positive sum if played correctly, negative sum if botched).

To a certain degree, it's in our interests to see China grow more powerful. As their economic interests from an absolute perspective become more and more dependent upon the global commons, the more defense dollars they'll have to spend to maintain access to the global commons, which if we play the positive sum game, we'll have to spend less on defense as China takes on their proper role in maintaining that access. That means money can be freed up for other uses (less spending, domestic priorities, etc.).

However, if you play it as a zero sum game, then you create an arms race that has a self-fulfilling prophecy tendency and sets up a negative sum outcome possibility.

Lastly, your statement that the US has been in decline since the end of WWII is simply incorrect. Whether by economic statistics (remove the artificiality of depressed output in the war ravaged countries), by economic power (who's the world's reserve currency? and where did people run to during the financial crisis?), by military power, or by your construct (if unipolar to multipolar is weakening, and it's a zero sum game, then bipolar to unipolar means you got stronger).

[Old World Order]

After World War II, the US was responsible for nearly half of the world's GDP. It's been consistently losing ground there since. And a world with limited resources will always been zero sum by its nature.

[gunnut]

After World War II, the US was responsible for nearly half of the world's GDP. It's been consistently losing ground there since. And a world with limited resources will always been zero sum by its nature.

Your definition of zero sum appears to be in terms of percentage. In that case, yes, it's a zero sum game because 100% is 100%. But 100% today is a whole lot more than 100% 50 years ago.

How come no one worries about China losing steam in development? Everyone is worried about the US slowing down or being surpassed by China. But no one ever wonders if China will all of a sudden slows down.

[Shek]

After World War II, the US was responsible for nearly half of the world's GDP. It's been consistently losing ground there since. And a world with limited resources will always been zero sum by its nature.

1. Your choice of start dates suffers from selection bias since you're comparing against a war ravaged Europe/Asia. Once you adjust for the catch up effect of Western Europe/Asia recovering from the war, the US' share of world GDP has remained remarkable stable. Rather than "consistently losing ground," we have maintained our relative economic power, while enjoying the bountiful fruits of the positive sum game of trade that has increased our real income (and in turn, consumption) 6.5x since the end of WWII or 3x since 1969, which is the start date of my graph below.
2. You're denying positive sum games, which is fundamentally flawed and denies reality.
3. I see that you've also ignored your earlier logic error, which by your construction, means that the US increased its power since WWII.

[highsea]

We're currently spending our way out of an economic crisis: bailing out banks, supporting AIG, GM, Chrysler, Fannie Mae, etc. and running a stimulus program. When that stops, debt will level off.

CBO estimates show deficits at trillion plus for a few years, then a decrease, then a climb again. But always deficits, so debt won't level off. The low spot is 2013 at $538 Billion, then back up to $722 Billion by 2019.

And when GDP returns to 2006-7 levels, the ratio will change for the better. The dollar amount of debt is meaningless. It's the ratio to earnings that matters.

$21.4 Trillion total debt in 2020 is the CBO baseline number based on the 2010 budget request. That's pretty close to the 100% of GDP even if we do manage the rosy growth Obama's OMB predicts.

Excluding the trust funds (which net out to large deficits every year) the publicly held debt goes from ~$7.5 Trillion in 2009 to ~$15 Trillion in 2020.

That will be ~67% of GDP, compared to ~53% in 2009, and that's not a change for the better. And that assumes a ~$20 Trillion GDP in 2020.

Trust Funds and Measures of Federal Debt

Not a very encouraging picture...