The World Matters: America’s Path and the Rise of the Rest

The perennial question of whether America is in decline is back.  It’s the subject of new books and the cover story of the Atlantic Monthly, where James Fallows does his usual credible job with it.   For declinists, the forces animating the current sense of national malaise about the future are everywhere, from the chronic disrepair of our infrastructure and the sad state of public education, to soaring public debt and the quagmires of our foreign wars.  On top of these dismal matters, there’s growing inequality and social polarization, and the failures of most important institutions, from the press and leading universities to, of course, Congress and Wall Street.  Fallows paints a dreary picture.  But he’s also impressed, and properly so, with American society’s flexibility and openness to new people -- from obscure origins here and immigrants from everywhere else – with new ideas, new technologies, new ways of conducting business, and new ways of living what almost everyone else in the world would call the good life.  He figures that these qualities are enough to meet any difficulty -- but for a political system that seems unable to address any serious challenge. 

Fallows is right about almost all of this, as far he goes.  Unfortunately, that’s not nearly far enough.  The analysis, along with most of what’s said in Washington these days, misses how much the context of America’s problems has gone global over the last generation.  It’s most obvious in the economic sphere, where the financial meltdown, problems creating jobs, even our soaring public debt are all intertwined with globalization.  The housing bubble, for example, drew on global dynamics driving up all asset prices.  That’s why housing bubbles appeared not just here, but around the world –and one is just getting started now in China, with housing prices in Shanghai and Beijing jumping 50 percent in the last year.  And it was global institutions drawing on global savings that drove the explosion of the financial instruments and their derivatives around this bubble.

The problem with jobs is also one that Washington policymakers can’t understand, much less solve, until they begin to view it in its true, global context.   A generation of sweeping economic reforms across most of Asia, Eastern Europe and much of Latin America, along with huge transfers of new technologies and entire business organizations from the West to everywhere else, produced tens of thousands of new businesses around the world.  For at least a decade, they’ve been competing with our own companies and workers, either directly or indirectly in their own home markets.  When competition becomes turbo-charged like this, everybody has to figure out how to cut costs – and in countries where most workers earn decent livings, like America, those cuts start with jobs and wages.  So, the answers to our jobs problem will have to be a lot more complicated than a new tax break for small businesses or ecologically-fashionable sectors.  

Everywhere we look, the problems and the opportunities that America faces involve our relationships with the rest of the world.  We will never manage a transition to a low-carbon economy with simply own ingenuity and grit – and why should we, when by definition, the climate problem and its solutions are entirely global.  Similarly, the notion that the President, Congress and the Pentagon, among themselves, can work out the “solution” to Afghanistan – as the last administration recklessly imagined it could with Iraq – is one that would be taken seriously only on Fox news.  And if, as most of us suspect, great social and economic opportunities lie in the wired world of broadband and wideband, 3G and 4G, their true potential can only be tapped and managed on a global basis.  

So, the challenges we face are not about the prospect of America’s decline at all.  They’re about the rise of the rest of the world and our capacity to understand and operate in a genuine global context.