The Next U.S. President: Set Up for Failure?
Cylde Prestowitz author of "Three Billion New Capitalists: The Great Shift of Wealth and Power to the East" argues that U.S. dominance is in jeopardy due largely to its own actions and the misuse of its own considerable power.Think of the major countries and the EU as players in a game of bridge. If you had your choice of whose hand you'd like to play, you'd almost surely pick the American one. It has all the aces. The U.S. GDP may be a bit behind that of the EU, but it's more than twice as large as Japan's, the next largest single-country economy. And U.S. overall productivity is the highest. The United States is still the overall leader in technology. It has the best universities and spends by far the most money on R&D. It is the financial capital of the world and the global economy runs on its money. It has the highest per capita income of the major nations.It spends more than the rest of the world combined on defense and, not surprisingly, has overwhelming military superiority. It has 12 aircraft carrier battle groups patrolling the oceans of the world — no other country even has one. It can fly its army anywhere in the world in 24 hours, as no other country could dream of doing. It spends more than the rest of the world combined on defense and, not surprisingly, has overwhelming military superiority. By 2050, today's 293 million Americans will have increased to 400 million. In the second half of the century, America will rapidly pass the EU in population. By 2050, the age of the median American will creep up to 40, compared with 43 for China, 48 for Europe — and 53 for Japan (India will be 38). Finally, until very recently, the United States enjoyed enormous reservoirs of goodwill throughout the world. What more could you want? Go for a slam. These cards should be pretty easy to play.But the United States is playing them as badly as possible — as though it was the only player that mattered.
Saving is down drastically — the U.S. net savings that was 11% of GDP in the 1960s having declined to near zero in 2005.And households are in debt up to their eyeballs after borrowing against inflated home equity values to maintain themselves in a style many can't really afford. The U.S. government has also gone into record debt, with budget deficits over 4% of GDP, rising — according to General Accounting Office projections — to 8% over the next 10 to 15 years. This debt is not being used to invest in new infrastructure, plants or equipment to generate future wealth. Federal spending on physical capital, R&D and education and training — which averaged over 6% of GDP in the 1960s and 1970s — is now well under 3% of GDP. To look at it another way, future-oriented outlays, which accounted for 32% of total U.S. federal spending in 1965, have fallen to 14% in 2005. Instead, the spending is going into benefits for individuals, which are going to rise dramatically as baby boomers retire and need more medical attention. Nor has private infrastructure been maintained. The labs and facilities of our world-class universities are beginning to look antiquated compared with those being installed in Asia and Europe.When you add to the trade deficits the rising dependence on foreign oil and the recent decline in respect and liking for the United States, the result is that the U.S. president — the head of the most powerful country the world has ever seen — is in a very tight box.
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