Ominous chronicle of a decline foretold
Time to Start Thinking: America and the Spectre of Decline
BARACK Obama, having won reelection last month, declared ‘‘ we still have work to do’’. Too right he does. Unfortunately, it seems unlikely that the US President’s team will be able to make the policy adjustments required.
Disturbingly, the alternative touted by the Republicans appears just as unlikely to have worked. The structural problems into which the US has got itself require changes that, at present, are nowhere in sight on the American political horizon.
That, at least, is the verdict of several astute observers. In The Betrayal of American Prosperity (2010), veteran trade negotiator and economic analyst Clyde Prestowitz argues trenchantly that the US grew rich between 1790 and 1945 as a mercantilist state and has been running itself into the ground since 1945 by embracing free trade in the face of persistent mercantilism among its key competitors, especially in East Asia. His book, published here by Simon & Schuster, repays a close reading.
Edward Luce of the London Financial Times has followed Prestowitz in articulating this case. Luce, an Oxford graduate in philosophy, politics and economics, has been an FT journalist for many years, serving as bureau chief in New Delhi and Washington. In 2000, he spent a year as speech writer for then US Treasury secretary Larry Summers, which afforded him an inside view of the workings of the Washington Consensus.
Time to Start Thinking: America and the Spectre of Decline sets out his slowly developed judgment that the US is in serious trouble. Luce borrows his title from a remark by Nobel prize-winning scientist Ernest Rutherford: ‘‘ Gentlemen, we have run out of money. It is time to start thinking.’’ He derives his theme from a remark by Alexis de Tocqueville: ‘‘ The greatness of America lies not in being more enlightened than any other By Edward Luce Little, Brown, 304pp, $55 (HB) nation, but her faults.’’
What concerns Luce is whether the US will be able to repair the many faults that plague its political system, economy and society. Far from anti-American, he is also far from optimistic. Early on, he quotes a passage from Mitt Romney’s book No Apology: Believe in America, declaring the Founding Fathers were committed to ‘‘ free enterprise, free markets and free trade’’. Luce comments wryly:
repair America’s Founding Fathers disagreed sharply among themselves on many subjects, including the economy. So it is always enjoyable to speculate which of the founders a politician has in mind when he or she cites them in support of an argument
Hamilton learned from the way England had pulled itself up by its mercantilist bootstraps. He created a strategically protectionist America, not a free trade one. In the early 1860s, Abraham Lincoln raised average tariffs to 40 per cent to 50 per cent, about where they would fluctuate until the middle of the 20th century. Britain, conversely, championed free trade from the repeal of the Corn Laws in the 1840s and saw its industrial ascendancy relentlessly eroded by its mercantilist competitors in the late 19th century.
The US, also, has seen its industrial ascendancy relentlessly eroded by mercantilist competitors since World War II. Here Prestowitz is a better guide than Luce, but the message is the same. Luce quotes a range of American chief executives who believe the US has a delusional macro-economic policy. ‘‘ This debate is too important to leave to the economists,’’ declares Intel’s Andy Grove. ‘‘ We are in the middle of a titanic war for global supremacy. We shouldn’t be carrying on as though it’s business as usual.’’
What concerns Luce most is this: ‘‘ America has not yet begun to think seriously about the consequences of where it is headed. Nowhere (or whether, in Sarah Palin’s case, she struggles to remember the name of any). It is unclear whether Romney had a specific one in mind. But if it was Alexander Hamilton, America’s first treasury secretary who viewed free trade as a luxury the young Republic could not afford, then Romney would have been mistaken. It was Hamilton who led the way in devising the pragmatic ideology that propelled America from an agricultural backwater in the 1790s to the world’s foremost industrial power by 1900. Today, anyone looking at the main details of what was widely known in the 19th century as the ‘‘ American system’’ could mistake it for China’s industrial policies in the early 21st century.