Omi­nous chron­i­cle of a de­cline fore­told

Time to Start Think­ing: Amer­ica and the Spec­tre of De­cline

The Weekend Australian - Review - - Books - Paul Monk

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:

rather

in

her

abil­ity

to

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.

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