6 ms·

Macro Perspective: Is This America's Great Decline?

38 points by bootload 16y ago

chailatte 16y ago
Yes, just like England lost the power to America, and Spain lost the power to England, so will US lose the power to China. Precisely because of the reasons author listed.
- j_baker 16y ago
  I don't think that's a given. China is big, but that doesnt necessarily equate to power. Besides that, who says America's decline has to come right now? It's easy to be all doom and gloom in economic times like these, but the grass isn't greener on the other side. Other countries are in this as deep if not deeper than we are.
  - chailatte 16y ago
    An aging US population, massive growing debt, shrinking dollar and shrinking manufacturing says America's decline is now.
    - j_baker 16y ago
      China's population is aging much faster than ours due to their one child policy. Our debt isn't really a whole lot worse than it was after World War II, and that preceded pretty good growth for us. Lastly, the effect of the value of the dollar going down and manufacturing jobs going elsewhere is of debatable importance.
      - positr0n 16y ago
        Yes but after World War II we had thousands of working age men return home to start careers and family. Also the pre-WWII centers of finance, industry, and everything important had been bombed to smithereens, so a lot of that moved to America. None of these affects are applicable today.
        j_baker 16y ago
        You're right. All of those things are already here. We're even better off than we were then.
    - InclinedPlane 16y ago
      Shrinking manufacturing? Perhaps due to the recession, but otherwise not so much. Peak output for US manufacturing was in 2006, current American manufacturing output is about 40% above what it was in the mid-90s. Just because there are fewer jobs due to automation doesn't mean manufacturing in America is in decline.
    - Helianthus16 16y ago
      Yeah, and an increasingly male population, a huge disparity in actual GDP, and the general maturity level of the country rated somewhere around "early teenager" says that China isn't going to take over anytime soon. China still _acts_ like a 19th or 20th century power. It's still pre-occupied with its "place" on the world stage, so sensitive to insult because it wants so hard to be important. Sure, that could grow into something, but it ain't there now.
- Gilson_Silveira 16y ago
  My vision is that no country will have a visible power in the future as it was in the past. I think the world is changing, but it seems to be walking to the equality direction, looking from a high level perspective.
- Helianthus16 16y ago
  "I've found a historical heuristic that might apply here."
csomar 16y ago
I'm living in an era where the US dominance is at its highest. May be I'm alone. Let's look around. My computer, my phone, websites and services I use, the cars (we used to buy French ones, now as Ford and other alternatives are available, we and the whole Tunisian population are somehow diversifying).... Everything you can think of, from food to Energy or wars, if you make a deeper look and analysis, you'll notice a dependency to Europe, but more increasingly to the USA in that last decade. China? They produce huge amounts of goods. Think of the $99 Android Tablet quality. They are quite popular, yes, but I don't think they match the Americans in term of profitability. I really wonder how is this America big decline? They have better education, stronger army, more resources and lot of smart people.
- chailatte 16y ago
  The American companies (which are mostly multinationals now) are rich (but also have a huge debt load). The typical Americans are poor and suffer from lack of jobs/credit and growing inflation (which is why Republicans were voted into office this month).
  - enjo 16y ago
    Is the typical American truly 'poor'? Unemployment is higher than typical, but hardly at unprecedented levels worldwide. Among the educated class, unemployment (4.6%) isn't even particularly high. At the same time debt-loads among American companies are not particularly out of whack from previous economic cycles. Hell a lot of companies (Apple, Microsoft, and Google just to name three off of the top of my head) are actually sitting on pretty enormous cash positions. Hell there is concern in the economic community that there isn't enough available credit (and thus, debt) available currently. As for inflation, I'm not aware of any significant inflation issues here in the U.S. As a matter of fact the inflation rate has been trending downward for the better part of this year. http://www.inflationdata.com/inflation/inflation_rate/currentinflation.asp http://www.inflationdata.com/inflation/inflation_rate/curren... There is some concern that some treasury activity in the form of asset acquisition might stoke some minor inflationary activity, but that's purely speculative at this point.
davidmathers 16y ago
It's refreshing to see some left-wing economic nonsense on HN instead of the right-wing economic nonsense that usually makes the front page (where's the hyper-inflation you promised me? oh, you meant next year. of course. of course.) Anyway, arguments aside (I'm not convinced he truly understands comparative advantage), isn't the relative decline of America something we want? I can't be the only one who wants to live in a world where wealth is distributed more equally among nations. 55 million people in China make less than $125 a year (the official "low income" line). How about we let them get to $125 a month before we start worrying about the rise of China and the decline of America? I'm assuming he means relative decline and not absolute decline. To posit absolute decline would be just bonkers.
- Helianthus16 16y ago
  Well... it might not be bonkers, but if you're positing absolute decline then not a lot of what we say is going to matter.
- arethuza 16y ago
  Out of interest, why do you interpret it as "left-wing" - is anything that is critical of the current state of the US economy automatically "left-wing"?
  - davidmathers 16y ago
    As a rule of thumb I'd say that pretty much any essay that contains the word "structure" is written by a leftist, no matter what the subject. Macroeconomics as a concept is basically leftist, as is focus on/awareness of society, social issues, systems based thinking, promotion of rationality or rational order, and suspicion of trade and natural order. Most of the right-wing crank economics that gets written (and sadly shows up on the HN front page) consists of direct attacks on macro policy and/or fiat currency (i.e. social money, not "hard" money). Rule of thumb: if you're reading a sky-is-falling essay and it contains the words "fed", "federal reserve", "gold", or "inflation" the author is a right-wing nutjob. Macro/social thinking and policy is either dangerous or immoral. Or useless and ineffective. Because, you know, "there's no such thing as society."
narrator 16y ago
The funny thing is China isn't an imperialist country. They're primarily concerned with their internal affairs and with the rest of the world insofar as they need their raw materials and advanced technology. They're not very interested in leading and controlling the world like the west seems to be so obssessed with.
- iskander 16y ago
  First of all, you seem to be ignoring China's wars with India and Vietnam, the Chinese attempt to overthrow the government of Malaysia, territorial claims to Taiwan (and a dozen smaller chunks of land), their continuing support of North Korea, as well as their explicit program of population dilution going on in Tibet and Xinjiang. Anyhow, imperial ambitions grow with capacity. For now, China asserts itself in its "backyard" (and Africa -- check out the Forum on China–Africa Cooperation). Chinese reach will almost certainly extend if their military competition dwindles.
  - davidmathers 16y ago
    As an aside on Mugabe, he makes one of those observations that are so precisely to the point that you wonder why so few other commentators ever get round to coming to it. "Darfur, Zimbabwe, Burma, North Korea, anywhere that the concept of human rights doesn't exist, it's always the Chinese at backstop. And always for reasons that you could write down in three words: blood for oil." -- http://www.guardian.co.uk/books/2010/nov/14/christopher-hitchens-cancer-interview http://www.guardian.co.uk/books/2010/nov/14/christopher-hitc... It would be tragic if China were to actually become the dominant power in the world. But that's a long long way from where we are now. And I personally can't see any path from here to there.
- Helianthus16 16y ago
  This is debatable. They are definitely throwing their weight around and playing some Machiavellian games with world opinion, flat-out denying things that anyone can see is probably true--look at how they re-directed network traffic.
Bertrood 16y ago
It didn't take too long before it was time to stop reading this article. After two paragraphs of this kind of stuff its easy to fill in the blanks. America will do fine in the future. It is easy to lose site of this when looking at things on the surface such as imports vs. exports in the US and emerging markets vs the stale US economy. America has the best univerities in the world, and the largest amount of highly educated workforce and entrepreneurs. This IS earning power for the 21st century. With declining traditional labor forces, markets in the future will be based more around innovation and knowledge management. The US will be well positioned for this in the future even with all it's current troubles. With the recent saving of our financial systems with the bailouts, the US government done the nation great service by ensuring the low cost of capital in the future. This is another reason America's future looks very bright. We are also very well positioned geographically to optimize trade by sea and land to the US.
- kiba 16y ago
  If the US economy tanks, everybody else tanks.
  - Bertrood 16y ago
    Regarless of what happens in the shortterm, the US will be the dominant power in the 21st century.
    - ThomPete 16y ago
      So is Europe. But do you really want the US to be relative to China as Europe is relative to the US?
    - Nick_C 16y ago
      Wow, that's a big call this early in the century. Think back to 1910 and the relative positions of the UK and the US versus their positions by 1990. Personally, I think China will have exerted its real economic influence well and truly by the third quarter of this century. Couple that with India, and I expect there won't be such a thing as "the dominant" power. There will several economic powers, with the US being one of them.
makeramen 16y ago
Someone needs to write an article that says "America will be okay." There are a lot of things we're doing wrong, but at the same time, a lot of things we're doing right. We want to make sure we stop the bad things from getting too bad, and the good things from turning bad. And sometimes (oftentimes), we're completely wrong about what was good or bad for us in the first place but things have been working out for hundreds of years anyway. So as long as we keep trying our hardest to do what's right, things will probably be okay. But then of course everyone would just nod their heads and we wouldn't have all this interesting discussion.
dmitri1981 16y ago
> The MegaJobs are more like lottery tickets, than prizes in a meritocracy (think landing a spot at a top law firm, or investment bank--it's more about who you know and where you studied, than what you can do). I could not disagree more. All people I know with what the author calls MegaJobs have them because they considerably smarter and are prepared to work harder than most. These are the guys that worked 16 hours a day at university and are now doing the same the at their jobs. To suggest that it was due to connections is frankly naive. Connections can definitely help you get in, but they are never a substitute for above qualities.
achompas 16y ago
This is all topical economics. Example: The result is a heavy dose of heavily concentrated industries--and while that's good for beancounters, it's terrible for innovation, basic quality standards, customer service, and, of course, investors. Wait. So large companies like Apple, GE, GM, Google, and Boeing aren't developing new and exciting technology? Also, if something is good for "beancounters" (like, say, an increase in the company's book value or cash flow), well, isn't that good for investors too? More: he reads the NY Times, sees that Chinese IPOs > US IPOs, and concludes America is broken? China's GDP is growing 3-4 times as fast as ours, so 3-4 times as many IPOs seems about right. He also misunderstands how savings flow through our economy. We don't need to "shift savings into investments." The moment banks receive consumer savings, they're lent out to small businesses so they can purchase equipment. That's investment. He also trots out the "oh woe is our net trade situation" without mentioning that any trade rebalancing will decrease China's GDP by billions. So there's that. He's complicating our economic problems. The bottom line: we were overleveraged as a country. Now our economy is (drastically) adjusting. We'll be fine.
joeycfan 16y ago
Absolutely yes. The USA is going down the way Great Britain did when it became Little England. Trouble is, China is taking over for America and China is a nasty piece of work.

38 points by bootload 16y ago

Yes, just like England lost the power to America, and Spain lost the power to England, so will US lose the power to China. Precisely because of the reasons author listed.

j_baker 16y ago
I don't think that's a given. China is big, but that doesnt necessarily equate to power. Besides that, who says America's decline has to come right now? It's easy to be all doom and gloom in economic times like these, but the grass isn't greener on the other side. Other countries are in this as deep if not deeper than we are.
- chailatte 16y ago
  An aging US population, massive growing debt, shrinking dollar and shrinking manufacturing says America's decline is now.
  - j_baker 16y ago
    China's population is aging much faster than ours due to their one child policy. Our debt isn't really a whole lot worse than it was after World War II, and that preceded pretty good growth for us. Lastly, the effect of the value of the dollar going down and manufacturing jobs going elsewhere is of debatable importance.
    - positr0n 16y ago
      Yes but after World War II we had thousands of working age men return home to start careers and family. Also the pre-WWII centers of finance, industry, and everything important had been bombed to smithereens, so a lot of that moved to America. None of these affects are applicable today.
      - j_baker 16y ago
        You're right. All of those things are already here. We're even better off than we were then.
  - InclinedPlane 16y ago
    Shrinking manufacturing? Perhaps due to the recession, but otherwise not so much. Peak output for US manufacturing was in 2006, current American manufacturing output is about 40% above what it was in the mid-90s. Just because there are fewer jobs due to automation doesn't mean manufacturing in America is in decline.
  - Helianthus16 16y ago
    Yeah, and an increasingly male population, a huge disparity in actual GDP, and the general maturity level of the country rated somewhere around "early teenager" says that China isn't going to take over anytime soon. China still _acts_ like a 19th or 20th century power. It's still pre-occupied with its "place" on the world stage, so sensitive to insult because it wants so hard to be important. Sure, that could grow into something, but it ain't there now.
Gilson_Silveira 16y ago
My vision is that no country will have a visible power in the future as it was in the past. I think the world is changing, but it seems to be walking to the equality direction, looking from a high level perspective.
Helianthus16 16y ago
"I've found a historical heuristic that might apply here."

csomar 16y ago

I'm living in an era where the US dominance is at its highest. May be I'm alone. Let's look around. My computer, my phone, websites and services I use, the cars (we used to buy French ones, now as Ford and other alternatives are available, we and the whole Tunisian population are somehow diversifying).... Everything you can think of, from food to Energy or wars, if you make a deeper look and analysis, you'll notice a dependency to Europe, but more increasingly to the USA in that last decade. China? They produce huge amounts of goods. Think of the $99 Android Tablet quality. They are quite popular, yes, but I don't think they match the Americans in term of profitability. I really wonder how is this America big decline? They have better education, stronger army, more resources and lot of smart people.

chailatte 16y ago
The American companies (which are mostly multinationals now) are rich (but also have a huge debt load). The typical Americans are poor and suffer from lack of jobs/credit and growing inflation (which is why Republicans were voted into office this month).
- enjo 16y ago
  Is the typical American truly 'poor'? Unemployment is higher than typical, but hardly at unprecedented levels worldwide. Among the educated class, unemployment (4.6%) isn't even particularly high. At the same time debt-loads among American companies are not particularly out of whack from previous economic cycles. Hell a lot of companies (Apple, Microsoft, and Google just to name three off of the top of my head) are actually sitting on pretty enormous cash positions. Hell there is concern in the economic community that there isn't enough available credit (and thus, debt) available currently. As for inflation, I'm not aware of any significant inflation issues here in the U.S. As a matter of fact the inflation rate has been trending downward for the better part of this year. http://www.inflationdata.com/inflation/inflation_rate/currentinflation.asp http://www.inflationdata.com/inflation/inflation_rate/curren... There is some concern that some treasury activity in the form of asset acquisition might stoke some minor inflationary activity, but that's purely speculative at this point.

davidmathers 16y ago

It's refreshing to see some left-wing economic nonsense on HN instead of the right-wing economic nonsense that usually makes the front page (where's the hyper-inflation you promised me? oh, you meant next year. of course. of course.) Anyway, arguments aside (I'm not convinced he truly understands comparative advantage), isn't the relative decline of America something we want? I can't be the only one who wants to live in a world where wealth is distributed more equally among nations. 55 million people in China make less than $125 a year (the official "low income" line). How about we let them get to $125 a month before we start worrying about the rise of China and the decline of America? I'm assuming he means relative decline and not absolute decline. To posit absolute decline would be just bonkers.

Helianthus16 16y ago
Well... it might not be bonkers, but if you're positing absolute decline then not a lot of what we say is going to matter.
arethuza 16y ago
Out of interest, why do you interpret it as "left-wing" - is anything that is critical of the current state of the US economy automatically "left-wing"?
- davidmathers 16y ago
  As a rule of thumb I'd say that pretty much any essay that contains the word "structure" is written by a leftist, no matter what the subject. Macroeconomics as a concept is basically leftist, as is focus on/awareness of society, social issues, systems based thinking, promotion of rationality or rational order, and suspicion of trade and natural order. Most of the right-wing crank economics that gets written (and sadly shows up on the HN front page) consists of direct attacks on macro policy and/or fiat currency (i.e. social money, not "hard" money). Rule of thumb: if you're reading a sky-is-falling essay and it contains the words "fed", "federal reserve", "gold", or "inflation" the author is a right-wing nutjob. Macro/social thinking and policy is either dangerous or immoral. Or useless and ineffective. Because, you know, "there's no such thing as society."

narrator 16y ago

The funny thing is China isn't an imperialist country. They're primarily concerned with their internal affairs and with the rest of the world insofar as they need their raw materials and advanced technology. They're not very interested in leading and controlling the world like the west seems to be so obssessed with.

iskander 16y ago
First of all, you seem to be ignoring China's wars with India and Vietnam, the Chinese attempt to overthrow the government of Malaysia, territorial claims to Taiwan (and a dozen smaller chunks of land), their continuing support of North Korea, as well as their explicit program of population dilution going on in Tibet and Xinjiang. Anyhow, imperial ambitions grow with capacity. For now, China asserts itself in its "backyard" (and Africa -- check out the Forum on China–Africa Cooperation). Chinese reach will almost certainly extend if their military competition dwindles.
- davidmathers 16y ago
  As an aside on Mugabe, he makes one of those observations that are so precisely to the point that you wonder why so few other commentators ever get round to coming to it. "Darfur, Zimbabwe, Burma, North Korea, anywhere that the concept of human rights doesn't exist, it's always the Chinese at backstop. And always for reasons that you could write down in three words: blood for oil." -- http://www.guardian.co.uk/books/2010/nov/14/christopher-hitchens-cancer-interview http://www.guardian.co.uk/books/2010/nov/14/christopher-hitc... It would be tragic if China were to actually become the dominant power in the world. But that's a long long way from where we are now. And I personally can't see any path from here to there.
Helianthus16 16y ago
This is debatable. They are definitely throwing their weight around and playing some Machiavellian games with world opinion, flat-out denying things that anyone can see is probably true--look at how they re-directed network traffic.

Bertrood 16y ago

It didn't take too long before it was time to stop reading this article. After two paragraphs of this kind of stuff its easy to fill in the blanks. America will do fine in the future. It is easy to lose site of this when looking at things on the surface such as imports vs. exports in the US and emerging markets vs the stale US economy. America has the best univerities in the world, and the largest amount of highly educated workforce and entrepreneurs. This IS earning power for the 21st century. With declining traditional labor forces, markets in the future will be based more around innovation and knowledge management. The US will be well positioned for this in the future even with all it's current troubles. With the recent saving of our financial systems with the bailouts, the US government done the nation great service by ensuring the low cost of capital in the future. This is another reason America's future looks very bright. We are also very well positioned geographically to optimize trade by sea and land to the US.

kiba 16y ago
If the US economy tanks, everybody else tanks.
- Bertrood 16y ago
  Regarless of what happens in the shortterm, the US will be the dominant power in the 21st century.
  - ThomPete 16y ago
    So is Europe. But do you really want the US to be relative to China as Europe is relative to the US?
  - Nick_C 16y ago
    Wow, that's a big call this early in the century. Think back to 1910 and the relative positions of the UK and the US versus their positions by 1990. Personally, I think China will have exerted its real economic influence well and truly by the third quarter of this century. Couple that with India, and I expect there won't be such a thing as "the dominant" power. There will several economic powers, with the US being one of them.

makeramen 16y ago

Someone needs to write an article that says "America will be okay." There are a lot of things we're doing wrong, but at the same time, a lot of things we're doing right. We want to make sure we stop the bad things from getting too bad, and the good things from turning bad. And sometimes (oftentimes), we're completely wrong about what was good or bad for us in the first place but things have been working out for hundreds of years anyway. So as long as we keep trying our hardest to do what's right, things will probably be okay. But then of course everyone would just nod their heads and we wouldn't have all this interesting discussion.

dmitri1981 16y ago

> The MegaJobs are more like lottery tickets, than prizes in a meritocracy (think landing a spot at a top law firm, or investment bank--it's more about who you know and where you studied, than what you can do). I could not disagree more. All people I know with what the author calls MegaJobs have them because they considerably smarter and are prepared to work harder than most. These are the guys that worked 16 hours a day at university and are now doing the same the at their jobs. To suggest that it was due to connections is frankly naive. Connections can definitely help you get in, but they are never a substitute for above qualities.

achompas 16y ago

This is all topical economics. Example: The result is a heavy dose of heavily concentrated industries--and while that's good for beancounters, it's terrible for innovation, basic quality standards, customer service, and, of course, investors. Wait. So large companies like Apple, GE, GM, Google, and Boeing aren't developing new and exciting technology? Also, if something is good for "beancounters" (like, say, an increase in the company's book value or cash flow), well, isn't that good for investors too? More: he reads the NY Times, sees that Chinese IPOs > US IPOs, and concludes America is broken? China's GDP is growing 3-4 times as fast as ours, so 3-4 times as many IPOs seems about right. He also misunderstands how savings flow through our economy. We don't need to "shift savings into investments." The moment banks receive consumer savings, they're lent out to small businesses so they can purchase equipment. That's investment. He also trots out the "oh woe is our net trade situation" without mentioning that any trade rebalancing will decrease China's GDP by billions. So there's that. He's complicating our economic problems. The bottom line: we were overleveraged as a country. Now our economy is (drastically) adjusting. We'll be fine.

joeycfan 16y ago

Absolutely yes. The USA is going down the way Great Britain did when it became Little England. Trouble is, China is taking over for America and China is a nasty piece of work.