Is America Declining?

Is America Declining?

By: Chen Songchuan and Chu Shulong

As world and Asian leaders gather this month in Cannes for the G20, in Honolulu for APEC meetings, and in Bali for the East Asia Summit, a phenomenon coloring some observers’ perceptions of global politics and economics is the alleged decline of the United States. Since the outbreak of the international financial crisis in 2008, the question of whether the United States is declining has appeared in China and in other countries. Some people, including some Americans themselves, even believe “an irreversible decline” has begun in the United States, and that the world is entering a “post-American era.” 

National power and international balance of power―and perceptions of them―are indeed very important strategic issues. Due to the United States’s special international status, to  accurately understand and judge the United States’s strength and status based on facts has become a major strategic, policy and academic issue faced by governments of all countries around the world as well as the academic world, business circles, media and people in all countries. Since the U.S. economy has run into a downturn during the financial crisis and after the crisis ended, and all kinds of difficulties and problems have stood out. Prominent questions placed in front of the United States and the world include: Is this a short-term and partial issue faced by the United States or is it going to be a long-term trend? Does it mean that the entire country of the United States is moving toward a decline? What are the implications for the global system, and for individual countries?

The Strength of the U.S. [1] 

With the end of World War II, the United States became a world superpower. Its strength and status reached another peak in the mid and late 1990s as the Cold War ended: it accounted for about 30 percent of global economic output. However, after it entered a new economic cycle from 2000 to 2001, the American share of the world economy has gradually dropped. At the same time, certain situations, including the “weakening of advantages compared to other countries,” have appeared in some main areas of the United States' national power. This trend already started before the September 11, 2001 terror attacks, continued during the international financial crisis, and remains today. 

At the same time, no fundamental changes have occurred in the sources of the United States’s power and influence, such as the economy, science and technology, military strength, international political influence, and cultural soft power. The United States is still the only comprehensive superpower in the world. The difficulties and problems existing in the United States currently are fundamental or comprehensive. Some may be short-term. No overall, obvious and fundamental “decline” has appeared in the strength and status of the United States yet. Although the strength and influence of the United States is somewhat less than it was before the economic crisis began in 2008, no clear long-term decline trend has appeared.

First of all, it is difficult to determine at present whether the difficulties faced by the United States during and after this international crisis will be long-term or not. Although the destructive power of this round of global financial crisis is quite strong, it still cannot be mentioned in the same breath with the world economic crisis in the 1920s and 1930s. The world economic crisis from 1929 to 1933 dragged the entire global economy into full recession. The British pound lost its status as the world currency. The economy, stock market, and employment rate in the United States all dropped around one-third, and helped trigger a new world war.

So far, the implications of the current crisis are very different. The strength of the United States, measured here by the U.S. share of total global economic output, indeed has relatively dropped. However, it has only dropped from 28 percent to around 25 percent. Even looking at the most extreme estimates, it has dropped only from 30 percent to 24 percent. This is not insignificant, but it does not represent a fundamental drop. Although we cannot say the 21st century will be an “American century,” the United States will maintain a certain dominant position in the first several decades of this century at least. Also, no fundamental changes have occurred in the world structure, and none are foreseen.

In assessing the economic situation of a country, it is useful to take a broad view. In terms of economic growth, the U.S. economy has been doing relatively well, whether it is compared to other developed countries or to the worldwide rate. The United States has always maintained a relatively high growth rate since the 1930s, including the more than the 60 years after World War II. If we consider every 10 years as a discrete segment, then the average annual economic growth rate of the United States in every 10 year period over the past 70 years has been above 3 percent. Such a record would not be high enough for a developing economy, but to a huge, mature and developed economy, like that of the United States, this is quite a good growth rate.

In the last 20 years and for most of the most recent 10 years, the economic growth of the United States was always faster than that of other developed countries such as in Europe, or Japan where growth rates have lingered around 1 percent to 2 percent. Therefore, if Europe and Japan, with low economic growth for a long time, are not generally considered by people as entities that have moved toward “decline,” then why do we talk about the “decline” of the United States? In any given 10 year period, the U.S. economy has never shrunk, and it has even had growth of 4 percent or even above 5 percent in some years.

Second, the stability and influence of the American political system, ideology, and value concepts have indeed has been greatly affected in the 21st century, with the impact of two wars, high consumption, and the financial crisis. This has not only been reflected in aspects of the economy, but more importantly it is apparent in other areas such as the status, reputation, and influence of the United States in the world. The United States no longer has the overwhelming power and absolute ideological influence in the world that it enjoyed before the Iraq War. The influence of what can be called America’s self-defined ideology―democracy, freedom, and human rights―has greatly dropped around the world because of the Iraq War. The international financial crisis, caused in part by seriously excessive consumption in the United States, also has negatively affected the attraction of the market economy model. As a result, American influence around the world has seriously dropped. In the last 10 years, when U.S. government officials and politicians were loudly shouting about “democracy,” “human rights,” and “market economy” in front of the whole world, they seemed to lack the ability to implement these words, and in fact they also seemed lack confidence in their own rhetoric. This is because serious problems and mistakes have appeared in several areas where the United States has proclaimed itself as the “flag bearer,” “leader,” “example,” and “spokesman.” However, after all, the United States is still the leader and the representative of freedom, democracy, and market economy around the world; it still enjoys the most powerful influence in political ideology, system, and values.

Third, we can see that the United States remains the world leader in scientific and technical strength. There has been no change in the strength, status, and influence of the American capability for innovation and its global competitive power. In science and technology, higher education, culture of innovation, military strength, world politics, and security, the United States is still ahead of the rest of the world. According to recent statistics, in 2010 China overtook the United States in terms of the output value of its manufacturing industry.[2] However, this considers only the quantity of output, not quality―and even then the gap was not large, and the Obama administration is trying to rejuvenate the manufacturing industry in the United States. The core advantages of the United States are science and technology and the service sector, including financial services. 

The United States is still ahead of the rest of the world in basic science, and it is still Americans that have received the most Nobel prizes. In most scientific and technological fields, such as computer software and hardware, aviation and aerospace, biotechnology, agricultural production, military technology and advanced equipment, the United States maintains its leading position. It has lost its leading position only in a few industries and fields, such as autos. However, even in the auto industry, the United States is still the largest vehicle production and marketing country around the world except for China. Also, most cars produced in China are produced by foreign companies in China, such as U.S. companies; they are not China's own brands.

Compared to other countries around the world, the most powerful area in the national power of the United States is its vigor and capacity to innovate. The United States advocates innovation, and its systems, society, and culture are structured in ways to encourage it. The election of Barack Obama as president in 2008 can be considered one obvious example of this capacity: it would likely be very difficult for a young and relatively inexperienced person – who is also of African descent – to be elected to such a position in Europe, Japan, or other developed countries. Yet American society continually pursues new things, and its science and technology community reflects this. 

Fourth, it is evident that American companies remain very competitive on a micro level, just as the economy as a whole is on a macro level. In recent years, even though the U.S. economy was not performing very well, far more companies in the global top 500 came from the United States than from any other. Among the assessments on the competitive power of all countries and regions around the world, the United States is still a big country that is listed among the leaders. Those that are ranked higher than the United States only include Hong Kong and several small countries, such Singapore and some in northern Europe; there are not many big countries whose competitive power is ranked higher than that of the United States. Competitive power is still the true essence of a country’s strength. 

Fifth, the advantages of the United States are even more obvious in terms of soft power. No other countries in the world, including Europe and Japan, can compete with the United States or be on the same level as the United States in terms of soft power. In all issues and disputes that appeared in Asia in 2010, including those in Central Asia, all parties from Japan and South Korea to various nations under the Association of Southeast Asian Nations (ASEAN) like Vietnam and Singapore and then even Kyrgyzstan, turned their attention to the United States, leaned toward it, and worked to strengthen relations with it. It can even be said that they relied on the United States to varying degrees. This has proven that the United States is still the only superpower and is the most influential nation in Asia and around the world. 

Besides its status and influence in politics and security, which are beyond comparison, the influence of U.S. culture, education, life style, and thinking also cannot be matched by those of other countries around the world. Hollywood movies, fast food, music, sports stars, and other cultural products remain known all over the world. On a different note, the education system in the United States attracts the most outstanding young people from across the world. In these areas related with soft power, the status and influence of the United States both have not declined or changed much and, it must be said, other countries and regions in the world have not strengthened themselves in these areas. The rest of the world still faces a huge soft power deficit with the United States.

In summary, both the financial crisis and the lack of strength in the economic recovery after the crisis so far have not made the United States lose its fundamental advantages in hard power and soft power. The United States is still the most powerful and the most influential country in the world, and it is also the only superpower in the world. The current difficulties facing the United States may last a while, or they may be resolved in the next few months or years. Either way, no signs of overall and fundamental decline in the United States have yet emerged, to say nothing of an “irreversible decline.”

Major Problems and Difficulties Facing the United States

The United States, like every country, has its share of problems and challenges to overcome. If these problems are not solved or effectively dealt with, then they will have the potential to affect the strength and status of the United States, to at least a certain extent, over the long run.

One major problem facing the United States is the problem concerning the capability and competitive power of its manufacturing industry. As the basis of a quite large and strong economy, the percentage of the United States’s share of global manufacturing has dropped over the last several decades, and has lost its leading position in some fields. In the civil airplane industry, for example, in a little more than 10 years the market share ratio between Boeing and Airbus has shifted from 7:3 or 6:4to about 5:5 in recent years. Similarly, the number of automobiles produced by Europe, Japan, and South Korea has become larger and larger, and the foreign share of the U.S. market has already exceeded one-third. Also, it seems that the number of American products that have a leading position around the world and can be exported to the world market has become smaller and smaller. 

A second problem is the problem concerning the health, stability, and quality of relevant service industries, such as finance. The United States has already become a post-industrial economy and society. The main part of its economy is the service sector. However, a number of serious difficulties and problems also have appeared in its main sectors over the last several decades. The American financial industry is the most advanced in the world, but due to problems such as excessive expansion, too high personal benefit, and too little supervision, the false prosperity of the U.S. financial industry and its problems were completely exposed during this financial crisis. This infection in the “lifeblood” of the modern economy has caused serious damage to the U.S. and world economies.

The U.S. government and Congress have attempted some measures to reform the financial industry, creating some new regulations, trying to enhance the supervision, and attempting to maintain. However, as to whether these measures and regulations will be implemented and carried out or not, and whether they will achieve actual effects or not, is still a question. Relevant measures and regulations, including those for restricting the payments to senior executives in the financial industry from becoming too high, have already received resistance from the financial industry. It seems that it is not going to be easy to truly get rid of the problems in the U.S. financial industry, just as it is proving difficult to undo the damage caused by the financial crisis. 

In addition, a serious trend of declining quality also has appeared in other service industries of the United States. Over the past 20 to 30 years, all people that resided, worked, and lived in the United States, or who have often associated with all circles in the United States, have clearly felt the decline in the quality and efficiency of different sectors of its service industry. The quality of services provided by airline companies, restaurants, banks, and telecommunications companies, among others, has dropped, and means for redressing problems are often felt by consumers to be unsatisfactory. The United States’s “tipping culture,” which often befuddles foreign visitors, is made even more confusing by the fact that the practice of providing a gratuity seems to have lost its original meaning. No matter whether service is good or bad, or even when there is no service, customers “must” give tips. Many tips are directly written on bills, and their amounts have already risen to around 20 percent of the total amount of consumption.

A third problem is the problem of wealth and income distribution and sustainable development. Statistics and views from various sources in the United States, such as the government and the academic world, consistently report that during the 30 years since 1980, the actual income of ordinary workers in the United States, including the middle class, did not increase even though the economy was growing and profits were increasing during the same time period. It seems that the fruits of economic development were carved up by a few capitalists and entrepreneurs. Consequently, society in the United States has become more unbalanced, and the gap between rich and poor has been seriously enlarged, a trend which for many was illustrated during the recent financial crisis, when a few senior executives from some companies with huge losses were awarded “bonuses” that were as high as several millions or tens of millions of dollars. 

This serious imbalance in the distribution of wealth and economic development will have a long-term impact on economic growth. The so-called post-industrial economy is a service economy and consumption economy: it is pushed by consumption. However, this model cannot rely on consumption by only a handful of people. Instead, it must rely on mass consumption. Indeed, many statistics show that capitalists and people with high income often spend only a small portion of their income on consumption, instead leaning more toward using their wealth for investments so as to “make money with money.” A service- and consumption-based economy cannot remain healthy under such circumstances.

A fourth problem is the problem of fiscal and trade deficits. The government, Congress, Federal Reserve System, and all walks of life in the United States have realized that the huge fiscal and trade deficits are a serious problem that affects the country’s economic development. In 2010, the fiscal deficit in the United States was US$1.3 trillion, or roughly 9 percent of U.S. gross domestic product (GDP) and equivalent to 35 percent of government outlays that year.[3] Based on international standards and compared to the figures of relevant developed countries, such as Japan, this number is not the highest, and may not even be too high. However, the national debt has reached US$14 trillion, a number which is greater than the annual U.S. GDP and which precipitated a political crisis this past summer.

Because of the budget deficit and national debt, there are limited resources to spend on production and investment. Instead, large amounts of money have to be spent on government expenditures and interest payments. Rebuilding and improving America’s physical infrastructure is one item that has engendered a lot of debate in the U.S. Although the United States is a world superpower, it spends far less on infrastructure than does China, which is a developing country.[4] Therefore, it appears to some that the U.S. government has insufficient strength to develop the economy; the fiscal deficit is too large. Because of the budget deficit and national debt, the United States is also facing the danger of inflation. If this continues, then it may cause the dollar to depreciate and could harm the U.S.’s international competitive power.

The influence from the trade deficit that has existed for a long time on the U.S. economy is not as obvious as the influence from the fiscal deficit. Generally speaking, the foreign trade deficit American currency to flow out from the country. It also causes affects domestic production and employment. However, since the dollar is the international currency, the outflow of dollars has not affected its international status and for the most part has not weakened its value. Similarly, the impact of imported products on employment in the United States is not as much as great as some sensational arguments might make it appear. This is because most products imported by the United States are not produced by the United States, or are produced by the United States in a quite small amount.

A fifth problem concerns military spending and international strategy. Just as debt service takes a large share of U.S. government spending, so does spending on military affairs, foreign wars, and foreign interference. In part because of overspending in these areas, the United States has not spent more wealth on its own development, but has spent in and for other countries and regions. During the 20 years since the Cold War ended, the world has become more peaceful and stable. Even though the 9-11 incident occurred and the menace of international terrorism has become more apparent, dealing with this challenge does not require a large-scale war or too large-scale spending. While the number of wars worldwide has dropped in the last 10 years, United States military spending has greatly increased; total spending on the Iraq War and the War in Afghanistan alone have already reached US$1.2 trillion.[5] To put it simply, if the United States did not spend such a huge amount of money on military affairs and wars and it instead spent it on economic, social, and infrastructure development inside the country, a huge different result would have been produced. 

To a certain extent, the United States is following an unfortunate path that other big countries, such as the former Soviet Union, have already taken in history, wasting too many resources and too much national wealth on military expansion, wars, and foreign interference. If the government and public in the United States insist on such “world leadership” and “world domination” status, then we should not be surprised to see that its strength does not match its ambitions in the areas of economic and social development inside the country.

A sixth problem is the problem of population size and structure. The rise and development of China and India in the last several decades has once again proven to the world that a certain size of population is still one of the basic factors for productivity and economic development. At the same time, the experiences across the whole world also have proven that population growth alone cannot generate positive effects for economic development either. Instead, it should also be accompanied by improvement of population quality at the same time, including education, skills, income, and consumption. In that case, population growth can generate active effects for economic development.

The United States is almost the only developed country with relatively fast population growth over the last several decades. According to statistics from the United States Census Bureau, the population in the United States reached 300 million at the end of 2006, the third largest national population in the world. It is estimated that the total population in the United States will reach 400 million by 2040, and 500 million by the late 21st century.[6]

However, population growth in the United States has not brought an obvious driving force to economic growth in recent years. The main reason is that the quality of the population has not been obviously improved. Over the years, the main source for population growth in the United States has been legal and illegal immigration from Latin America, and this community maintains a high birth rate. This group is generally perceived to have a relatively low education level, often poor English language skills, generally lower incomes and therefore a weaker consumption power, and fewer professional skills than the general U.S. population.[7] Therefore, the population growth with this group of people has not brought a big increase in productivity and consumption, or an overall increase in the economy, but provides a good deal of unskilled and low-paid labor. The typical pattern in the United States is that the first generation of immigrants struggles in this way, and that the second generation begins to contribute to higher levels of the economy. However, the problems that statistics reveal in the U.S. education system may reveal could threaten this pattern.

A seventh problem is the problem of social culture and value concepts. Relevant social movements that started to appear in the 1960s in the United States, such as the anti-war movement, human rights movement, hippies, and sexual liberation, not only brought active progress in relevant areas, such as democracy, freedom, and human rights, but also caused many social problems, including the expansion of personal desires and power consciousness, and a decline in a sense of duty among parts of society; many feel that discipline has become lax, and the will of the people to learn new things and work hard has become weaker (it should be noted that this trend is lamented in a number of countries, not just the United States). Work, learning, efficiency, capabilities, and skills have dropped, and American students are falling behind their counterparts in many countries on certain standardized tests.[8] Also, the service level of the service sector has dropped, efficiency is not high in certain fields and services, and the competitive power of some areas in society is not strong enough. All of these are directly related to people’s cultural concepts and values.

Neoconservatives in the United States have tried to change the unfavorable tendencies in social and cultural development in the United States through relevant value concepts, such as rejuvenating religion and attempting to revitalize some “traditional values.” However, not many achievements have been made. On the contrary, due to some extreme policies and actions of neoconservatives in areas such as politics, society, and diplomacy, their influence in U.S. politics and society has gradually declined. The “Tea Party” movement seems to wield great power within the Republican Party, but its ability to effect society as a whole is questionable.

In short, although the problems and difficulties mentioned above are serious and have caused many negative effects for the United States and its society, these problems and difficulties are not fundamental and irreversible, so far. To this point, they have not generally and fundamentally affected the strength, competitive power, and development of the United States. Right now, it is still hard to determine whether or not they will generate a fundamental impact on the long-term development trend in the United States in the future. The answer to this question depends on the capabilities of the United States and its society in overcoming and solving the difficulties and problems mentioned above currently and in the future, and the results of their efforts to do so.

[1] An earlier, Chinese-language version of this article was published in Xiandai Guoji Guanxi  (Contemporary International Relations), in Beijing on April 20, 2011. This article reflects the opinions of the authors, and do not necessarily represent the perspective of any other individual or organization.

[2] Peter Marsh, "China noses back ahead as top goods producer to halt 110-year US run," FT Zhongwen Wang, March 14, 2011, http://www.ftchinese.com/story/001037460/en/, accessed November 4, 2011.

[3] See “The Budget and Economic Outlook: Fiscal Years 2011-2021,” Congressional Budget Office, Publication No. 4236 (January 2011), http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_fy2011outlook.pdf; accessed November 7, 2011.

[4] See “Infrastructure 2011: A Strategic Priority,” Urban Land Institute and Ernst & Young, 2011, http://www.uli.org/sitecore/content/ULI2Home/ResearchAndPublications/PolicyPracticePriorityAreas/Infrastructure/~/media/Documents/ResearchAndPublications/Reports/Infrastructure/Infrastructure2011.ashx; accessed November 7, 2011.

[5] See Amy Belasco, “The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11,” Congressional Research Service, March 29, 2011, http://www.fas.org/sgp/crs/natsec/RL33110.pdf; accessed November 7, 2011.

[6] Stephen Kaufman, “2010 Census Data Show Population Shift to South, West Continues,” Washington File, 28 December 2010, pp.3-5.

[7] For a quick overview of statistics, see “Hispanics in the United States,” U.S. Census Bureau, 2006, http://www.census.gov/population/www/socdemo/hispanic/files/Internet_Hispanic_in_US_2006.pdf; accessed November 7, 2011.

[8] For a comparison of average reading, mathematics, and science literacy scores for 15 year-old students in  OECD members and other nations, see “Digest of Education Statistics; 2010, Table 408” National Center for Education Statistics, U.S. Department of Education, December 2010, http://nces.ed.gov/programs/digest/d10/tables/dt10_408.asp?referrer=list; accessed November 8, 2011.

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