Is America Falling Behind?

Trouble comes when other nations discover paths to success and steal your thunder.

Once a nation rises to dominance, however, the dynamics change. The dominant country’s interests expand. It develops far-flung commitments. Fleets and armies are needed to protect its newly won territory. Its national power is not only much larger but much more expensive. The problem becomes one of expanding its economic base to keep pace with the expansion of its political and military role.

So it’s easier to rise to power than to remain there?

You might say that. Success comes relatively quickly because you usually know what combination of factors is driving you ahead. The trouble comes when the momentum begins to crest or when other nations discover their own paths to success and then start to steal your thunder. Then there is a great debate about falling behind and about what should be done about it.

Isn’t it the case that both rise and fall take place more rapidly today than in the past?

I think that’s undoubtedly true. The economic problem facing the old monarchies was not the same as ours. Charles V, for example, as Holy Roman Emperor, lacked the administrative capacities to levy effective taxes. He was always strapped for cash. He had no effective means of raising citizen armies or efficiently taxing the citizenry (usually the aristocracy were exempt from taxation). In those days, mercenaries were a common means by which nations recruited military strength, and loans were a common means by which war finance was gathered. Both were very costly.

By contrast, a modern government has the ability to mobilize an entire society in times of war. And in times of peace the techniques for increasing national wealth are vastly more powerful than in more distant times. As we have seen in the Pacific countries, a nation can move up from the second or even third tier to the first in the course of a generation. As a consequence, a dominant power can be shouldered aside much more quickly than in the past. Think of the fact that America has slipped in less than a decade from the world’s largest creditor nation to its largest debtor. Only a catastrophic war could have brought about so rapid a change in the past.

Hence both rise and fall seem to have accelerated in our time. That has a sobering implication. In the past the process of decline could take a very long while. It’s often been said that the Roman Empire took longer in falling than the lifetime of most empires or that the Ottoman Empire was in decline from the start. I’m afraid that such a leisurely, slow, nearly imperceptible decline is not so easily managed today.

To what do you ascribe that acceleration?

It seems to be a combination of a number of things, some technical, some organizational. We simply have more know-how than in the past—more command over nature—so that when a nation like Japan or Korea is ready to take the plunge into manufacturing, it can build the necessary plant and equipment more rapidly than in the past. No less important, a nation can import scientific technology that allows it to make high-tech products with relatively low-skilled workers. That’s how Taiwan learned to make computer parts. Meanwhile, the international transmission of information—and of credit—is as quick and easy as a telephone call next door.

All these new capabilities allow manufacturing activities to be transferred from one part of the world to another in a fraction of the time and cost it would have taken fifty or even thirty years ago. A country that imports the right technology, combines it with a disciplined—and, of course, low-wage—labor force, and finds the right way of putting together private entrepreneurship and government backing can rise in the world with great rapidity. Contrariwise, the competitive advantage of older, more established centers can disappear with equal rapidity. But that is certainly something Americans know about at first hand.






Do you think the loss of our markets is a sign that America is losing its status as a great power?

There is no blinking the fact that the United States has lost its relative place in the sun. After World War II this country was the steelmaker to the world, the breadbasket of the world, the auto manufacturer for the world. America’s predominance in manufacturing and in agriculture—a mighty combination, you must admit—was without peer. Not surprisingly, the American dollar was also the strongest currency in the world. All these elements of economic superiority have been eroded. The United States is still the single largest economic entity on the planet, but it is not any longer the entity whose performance puts it in a class by itself, hopelessly beyond the reach of any would-be competitor.