Are We Really Going The Way Of The British Empire?

PrintPrintEmailEmail

The second difference is that British power in 1914 rested very heavily on its empire. That empire rapidly succumbed to nationalistic pressures, so that by 1926 the British Imperial General Staff, when engaging in military planning, could no longer count on the prospect of a unified force that would include New Zealand and Australia, South Africa, and Canada. American power—at least since 1865—is not susceptible to problems of secession or to nationalistic fissure.

The third difference, and one that perhaps is as important as any, is that Britain at the beginning of the century was very hard pressed by its rival, the kaiser’s Germany, which had passed Britain both economically and militarily, while the United States is in fact facing a military rival that has suffered severe economic decline and economic rivals in Europe and Japan that are not major military rivals. Since power is relative, that makes a huge difference in terms of the type of environment in which American power is measured.

So for all three of those reasons, I think the metaphors or analogies with Britain are misleading.

Kennedy points out that the size of an economy in gross terms is perhaps less significant than the efficiency of its most advanced sectors. Russian and perhaps even Chinese gross national product exceeded Britain’s at the turn of the last century, but enormous subsistence economies are unimpressive in power terms. The pessimists fear that a great deal of future American GNP will be people flipping burgers, plus agricultural and raw material exports.

It’s commonly argued that American industry is going through the same problem that British industry went through at the turn of the last century. I think this is a mistake. If you look at the idea that American industry has been hollowed out, it’s worth noticing that American industry has held the same share of our GNP for the last fifteen years, about 22 percent. What’s more, manufacturing productivity rose by 3.5 percent a year during the 1980s. Those are not signs of a declining industrial sector.

What is true is that there are some subsectors in manufacturing where there has been serious decline. Consumer electronics would probably be the most dramatic, but automobiles have also had a serious loss in market share. But there are other industries, such as chemicals, aircraft, biotechnology, and computer software—actually, the computer industry as a whole—where the Americans still have a leading role.

So in that sense what we’re going to see is not something analogous to Britain, where the British economy stayed at the low end of the manufacturing sector to export essentially simple goods to colonies and the less developed countries. American markets are primarily in developed countries, and I think that American export competitiveness has been increasing for the last ten years. Our share of world exports has been going up—not just in agriculture but in higher-end industry as well.

If we were to push the analogy, it would be to highlight the loss of Britain’s innovation by the turn of the century in the electrical and chemical industries versus her dominance in the production of railway engines or textiles or steel. Bound to Lead makes the argument that the United States continues to lead in innovation in information technology, particularly computers. But isn’t it possible that the pertinent analogy to Edwardian Britain may be our domination in desktop machines and mainframes, older and in fact obsolescent technology, where we remain the leading manufacturer, compared with the newer laptop machines or flat-screen display technologies, where we can no longer compete?

I think that’s a valid concern. There are some economists who say that it doesn’t matter if your economy produces computer chips or potato chips. In fact, I believe there are many more benefits to the economy as a whole in the area of silicon chips than in potato chips. On the other hand, if one looks in the area of computers, it’s now very hard to distinguish between what’s manufacturing and what’s services. Indeed, much modern electrical or computing equipment is a strange mixture. Switching equipment is such an area, and one where the Americans have remained ahead. We have lost ground in the areas of miniaturization and display technology, but it’s generally agreed that American software is well ahead of Japan and Europe’s. So it’s still a mixed picture.

We produced half of world product in 1945. But 1945 is a strange place to start measuring, because World War II had strengthened the United States and weakened everybody else.

But to your question, would I be concerned with the American loss of an ability to keep the computer market, the answer is yes.

You believe that part of America’s strength in the world market lies in its free-trade initiatives, even though competing nations have adapted a neo-mercantilist strategy—that is to say, their governments protect and assist businesses whose long-term health they see as important. The parallel case might be when the British statesman Joseph Chamberlain was worried about the same thing at the turn of the century. Chamberlain urged the British government to step in and protect its industries as international competitors became more capable. Do you think the neo-mercantilist argument has any merit today?