Il declino dell’impero americano
THE GRAY ZONE
The United States’ advantages might seem obvious when compared with conditions in Asia, which is still a continent of mostly developing countries. Against Europe, the margin is slimmer than many Americans believe. The eurozone has been growing at an impressive clip, about the same pace per capita as the United States since 2000. It takes in half the world’s foreign investment, boasts strong labor productivity, and posted a $30 billion trade surplus in the first ten months of 2007. In the World Economic Forum’s Global Competitiveness Index, European countries occupy seven of the top ten slots. Europe has its problems — high unemployment, rigid labor markets — but it also has advantages, including more efficient and fiscally sustainable health-care and pension systems. All in all, Europe presents the most significant short-term challenge to the United States in the economic realm.
[ad]But Europe has one crucial disadvantage. Or, to put it more accurately, the United States has one crucial advantage over Europe and most of the developed world. The United States is demographically vibrant. Nicholas Eberstadt, a scholar at the American Enterprise Institute, estimates that the U.S. population will increase by 65 million by 2030, whereas Europe’s population will remain “virtually stagnant.” Europe, Eberstadt notes, “will by that time have more than twice as many seniors older than 65 than children under 15, with drastic implications for future aging. (Fewer children now means fewer workers later.) In the United States, by contrast, children will continue to outnumber the elderly. The United Nations Population Division estimates that the ratio of working-age people to senior citizens in western Europe will drop from 3.8:1 today to just 2.4:1 in 2030. In the U.S., the figure will fall from 5.4:1 to 3.1:1.”
The only real way to avert this demographic decline is for Europe to take in more immigrants. Native Europeans actually stopped replacing themselves as early as 2007, and so even maintaining the current population will require modest immigration. Growth will require much more. But European societies do not seem able to take in and assimilate people from strange and unfamiliar cultures, especially from rural and backward regions in the world of Islam. The question of who is at fault here — the immigrant or the society — is irrelevant. The reality is that Europe is moving toward taking in fewer immigrants at a time when its economic future rides on its ability to take in many more. The United States, on the other hand, is creating the first universal nation, made up of all colors, races, and creeds, living and working together in considerable harmony. Consider the current presidential election, in which the contestants have included a black man, a woman, a Mormon, a Hispanic, and an Italian American.
Surprisingly, many Asian countries (with India an exception) are in demographic situations similar to or even worse than Europe’s. The fertility rates in China, Japan, South Korea, and Taiwan are well below the replacement level of 2.1 births per woman, and estimates indicate that the major East Asian nations will face a sizable reduction in their working-age populations over the next half century. The working-age population in Japan has already peaked; by 2010, Japan will have three million fewer workers than it did in 2005. The worker populations in China and South Korea are also likely to peak within the next decade. Goldman Sachs predicts that China’s median age will rise from 33 in 2005 to 45 in 2050, a remarkable graying of the population. And Asian countries have as much trouble with immigrants as European countries do. Japan faces a large prospective worker shortage because it can neither take in enough immigrants nor allow its women to fully participate in the labor force.
The effects of an aging population are considerable. First, there is the pension burden — fewer workers supporting more gray-haired elders. Second, as the economist Benjamin Jones has shown, most innovative inventors — and the overwhelming majority of Nobel laureates — do their most important work between the ages of 30 and 44. A smaller working-age population, in other words, means fewer technological, scientific, and managerial advances. Third, as workers age, they go from being net savers to being net spenders, with dire ramifications for national savings and investment rates. For advanced industrialized countries, bad demographics are a killer disease.
The United States’ potential advantages today are in large part a product of immigration. Without immigration, the United States’ GDP growth over the last quarter century would have been the same as Europe’s. Native-born white Americans have the same low fertility rates as Europeans. Foreign students and immigrants account for 50 percent of the science researchers in the country and in 2006 received 40 percent of the doctorates in science and engineering and 65 percent of the doctorates in computer science. By 2010, foreign students will get more than 50 percent of all the Ph.D.’s awarded in every subject in the United States. In the sciences, that figure will be closer to 75 percent. Half of all Silicon Valley start-ups have one founder who is an immigrant or a first-generation American. In short, the United States’ potential new burst of productivity, its edge in nanotechnology and biotechnology, its ability to invent the future — all rest on its immigration policies. If the United States can keep the people it educates in the country, the innovation will happen there. If they go back home, the innovation will travel with them.
Immigration also gives the United States a quality rare for a rich country — dynamism. The country has found a way to keep itself constantly revitalized by streams of people who are eager to make a new life in a new world. Some Americans have always worried about such immigrants — whether from Ireland or Italy, China or Mexico. But these immigrants have gone on to become the backbone of the American working class, and their children or grandchildren have entered the American mainstream. The United States has been able to tap this energy, manage diversity, assimilate newcomers, and move ahead economically. Ultimately, this is what sets the country apart from the experience of Britain and all other past great economic powers that have grown fat and lazy and slipped behind as they faced the rise of leaner, hungrier nations.
LEARNING FROM THE WORLD
In 2005, New York City got a wake-up call. Twenty-four of the world’s 25 largest initial public offerings that year were held in countries other than the United States. This was stunning. The United States’ capital markets have long been the biggest in the world. They financed the turnaround in manufacturing in the 1980s and the technology revolution of the 1990s, and they are today financing the ongoing advances in bioscience. It is the fluidity of these markets that has kept American business nimble. If the United States is losing this distinctive advantage, it is very bad news.
Much of the discussion around the problem has focused on the United States’ regulation, particularly post-Enron laws such as Sarbanes-Oxley, and the constant threat of litigation that hovers over businesses in the United States. These obstacles are there, but they do not really get at what has shifted business abroad. The United States is conducting business as usual. But others are joining in the game. What is really happening here, as in other areas, is simple: the rise of the rest. The United States’ sum total of stocks, bonds, deposits, loans, and other financial instruments — its financial stock, in other words — still exceeds that of any other region, but other regions are seeing their financial stock grow much more quickly. This is especially true of the rising countries of Asia, but even the eurozone is outpacing the United States. Europe’s total banking and trading revenues, $98 billion in 2005, have nearly pulled equal to the United States’ revenues. And when it comes to new derivatives based on underlying financial instruments such as stocks or interest-rate payments, which are increasingly important for hedge funds, banks, and insurers, London is the dominant player already. This is all part of a broader trend. Countries and companies now have options that they never had before.
In this and other regards, the United States is not doing worse than usual. It functions as it always has — perhaps subconsciously assuming that it is still leagues ahead of the pack. U.S. legislators rarely think about the rest of the world when writing laws, regulations, and policies. U.S. officials rarely refer to global standards. After all, for so long the United States was the global standard, and when it chose to do something different, it was important enough that the rest of the world would cater to its exceptionality. The United States is the only country in the world other than Liberia and Myanmar that is not on the metric system. Other than Somalia, it is alone in not ratifying the Convention on the Rights of the Child. In business, the United States did not need to benchmark. It was the one teaching the world how to be capitalist. But now everyone is playing the United States’ game, and playing to win.
For most of the last 30 years, the United States had the lowest corporate tax rates of the major industrialized countries. Today, it has the second highest. U.S. rates have not gone up; others have come down. Germany, for example, long a staunch believer in its high-taxation system, has cut its rates in response to moves by countries to its east, such as Austria and Slovakia. This kind of competition among industrialized countries is now widespread. It is not a race to the bottom — Scandinavian countries have high taxes, good services, and strong growth — but a quest for growth. U.S. regulations used to be more flexible and market-friendly than all others. That is no longer true. London’s financial system was overhauled in 2001, with a single entity replacing a confusing mishmash of regulators, which is one reason that London’s financial sector now beats out New York’s on some measures. The entire British government works aggressively to make London a global hub. Regulators from Warsaw to Shanghai to Mumbai are moving every day to make their systems more attractive to investors and manufacturers. Washington, by contrast, spends its time and energy thinking of ways to tax New York, so that it can send its revenues to the rest of the country.
Being on top for so long has its downsides. The U.S. market has been so large that Americans have assumed that the rest of the world would take the trouble to understand it and them. They have not had to reciprocate by learning foreign languages, cultures, or markets. Now, that could leave the United States at a competitive disadvantage. Take the spread of English worldwide as a metaphor. Americans have delighted in this process because it makes it so much easier for them to travel and do business abroad. But it also gives the locals an understanding of and access to two markets and cultures. They can speak English but also Mandarin or Hindi or Portuguese. They can penetrate the U.S. market but also the internal Chinese, Indian, or Brazilian one. Americans, by contrast, have never developed the ability to move into other people’s worlds.
The United States is used to being the leading economy and society. It has not noticed that most of the rest of the industrialized world — and a good part of the nonindustrialized world as well — has better cell-phone service than the United States. Computer connectivity is faster and cheaper across the rest of the industrialized world, from Canada to France to Japan, and the United States now stands 16th in the world in broadband penetration per capita. Americans are constantly told by their politicians that the only thing they have to learn from other countries’ health-care systems is to be thankful for their own. Americans rarely look around and notice other options and alternatives, let alone adopt them.
Learning from the rest is no longer a matter of morality or politics. Increasingly, it is about competitiveness. Consider the automobile industry. For more than a century after 1894, most of the cars manufactured in North America were made in Michigan. Since 2004, Michigan has been replaced by Ontario, Canada. The reason is simple: health care. In the United States, car manufacturers have to pay $6,500 in medical and insurance costs for every worker. If they move a plant to Canada, which has a government-run health-care system, the cost to them is around $800 per worker. This is not necessarily an advertisement for the Canadian health-care system, but it does make clear that the costs of the U.S. health-care system have risen to a point where there is a significant competitive disadvantage to hiring American workers. Jobs are going not to low-wage countries but to places where well-trained and educated workers can be found: it is smart benefits, not low wages, that employers are looking for.
For decades, American workers, whether in car companies, steel plants, or banks, had one enormous advantage over all other workers: privileged access to American capital. They could use that access to buy technology and training that no one else had — and thus produce products that no one else could, and at competitive prices. That special access is also gone. The world is swimming in capital, and suddenly American workers have to ask themselves, What can we do better than others? It is a dilemma not just for workers but for companies as well. When American companies went abroad, they used to bring with them capital and know-how. But when they go abroad now, they discover that the natives already have money and already know how.
There really is not a Third World anymore. So what do American companies bring to Brazil or India? What is the United States’ competitive advantage? This is a question few American businesspeople thought they would ever have to answer. The answer lies in something the economist Martin Wolf noted. Economists used to discuss two basic concepts, capital and labor. But these are now commodities, widely available to everyone. What distinguishes economies today are ideas and energy. A country can prosper if it is a source of ideas or energy for the world.
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